<PAGE>
As Filed with the Securities and Exchange Commission on September 27, 1996
Registration No. 33-44714
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
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Pre-Effective Amendment No. [ ]
----- -----
Post-Effective Amendment No. 5 [ X ]
----- -----
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
-----
Amendment No. 5 [ X ]
----- -----
THE ATLANTA GROWTH FUND, INC.
(Exact name of Registrant as Specified in Charter)
Suite 1661
Eleven Hundred Peachtree Street, N.E.
Atlanta, Georgia 30309
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (404) 875-2161
MICHAEL L. LUCAS
Wedgewood Equities, Inc.
Suite 1661
Eleven Hundred Peachtree Street, N.E.
Atlanta, Georgia 30309
(Name and Address of Agent for Service)
Copies to:
Scott D. Smith, Esq.
Powell, Goldstein, Frazer & Murphy
16th Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
It is proposed that this filing will become effective:
Immediately upon filing pursuant to paragraph (b) of Rule 485
- -----
On (date) pursuant to paragraph (b) of Rule 485
- -----
x 60 days after filing pursuant to paragraph (a) of Rule 485
- -----
On (date) pursuant to paragraph (a) of Rule 485
- -----
Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Section 24(f) of the Investment Company Act
of 1940, and has filed a Rule 24f-2 Notice for fiscal year ending May 31, 1996.
Total Number of Pages: 66 Index to Exhibits on Page: 63
---------- ---------
<PAGE>
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933 (1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Title of Maximum Offering Price Proposed Maximum Amount of
Securities Being Amount Being Per Offering Registration
Registered Registered (2) Share (2) Price (3) Fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock,
No Par Value 191,198 $12.09 $290,000 $100
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Registrant has registered an indefinite number of shares of its common
stock under the Securities Act of 1933, as amended (the "1933 Act"),
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended
(the "1940 Act"). Registrant's Rule 24f-2 Notice for its fiscal year ended
May 31, 1996 was filed on July 25, 1996.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 24e-2 under the 1940 Act and Rule 457(c) under the 1933
Act, based on an offering price of $12.09 with respect to its shares of
common stock on September 23, 1996.
(3) The maximum aggregate offering price for Registrant's shares of common
stock is calculated pursuant to Rule 24e-2 under the 1940 Act. During the
year ended May 31, 1996, Registrant redeemed a total of 167,211 shares of
its common stock. Of these redeemed shares, no shares of common stock were
used for reductions pursuant to paragraph (c) of Rule 24f-2 in Registrant's
Rule 24f-2 Notice for the year ended May 31, 1996, and none of the redeemed
shares were used for reductions pursuant to Rule 24e-2 in previous post-
effective amendments. As a result, 167,211 redeemed shares of common stock
are being used to reduce, pursuant to paragraph (a) of Rule 24e-2, the
number of shares for which the registration fee is payable with respect to
this post-effective amendment.
<PAGE>
THE ATLANTA GROWTH FUND, INC.
Form N-1A Cross-Reference Sheet
<TABLE>
<CAPTION>
Part A Item No. Prospectus Caption
<S> <C>
Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Condensed Financial Information
4. General Description of Registrant Investment Objectives and Policies; Risk Considerations
5. Management of the Fund Management
6. Capital Stock and Other Securities Description of Common Stock
7. Purchase of Securities Being Offered Purchase of Shares;
Shareholder Account Services and Privileges
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
Part B Item No. Statement of Additional
Information Caption
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives and Policies; Risk Considerations; Investment
Restrictions
14. Management of the Fund Directors and Officers; Board of Advisers; Investment Advisory and Other
Services
15. Control Persons and Principal Holders
of Securities Directors and Officers; Board of Advisers
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Practices Portfolio Transactions and Allocations of Brokerage
18. Capital Stock and Other Securities Initial Capitalization
19. Purchase, Redemption and Pricing of
Securities Being Offered Purchase and Redemption of Shares
20. Tax Status Tax Status
21. Underwriters Plan of Distribution
22. Calculation of Performance Data Investment Performance
23. Financial Statements Financial Statements
</TABLE>
Part C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to the Registration Statement.
<PAGE>
PROSPECTUS
SEPTEMBER 27, 1996
THE ATLANTA GROWTH FUND, INC.
SUITE 1661
ELEVEN HUNDRED PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
TELEPHONE: (404) 875-2161
TOLL-FREE: 1-800-899-4742
The Atlanta Growth Fund, Inc. (the "Fund") is an open-end, non-diversified,
mutual fund seeking long-term growth of capital through investment in a
professionally-managed portfolio (the "Atlanta 50 Portfolio") primarily
comprised of the common stock of the 50 most highly capitalized publicly traded
companies headquartered in the 18-county metropolitan statistical area of
Atlanta, Georgia ("Metropolitan Atlanta"). The Fund pursues its investment
objective: (i) by investing at least 75% of its total assets in the Atlanta 50
Portfolio using a five-tiered weighting system based primarily on each stock's
relative total market value; and (ii) by investing up to 25% of its total
assets, on a non-weighted basis, in the common stock of publicly traded
companies that either are headquartered in the State of Georgia or have
significant business or operations in Metropolitan Atlanta (including one or
more of the stocks included in the Atlanta 50 Portfolio). (See "Investment
Objectives and Policies.")
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It should be read and
retained for future reference.
A Statement of Additional Information regarding the Fund dated September
27, 1996, which is incorporated herein by reference, has been filed with the
Securities and Exchange Commission and is available without charge upon request
from Pryor, McClendon, Counts & Co., Inc., the Fund's principal distributor, at
the address and telephone number listed below or by writing or calling the Fund
at the address or either of the telephone numbers shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PRYOR, MCCLENDON, COUNTS & CO., INC.
SUITE 819
1515 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19102
TELEPHONE: (215) 569-0274
<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . 1
EXPENSE TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONDENSED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 5
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . . 6
Atlanta 50 Portfolio . . . . . . . . . . . . . . . . . . . . . 6
Non-Weighted Portfolio . . . . . . . . . . . . . . . . . . . . 7
Certain Portfolio Strategies . . . . . . . . . . . . . . . . . 7
Investment Restrictions. . . . . . . . . . . . . . . . . . . . 8
RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Board of Directors . . . . . . . . . . . . . . . . . . . . . . 9
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . 10
Portfolio Manager. . . . . . . . . . . . . . . . . . . . . . . 10
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Execution of Portfolio Transactions. . . . . . . . . . . . . . 10
BOARD OF ADVISERS . . . . . . . . . . . . . . . . . . . . . . . . . 11
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . 12
COMPUTATION OF NET ASSET VALUE AND PRICING. . . . . . . . . . . . . 12
PURCHASE OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . 13
Purchases Through Brokers. . . . . . . . . . . . . . . . . . . 13
Purchases Through the Transfer Agent . . . . . . . . . . . . . 14
Public Offering Price. . . . . . . . . . . . . . . . . . . . . 14
Reductions in Sales Charges. . . . . . . . . . . . . . . . . . 15
Aggregation. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Statement of Intention . . . . . . . . . . . . . . . . . . . . 15
Purchases by Retirement Plans. . . . . . . . . . . . . . . . . 16
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 16
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES . . . . . . . . . . . . 16
Automatic Investment Plan. . . . . . . . . . . . . . . . . . . 16
Automatic Reinvestment of Dividends and Distributions. . . . . 16
REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . 17
Redemptions Through Brokers. . . . . . . . . . . . . . . . . . 17
Redemptions Through the Transfer Agent . . . . . . . . . . . . 17
Other Important Redemption Information . . . . . . . . . . . . 18
Contingent Deferred Sales Charges. . . . . . . . . . . . . . . 18
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS . . . . . . . . . . . . . . 19
DESCRIPTION OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . 19
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT . . . . . . . . . 20
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . 20
ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 20
INVESTMENT RESULTS. . . . . . . . . . . . . . . . . . . . . . . . . 20
i
<PAGE>
PROSPECTUS SUMMARY
1. WHAT IS THE ATLANTA GROWTH FUND?
The Fund is an open-end, non-diversified, mutual fund. A mutual fund, very
simply, is an arrangement by which a number of persons invest in a company that
in turn invests in securities of other companies. The Fund is "open-end"
because, upon demand of the investor, the Fund has a legal duty to acquire the
shares of the Fund held by the investor and to pay the investor the net asset
value of such shares. (See "Computation of Net Asset Value and Pricing" and
"Redemption of Shares.") The Fund is classified as "non-diversified" for
purposes of the Investment Company Act of 1940 because the Fund may invest more
than 5% of its assets in the securities of a single issuer. (See "Investment
Objectives and Policies--Investment Restrictions.")
2. WHAT IS THE INVESTMENT OBJECTIVE OF THE FUND?
The Fund's investment objective is capital appreciation. Consistent with
this objective, the Fund invests primarily in the common stock of publicly
traded companies headquartered in the 18-county metropolitan statistical area of
Atlanta, Georgia ("Metropolitan Atlanta"). At least 75% of the Fund's total
assets are invested in the 50 most highly capitalized publicly traded companies
headquartered in Metropolitan Atlanta (the "Atlanta 50 Portfolio"). The Adviser
has developed a five-tiered weighting system based primarily on the relative
total market capitalization of each stock included in the Atlanta 50 Portfolio.
In order to allow the Fund to take advantage of other attractive investment
opportunities, the Adviser can invest the Fund's remaining assets (i.e., no more
than 25% of total Fund assets), on a non-weighted basis (the "Non-Weighted
Portfolio"), in the common stock of publicly traded companies (including one or
more of the companies included in the Atlanta 50 Portfolio) that either are
headquartered in the State of Georgia or have significant business or operations
in Metropolitan Atlanta (i.e., derive more than 50% of their revenue from one or
more operating units headquartered in Metropolitan Atlanta or rank among the top
100 publicly traded companies in terms of number of people employed in
Metropolitan Atlanta). (See "Investment Objectives and Policies.")
There is no assurance that the Fund will achieve its investment objective.
The Fund's net asset value will fluctuate, reflecting changes in the market
value of its portfolio positions. The performance of companies headquartered in
Atlanta may differ favorably or unfavorably from the performance of other
U.S. companies. Certain of the stocks included in the Atlanta 50 Portfolio may
be less liquid and their prices more volatile than those of securities of other
larger, more mature companies. In addition to common stocks, the Fund is also
authorized to invest a limited amount of its total assets in futures and
options, bonds or other fixed income securities, short-term money market
securities and shares of other investment companies which invest in short-term
money market securities. (See "Risk Considerations.")
3. WHAT ARE THE ADVANTAGES OF INVESTING IN THE FUND COMPARED TO INVESTING
DIRECTLY IN THE FUND'S PORTFOLIO SECURITIES?
There are three major advantages. First, the Fund provides investors with
professional investment management which might be beyond the investors' reach as
individuals. At least 75% of the Fund's assets, however, will not be
defensively managed (other than within the weighted tiers of the portfolio) in
the traditional sense. (See "Investment Objectives and Policies--Atlanta 50
Portfolio" and "Risk Considerations"). Second, within the limitations inherent
in a portfolio concentrated in a single geographical area, the Fund provides
individual investors, having the same investment objectives as the Fund, with
the opportunity to spread their investments over a greater number of companies
than they might otherwise be able to do. Finally, by owning just one security,
an investor's bookkeeping and income tax records are greatly simplified.
<PAGE>
4. WHO IS THE INVESTMENT ADVISER?
Wedgewood Equities, Inc. serves as the Fund's investment adviser (the
"Adviser"). Subject to the supervision of the Board of Directors, the Adviser
manages the investment and other affairs of the Fund and directs the investments
of the Fund in accordance with its investment objectives, policies and
limitations. (See "Management.")
5. HOW IS THE FUND DISTRIBUTED?
Pryor, McClendon, Counts & Co., Inc. is the underwriter and principal
distributor of the Fund's shares (the "Underwriter"). Shares may be purchased
from the Underwriter or through certain securities dealers and banks which have
sales agreements with the Underwriter. (See "Plan of Distribution.")
6. WHAT IS THE MINIMUM INITIAL INVESTMENT?
The minimum initial investment is $500 ($250 for an IRA and $1,000 for bank
wire purchases). The minimum investment may be reduced from time to time for
investors who elect to participate in the automatic investment plan. (See
"Automatic Investment Plan"). The minimum amount of subsequent purchases is
$50. (See "Purchase of Shares.")
7. AT WHAT PRICE ARE THE FUND'S SHARES SOLD AND REDEEMED?
The Fund continually offers its shares at a price equal to the net asset
value of such shares plus a sales charge. The Fund's shares may be redeemed at
their net asset value. A sales charge of 3.75% of the public offering price is
imposed in connection with each purchase of less than $25,000; the sales charge
is reduced for purchases of $25,000 or more. Subject to the possible imposition
of a deferred contingent sales charge under certain circumstances, there is no
redemption fee charged in connection with the redemption of the Fund's shares.
(See "Purchase of Shares," "Redemption of Shares" and "Computation of Net Asset
Value and Pricing.")
8. HOW CAN AN INVESTMENT BE MADE IN THE FUND?
Simply complete the Account Application located at the back of this
Prospectus (the "Application") and mail it, along with a check for the amount to
be invested, to the Fund's transfer agent (PFPC Inc.), at the address listed on
the first page of the Application. Questions may be answered by calling the
Fund's offices at (404) 875-2161 or 1-800-899-4742 or by calling the Underwriter
at (404) 875-2161. (See "Purchase of Shares.")
2
<PAGE>
* EXPENSE TABLE
The purpose of this table is to assist shareholders in understanding the
various costs and expenses associated with investing in the Fund. The expenses
and Example appearing in the table below are calculated using current fees and
expenses rather than historical fees and expenses and should not be considered a
representation of future expenses. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price)....................................... 3.75%(1)
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)...................... None
Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)............. None(2)
Redemption Fee (as a percentage of amount redeemed, if
applicable).............................................. None
Exchange Fee............................................. None
Annual Fund Operating Expenses (net of fee waivers):
(as a percentage of average net assets)
Management Fee 0.00%(3)
Rule 12b-1 Expenses 0.25%(4)
Other Expenses 8.11%(5)
Total Fund Operating Expenses (net of fee waivers) 8.36%(5)
Example (5)--(8):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following total
expenses on a $1,000 investment,
assuming (i) a 5% annual return
and (ii) redemption at the end
of each time period............ $117 $267 $407 $719
</TABLE>
(1) Sales charges are reduced for purchases of $25,000 or more. (See "Purchase
of Shares.")
(2) Purchases of $1,000,000 or more are not subject to an initial sales charge;
however, a contingent deferred sales charge of 0.30% may be imposed in the
future in the event of redemption transactions within 12 months following
such purchases. (See "Redemption of Shares--Contingent Deferred Sales
Charges.")
(3) The Fund's investment adviser, Wedgewood Capital Management, Inc.
("Wedgewood"), is entitled to receive a management and advisory fee,
calculated daily and payable monthly, at an annual rate of .34% of the
Fund) of the average daily net assets of the Fund. For the period ended
May 31, 1996, the Fund's advisers (Wedgewood and Astrop Advisory
Corporation) waived all of their fees, which amounted to $23,448 (based
upon the annual rate of 0.54% of the average daily net assets of the Fund).
Wedgewood intends (but is not obligated) to continue to waive its fee for
the current fiscal year. The management and advisory fees reported herein
and in the audited financial statements of the Fund are based upon an
annual rate of 0.54% of the average daily net assets of the Fund. (See
"Management--Investment Adviser.")
(4) The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 which
provides that the Fund may reimburse certain distribution expenses in an
amount up to 0.25% of its average net assets annually. Shareholders who
hold their shares for an extended period of time may pay more than the
economic equivalent of the maximum front-end sales charges permitted under
the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (See "Plan of Distribution.")
3
<PAGE>
(5) Reflects (i) the elimination of certain fee waiver and expense
reimbursement arrangements that were in place during all or part of the
Fund's first fiscal year but which are no longer in effect and (ii) other
fee waiver arrangements that reduced operating expenses during the Fund's
first fiscal year and are expected to continue to do so during the
current fiscal year. Without any fee waivers and expense reimbursements,
total Fund operating expenses as a percentage of average net assets would
have been 9.45% for the period ended May 31, 1996, 7.65% for the period
ended May 31, 1995, 5.85% for the period ended May 31, 1994, and 4.85%
annualized for the period ended May 31, 1993, respectively. (See Note
(4) above and Note (3) to the audited financial statement of the Fund,
"Financial Highlights," in the Fund's Annual Report to Shareholders for
the period ended May 31, 1996, which is incorporated into the Statement
of Additional Information.) Actual total operating expenses for the Fund
as a percentage of average net assets were 8.36% for the period ended
May 31, 1996, after taking into account all fee waiver and expense
reimbursement arrangements that were in effect during this period.
(6) Does not include the imposition of any contingent deferred sales charge.
(See "Redemption of Shares.")
(7) These are cumulative totals. The average expenses paid over a ten-year
period would be approximately $72 per year.
(8) Use of this annual return in the Example is mandated by the Securities
and Exchange Commission and is not intended to be an illustration of past
or future results.
4
<PAGE>
CONDENSED FINANCIAL INFORMATION
The table below sets forth certain selected data for a share of the Fund
outstanding for each period indicated. Additional financial data and related
notes are included in the Fund's audited financial statements which are
contained in the Annual Report to Shareholders for the period ended May 31,
1996, which may be obtained at no charge by calling the Fund at 1-800-899-4742.
(See "Statement of Additional Information--Financial Statements.")
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the For the For the For the Period
Year Ended Year Ended Year Ended June 22, 1992(1)
May 31, 1996 May 31, 1995 May 31, 1994 to May 31, 1993
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . $ 11.29 $ 10.92 $ 11.12 $ 10.00
---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Loss (5). . . . . . . . . . . . (.77) (.50) (.33) (.04)
Net Realized and Unrealized Gain
on investments . . . . . . . . . . . . . . . 3.34 1.24 .59 1.20
---------- ---------- ---------- ----------
Total From Investment Operations . . . . . . 2.57 .74 .26 1.16
---------- ---------- ---------- ----------
Less Distributions:
Dividends (from net investment income) . . . . (.02)
---------- ---------- ---------- ----------
Distributions (from net capital gains) . . . . (1.33) (.37) (.46) (.02)
---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . (1.33) (.37) (.46) (.04)
---------- ---------- ---------- ----------
Net Asset Value, End of Period . . . . . . . . . . $ 12.53 $ 11.29 $ 10.92 $ 11.12
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Return . . . . . . . . . . . . . . . . . . . 24.56% 7.10% 2.24% 12.40%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) . . . . $ 3,984 $ 4,951 $ 6,582 $ 9,122
Ratio of Expenses to Average Net Assets (3). . . 8.36% 6.49% 4.82% 2.53%(2)
Ratio of Net Investment Income (Loss)
to Average Net Assets. . . . . . . . . . . . . (6.55%) (4.56%) (2.89%) (.36%)(2)
Portfolio Turnover Rate. . . . . . . . . . . . . 3.34% .11% 11.56% 8.70%(2)
Average Commission Rate (4). . . . . . . . . . . $ 0.0635 N/A N/A N/A
</TABLE>
- ----------------------------
(1) Commencement of Operations.
(2) Annualized.
(3) Reflects the waiver of certain fees and the reimbursement of certain
expenses for each period indicated. Without such waivers, the ratio of
expenses to average daily net assets would have been 9.45% for the year
ended May 31, 1996, 7.65% for the year ended May 31, 1995, 5.85% for the
year ended May 31, 1994, and 4.85% annualized for the period ended May
31, 1993, respectively. (See Note (3) to the audited financial
statements of the Fund, "Financial Highlights," in the Fund's Annual
Report to Shareholders for the period ended May 31, 1996, which is
incorporated by reference into the Statement of Additional Information.)
For information concerning certain increases in current Fund operating
expenses resulting from the elimination of certain of these fee waiver
and expense reimbursement arrangements, see "Expense Table."
(4) Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the period for which there
was a commission. This disclosure is required by the SEC beginning 1996.
(5) Average shares method used.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is capital appreciation. Consistent
with this objective, the Fund invests primarily in the common stock of
publicly traded companies headquartered in the 18-county metropolitan
statistical area of Atlanta, Georgia ("Metropolitan Atlanta"). The Adviser
believes that the demographic and economic characteristics of Metropolitan
Atlanta, including population, employment, retail sales, personal income,
bank loans, bank deposits and residential construction, are such that many
companies headquartered in the area have greater than average potential for
capital appreciation. The Adviser also believes that other factors, such as
a generally mild climate, lower state taxes and cost of living, labor
availability, governmental and political attitudes generally favorable to
business development, availability of natural resources, a highly developed
and sophisticated transportation infrastructure will have a positive effect
on companies headquartered in the area. These factors and characteristics,
in the Adviser's opinion, have enabled companies headquartered in
Metropolitan Atlanta to experience high growth rates, which have generally
led to higher common stock prices and greater opportunities for capital
appreciation. The Adviser believes that these favorable trends will
continue in the future.
ATLANTA 50 PORTFOLIO. At least 75% of the Fund's total assets will be
invested in the 50 most highly capitalized publicly traded companies
headquartered in Metropolitan Atlanta (the "Atlanta 50 Portfolio"). The
Adviser has developed a five-tiered weighting system based primarily on the
relative total market capitalization of each stock included in the Atlanta
50 Portfolio (i.e., its market price per share times the number of shares
outstanding) under which system 25% of the Fund's assets will be invested in
the 10 most highly capitalized stocks included in the Atlanta 50 Portfolio
with no more than 7% and no less than 2% of such assets being invested in
any of such stocks; 20% of the Fund's assets will be invested in the 10 next
most highly capitalized stocks included in the Atlanta 50 Portfolio with no
more than 4.5% and no less than 1.5% of such assets being invested in any of
such stocks; 15% of the Fund's assets will be invested in the 10 next most
highly capitalized stocks included in the Atlanta 50 Portfolio with no more
than 2.5% and no less than 1.0% of such assets being invested in any of such
stocks; 10% of the Fund's assets will be invested in the 10 next most highly
capitalized stocks included in the Atlanta 50 Portfolio with no more than
1.5% and no less than 0.5% of such assets being invested in any of such
stocks; and 5% of the Fund's assets will be invested in the remaining 10
stocks included in the Atlanta 50 Portfolio with no more than 0.75% and no
less than 0.25% of such assets being invested in any of such stocks.
The Adviser attempts to invest in all the stocks included in the
Atlanta 50 Portfolio in accordance with the weighting system described
above, beginning with the heaviest-weighted stocks that make up a larger
portion of the portfolio. Because of the difficulty and expense of
executing relatively small stock transactions, the Fund may not always be
invested in each stock included in the Atlanta 50 Portfolio. No attempt is
made to manage the Atlanta 50 Portfolio defensively in time of generally
declining stock prices or, except within tiers, to otherwise manage the
Atlanta 50 Portfolio in the traditional sense, using economic, financial,
and market analysis, nor will the adverse financial situation of a company
directly result in elimination of its common stock from the Atlanta 50
Portfolio.
To reduce transaction costs and minimize shareholders' current capital
gains tax liability, the stocks included in the Atlanta 50 Portfolio are not
automatically bought and sold (i.e., "rebalanced") to reflect changes in
their market capitalization. Instead, the Adviser reviews and, as
necessary, rebalances the portfolio and revises the list of companies whose
securities are included in the Atlanta 50 Portfolio on a quarterly basis.
The Fund's trading strategy is designed to further minimize transaction
costs (e.g., the Fund generally only buys round-lots of stocks and may trade
large blocks of securities). These policies may cause a particular stock to
be over or under
6
<PAGE>
represented in the Fund relative to its weighting or result in its continued
ownership by the Fund after it no longer meets the inclusion criteria.
To be included as one of the stocks in the Atlanta 50 Portfolio, a
company must satisfy all of the following criteria: (i) it must be an
"operating company" (i.e., not an investment company) having its principal
corporate office located in Metropolitan Atlanta; (ii) a liquid market for
its common stock must exist on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ National Market System; and (iii) its total
market value (i.e., its market price per share times the number of shares
outstanding) must place it among the top 50 such companies measured by
market capitalization.
NON-WEIGHTED PORTFOLIO. In order to allow the Fund to take advantage
of other attractive investment opportunities, the Adviser can invest the
Fund's remaining assets (i.e., no more than 25% of total Fund assets), on a
non-weighted basis (the "Non-Weighted Portfolio"), in the common stock of
publicly traded companies (including one or more of the companies included
in the Atlanta 50 Portfolio) that either are headquartered in the State of
Georgia or have significant business or operations in Metropolitan Atlanta
(i.e., derive more than 50% of their revenue from one or more operating
units headquartered in Metropolitan Atlanta or rank among the top 100
publicly traded companies in terms of number of people employed in
Metropolitan Atlanta).
When investing in stocks included in the Non-Weighted Portfolio, the
Adviser generally considers a number of factors such as overall growth
prospects, competition, position in product markets, leadership in
technology, quality of management, financial strength, price/earnings
ratios, research and development, productivity, labor costs, raw material
costs and sources of supply, profit margin, return on investment, capital
resources and extent of government regulation, among others. Current income
is not a criterion of investment selection.
CERTAIN PORTFOLIO STRATEGIES. Under normal conditions, the Adviser
attempts to invest as much of the Fund's assets as is practicable in common
stocks. In unusual market conditions, or when the Adviser believes that a
more conservative position is warranted, it may invest the Fund's
Non-Weighted Assets, without limit, in bonds or other fixed-income
securities or in short-term money market securities or it may purchase
shares of other investment companies which primarily invest in any of such
securities, provided that the requirements of Section 12(d) of the
Investment Company Act of 1940 are complied with, including the requirement
that in the aggregate no more than 10% of the Fund's total assets may be
invested in other investment companies and that an investment in any one
investment company will be limited to 5% of total Fund assets. The Adviser
will charge no management fees attributable to any Fund assets invested in
other investment companies.
Such fixed-income securities or short-term money market securities may
include securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, bank certificates of deposit, banker's acceptances,
commercial paper and repurchase agreements collateralized by these types of
instruments. Fixed income securities will only be purchased if they are
rated Aaa, Aa or A by Moody's Investor's Service, Inc. or AAA, AA or A by
Standard & Poor's Corporation. Short-term money market securities will only
be purchased if they are of "high quality," which means the instruments, if
rated, must have been given one of the top two ratings by a major rating
service, or if unrated, are of comparable quality as determined by the
Adviser.
The Adviser may also invest certain of the Fund's Non-Weighted Assets
in stock index futures and options to manage cash flow or, when in the
opinion of the Adviser, available cash balances do not permit economically
efficient stock purchases. Strategies the Fund could use in this regard
include purchasing futures contracts, writing put options, and purchasing
call options. When the Fund wishes to sell securities, because of
shareholder redemptions or otherwise,
7
<PAGE>
it may use stock index futures or options to hedge against market risk until
the sale can be completed. These strategies could include selling futures
contracts, writing call options, and purchasing put options. The Fund will
not write options on any futures contracts.
INVESTMENT RESTRICTIONS. The investment objectives of the Fund, as
stated in this Prospectus, are fundamental policy which cannot be changed
without shareholder approval. The Fund has adopted a number of other
restrictions on its investments and other activities that may not be changed
without shareholder approval. In particular, without such approval, the
Fund may not change its investment objective and may not purchase securities
of any issuer (except U.S. Government securities) if immediately after and
as a result of such purchase the value of the Fund's holdings in the
securities of that issuer exceeds 7.5% of the value of the Fund's total
assets. Without such approval, the Fund also may not borrow funds in excess
of 5% of its assets (and no borrowing may be undertaken except from banks as
a temporary measure for extraordinary or emergency purposes) nor purchase
securities on margin or invest in restricted securities in excess of 5% of
its total assets. The Fund's other investment limitations are described in
the Statement of Additional Information.
RISK CONSIDERATIONS
The Fund is not intended to be a complete investment program, and there
is no assurance that its investment objective can be achieved. The Fund's
concentration in companies located or doing business in Metropolitan Atlanta
to some extent may tie the performance of the Fund to the economic
environment of Atlanta and the surrounding region. Accordingly, the Fund
could possibly be adversely impacted by industrial and business trends
within the geographical area. Moreover, the Fund's portfolio will include
securities of certain smaller companies and companies that are not
nationally recognized, as well as securities of companies that pay no
dividends or interest. The prices of stocks of such companies generally are
more volatile than those of larger or more mature companies, their
securities are generally less liquid, and they are generally more likely to
be negatively affected by adverse economic or market conditions. In
addition, the fact that the Fund limits at least 75% of its portfolio to a
maximum of 50 companies may result in imbalances relative to diversification
by industry sector.
With respect to the Atlanta 50 Portfolio, these limitations also
restrict the Adviser from using certain traditional analytical measures
frequently employed to select investments and also exclude some strategies
which could offer superior performance or reduce fluctuations in the values
of such assets. No attempt will be made to manage the Atlanta 50 Portfolio
defensively in time of generally declining stock prices or, except within
tiers, to otherwise manage the Atlanta 50 Portfolio in the traditional
sense, using economic, financial, and market analysis, nor will adverse
financial developments at a company automatically result in elimination of
its common stock from the Atlanta 50 Portfolio. There is also no assurance
that the demographic and economic characteristics and other factors that the
Adviser believes favor companies in the Atlanta area will continue in the
future.
The Fund may invest in repurchase agreements in which securities are
purchased from a seller (a commercial bank which is a member of the Federal
Reserve System or a broker-dealer registered with the Securities and
Exchange Commission) with an agreement by the seller to repurchase such
securities at a fixed price in excess of the cost to the Fund. In investing
in repurchase agreements, the Fund's risk is limited to the ability of the
seller to pay the agreed upon amount at the maturity of the repurchase
agreement. In the opinion of the Adviser, such risk can be minimized by:
(a) entering into repurchase agreements only with reputable, creditworthy
commercial banks and broker-dealers; (b) continually monitoring the
creditworthiness of commercial banks and broker-dealers with which
repurchase agreements are contemplated; (c) insisting on taking physical
possession of the securities that are the subject of the
8
<PAGE>
repurchase agreement; (d) continually monitoring the market value of the
underlying securities; and (e) carefully scrutinizing the terms of each
proposed repurchase agreement. Additionally, in the event of default, barring
extraordinary circumstances, the Fund would be entitled to sell the underlying
securities. However, to the extent that proceeds from any sale upon a default
were less than the repurchase price, the Fund could suffer a loss. Repurchase
agreements usually are for a short period, such as one week or less, but could
be longer. The Fund will not enter into repurchase agreements having a
maturity of longer than one week if more than 10% of the Fund's assets, along
with certain other assets as set forth in the section "Investment
Restrictions" contained in the Fund's Statement of Additional Information,
would be so invested. The Fund will not enter into foreign repurchase
agreements. All repurchase agreements invested in by the Fund will be fully
collateralized and marked to market on a daily basis.
Because the Fund will invest in futures and options solely for the
purpose of hedging, the Adviser does not believe that the Fund will be
subject to the degree of risk frequently associated with futures and options
transactions. There are, nonetheless, certain risks associated with the use
of futures and options contracts even in a hedging context. First, there
may not always be a liquid secondary market for a futures or option contract
at the time when the Fund seeks to "close out" its position. The Fund will
seek to reduce the risk that it will be unable to "close out" contracts by
only entering into futures or options contracts which are traded on national
exchanges. It is also possible that changes in the prices of futures or
options contracts might correlate imperfectly, or not at all, with changes
in the market values of the stocks being hedged. With respect to Fund
investments in securities index futures contracts, there may be an imperfect
correlation (or no correlation) between the price movements of the
securities index futures contracts and price movements of the Atlanta 50
Portfolio securities or other Fund securities being hedged. In addition,
adverse market movements could cause the Fund to lose up to its full
investment in an options contract or to experience substantial losses on an
investment in a futures contract. However, barring the just referenced
significant market distortions, a similar result could be expected were the
Fund to invest directly in the securities being hedged. Of course, in a
given case, if the Adviser is incorrect in its forecast of interest rates,
market values, and other economic factors, the Fund would be better off
without the hedge. There is also the risk of loss by the Fund of margin
deposits in the event of bankruptcy of a broker with whom the Fund has an
open position in a futures contract or option.
As a matter of operational policy, the Adviser will not engage in any
of the foregoing options or futures transactions if, after giving effect to
such transaction, the aggregate of (i) the fair market value of securities
underlying options written by the Fund, (ii) the fair market value of
portfolio securities underlying index options written by the Fund and
(iii) the aggregate net settlement value of the Fund's open futures
contracts and options thereon would exceed 5% of the Fund's net assets.
Further information regarding the risks of the foregoing portfolio
strategies is provided in the Statement of Additional Information.
MANAGEMENT
BOARD OF DIRECTORS. The Board of Directors of the Fund is responsible
for the overall supervision of the operations of the Fund and performs
various duties of directors of corporations under state law as well as
duties imposed on boards of investment companies by the 1940 Act. The
members of the Board of Directors are William M. Bauman, Sidney Feldman,
Ronald L. Krise and Michael L. Lucas (Chairman of the Board). Additional
information concerning the Board of Directors may be found in the Statement
of Additional Information.
9
<PAGE>
INVESTMENT ADVISER. Wedgewood Equities, Inc. ("Wedgewood"), Eleven
Hundred Peachtree Street, N.E., Suite 1661, Atlanta, Georgia 30309 (the
"Adviser") serves as the Fund's sole investment adviser and manager
following the voluntary resignation in April 1996 of Astrop Advisory
Corporation as an investment adviser to the Fund. Subject to the
supervision of the Board of Directors, the Adviser manages the investment
and other affairs of the Fund and directs the investments of the Fund in
accordance with its investment objectives, policies and limitations pursuant
to an Investment Advisory and Management Agreement (the "Advisory
Agreement") which the Fund has entered into with the Adviser. Wedgewood
manages investment portfolios for private and institutional investors.
Wedgewood is affiliated with Pryor, McClendon, Counts & Co., Inc., the
Fund's principal distributor.
Under the Advisory Agreement, the Adviser provides the Fund with
investment advice, statistical and research facilities, and certain
equipment and services, including, but not limited to, office space and
necessary office facilities, equipment, and the service of required
personnel. The Adviser has the sole authority and responsibility to make
and execute investment decisions for the Fund, within the framework of the
Fund's investment policies, subject to review by the Board of Directors of
the Fund. The Adviser receives in the aggregate a management and advisory
fee, calculated daily and payable monthly, at an annual rate of 0.34% of the
average daily net assets of the Fund. The Adviser has agreed that 10% of
its fee will be contributed annually by the Fund on behalf of the Adviser to
one or more Atlanta charities designated by the "non-interested" members of
the Board of Directors. For the period ended May 31, 1996, the Adviser,
along with the former investment adviser, waived all of their fees, which
amounted to $23,448 (based upon the annual rate of 0.54% of the average
daily net assets of the Fund). Wedgewood intends (but is not obligated) to
continue to waive its fees for an indefinite period in the future.
PORTFOLIO MANAGER. The person employed by the Fund's investment
adviser who is responsible for the day-to-day management of the Fund's
portfolio is Michael L. Lucas. Below is a brief biography of Mr. Lucas.
Portfolio Manager: Michael L. Lucas
Title: President and Chairman of the Board
Mr. Lucas has acted as Portfolio Manager of the Fund and as President
and Chairman of the Board of Directors of the Fund since June 23, 1994. In
addition to serving as President and Chairman of the Fund, he has served as
President of Trias Capital Management, Inc., a Chicago-based investment
management firm since June 1996. From 1992 to present, Mr. Lucas served as
President of PMC/Astrop Capital Management, Inc., an Atlanta-based
investment management firm. From 1992 to June 1996, Mr. Lucas also served
as a vice-president of Pryor, McClendon, Counts & Co., Inc., the principal
distributor of the Fund. From 1988 to 1990, Mr. Lucas served as an
assistant vice president of Mellon Bank, Pittsburgh.
EXPENSES. In addition to the management and advisory fees paid to the
Adviser, the Fund pays all its other costs and expenses, including, for
example, costs incurred in the purchase and sale of assets, interest, taxes,
charges of the custodian of the Fund's assets, costs of reports and proxy
material sent to Fund shareholders, fees paid for independent accounting and
legal services, costs of printing prospectuses for Fund shareholders and
registering the Fund's shares, postage, fees to directors who are not
"interested persons" of the Fund, distribution expenses pursuant to the
Fund's Rule 12b-1 Plan, and insurance premiums.
EXECUTION OF PORTFOLIO TRANSACTIONS. In placing orders for the Fund's
portfolio transactions, the Adviser seeks to obtain the best net results.
When consistent with the objective of obtaining the best net results,
brokerage may be directed to persons or firms supplying investment
information to the Adviser. There may be occasions where the transaction
costs charged by a broker may be greater than that which another broker
might charge if the Fund determines, in
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<PAGE>
good faith, that the amount of such transaction costs is reasonable in
relation to the value of the brokerage, research and statistical services
provided by the executing broker. In no event, however, will the Fund "pay
up" for research in transactions where the broker acts as principal. The Fund
has no obligation to deal with any broker or group of brokers in the execution
of transactions. No formula exists and no arrangement is made with or
promised to any broker-dealer which commits either a stated volume or
percentage of brokerage business based on services furnished to the Adviser or
upon sale of Fund shares. Consistent with its obligation to obtain best net
results, the Adviser may consider a broker's or dealer's sale of Fund shares
as a factor in considering through whom portfolio transactions will be
effected.
BOARD OF ADVISERS
The Fund has a Board of Advisers primarily made up of Atlanta business
and professional leaders who provide the Fund with general investment and
economic advice. The Board of Advisers, whose role is purely advisory in
nature and which is not involved in the management of the Fund in any
respect, may consist of not more than 12 persons chosen by the Board of
Directors.
The current members of the Board of Advisers are as follows: MARIE
W. DODD, Vice President, Ivan Allen Company, Atlanta; JAMES C. EDENFIELD,
President and Chief Executive Officer, American Software, Inc., Atlanta; JOE
FRANK HARRIS, Private Investor, Cartersville, Georgia (former Governor of
Georgia); WALTER B. KISSINGER, Vice Chairman of the Board of Trustees,
Hofstra University, New York City; R. CHARLES LOUDERMILK, SR., President,
Chairman of the Board, Chief Executive Officer, Aaron Rents, Inc., Atlanta;
DONALD RATAJCZAK, Professor of Economics, Georgia State University, Atlanta;
J. EUGENE TALLEY, Independent Consultant, International Soft Drink
Manufacturing Industry; C. MACK TAYLOR, Chairman, Taylor & Mathis, Atlanta;
and THOMAS R. WILLIAMS, President, The Wales Group, Atlanta (former Chairman
of the Board, First Wachovia Corporation). Additional information
concerning the Board of Advisers may be found in the Statement of Additional
Information.
Each member of the Board of Advisers is entitled to receive an annual
fee of $1,000, of which one half will be contributed by the Fund, on behalf
of such member, to one or more Atlanta charities designated by the
"non-interested" members of the Board of Directors. For the period ended
May 31, 1996, all of such fees were waived. The members of the Board of
Advisers intend (but are not obligated) to continue to waive their annual
fee until the Fund's net assets reach a certain level.
11
<PAGE>
PLAN OF DISTRIBUTION
The Fund has adopted a written plan of distribution (the "12b-1 Plan")
in accordance with Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). Rule 12b-1, adopted by the Securities and Exchange Commission
under the 1940 Act, permits an investment company to directly or indirectly
pay expenses associated with the distribution of the investment company's
shares in accordance with a plan adopted by the company's board of directors
and approved by its shareholders. Pursuant to the 12b-1 Plan, the Fund has
entered into an Underwriting and Distribution Agreement with Pryor,
McClendon, Counts & Co., Inc. (the "Underwriter") whereby the Fund may
reimburse the Underwriter in an amount up to 0.25% per annum of the Fund's
average daily net assets for the purpose of financing any activity which is
primarily intended to result in the sale of the Fund's shares. The 12b-1
Plan is designed to reimburse the Underwriter for certain promotional and
other sales-related costs and to implement a dealer incentive program which
provides for periodic payments (trail fee) by the Fund to selected dealers
who furnish assistance to their customers in connection with the purchase of
shares of the Fund and who provide administrative support services to
customers who own shares in the Fund. In addition, the Adviser, in its sole
and absolute discretion, may from time to time out of its own assets provide
additional promotional incentives to dealers who sell shares of the Fund.
(See "Purchase of Shares.")
Activities appropriate for financing under the 12b-1 Plan include, by
way of example but not by way of limitation, the following: preparation and
distribution of advertising material and sales literature; expenses of
conducting and organizing sales seminars; supplemental payments to dealers
under a dealer incentive program; and costs of prospectuses, annual reports
and semi-annual reports for other than current shareholders. The fees
payable to selected dealers who participate in the program are calculated at
the annual rate of 0.25% of the average daily net asset value of those Fund
shares that are held in such dealers' customers' accounts which were
purchased on or after a specified date.
The 12b-1 Plan does not provide for reimbursement of the Underwriter's
salaries or other overhead costs. The 12b-1 Plan also does not provide for
the carrying over to future years of Underwriter's expenses in excess of
amounts currently reimbursable by the Fund under the 12b-1 Plan or permit
the carryover of unused reimbursement amounts to future years. Similarly,
if the 12b-1 Plan is terminated for any reason, the Fund will only reimburse
the Underwriter for expenses incurred under the Plan prior to the effective
date of termination.
The continuation of the 12b-1 Plan will be considered by the Board of
Directors annually. At least quarterly, the Board of Directors will review
a written report of amounts expended pursuant to the 12b-1 Plan and the
purposes for which such expenditures were made.
COMPUTATION OF NET ASSET VALUE AND PRICING
The net asset value of the Fund's shares is determined once daily as of
4:00 p.m., Eastern Time, each Business Day. A "Business Day" is any day on
which the New York Stock Exchange is open for business.
Net asset value is determined by dividing the value of the securities
owned by the Fund plus any cash or other assets (including interest or
dividends accrued but not collected) less all liabilities by the number of
the Fund's shares outstanding. Any portfolio securities which are primarily
traded on a national securities exchange are valued at the last sale price
on that exchange or, if there is no recent last sale price available, at the
current bid quotation. A security which is listed or traded on more than
one exchange is valued at the quotation on the exchange determined to be the
primary market for such security by the Board of Directors or its delegates.
All other securities not so traded are valued at the current bid quotation
if market quotations are available.
12
<PAGE>
Debt securities are valued on the basis of valuations furnished by a
pricing service which utilizes electronic data processing techniques to
determine valuations for normal institutional size trading units of debt
securities without regard to sale or bid prices when such valuations are
believed to more accurately reflect the fair market value of such
securities; otherwise, sale or bid prices are used. The premium or discount
on short-term securities, other than United States government agencies, with
a maturity of less than 60 days is amortized over the life of the security
on a straight line basis. Short-term securities purchased with a maturity
greater than 60 days are marked to market on a daily basis.
Options are valued at the last sale price unless the bid price is
higher or the asked price is lower, in which event such bid or asked price
is used. Financial futures are valued at the settlement price established
each day by the board of trade or exchange on which they are traded.
Securities with no readily available market quotations and other securities
are valued at fair value as determined in good faith by the Board of
Directors.
PURCHASE OF SHARES
The Fund's shares are continuously offered for sale by the Underwriter
and certain securities dealers and banks with which the Underwriter has
entered into sales agreements. Shares also may be purchased through the
Fund's transfer agent (the "Transfer Agent"). The minimum initial
investment is $500 ($250 for an IRA and $1,000 for bank wire purchases), and
the minimum for additional purchases is $50. All purchase orders will be
executed at the public offering price next determined after the purchase
order is received. (See "Public Offering Price.") The Fund and the
Underwriter reserve the right to reject any purchase order and to suspend
the offering of shares for a period of time.
With respect to any sales agreements that the Underwriter may enter
into with banks for the purpose of selling shares of the Fund, it should be
noted that the Glass-Steagall Act and other applicable laws, among other
things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting or distributing securities. While
the matter is not free from doubt, the Fund and the Underwriter believe that
such laws should not preclude a bank from providing administration or
shareholder servicing support or from acting as a broker. However, judicial
or administrative decisions or interpretations of such laws, as well as
changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or part of its servicing or
broker activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders, and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these occurrences.
PURCHASES THROUGH BROKERS. Purchase orders received by a broker before
4:00 p.m., Eastern Time, on any Business Day will be executed at the public
offering price determined that day, provided that the broker transmits the
order to the Underwriter by 4:00 p.m., Eastern Time, that day. Brokers
using the National Securities Clearing Corporation ("NSCC") who have
received a purchase order by 4:00 p.m., Eastern Time, are responsible for
ensuring that NSCC transmits such orders to the Underwriter by 4:00 p.m.,
Eastern Time, that day, in order to assure execution at that day's public
offering price. After an initial investment is made and a shareholder
account is established through a broker, at the investor's option subsequent
purchases may be made directly through the Transfer Agent.
Brokers who do not have sales agreements with the Underwriter also may
offer to place orders for the purchase of shares. Such a broker may charge
the investor a transaction fee as determined by the broker. That fee may be
in addition to the sales charge payable by the investor, and may be avoided
if
13
<PAGE>
shares are purchased through a broker which has a sales agreement with the
Underwriter or through the Transfer Agent.
PURCHASES THROUGH THE TRANSFER AGENT. Investors may purchase shares
and open an account directly through the Transfer Agent by completing and
signing the Account Application. Investors should mail the completed
Application, together with a check to cover the purchase, to the Transfer
Agent: PFPC Inc., P.O. Box 8950, Wilmington, Delaware 19899. Purchases
will be executed at the public offering price next computed after the
Transfer Agent has received the purchase order. Subsequent investments do
not need to be accompanied by an Application but should include an account
number.
Investors also may purchase shares of the Fund through the Transfer
Agent by bank wire, provided that prior to such purchase the Transfer Agent
has received an executed Account Application with the investor's taxpayer
identification number. The minimum wire investment is $1,000. Bank wire
purchases will be effected at the next computed public offering price after
the order is received; accordingly, a wire order received by 4:00 p.m.,
Eastern Time, on a Business Day will be effected that day. A wire
investment is considered received when the Transfer Agent is notified that
the bank wire has been credited to the Fund. The investor is responsible
for providing prior telephonic notice to the Transfer Agent that a bank wire
is being sent. An investor's bank may charge a service fee for wiring money
to the Fund. In addition, the Transfer Agent currently charges a service
fee for facilitating such wire purchases. Investors desiring to open an
account by bank wire should use the following wire instructions:
PNC Bank
Philadelphia, PA
ABA #031-000-053
For credit to Atlanta Growth Fund
A/C #510-112-3
REF: (investor's name & a/c #)
PUBLIC OFFERING PRICE. The Fund offers its shares continually to the
public at a price equal to the net asset value of such shares plus a sales
charge. The sales charge, which is imposed at the time of purchase, will be
reduced on purchases involving large amounts and may be eliminated in
certain circumstances described below. The following table shows the sales
charge and dealer concession at various investment levels:
USUAL
SALES SALES DEALER
CHARGE CHARGE CONCESSION
AS % OF AS % OF AS % OF
PUBLIC NET PUBLIC
AMOUNT OF PURCHASE AT THE OFFERING AMOUNT OFFERING
PUBLIC OFFERING PRICE PRICE INVESTED PRICE
------------------------------------------------------------------
Less than $25,000 3.75% 3.90% 3.30%
$25,000 to less than $50,000 3.25% 3.36% 2.86%
$50,000 to less than $100,000 2.75% 2.83% 2.42%
$100,000 to less than $250,000 2.25% 2.30% 1.98%
$250,000 to less than $500,000 1.25% 1.27% 1.10%
$500,000 to less than $1,000,000 0.50% 0.50% 0.44%
$1,000,000 and above * * *
* No sales charge is payable at the time of purchase on investments of
$1,000,000 or more, but for such investments a contingent deferred sales
charge of 0.30% may be imposed in the future in the event of redemption
transactions within one year of such purchase. (See "Redemption of
Shares.") In addition, with respect to any such purchases made through
dealers, the Adviser may pay such dealers from its own resources a fee
14
<PAGE>
of up to 0.30 of 1% of the amount invested to compensate such dealers for
their distribution assistance in connection with such purchase.
In addition to the amounts paid to dealers as a dealer concession out
of the sales charge paid by investors, the Underwriter may, from time to
time, at its expense or as an expense for which it may be reimbursed under
the 12b-1 Plan, pay a bonus or other consideration or incentive to dealers
who sell a minimum dollar amount of the shares of the Fund during a
specified period of time. In some instances, these incentives may be
offered only to certain dealers who have sold or may sell significant
amounts of shares. The total amount of such additional bonus payments or
other consideration will not exceed 0.25% of the public offering price of
the shares sold. Any such bonus or incentive programs will not change the
price paid by investors for the purchase of the Fund's shares or the total
amount that the Fund will receive as proceeds from such sales, although Fund
income will be reduced to the extent that the Underwriter is reimbursed by
the Fund for its expenses related thereto. Dealers may not use sales of the
Fund's shares to qualify for any incentives to the extent that such
incentives may be prohibited by the laws of any state.
From time to time upon written notice to all dealers, the Underwriter
also may hold special promotions for specified periods during which the
Underwriter may reallow dealers up to the full sales charge shown above.
During such periods, dealers who receive 90% or more of the sales charge
paid by investors may be deemed to be underwriters under the Securities Act
of 1933.
REDUCTIONS IN SALES CHARGES. Investors may qualify to receive reduced
sales charges pursuant to an aggregation privilege or under a statement of
intention, as described below. To qualify, investors must, at the time of
purchase, provide sufficient information to permit confirmation of
qualification.
(1) AGGREGATION. The following purchases may be aggregated for
purposes of determining the amount of purchase by an investor: (a)
individual purchases by a single purchaser, the purchaser's spouse and their
children under the age of 21 years purchasing shares for their own account,
including shares purchased in connection with an employee benefit plan(s)
exclusively for the benefit of such individual(s) (such as an Individual
Retirement Plan ("IRA"), individual-type 403(b) plan ("403(b) Plan") or
single-participant Keogh-type plan) or by a company, as defined in Section
2(a)(8) of the 1940 Act, solely controlled, as defined in the 1940 Act, by
such individuals; or (b) individual purchases by a trustee(s) or other
fiduciary(ies) purchasing shares (i) for a single trust estate or a single
fiduciary account, including an employee benefit plan other than a plan
described in "(a)" above, or (ii) concurrently for two or more employee
benefit plans of a single employer or of employers affiliated with each
other in accordance with Section 2(a)(3)(c) of the 1940 Act (again excluding
an employee benefit plan described in "(a)" above), provided such trustee or
other fiduciary purchases fund shares in a single payment. Purchases made
for nominee or street name accounts may not be aggregated with purchases
made for other accounts.
(2) STATEMENT OF INTENTION. In executing a Statement of Intention
("SOI") an investor indicates an aggregate investment amount he or she
intends to invest in the Fund in the following thirteen months. The SOI is
included as part of the Account Application. The sales charge applicable to
that aggregate amount then becomes the applicable sales charge on all
purchases made concurrently with the execution of the SOI and in the
thirteen months following that execution. If at the end of the
thirteen-month period covered by the SOI the total amount of purchases does
not equal the amount indicated, the investor will be required to pay the
difference between the sales charges paid at the reduced rate and the sales
charges applicable to the purchases actually made. Shares having a value
equal to 5% of the amount specified in the SOI will be held in escrow during
the thirteen-month period (while remaining registered in the investor's
name) to assure any necessary payment.
15
<PAGE>
PURCHASES BY RETIREMENT PLANS. Shares of the Fund may be an
appropriate investment medium for various retirement plans, including IRAs,
Simplified Employee Pension Plans, 403(b) Plans and Keogh-type and
corporate-type business retirement plans. The Fund has certain prototype
retirement plans available for use by corporations and individuals.
Information concerning these plans, including the custodian's fees and forms
necessary to adopt such plans, can be obtained by calling or writing the
Fund or the Underwriter.
All retirement plans involve a long-term commitment of assets and are
subject to various legal requirements and restrictions. The legal and tax
implications may vary according to the circumstances of the individual
investor. Therefore, investors are urged to consult with their own
attorneys or tax advisers in connection with any such investment.
CERTIFICATES. In the interest of economy and convenience, physical
certificates representing the Fund's shares will not be issued unless an
investor or an investor's broker submits a written request to the Transfer
Agent. Shares of the Fund are recorded on a register by the Transfer Agent,
and shareholders who do not elect to receive certificates have the same
rights of ownership as if certificates had been issued to them. Redemptions
and exchanges by shareholders who hold certificates may take longer to
effect than similar transactions involving non-certificated shares because
the physical delivery and processing of properly executed certificates is
required, and shareholders with certificated shares ordinarily may not hold
their shares through the "street name" of their brokers. Accordingly, the
Fund strongly recommends that shareholders do not request issuance of
certificates.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
When a shareholder makes an initial investment in the Fund, a
shareholder account is opened in accordance with registration instructions.
The registered shareholder will receive from the Transfer Agent a periodic
confirmation statement showing current transactions in the account, along
with a summary of the status of the account.
The services described below are permitted under the current policies
of the Fund but may be terminated at any time upon 60 days' written notice.
For more information on any of these services, please contact the Transfer
Agent.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables
shareholders to make regular monthly or quarterly investments in shares
through automatic charges to their bank accounts. With shareholder
authorization and bank approval, the Transfer Agent will automatically
charge the bank account for the amount specified ($50 minimum), which will
be automatically invested in shares at the public offering price on or about
the 20th day of the month. Participation in such plan will begin within 20
days after receipt of the Automatic Investment Plan Application. If your
bank account cannot be charged due to insufficient funds, a stop-payment
order or the closing of your bank account, such plan may be terminated and
the related investment reversed. The shareholder may change the amount of
the investment or discontinue the plan at any time by writing to the
Transfer Agent.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. Dividends and
capital gain distributions will be automatically reinvested in additional
shares of the Fund unless otherwise indicated (see the Account Application).
A shareholder may elect to have all dividends and/or capital gain
distributions automatically reinvested in additional shares of the Fund or
paid in cash.
When an election has been made to receive income dividends and/or
capital gain distributions in cash, the shareholder may, by returning the
dividend or capital gain distribution check to the Transfer Agent, have that
check applied to the purchase of additional shares at the net asset value
(without sales
16
<PAGE>
charge) next determined after receipt by the Transfer Agent. Such check must
be received by the Transfer Agent no later than the close of business on the
30th calendar day following the payment date. Checks should be returned for
reinvestment only if the amount is clearly sufficient to purchase at least one
full share.
Dividends and distributions automatically reinvested are credited to
the Fund on the day they are paid at the Fund's net asset value for that
day. This election may be changed by the shareholder at any time but, to be
effective for a particular dividend or capital gain distribution, the
election must be received by the Transfer Agent approximately 15 business
days prior to the payment date to permit the change to be entered into the
shareholder account. The federal income tax status of dividends and capital
gain distributions is the same whether taken in cash or reinvested in
shares.
REDEMPTION OF SHARES
As described below and subject to the possible imposition in the future
of a contingent deferred sales charge under certain circumstances (described
below), shares of the Fund may be redeemed without charge at their net asset
value. Redemption proceeds will be sent within [seven] days of the
execution of a redemption request. Shareholders with brokers who sell
shares may redeem shares through such brokers; if the shares are held in the
broker's "street name" the redemption must be made through the broker.
Other shareholders may redeem shares through the Transfer Agent.
REDEMPTIONS THROUGH BROKERS. Shareholders with accounts with brokers
who sell shares of the Fund may submit redemption requests to such brokers.
Brokers may honor redemption requests either by repurchasing shares from
redeeming shareholders at their net asset value next computed after the
brokers receive the requests or by forwarding such requests to the Transfer
Agent (see "Redemptions Through the Transfer Agent"). Redemption proceeds
normally will be paid by check, or if offered by brokers, credited to the
shareholder's brokerage account at the election of the shareholder. Brokers
may impose a service charge for handling redemption transactions placed
through them and may have other requirements concerning redemptions.
Accordingly, shareholders should contact their brokers for more details.
REDEMPTIONS THROUGH THE TRANSFER AGENT. Redemption requests may be
transmitted to the Transfer Agent by telephone, telex or telegram or by
mail. All redemptions will be effected at the net asset value next computed
after the Transfer Agent has received the request and any required
supporting documentation. Redemption requests will require a signature
guarantee unless the shareholder has qualified to have redemption proceeds
sent directly to a designated bank ("Designated Account"); shareholders may
so qualify by completing the appropriate sections of the Application.
Shareholders may change their "Designated Accounts" only by a letter of
instruction containing all account signatures, all of which must be
guaranteed.
(i) BY TELEPHONE OR TELEGRAM. Redemptions may be made by
telephone or telegram; a check representing the redemption proceeds
will be mailed to the shareholders' address of record. In addition,
telephone and telegram redemption orders will be effected and proceeds
will be sent to a Designated Account if the shareholder has qualified
for such an Account, as discussed in the preceding paragraph.
Redemptions may be made by calling the Transfer Agent toll-free at
1-800-331-3186, Monday through Friday, during the hours of 8:30 a.m.
and 5:00 p.m., Eastern Time, except for holidays on which the New York
Stock Exchange is closed. Shareholders with Designated Accounts should
request that redemption proceeds be sent either by bank wire or by
check. The minimum redemption amount for a bank wire is $1,000.
Shareholders requesting a bank wire should allow two business days from
the time the redemption request is effected for the
17
<PAGE>
proceeds to be deposited in the shareholder's Designated Account. See
"Other Important Redemption Information." Shareholders who hold
certificates for shares may not redeem by telephone, telex or telegram.
The Account Application provides that neither the Fund nor the
Transfer Agent nor any other agent of the Fund will be responsible for
the authenticity of redemption instructions received by telephone and
believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Fund will use procedures as are
considered reasonable, including requesting information as to account
registration (such as the name in which the account is registered, the
account number, recent transactions in the account, and the
shareholder's social security number and address). To the extent that
the Fund fails to use reasonable procedures as a basis for its belief,
it and/or the Transfer Agent may be liable for instructions that prove
to be fraudulent and/or unauthorized.
(ii) BY MAIL. Redemption requests should be mailed directly to
the Transfer Agent: PFPC Inc., P.O. Box 8950, Wilmington, Delaware
19899. At the election of the shareholder, redemption proceeds will be
paid by check mailed to the shareholder or through a bank wire to a
Designated Account. Requests for payment through a check of
redemptions of more than $25,000 require signature guarantees, as do
requests for payment of redemption proceeds to a party other than the
registered account owner(s). Redemptions of shares for which
certificates have been issued must be accompanied by properly endorsed
share certificates.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will
not be processed until all of the necessary documentation has been received
in proper form. A shareholder in doubt about what documents are required
should contact his or her broker, the Transfer Agent or the Underwriter.
To protect the Fund and its shareholders, signature guarantees are
required for certain transactions. A signature guarantee can be obtained
from any FDIC member bank, a trust company located in the United States, a
member firm of a national securities exchange or a foreign branch of any of
the foregoing. A savings and loan association or notary public is not an
acceptable guarantor.
Except in extraordinary circumstances and as permitted under the 1940
Act, payment for shares redeemed by telephone or telegram or in writing will
be made promptly after receipt of a redemption request, if in good order,
but not later than [seven] days after the date the request is executed.
Requests for redemption which are subject to any special conditions or which
specify an effective date other than as provided herein cannot be accepted.
If the Transfer Agent is requested to redeem shares for which the Fund
has not yet received good payment, it may delay payment of redemption
proceeds until it has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check, it can
take up to 15 days from the purchase date to confirm that the check has
cleared and good payment has been received. Redemption proceeds will not be
delayed when shares have been paid for by wire or when the investor's
account holds a sufficient number of shares for which funds already have
been collected.
The Fund may redeem the shares of any shareholder whose account is
reduced to less than $250 in value through redemptions or other action by
the shareholder. Notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the
shareholder may increase his or her holdings to an aggregate amount of $250
or more (with a minimum purchase of $50 or more).
CONTINGENT DEFERRED SALES CHARGES. In order to recover commissions
paid to dealers on purchases of $1,000,000 or more, the Fund may in the
future seek an exemption under Section 6(c) of the 1940 Act to permit it in
the future to
18
<PAGE>
impose a contingent deferred sales charge of 0.30% in the event of redemption
transactions within 12 months following such purchases. There is no assurance
that any such request by the Fund for an exemption under Section 6(c) will be
granted.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The policy of the Fund is to pay dividends from net investment income
and make distributions of realized capital gains, if any, annually.
However, provisions in the Internal Revenue Code of 1986, as amended (the
"Code"), may result in additional income and capital gains distributions by
the Fund. Unless indicated otherwise by the shareholder, the Fund will
automatically reinvest such distributions into full and fractional shares at
net asset value.
The Fund intends to qualify and elect to be taxed as a "regulated
investment company" under Subchapter M of the Code. In order to do so, the
Fund must satisfy certain requirements concerning the timing of dividends
and distributions, sources of income and diversification of assets. In any
fiscal year in which the Fund so qualifies and distributes to shareholders
its net investment income and net capital gains, the Fund will be relieved
of federal corporate income tax with respect to dividends and distributions
paid to shareholders.
Distributions by the Fund to shareholders, except distributions to
shareholders not subject to federal income taxation, are generally taxable
to the shareholders, whether received in cash or additional Fund shares.
Distributions paid out of the Fund's net investment income and net
short-term capital gains are taxable to shareholders as ordinary income.
Distributions paid out of the Fund's net long-term capital gains and
designated as such are taxable to shareholders as long-term capital gains,
regardless of the length of time that they have held their shares in the
Fund. For individuals, long-term capital gains are currently subject to a
maximum tax rate of 28% while ordinary income is subject to a maximum
effective rate in excess of 39.6%.
Information about the tax status of dividends and distributions from
the Fund will be mailed to the Fund's shareholders annually.
In general, upon redemption of shares of the Fund the shareholder will
recognize taxable gain or loss equal to the difference between the amount
realized on the redemption and the shareholder's adjusted basis in such
shares. Such gain or loss will be capital gain or loss for any shareholder
who is not a dealer in securities. Under the Code, the deductibility of
capital losses is subject to certain limitations.
The foregoing relates to federal income taxation as in effect as of the
date of this Prospectus. Distributions from net investment income and from
net realized capital gains may also be subject to state and local taxes.
For a more detailed discussion of the federal income tax consequences of
investing in shares of the Fund, see "Tax Status" in the Statement of
Additional Information.
DESCRIPTION OF COMMON STOCK
The Fund is an open-end, non-diversified, investment company
incorporated under the laws of the State of Georgia. All shares of the Fund
have equal rights as to redemption, dividends and liquidation and will be
fully paid and non-assessable when issued and will have no preemptive or
conversion rights. All shares also have equal voting rights and may be
voted in the election of Directors and on other matters submitted to the
vote of shareholders.
The Fund's Articles of Incorporation divide the Board of Directors into
three classes each having a term of three years. At the annual meeting of
shareholders every year, the term of one class expires. This provision may
be
19
<PAGE>
deemed to have "antitakeover" implications and could delay for up to two years
the replacement of a majority of the Board of Directors; therefore, it may
discourage proxy contests for the election of directors or purchases of
substantial blocks of shares because it could operate to prevent obtaining
control of the Board of Directors in a relatively short period of time. The
Board of Directors nonetheless believes that a classified Board of Directors
will be advantageous to the Fund and its shareholders, because, by providing
that directors will serve three-year terms rather than one-year terms, it will
enhance the likelihood of continuity and stability in the composition of the
Board of Directors and in its policies which, in turn, will permit the Board
of Directors more effectively to represent the interests of all shareholders.
Fund shares do not have cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of directors
can elect 100% of the directors if they choose to do so, and, in such event,
the holders of the remaining shares so voting will not be able to elect any
directors.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
PNC Bank, 200 Stevens Drive, Suite 440, Lester, Pennsylvania 19113,
acts as custodian for the securities and cash of the Fund. PFPC Inc., 400
Bellevue Parkway, Wilmington, Delaware 19809, serves as the Fund's transfer
and dividend disbursing agent.
The custodian and the transfer and dividend disbursing agent play no
role in determining the investment policies of the Fund or which Fund
investments are to be purchased or sold.
LEGAL COUNSEL
Powell, Goldstein, Frazer & Murphy, Atlanta, Georgia, serves as legal
counsel to the Fund.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. serves as the independent accountants for the
Fund.
ADDITIONAL INFORMATION
The Fund will send to its shareholders a six-month unaudited and an
annual audited financial report, each of which will include a list of
investment securities held by the Fund.
Shareholder inquiries should be directed to the Fund at either of the
telephone numbers or the mailing address listed on the cover page of this
Prospectus.
INVESTMENT RESULTS
The Fund may from time to time include information on its investment
results and/or comparisons of its investment results to various unmanaged
indices as set forth in the Statement of Additional Information or results
of other mutual funds or investment or savings vehicles in advertisements or
in reports furnished to present or prospective shareholders. See the
Statement of Additional Information for further details concerning such
performance comparisons.
20
<PAGE>
The Fund's investment results will be calculated on a total return
basis in the following manner. An initial investment is divided by the
offering price (which includes the sales charge) as of the first day of the
period in order to determine the initial number of shares purchased.
Subsequent dividends and capital gain distributions are then reinvested at
net asset value on the reinvestment date determined by the Board of
Directors. The sum of the initial shares purchased and shares acquired
through reinvestment is multiplied by the net asset value per share as of
the end of the period in order to determine ending value. The difference
between the ending value and the initial investment divided by the initial
investment converted to a percentage equals total return. The resulting
percentage indicates the positive or negative investment results that an
investor would have experienced from reinvested dividends and capital gain
distributions and changes in share price during the period. Total return
may be calculated for one year, five years, ten years and for other periods
of years. The average annual total return over periods greater than one
year also may be computed by utilizing ending values as determined above.
The Fund may also, at times, calculate total return based on net asset
value per share (rather than the offering price), in which case the figure
would not reflect the effect of any sales charges which would have been paid
if shares were purchased during the period reflected in the computation.
Consequently, total return calculated in this manner will be higher. Total
return for the unmanaged indices will be calculated assuming reinvestment of
dividends and interest but will not reflect any deductions for advisory
fees, brokerage costs or administrative expenses.
The Fund's investment results will vary from time to time depending
upon market conditions, the composition of the Fund's portfolio and
operating expenses of the Fund, so that any investment results reported by
the Fund should not be considered representative of what an investment in
the Fund may earn in any future period. These factors and possible
differences in calculation methods should be considered when comparing the
Fund's investment results with those published for other mutual funds, other
investment vehicles and unmanaged indices. The Fund's results also should
be considered relative to the risks associated with the Fund's investment
objectives and policies.
21
<PAGE>
ACCOUNT APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number ("TIN") which appears
in Section 1 of the Application complies with the following guidelines:
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Individual Individual Trust, Estate, Trust, Estate,
Pension Plan Trust Pension Plan and
not personal TIN
of fiduciary
Joint First individual
Individual listed in the "Account
Registration" portion
of the Application
Uniform Gifts Minor Corporation, Corporation,
to Minor Partnership, Other Partnership, Other
Organization Organization
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
Applications without a certified TIN will not be accepted unless the
applicant is a nonresident alien, foreign corporation or foreign partnership and
has attached a completed Internal Revenue Service ("IRS") Form W-8.
BACKUP WITHHOLDING. The Fund, and other payers, must, according to
Section 3406 and the authority promulgated thereunder, withhold 31% of any
reportable interest and reportable dividends with respect to an investor if:
(1) the investor fails to furnish a correct TIN to the Fund;
(2) the IRS notifies the Fund that the investor furnished an incorrect
TIN;
(3) the Fund is notified by the IRS that the investor is subject to
backup withholding under Section 3406(a)(1)(C); or
(4) the investor fails to certify to the payor that the investor is not
subject to backup withholding under (3) above.
For reportable payments other than interest or dividends, the investor is
subject to backup withholding only if (1) or (2) above applies.
i
<PAGE>
A number of entities are exempt from backup withholding and such entities
should check the box "Exempt from Backup Withholding" on the Application. A
complete listing of such exempt entities appears in the Instructions
accompanying Form W-9 (which can be obtained from the IRS) and includes, among
others, the following:
- a corporation
- a financial institution
- an organization exempt from tax under Section 501(a) and an
individual retirement plan (IRA)
- the United States or any agency or instrumentality thereof
- a State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof
- an international organization or any agency or instrumentality
thereof
- a registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
- a real estate investment trust
- a common trust fund operated by a bank under Section 584(a)
- an exempt charitable remainder trust, or a non-exempt trust described
in Section 4947(a)(1)
Investors should contact competent tax counsel if they have any questions
concerning entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Internal Revenue Code of 1986,
as amended.
IRS PENALTIES. Investors who do not supply the Fund with a correct TIN may
be subject to a $50 penalty imposed by the IRS. If an investor fails to report
interest, dividend or patronage dividend income on the investor's federal income
tax return, which amounts were reported as paid to such investor on an
information return, such failure will constitute strong evidence that any
portion of an underpayment attributable to such failure was negligent and
subjects the investor to a 20% penalty with respect to such portion in addition
to other applicable penalties. If an investor provides information on this form
or makes any other statement resulting in a decrease in amounts otherwise
withheld and as of the time such statement was made, there was no reasonable
basis for such statement, such investor may be subject to a $500 penalty imposed
by the IRS and to certain criminal penalties including fines and imprisonment.
NONRESIDENT ALIENS. Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 with their application. Form W-8
generally remains in effect for three calendar years following the date it is
received by the Fund. Filing Form W-8 with the payor will not exempt investors
from the 30% (or lower treaty rate) withholding applicable to nonresident
aliens, foreign corporations and foreign partnerships.
ii
<PAGE>
ACCOUNT APPLICATION
THE ATLANTA GROWTH FUND, INC.
PLEASE MAKE A PHOTOCOPY OF THIS APPLICATION
FOR YOUR RECORDS AND MAIL THE ORIGINAL TO:
PFPC INC.
P.O. BOX 8950
WILMINGTON, DELAWARE 19899.
TOLL-FREE: 1-800-331-3186
If this account has more than one shareholder, all singular references in
this Application refer to all shareholders. In case of two or more
shareholders, the account will be registered "Joint Tenants with Rights of
Survivorship" unless otherwise specified. All references herein to the Fund
refer to The Atlanta Growth Fund, Inc.
For Uniform Transfers to Minors Act or Uniform Gifts to Minors Act
accounts, use the child's Social Security number. If your account is an IRA or
other retirement plan or trust account, please indicate the type of account
after your name on the first line of Section 1.
1. ACCOUNT REGISTRATION (PLEASE PRINT):
Individual
First Name Middle Name Last Name Social Security Number
Joint Tenancy
First Name Middle Name Last Name
First Name Middle Name Last Name
Street Address or P.O. Box City State Zip
Home Phone Business Phone Citizenship
Uniform Gifts to Minors
Custodian's Name Minor's Name
Minor's Social Security Number
Under the Uniform Gifts to Minors Act
State of Residence of Minor
Other
Name Employer Identification No.
(NOTE: All owners, trustees and authorized signers must sign the Application).
2. PAYMENT:
(Please see Prospectus for minimum initial investment requirements.) DO NOT SEND
CURRENCY.
A. Check enclosed for $. (Payable to The Atlanta Growth Fund, Inc.), or
B. I purchased shares of the Fund through my dealer on .
Date
3. STATEMENT OF INTENTION:
(Optional)
I understand that through accumulated investments I can reduce my sales charges.
I plan to invest over a 13-month period in shares of the Fund an aggregate
amount of at least:
$ 25,000 $ 50,000 $100,000 $250,000
$500,000 $1,000,000 (and above)
<PAGE>
(When a shareholder signs a Statement of Intention in order to qualify for a
reduced sales charge, shares equal to 5% (in no case in excess of 1/2 of 1%
after an aggregate of $1,000,000 has been purchased under the Statement) of the
dollar amount specified in this Statement of Intention will be held in escrow in
the Shareholder's Account out of the initial purchase (or subsequent purchases,
if necessary). All dividends will be credited to the Shareholder's Account in
shares (or paid in cash, if requested). If the intended investment is not
completed within the specified 13-month period, the purchaser will remit the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total of such purchases had been made at a single
time. If this difference is not paid within 20 days after written request by
the Fund or its representative, the appropriate number of escrowed shares will
be redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser will be liable for the balance still outstanding. The
Statement of Intention may be revised upward at any time during the 13-month
period, and such revision will be treated as a new Statement of Intention,
except that the 13-month period during which the purchase must be made will
remain unchanged and there will be no retroactive reduction of the sales charges
paid on prior purchases.)
4. SIGNATURE AND TAXPAYER CERTIFICATION:
The undersigned warrant(s) that I (we) have full authority and, if a natural
person, I (we) am (are) of legal age to purchase shares pursuant to this
Application and have received a current prospectus for the Fund.
Under the Interest and Dividend Tax Compliance Act of 1983, the Fund is required
to have the following certification:
Under the penalties of perjury, I certify that:
(1) The number shown in Section 1 is my correct Social Security/Taxpayer
Identification Number, and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all reportable interest or
dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--YOU MUST CROSS OUT ITEM (2) ABOVE IF YOU HAVE BEEN
NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE
OF UNDERREPORTING OF INTEREST OR DIVIDENDS ON YOUR TAX RETURN.
Please print titles if signing for corporations, trusts, etc.
- ------------------------- ------------------------------ ----------
Signature of Owner President, Trustee, Date
General Partner, Etc.
- ------------------------- ------------------------------ ----------
Signature of Joint Owner Secretary, Co-Trustee, Etc. Date
2
<PAGE>
5. DEALER INFORMATION:
(For dealer use only.)
- -------------------------------------------------------------------------------
Dealer Name
- -------------------------------------------------------------------------------
Address of Home Office
- -------------------------------------------------------------------------------
City State Zip
X
------------------------------------------------------------------------------
Authorized Signature of Dealer
- -------------------------------------------------------------------------------
Address of Office Servicing Account
- -------------------------------------------------------------------------------
City State Zip
Registered Representative's Name and No. (exactly as it appears on firm's
registration)
( )
Registered Representative's Phone No.
6. ACCOUNT OPTIONS:
(a) DIVIDEND AND CAPITAL GAIN INSTRUCTIONS:
All dividends will be reinvested into the Fund unless otherwise checked here:
Pay in cash.
All capital gain distributions will be reinvested into the Fund unless otherwise
checked here: Pay in cash.
(b) PAYMENTS TO OTHERS:
(Complete if dividend or withdrawal checks are to be payable to someone other
than the registered shareholder(s).)
Make checks payable and send to:
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Street Address
- -------------------------------------------------------------------------------
City State Zip
(c) AUTOMATIC INVESTMENT PLAN:
IMPORTANT: Attach an unsigned, voided check (for checking accounts) or a savings
account deposit slip here and complete the information below.
I would like to establish an Automatic Investment Plan as described in the
Prospectus. I agree to reimburse the Fund and its transfer agent for any
expenses or losses that they may incur in connection with my plan, including any
caused by my bank's failure to act in accordance with my request. If my bank
makes any erroneous payment or fails to make a payment after shares are
purchased
3
<PAGE>
on my behalf, any such purchase may be cancelled and I hereby authorize
redemptions and/or deductions from my account for that purpose.
Debit my bank account $ ($50 minimum) on a monthly quarterly basis, to be
invested in the Fund.
(d) REDEMPTION BY TELEPHONE OR TELEGRAM; WIRING OF REDEMPTION PROCEEDS:
I, either directly or through my dealer, if any, named below, hereby
authorize PFPC Inc. to honor any telephone or telegraphic request believed to be
authentic for redemption.
By selecting telephone privileges, I agree that neither the Fund nor its
advisers, underwriter, transfer agent or other Fund agent will be liable for any
loss, injury, damage or expense as a result of acting upon telephone
instructions purporting to be on my behalf, and that neither the Fund nor any
such party will be responsible for the authenticity of any such telephone
instructions believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Fund will use procedures as are considered
reasonable, including requesting information as to account registration (such as
the name in which the account is registered, the account number, recent
transactions in the account, and the shareholder's social security number and
address). To the extent that the Fund fails to use reasonable procedures as a
basis for its belief, it and/or the transfer agent may be liable for
instructions that prove to be fraudulent and/or unauthorized. I have read the
Prospectus and understand the terms and conditions of the privileges that I have
selected, and I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the
Fund reserves the right to refuse any telephone instructions.
By completing the following section, redemptions which exceed $1,000 may be
wired to your bank. (Wiring instructions may be obtained from your bank.)
Name(s) in which Bank Account is Established
- -------------------------------------------------------------------------------
Name of Bank
- -------------------------------------------------------------------------------
Bank A.B.A. Number Account Number
- -------------------------------------------------------------------------------
Bank Address
(A corporation (or partnership) must also submit a "Corporate Resolution" (or
"Certificate of Partnership") indicating the names and titles of officers (or
partners) authorized to act on its behalf.)
4
<PAGE>
DO NOT DETACH
INSTRUCTIONS TO BANK--AUTOMATIC INVESTMENT PLAN AUTHORIZATION:
To:
----------------------------------------------------------------------------
Name of your Bank ABA Number
- -------------------------------------------------------------------------------
Street Address City State Zip
I authorize you, the above-named bank, to charge my checking/savings account for
amounts drawn by PFPC Inc., acting as my agent. I agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me. This authority shall remain in effect until you
receive written notice from me changing its terms or revoking it. Until you
actually receive such notice, I agree that you shall be fully protected in
paying any charge under this authority. I further agree that if any such charge
is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X
------------------------------------------------------------------------------
Signature(s) EXACTLY as Shown on Bank Records Date
- -------------------------------------------------------------------------------
Print name(s) Account Number
- -------------------------------------------------------------------------------
Your street address City State Zip
INDEMNIFICATION AGREEMENT:
To the bank named above: In consideration of your compliance with the request
and authorization of the depositor named above, the Fund agrees: (1) to
indemnify and hold you harmless from any liability to any person having an
account with you arising out of payments made by you to the Fund or its transfer
agent after charging the account of such person pursuant to the authorization of
the depositor named above, and from any liability to any such person resulting
from nonpayment of any such charge whether with or without cause, and whether
intentionally or inadvertently, but excepting any liability arising out of your
payment of any charge made against insufficient funds; and (2) to refund to you
any amount erroneously paid by you to the Fund or its transfer agent provided
your refund request is received by the Fund or its transfer agent within 12
months of such payment.
5
<PAGE>
INVESTMENT ADVISER AND MANAGER
Wedgewood Equities, Inc.
Suite 1661
Eleven Hundred Peachtree Street
Atlanta, Georgia 30309
UNDERWRITER
Pryor, McClendon, Counts & Co., Inc.
Suite 819
1515 Market Street
Philadelphia, Pennsylvania 19102
CUSTODIAN
PNC Bank
200 Stevens Drive
Suite 440
Lester, Pennsylvania 19113
COUNSEL
Powell, Goldstein, Frazer & Murphy
16th Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103-2962
<PAGE>
THE ATLANTA
GROWTH FUND, INC.
SUITE 1661
ELEVEN HUNDRED PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
TELEPHONE: (404) 875-2161
TOLL-FREE: 1-800-899-4742
<PAGE>
THE ATLANTA GROWTH FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 27, 1996
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to a Prospectus (the "Prospectus")
of The Atlanta Growth Fund, Inc. (the "Fund") dated September 27, 1996 and
should be read in conjunction therewith. A copy of the Prospectus may be
obtained from the Fund, Suite 1661, Eleven Hundred Peachtree Street, N.E.,
Atlanta, Georgia 30309.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVES AND POLICIES; RISK CONSIDERATIONS. . . . . . . . . . . 1
Options and Futures Transactions. . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Options on Securities . . . . . . . . . . . . . . . . . . . . . . . . . 1
Securities Index Options. . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Futures Contracts and Related Options . . . . . . . . . . . . 2
Regulatory Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 3
Limitations on Options or Futures Transactions. . . . . . . . . . . . . 3
Risk Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
DIRECTORS AND OFFICERS; BOARD OF ADVISERS. . . . . . . . . . . . . . . . . . 9
Remuneration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Initial Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . 11
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment Advisory and Management Agreement. . . . . . . . . . . . . . 12
Other Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Expense Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . 12
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE . . . . . . . . . . . . . 14
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
CERTAIN RELATIONSHIPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
LIMITATION OF DIRECTOR LIABILITY . . . . . . . . . . . . . . . . . . . . . . 16
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Appendix A--Specimen Price-Make-Up Sheet
B-i
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES; RISK CONSIDERATIONS
The investment objectives and policies of the Fund are summarized on the
front page of the Prospectus and discussed in the text of the Prospectus under
"Investment Objectives and Policies." Certain of the investment practices of the
Fund are further explained below.
OPTIONS AND FUTURES TRANSACTIONS.
GENERAL. The Fund may purchase and write put and call options on
securities and market indices, which options are listed for trading on a
national securities exchange. A call option gives the purchaser the right to
buy, and the writer the obligation to sell, the underlying security or market
index value at the exercise price during the option period. A put option gives
the purchaser the right to sell, and the writer the obligation to buy, the
underlying security or market index value at the exercise price during the
option period. In general, the Fund will purchase or write such options to
hedge against anticipated or potential declines in the value of the Fund's
portfolio of securities or to facilitate the rapid implementation of investment
strategies if the Fund anticipates a significant market or market sector
advance.
The Fund may also purchase and sell certain financial futures contracts and
purchase, but not write, options on such futures contracts. Futures contracts
and options thereon are generally traded on commodities exchanges or contract
markets. The Fund's commodities futures and options transactions would
generally be for the purpose of hedging against the effect that changes in
general market conditions, interest rates, and conditions affecting particular
industries may have on the value of securities held in the Fund's portfolio.
OPTIONS ON SECURITIES. The Fund will write call options on securities only
if they are covered. A call option is "covered" if the Fund owns the underlying
securities covered by the call or if the Fund holds a call at the same exercise
price, for the same exercise period and on the same securities as the call
written. The Fund will write put options on securities only if they are
secured. A put option is "secured" if the Fund holds a put at the same exercise
price, for the same exercise period and on the same underlying security as the
put written, or if the Fund holds cash, cash equivalents or high grade
short-term obligations with a value equal to the exercise price of the put, in a
segregated account with the Fund's custodian. Such segregated account will be
"marked-to-market" daily to reflect the current value of such put.
During the option period, the covered call writer gives up most of the
potential for capital appreciation above the exercise price should the
underlying security rise in value, and the secured put writer retains the risk
of loss should the underlying security decline in value. For the covered call
writer, substantial appreciation in the value of the underlying security would
result in the security being "called away." For the secured put writer,
substantial depreciation in the value of the underlying security would result in
the security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain and the buyer a loss in the amount of
the premium. If the covered call option writer has to sell the underlying
security because of the exercise of a call option, the call option writer
realizes a gain or loss from the sale of the underlying security, with the
proceeds being increased by the amount of the premium.
If a secured put option expires unexercised, the writer realizes a gain and
the buyer a loss in the amount of the premium. If the secured put writer has to
buy the underlying security because of the exercise of the put option, the
secured writer incurs an unrealized loss to the extent that the current market
value of the underlying security is less than the exercise price of the put
option, minus the premium received.
B-1
<PAGE>
SECURITIES INDEX OPTIONS. As part of its options transactions, the Fund
may also use securities index options. Through the writing or purchase of index
options, the Fund can achieve many of the same objectives as through the use of
options on individual securities. Options on securities indices are similar to
options on a security except for the right to take or make delivery of a
security at a specified price. An option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of cash if the
closing level of the securities index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. For a further discussion of index options, see "Financial
Futures Contracts and Related Options," below.
Price movements in securities which the Fund owns or intends to purchase
will not correlate perfectly with movements in the level of an index and,
therefore, the Fund bears the risk of a loss on an index option which is not
completely offset by movements in the price of such securities. Because index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on specific
securities, cannot provide in advance for or cover its potential settlement
obligations by acquiring and holding the underlying securities.
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may purchase and
sell securities index futures contracts and futures based upon other financial
instruments and purchase options on such contracts. The Fund will not write
options on any futures contracts. Such investments may be made by the Fund for
the purpose of hedging against the effected changes in general market
conditions, interest rates, and conditions affecting particular industries may
have on the values of securities held in the Fund's portfolio or which it
intends to purchase.
Futures contracts obligate the buyer to take and the seller to make
delivery at a future date of the cash value of a securities index or a specified
quantity of a financial instrument.
In general, the Fund will sell futures contracts to hedge against
anticipated or potential decline in the market value of the Fund's portfolio of
securities. For example, when the Fund anticipates a general market or market
sector decline that may adversely affect the values of the Fund's portfolio of
securities, it may sell stock index futures contracts.
A "securities index" assigns relative values to the common stock included
in that index. A securities index futures contract is a bilateral agreement to
accept or make payment, depending on whether a contract is purchased or sold, of
an amount of cash equal to a specified dollar amount multiplied by the
difference between the index value at the close of the last trading day of the
contract and the price at which the futures contract is originally purchased or
sold.
To the extent that changes in the value of the Fund's portfolio correspond
to changes in a given index, the sale of futures contracts on that index ("short
hedge") would substantially reduce the risk to the portfolio of a market decline
and, by so doing, provide an alternative to a liquidation of securities
positions, which may be difficult to accomplish in a rapid and orderly fashion.
Securities index futures contracts might also be sold:
(1) when a sale of portfolio securities at that time would appear to
be disadvantageous in the long-term because such liquidation would: (a)
forego possible price appreciation; (b) create a situation in which the
securities would be difficult to repurchase; or (c) create substantial
brokerage commissions;
(2) when a liquidation of the portfolio has commenced or is
contemplated, but there is, in the opinion of the Adviser, a substantial
risk of a major price decline before liquidation can be completed; or
B-2
<PAGE>
(3) to close out securities index futures contract purchase
transactions.
Where the Fund anticipates a significant market or market sector advance,
the purchase of an index futures contract ("long hedge") affords a hedge against
not participating in such advance at a time when the Fund is not fully invested.
Such purchases would serve as a temporary substitute for the purchase of
individual stocks, which may then be purchased in an orderly fashion. As
purchases of securities are made, an amount of index futures contracts which is
comparable to the amount of securities purchased would be terminated by
offsetting closing sales transactions. Securities index futures contracts might
also be purchased to close out securities index futures contract sales
transactions.
The Fund may purchase call and put options on futures contracts. An option
on a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract at a specified exercise price
at any time during the period of the option. Upon exercise, the writer of the
option delivers to the holder the futures position together with the accumulated
balance in the writer's futures margin account (the amount, if any, by which the
market price of the futures contract varies from the exercise price).
The Fund may purchase put options on futures contracts to protect its
portfolio against a decline in value. The Fund may purchase call options on
futures contracts to protect against an increase in the value of securities or
in the currencies of the securities it wants eventually to purchase are
denominated.
Commodities transactions are subject to regulation by the Commodities
Futures Trading Commission ("CFTC"). The CFTC's rules and interpretations
provide an exemption from "commodity pool operator" status for registered
investment companies, such as the Fund, if their commodities transactions
generally consist of hedging transactions that are incidental to their
securities transactions. Absent this exemption, the Fund would be exposed to
substantial CFTC regulation. Therefore, in purchasing and selling futures
contracts and in purchasing options on futures contracts, the Fund intends to
comply with all applicable rules and interpretations of the CFTC in order to
obtain and maintain an exemption from commodity pool operator status. The
Internal Revenue Code's requirements for qualification as a regulated investment
company may also limit the extent to which the Fund can engage in futures
transactions.
In addition, the Fund will only sell futures contracts to offset expected
declines in the value of its portfolio securities if the aggregate contract
amount of such futures does not exceed the total market value of those
securities, as adjusted for the historic volatility of the securities being
hedged. The Fund will deposit with the custodian, as set forth below, cash,
U.S. government securities or other appropriate high-grade debt obligations in
an amount equal to a portion of the market value of any futures contract it
purchases or sells. This amount is known as "initial margin," and represents a
good faith deposit assuring the performance of both the purchaser and the seller
under the futures contract. Subsequent payments to and from the broker, known
as "variation margin," are required to be made on a daily basis as the price of
the futures contract fluctuates.
REGULATORY RESTRICTIONS. When writing a put option, the Fund will maintain
in a segregated cash account, U.S. government securities or other appropriate
high-grade debt obligations equal to the value of such contract. With respect
to transactions in futures contracts and options thereon, the Fund intends to
comply with applicable rules and regulations of the CFTC.
LIMITATIONS ON OPTIONS OR FUTURES TRANSACTIONS. The Fund will not engage
in any of the foregoing options or futures transactions, if, after giving effect
to such transaction, the aggregate of (i) the fair market value of securities
B-3
<PAGE>
underlying options written by the Fund, (ii) the fair market value of portfolio
securities underlying index options written by the Fund, and (iii) the aggregate
net settlement value of the Fund's open futures contracts and options thereon,
would exceed 5% of the Fund's total assets.
RISK CONSIDERATIONS.
Investors should understand that all investments involve certain risks.
There can be no guarantee against loss resulting from an investment in the Fund,
and there can be no assurance that the Fund's investment policies will be
successful or that its investment objectives will be attained. Certain risks
associated with an investment in the Fund are discussed in the Prospectus under
"Risk Considerations." Risk considerations relating specifically to the use of
futures contracts and related options are further explained below.
There are certain risks associated with the use of futures contracts and
related options. There is no assurance that the Fund will be able to close out
its futures positions at any time, in which case it would be required to
maintain the margin deposits on the contract.
There can be no assurance that hedging transactions will be successful, as
they will depend upon the ability of the Adviser to predict changes in general
market conditions, interest rates and conditions affecting particular
industries. The degree of success in hedging the Fund's portfolio by
correlating the use of securities index futures and options thereon with the
increase or decrease in the value of its investment portfolio will depend, in
part, upon the ability of the Adviser to correctly predict movements in the
direction of the market. The skills required in successfully using securities
index futures and options thereon may be different from the skills required in
selecting securities. If the Fund hedged the possibility of a decline in the
market, which would adversely affect the value of the securities held in its
portfolio, but market prices increased instead, the Fund would not realize all
of the benefits of the increased value of that portion of its portfolio that is
hedged because it would realize offsetting losses in its securities index
futures positions until those positions could be closed out. While those
positions remain open, the Fund would have to meet daily maintenance margin
requirements and might have to sell securities if it had insufficient cash or
cash equivalents to make those payments, and such sales might have to be made at
a time when it might be disadvantageous to do so. Sales of securities normally
would be, but would not necessarily be, at the increased prices reflected in the
rising market prices.
When portfolio securities are hedged with securities index futures
contracts and the market values of the Fund's portfolio securities increase,
losses sustained on the open futures contracts (until they can be closed out)
may partially or completely be offset by the increase in the value of its
portfolio, although there can be no assurance that the market prices of the
portfolio securities will in fact correlate with the price movements of the
futures contracts.
There may be an imperfect correlation (or no correlation) between the price
movements of the securities index futures contracts and price movements of the
portfolio securities being hedged. To compensate for the imperfect correlation
of movements of prices of a securities index future and the securities being
hedged, the Fund may buy or sell securities index futures contracts in a greater
currency amount than the currency amount of securities being hedged if the
historical volatility of the prices of such securities has been greater than the
historical volatility of the index, or may buy or sell fewer securities index
futures contracts if the historical volatility of the price of the securities
being hedged is less than the historical volatility of the securities index.
Nevertheless, the price of the securities index futures contract may move less
than the price of the securities which are the subject of the hedge (or the
value of futures contracts and securities held by the Fund may decline
simultaneously), resulting in the hedge not being fully effective.
B-4
<PAGE>
The price of securities index futures may not correlate perfectly with
movement in the securities index, due to certain market conditions. This might
result from decisions by a significant number of market participants holding
securities index futures positions to close out their futures contracts through
offsetting transactions rather than to make additional margin deposits. Also,
increased participation by speculators in the futures market may cause temporary
price distortions. Due to the possibility of such price distortion in the
futures markets and because of the imperfect correlation between movements in
the securities index and movements in the price of securities index futures, a
correct forecast of general market trends by the Adviser may not result in a
fully successful hedging transaction over a short time frame. Thus, the price
of securities index futures might increase, reflecting a general advance in the
market price of the indices' component securities, while some or all of the
Fund's securities portfolio might decline. If the Fund has hedged a portion of
its portfolio against a possible decline in the market with a position in
futures contracts on that index, it might experience a loss on its futures
position until it could be closed out, while not experiencing an increase in the
value of its portfolio securities.
Futures positions may be closed out only on an exchange or board of trade
which provides a market for such futures. Although the Fund intends to purchase
or sell futures which appear to have an active market, there is no assurance
that a liquid market will exist for any particular contract or at any particular
time. Thus, it may not be possible to close a futures position in anticipation
of adverse price movements.
The settlement procedure in connection with the Fund's entry into a futures
transaction requires the deposit of cash, cash equivalents or appropriate
high-grade debt obligations, constituting initial margin, in a special
segregated account. Investors should note that such segregated account will be
in the name or for the benefit of the futures commission merchant that will
execute commodities transactions for the Fund, or an entity performing the same
or a similar function under local law ("FCM"). Subsequent payments, called
variation margin, are made to and from the FCM (a process known as
"marking-to-market") on a daily basis as the value of the long and short
positions in the futures contract fluctuates. Prior to the settlement date of
the futures contract, the position may be closed out by taking an opposite
position which will operate to terminate the position in the futures contract.
A final determination of variation margin is then made and the purchaser
realizes a gain or loss. In addition, a commission is paid on each completed
purchase and sale transaction.
Initial margin and maintenance margin paid to an FCM by the Fund will
continue to be regarded as the Fund's asset unless and until such amounts are
owed to such FCM. No FCM will be permitted to pledge or encumber amounts held
by it or the custodian for the benefit of the Fund. In the event of insolvency
of an FCM, amounts held in a segregated account for the benefit of the FCM or by
the FCM for the benefit of the Fund may become subject to federal bankruptcy
laws and bankruptcy regulations of the CFTC, which provide for pro-rata
distribution to customers of the FCM of all customer property.
Similar risks apply to the use of interest rate and other futures
contracts.
INVESTMENT RESTRICTIONS
The Fund is subject to certain fundamental investment restrictions, which
may not be changed without the vote of a "majority" of the Fund's outstanding
shares. As used in the Prospectus and this Statement of Additional Information,
"majority" means the lesser of (i) 67% of the Fund's outstanding shares present
at a meeting of the holders if more than 50% of the outstanding shares are
present in person or by proxy or (ii) more than 50% of the Fund's outstanding
shares.
B-5
<PAGE>
As a fundamental policy, the Fund will NOT:
1. Invest its assets except as set forth in the Prospectus under
"Investment Objectives and Policies;"
2. Invest more than 7.5% of the value of its total assets in the
securities of any one issuer (other than securities of the United States
Government or its agencies or instrumentalities) or purchase more than 10%
of any class of securities of any one issuer (for this purpose all
indebtedness of an issuer shall be deemed a single class) or invest more
than 50% of the value of its total assets in securities which, in respect
of any one issuer, comprise more than 5% of the Fund's total assets;
3. Issue any senior securities (as defined in the Investment Company
Act of 1940, as amended) except to the extent permitted under paragraph 4
below;
4. Borrow money, except from banks for temporary or emergency
purposes in an amount not exceeding 5% of the value of the Fund's total
assets;
5. Mortgage, pledge or hypothecate its assets except in an amount not
exceeding 10% of the value of its total assets, to secure temporary or
emergency borrowing;
6. Act as an underwriter of securities of other issuers;
7. Purchase or sell real estate, interests in real estate (including
partnership interests) or real estate mortgage loans, except the Fund may
purchase or sell securities issued by companies owning real estate or
interests therein;
8. Purchase or sell commodities or commodities contracts (except
futures and option contracts);
9. Purchase or retain the securities of any issuer, if, to the Fund's
knowledge, those officers or directors of the Fund or of its investment
advisers who individually own beneficially more than 0.5% of the
outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities;
10. Make loans to other persons, provided that it may purchase debt
securities as described under "Investment Objectives and Policies;"
11. Purchase securities on margin, except that it may obtain such
short-term credits as may be necessary for the clearance of purchases or
sales of securities and except that deposits of initial deposit and
variation margin may be made in connection with the purchase, ownership,
holding or sale of futures;
12. Participate on a joint and several basis in any securities
trading account;
13. Engage in any options or futures transaction if, after giving
effect to such transaction, the aggregate of (i) the fair market value of
securities underlying options written by the Fund, (ii) the fair market
value of portfolio securities underlying index options written by the Fund,
and (iii) the aggregate net settlement value of the Fund's open futures
contracts and options therein, would exceed 5% of the Fund's total assets;
14. Make short sales;
B-6
<PAGE>
15. Purchase from or sell to any officer, director or employee of the
Fund, or its investment advisers or any of such adviser's officers or
directors, any securities other than shares of the Fund's common stock;
16. Invest in any warrants or for the purpose of exercising control
or management;
17. Invest 25% or more of its total assets in the securities of
issuers in any one particular industry;
18. Invest in interests (including partnership interests) in oil, gas
or other mineral exploration or development programs, except the Fund may
purchase or sell securities issued by corporations engaging in oil, gas or
other mineral exploration or development business;
19. Buy or sell foreign exchange;
20. Invest more than 5% of the value of its total assets in illiquid
investments (which include repurchase agreements with a maturity of over
seven days and other securities that are restricted or not otherwise
readily marketable); or
21. Invest in securities of any issuer which, together with any of
its predecessors, has not been in operation for at least three years.
Any investment policy set forth under "Investment Objectives and Policies"
in the Prospectus, or any restriction set forth above under "Investment
Restrictions" which involves a maximum percentage of securities or assets (other
than paragraph 4), shall not be considered to be violated unless an excess over
the percentage occurs immediately after an acquisition of securities or
utilization of assets and results therefrom.
INVESTMENT PERFORMANCE
Advertisements and other sales literature for the Fund may refer to
monthly, quarterly, yearly, cumulative and average annual total return. Each
such calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts. Each
monthly, quarterly and yearly total return are computed in the same manner as
the cumulative total return, as set forth below.
Cumulative total return is computed by finding the cumulative rate of
return over the period indicated in the advertisement that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
CTR = (ERV-P)
P 100
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period; and
P = initial payment of $1,000.
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
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<PAGE>
P(1 + T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period.
In advertising and sales literature, the Fund may compare its performance
with that of other mutual funds, indexes or averages of other mutual funds,
indexes of related financial assets or data, and other competing investment and
deposit products available from or through other financial institutions. The
composition of these indexes, averages or products differs from that of the
Fund. The comparison of the Fund to an alternative investment should be made
with consideration of differences in features and expected performance.
The indexes and averages noted below will be obtained from the indicated
sources or reporting services, which the Fund believes to be generally accurate.
The Fund may also note its mention in newspapers, magazines, or other media from
time to time. However, the Fund assumes no responsibility for the accuracy of
such data. In addition to various daily newspapers which might mention the
Fund, such as THE WALL STREET JOURNAL, USA TODAY and THE NEW YORK TIMES, other
periodicals which might mention the Fund include, but are not limited to, the
following:
BARRONS INVESTMENT VISION
BETTER INVESTING INVESTOR'S DAILY
BUSINESS MONTH MONEY
BUSINESS WEEK MUTUAL FUND FORECASTER
CFO MUTUAL FUND LETTER
CHANGING TIMES MUTUAL FUND VALUES
CONSUMER DIGEST (MORNINGSTAR)
CONSUMER REPORTS NATIONS BUSINESS
D & B REPORTS NEWSWEEK
DOLLARS & SENSE NO-LOAD FUND INVESTOR
ENTREPRENEUR PENSIONS & INVESTMENTS
FINANCIAL TIMES PERSONAL INVESTING
FINANCIAL WORLD PERSONAL INVESTOR
FORBES PHYSICIAN'S FINANCIAL NEWS
FORTUNE STANDARD & POOR'S REGISTER
HARVARD BUSINESS REVIEW INC. STANGER REPORTS
INDIVIDUAL INVESTOR TIME
INVESTMENT ADVISOR U.S. NEWS AND WORLD REPORT
In addition, the Fund may compare performance with various indices and
averages, including, without limitation, the following:
Consumer Price Index (CPI)
Dow Jones Industrial Average (DJIA)
Salomon Brothers Broad Investment Grade Index
Standard & Poor's 500 Stock Index (S&P 500)
The Value Line Index
B-8
<PAGE>
DIRECTORS AND OFFICERS; BOARD OF ADVISERS
The names, addresses and positions of the directors and officers of the
Fund and the members of the Fund's Board of Advisers, together with information
regarding their principal occupations during the past five years, are given
below.
<TABLE>
<CAPTION>
BUSINESS AFFILIATIONS
AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS POSITION DURING LAST 5 YEARS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael L. Lucas* President, Chairman of Board of Advisors President, Trias
Suite 1661 the Board of Directors Capital Management, Inc., Chicago,
Eleven Hundred Peachtree Illinois (asset management firm),
Street, N.E. June 1996 to present; Vice President,
Atlanta, Georgia 30309 Wedgewood Equities, Inc., Atlanta,
Georgia, 1991 to present; Vice
President, Pryor, McClendon, Counts &
Co., Inc., Atlanta, Georgia, 1992 to
June 1996; President, PMC/Astrop
Capital Management, Atlanta, Georgia
(asset management firm), 1992 to
present; Assistant Vice President,
Mellon Bank, Pittsburgh,
Pennsylvania, 1988 to 1990.
William M. Bauman Director President, Intersouth Properties,
3131 Piedmont Road Inc., Atlanta, Georgia (commercial
Atlanta, Georgia 30305 real estate firm), 1964 to present.
Sidney Feldman Director President, LIMCO Investments, Inc.,
P.O. Box 52757 Atlanta, Georgia (scrap and iron
Atlanta, Georgia 30355 metal investment company), 1964 to
present.
Ronald L. Krise Director Chairman of the Board Chief Executive
Suite 400 Officer of CTI Resources, Inc.,
11660 Alpharetta Hwy. Atlanta, Georgia (shipping company),
Roswell, Georgia 30076 1973 to present.
[Marie W. Dodd Board of Advisors Vice President and Director of Ivan
221 Peachtree Center Avenue Allen Company, Atlanta, Georgia
Atlanta, Georgia 30303 (distributor of office products and
supplies).
</TABLE>
B-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
James C. Edenfield Board of Advisors President and Chief Executive
3700 Randall Mill Road Officer, American Software, Inc.,
Atlanta, Georgia 30327 Atlanta, Georgia, 1970 to present
Joe Frank Harris Board of Advisors Private Investor; Governor State of
712 West Avenue Georgia, 1982 to 1990.
Cartersville, Georgia 30120
Walter B. Kissinger Board of Advisors Vice Chairman of the Board of
Lower Drive Trustees, Hofstra University, New
Huntington Bay, New York 11743 York, New York, 1988 to present;
Chairman, President and Chief
Executive Officer of The Allen Group,
New York, New York (manufacturer and
marketer of automotive diagnostic
equipment), 1969 to 1988.
R. Charles Loudermilk, Sr. Board of Advisors President, Chairman of the Board,
1100 Aaron Building Chief Executive Officer, Aaron Rents,
3001 N. Fulton Drive Inc., Atlanta, Georgia (sale and
Atlanta, Georgia 30363 rental of commercial and residential
office furniture).
Donald Ratajczak Board of Advisors Professor of Economics, Georgia State
Georgia State University University, Atlanta, Georgia.
University Plaza
Atlanta, Georgia 30303-3087
J. Eugene Talley Board of Advisors Independent Consultant, International
3255 Valley Road Soft Drink Manufacturing Industry,
Atlanta, Georgia 30305 Atlanta, Georgia.
C. Mack Taylor Board of Advisors Chairman and Co-founder, Taylor &
115 Perimeter Ctr. Pl. Mathis, Atlanta, Georgia (real estate
Suite 200 developers)
Atlanta, Georgia 30346
Thomas R. Williams Board of Advisors President, The Wales Group, Atlanta,
21st Floor Georgia, (investments), 1987 to
191 Peachtree Street present; Chairman, First Wachovia
Atlanta, Georgia 30303 Corporation (bank holding company),
1985 to 1987.]
</TABLE>
* Directors of the Fund who are "interested persons" (as that term is defined
by the Investment Company Act of 1940) of the Fund.
B-10
<PAGE>
REMUNERATION.
No compensation is paid by the Fund to any of its officers. Directors who
are not "interested persons" are each entitled to receive a fee of $1,000 per
meeting and are reimbursed for expenses incurred in connection with attending
meetings. For the period ended May 31, 1996, all of such fees were waived. The
Directors of the Board intend (but are not obligated) to purchase shares of the
Fund with their fee. Each member of the Board of Advisers is entitled to
receive an annual fee of $1,000 of which one half will be contributed by the
Fund, on behalf of such member, to one or more Atlanta charities designated by
the "non-interested" members of the Board of Directors. For the period ended
May 31, 1996, all of such fees were waived. The members of the Board of
Advisers intend (but are not obligated) to continue to waive their annual fee
until the Fund's net assets reach a certain level.
INITIAL CAPITALIZATION.
To provide the initial capitalization of the Fund, Shapiro Capital
Management Company, Inc. purchased 10,000 shares of the Fund at the net asset
value of $10.00 per share for an aggregate purchase price of $100,000. To the
best of management's knowledge, directors and officers of the Fund owned
approximately 3,449 shares of the Fund as of May 31, 1996.
B-11
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
GENERAL.
Wedgewood Equities, Inc., Suite 1661, Eleven Hundred Peachtree Street,
N.E., Atlanta, Georgia 30309 (the "Adviser"), has been selected to act as the
investment adviser and manager of the Fund. The Adviser has entered into an
Investment Advisory and Management Agreement (the "Advisory Agreement") with the
Fund that will be periodically approved by the directors or shareholders of the
Fund. Wedgewood Equities, Inc. is affiliated with Pryor, McClendon, Counts &
Co., Inc., the Fund's principal distributor.
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT.
The Adviser has agreed to provide the Fund with investment advice,
statistical and research facilities, and certain equipment and services,
including, but not limited to, office space and necessary office facilities,
equipment, and the services of required personnel. In return, the Fund has
agreed to pay the Adviser an aggregate management and advisory fee, calculated
daily and payable monthly, at an annual rate equal to 0.34% of the average daily
net assets of the Fund. For the periods ended May 31, 1993 (June 22, 1992
through May 31, 1993), May 31, 1994, May 31, 1995 and May 31, 1996, the Adviser,
along with the Fund's former investment advisers, waived all of their fees,
which amounted to $53,972, $60,986, $41,623 and $23,448, respectively (based
upon the annual rate of 0.74% (for the fiscal years ended May 31, 1993, May 31,
1994 and May 31, 1995) and 0.54% (for the fiscal year ended May 31, 1996) of the
average daily net assets of the Fund). The Adviser intends to continue to waive
its fees for an indefinite period in the future. The Adviser has the sole
authority and responsibility to make and execute investment decisions for the
Fund within the framework of the Fund's investment policies, subject to review
by the directors of the Fund. The Adviser is not liable for any loss suffered
by the Fund in the absence of willful misfeasance, bad faith or gross negligence
in the performance of its duties and obligations.
OTHER SERVICES.
The Fund has engaged PNC Bank to serve as its custodian and has engaged
PFPC Inc. to act as its transfer and dividend disbursing agent.
EXPENSE LIMITATIONS.
Certain state securities commissions may impose limitations on certain of
the Fund's expenses, and the Adviser may be required by such state commissions
to reimburse the Fund for expenses in excess of any limitations as a requirement
to selling shares of the Fund in those states.
PURCHASE AND REDEMPTION OF SHARES
Information concerning the purchase, redemption and pricing of the Fund's
shares is contained in the Prospectus under "Purchase of Shares" and "Redemption
of Shares."
The Fund offers its shares continually to the public at the net asset value
of such shares plus a sales charge which is reduced on purchases involving large
amounts, and which may be eliminated in certain circumstances. Net asset value
is determined by dividing the value of the securities owned by the Fund plus any
cash or other assets (including interest or dividends accrued but not collected)
less all liabilities by the number of the Fund's shareholders. (See the
Specimen Price-Make-up Sheet attached hereto as Appendix A.) Shares may be
purchased through the Underwriter or other designated securities dealers who are
registered (or exempt from registration) in the jurisdiction where the purchase
is made and who have sales agreements with the Underwriter. In addition, the
Fund may sell shares at net asset value to the following persons: (i) directors,
officers and employees of the Fund and the Adviser, certain family members of
the foregoing
B-12
<PAGE>
persons and trusts primarily for such persons; (ii) registered representatives
or full-time employees and their spouses and minor children of dealers who have
entered into sales agreements with the Underwriter and retirement plans for such
persons; (iii) trustees or other fiduciaries purchasing shares for retirement
plans which are sponsored by companies with 50 or more employees; (iv) insurance
company separate accounts; and (v) investment companies and certain investment
advisers on behalf of their discretionary accounts. Shares are offered at net
asset value to such persons because of anticipated economies in sales effort and
sales-related expenses.
The Fund will buy back (redeem), at current net asset value, all shares of
the Fund offered for redemption. There is no charge for redemption of shares
tendered directly to the Fund's transfer agent. In order to recover commissions
paid to dealers on purchases of $1,000,000 or more, the Fund may in the future
seek an exemption under Section 6(c) of the 1940 Act to permit it in the future
to impose a contingent deferred sales charge of 0.30% in the event of redemption
transactions within 12 months following such purchases. There is no assurance
that any such request by the Fund for an exemption under Section 6(c) will be
granted.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution (the "Plan") relating to the
payment of certain distribution expenses pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). The Plan meets all of the
conditions and requirements of Rule 12b-1 (certain of which are described
below). The Plan has been approved by the Fund's Board of Directors (which has
concluded that there is at least a reasonable likelihood that the Plan will
benefit the Fund and its shareholders) and was approved by the shareholders of
the Fund at its first annual meeting. Pursuant to the Plan, the Fund has
entered into an Underwriting and Distribution Agreement with Pryor, McClendon,
Counts & Co., Inc. (the "Underwriter") pursuant to which the Fund may pay up to
0.25% of the Fund's average daily net assets for the purpose of financing any
activity which is primarily intended to result in the sale of Fund shares. The
Fund has also agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
Rule 12b-1(b) provides that any payments made by a fund in connection with
the distribution of its shares may only be made pursuant to a written plan
describing all material aspects of the proposed financing of distribution and
also requires that all agreements with any person relating to implementation of
the plan must be in writing. In addition, Rule 12b-1(b)(1) requires that such
plan be approved by a vote of at least a majority of the fund's outstanding
shares, and Rule 12b-1(b)(2) requires that such plan, together with any related
agreements, be approved by a vote of the board of directors of the company and
the directors of the company who are not interested persons of the company and
have no direct or indirect financial interest of the operation of the plan or in
any agreements related to the plan, cast in person at a meeting called for the
purpose of voting on such plan or agreements. Rule 12b-1(b)(3) requires that
the plan or agreement provide, in substance: (1) that it shall continue in
effect for a period of more than one year from the date of its execution or
adoption only so long as such continuance is specifically approved at least
annually in the manner described in paragraph (b)(2) of Rule 12b-2; (2) that any
person authorized to direct the disposition of monies paid or payable by a fund
pursuant to its plan or any related agreement shall provide to the fund's board
of directors, and the directors shall review, at least quarterly, a written
report of the amount so expended and the purposes for which such expenditures
were made; and (3) in the case of a plan, that it may be terminated at any time
by vote of a majority of the members of the board of directors of the fund who
are not interested persons of the fund and have no direct or indirect financial
interest in the operation of the plan or in any agreements related to the plan
or by vote of a majority of the outstanding voting securities of the fund.
B-13
<PAGE>
Rule 12b-1(b)(4) requires that such plans may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and that all material amendments of the plan must be approved in the manner
described in paragraph (b)(2) of Rule 12b-1. Rule 12b-1(c) provides that a fund
may rely upon Rule 12b-1(1) only if selection and nomination of its
disinterested directors are committed to the discretion of such disinterested
directors. Rule 12b-1(e) provides that a fund may implement or continue a plan
pursuant to Rule 12b-1(b) only if the directors who vote to approve such
implementation or continuation conclude, in the exercise of reasonable business
judgment and in light of their fiduciary duties under state law, and under
Section 36(a) and (b) of the 1940 Act, that there is a reasonable likelihood
that the plan will benefit the fund and its shareholders.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
In a certain number of security transactions, it may be possible for the
Fund to deal in the over-the-counter security markets (including the so-called
"third market" which is the "over-the-counter" market for securities listed on
the New York Stock Exchange) without the payment of brokerage commissions but at
net prices including a spread or markup; the Fund will trade in this manner
whenever the net price appears advantageous. Generally, however, the Fund must
deal with brokers.
The Adviser selects and (where applicable) negotiates commissions with the
brokers who execute the transactions for the Fund. In placing orders for the
Fund's portfolio transactions, the Adviser will seek to obtain the best net
results. When consistent with the objective of obtaining the best net results,
brokerage may be directed to persons or firms supplying investment information
to the Adviser. There may be occasions where the transaction costs charged by a
broker may be greater than that which another broker might charge if the Fund
determines, in good faith, that the amount of such transaction costs is
reasonable in relation to the value of the brokerage, research and statistical
services provided by the executing broker. In no event, however, will the Fund
"pay up" for research in transactions where the broker acts as principal. The
Fund has no obligation to deal with any broker or group of brokers in the
execution of transactions. No formula exists and no arrangement is made with or
promised to any broker-dealer which commits either a stated volume or percentage
of brokerage business based on services furnished to the Adviser or upon sale of
Fund shares. Consistent with its obligation to obtain best net results, the
Adviser may consider a broker's or dealer's sale of Fund shares as a factor in
considering through whom portfolio transactions will be effected.
TAX STATUS
The tax status of the Fund and the distributions the Fund will make are
summarized in the Prospectus under "Dividends, Distributions and Tax Status."
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code")
during the current taxable year in order to be relieved of payment of federal
income taxes on amounts distributed to shareholders (both net investment income
and net realized capital gains). Distributions by the Fund, however, are
generally taxable to Fund shareholders (except shareholders exempt from federal
income taxation), whether received in cash or additional Fund shares. Under the
Code, individual shareholders may no longer exclude any amount of distributions
from Fund gross income that is derived from dividends; corporate shareholders,
However, generally are permitted to deduct 70% of dividend distributions
received from domestic corporations. Such a deduction by a corporate
shareholder of the Fund will depend upon the portion of the Fund's gross income
which is derived from dividends received from domestic corporations. Since it
is anticipated that a portion of the Fund's net investment income may derive
from sources other than dividends from domestic corporations, a portion of the
Fund's dividends may not qualify for this exclusion. Distributions designated
as capital gain dividends will be taxable to the shareholder as long-term
capital gains regardless of how
B-14
<PAGE>
long the shareholder has held the shares. Such distributions will not be
eligible for the dividends exclusion referred to above.
If Fund shares are sold or otherwise disposed of more than one year from
the date of acquisition, the difference between the adjusted tax basis of the
shares and the sales price will result in long-term capital gain or loss to the
Fund shareholder if, as is usually the case, the Fund shares are a capital asset
in the hands of the Fund shareholder at that time. However, under a special
provision in the Code, if Fund shares with respect to which a capital gain
dividend distribution has been, or will be, made or with respect to which
undistributed capital gains are reportable, are held for six months or less, any
loss on the sale or other disposition of such shares will be long-term capital
loss to the extent of such gain distribution.
With certain exceptions, dividend distributions to Fund shareholders are
not subject to withholding of federal income tax. However, 31% of a
shareholder's dividend distributions may be withheld upon the occurrence of
certain events specified in Section 3406 of the Code and the Treasury
Regulations promulgated thereunder. These events include, among others, the
failure of a Fund shareholder to supply the Fund with such shareholder's
taxpayer identification number, and the failure of a Fund shareholder who is
otherwise exempt from withholding to properly document such shareholder's status
as an exempt recipient. Additionally, distributions may be subject to state and
local income taxes and the treatment thereunder may differ from the federal
income tax consequences discussed above.
Under the Code, the Fund will be subject to a non-deductible excise tax
equal to 4% of the excess, if any, of the amount of ordinary income and capital
gains required to be distributed pursuant to the Code for each calendar year
over the amount actually distributed. In order to avoid this excise tax, the
Fund generally must pay dividends by the end of each calendar year representing
98% of the Fund's ordinary income for such calendar year and 98% of its capital
gain net income (both long-term and short-term) for each 12 month period ending
October 31 of the same calendar year. Undistributed adjusted income and gains
of the Fund will also be subject to taxation at applicable corporate rates.
Generally, in order to qualify as a regulated investment company under
Subchapter M of the Code, the Fund must derive at least 90% of its gross income
from dividends, interest, and gains from the sale or other disposition of stock
or securities. Subchapter M of the Code also requires that less than 30% of the
Fund's gross income for any year be derived from gains realized on the sale or
other disposition of stocks or securities, options, futures contracts or forward
contracts held by the Fund for less than three months.
Under the Code, dividends (other than capital gain dividends) received from
the Fund by a shareholder who, as to the United States, is a nonresident alien
individual, nonresident alien fiduciary of a foreign trust or estate, foreign
corporation or foreign partnership ("foreign shareholder") are subject to a
withholding tax of 30% (or such lower rate as is prescribed by the income tax
convention, if any, in force between the U.S. and the foreign shareholder's
country) without regard to the amount of gross income that the Fund derives from
sources within the United States. Distributions of capital gain dividends to a
foreign shareholder will not be subject to U.S. tax unless the foreign
shareholder is engaged in a U.S. trade or business to which the distributions
are attributable, the gains are attributable to the disposition of a United
States real property interest, or, in the case of a foreign shareholder who is a
nonresident alien individual, such foreign shareholder is physically present in
the United States for more than 182 days during the taxable year.
A disposition of shares in the Fund by a foreign shareholder may be subject
to U.S. tax and withholding if the shares constitute United States real property
interests under the Code. It is not anticipated that the shares of the Fund
will constitute such interests, and the Fund will furnish affidavits to such
effect
B-15
<PAGE>
if necessary and appropriate to avoid application of U.S. tax or withholding on
a disposition of shares.
The foregoing is a general and abbreviated summary of the Code and Treasury
Regulations in effect as of the date of the Fund's Prospectus and this Statement
of Additional Information. Potential investors in the Fund are encouraged to
consult a competent tax adviser regarding the income tax consequences of owning
shares of the Fund.
CERTAIN RELATIONSHIPS
PMC/ASTROP Capital Management, Inc. ("PMC/ASTROP"), an Atlanta-based
investment management firm, is co-owned by the Underwriter. Michael L. Lucas
is the Vice President of Wedgewood Equities, Inc., and serves as President
of PMC/Astrop.
LIMITATION OF DIRECTOR LIABILITY
Under Georgia law, the Fund's Board of Directors owes certain duties to the
Fund and to its shareholders. The duties of a director of a Georgia corporation
include both a duty of "loyalty" (to act in a manner the director believes in
good faith to be in the best interests of the corporation) and a duty of "care"
(to act with the care an ordinarily prudent person in a like position would
exercise under similar circumstances). Georgia law authorizes corporations to
eliminate or limit the personal liability of a director to the corporation and
its shareholders for monetary damages for breach of the duty of care or other
duty as a director. Georgia law does not, however, permit a corporation to
eliminate or limit the liability of a director: (i) for any appropriation, in
violation of his duties, of any business opportunity of the corporation;
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (iii) for authorizing a dividend,
stock repurchase or redemption or other distribution in violation of Georgia
law; or (iv) for any transaction from which the director derived an improper
personal benefit. The Articles of Incorporation of the Fund limit the liability
of directors to the fullest extent permitted by Georgia statutes, except to the
extent that such liability cannot be limited as provided in the 1940 Act (which
Act prohibits any provisions which purport to limit the liability of directors
arising from such directors' willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their role as
directors).
Georgia law does not eliminate the duty of "care" or any other duty imposed
upon a director. It only authorizes a corporation to eliminate monetary
liability for violations of that duty. Georgia law, further, does not permit
elimination or limitation of the availability of equitable relief, such as
injunctive or rescissionary relief. Additionally, Georgia law does not
eliminate or limit a director's liability under the Securities Act of 1933, as
amended or the Securities Exchange Act of 1934, as amended, and it is uncertain
whether and to what extent the elimination of monetary liability would extend to
violations of duties imposed on directors by the 1940 Act and the rules and
regulations adopted under such Act.
ADDITIONAL INFORMATION
This Statement of Additional Information and the Prospectus do not contain
all the information included in the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
Pursuant to the rules and regulations of the Securities and Exchange Commission,
certain portions have been omitted. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
Statements contained in this Statement of Additional Information and the
Prospectus concerning the contents of any contract or other documents are not
necessarily complete and in each instance reference is made to the copy of such
B-16
<PAGE>
contract or other document filed as an exhibit to the Registration Statement.
Each such statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Fund's audited financial statements for the period ended May 31, 1996
are included in the Annual Report to Shareholders for the period ended May 31,
1996, which is a separate report supplied with this Statement of Additional
Information and which is incorporated herein by reference and made a part
hereof.
B-17
<PAGE>
APPENDIX A
THE ATLANTA GROWTH FUND, INC.
SPECIMEN PRICE-MAKE-UP SHEET
(AT MAY 31, 1996)
Assets $ 4,041,575
------------
Liabilities $ 58,022
------------
Net Assets $ 3,983,553
------------
------------
Shares Outstanding 317,956
Net Assets Per Share (Net Assets/Shares Outstanding) $ 12.53
Maximum Offering Price Per Share (Net Assets Per Share/ 96.25) $ 13.02
-----
100
B-18
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: The Fund's financial statements for the
fiscal year ended May 31, 1996 are incorporated herein by
reference to the Statement of Additional Information and are
filed herein as Exhibit 24(a).
(b) Exhibits:
(1) Registrant's Articles of Incorporation are incorporated by
reference to Exhibit 1.1 to the Registration Statement on Form N-
1A, Registration No. 33-44714, filed on December 20, 1991;
(2) Registrant's Bylaws are incorporated by reference to Exhibit 2.1
to Post-Effective Amendment No. 1 to Form N-1A, Registration No.
33-44714, filed on November 13, 1992;
(3) Voting Trust Agreement - None;
(4) Specimen Certificate for the Registrant's Security is
incorporated by reference to Exhibit 4.1 to Pre-Effective
Amendment No. 2 to Form N-1A, Registration No. 33-44714, filed on
March 16, 1992;
(5) Form of Investment Advisory and Management Agreement is
incorporated by reference to Exhibit 5.1 of Post-Effective
Amendment No. 3 to Form N-1A, Registration No. 33-44714, filed on
July 29, 1994;
(6) (a) Form of Underwriting and Distribution Agreement is
incorporated by reference to Exhibit 6.2 to Post-Effective
Amendment No. 1 to Form N-1A, Registration No. 33-44714,
filed on November 13, 1992;
(b) Form of Soliciting Dealer Agreement is incorporated by
reference to Exhibit 6.3 to Post-Effective Amendment No. 1
to Form N-1A, Registration No. 33-44714, filed on November
13, 1992;
(c) Form of Bank Sales Agreement is incorporated by reference to
Exhibit 6.3 to Post-Effective Amendment No. 1 to Form N-1A,
Registration No. 33-44714, filed on November 13, 1992;
(7) Bonus, Profit Share or Pension Plans - None;
(8) Form of Custodian Services Agreement Terms and Conditions is
incorporated by reference to Exhibit 8.1 to Pre-Effective
Amendment No. 1 to Form N-1A, Registration No. 33-44714, filed on
February 14, 1992;
(9) (a) Form of Transfer Agency Services Agreement Terms and
Conditions is incorporated by reference to Exhibit 9.1 to
Pre-Effective Amendment No. 1 to Form N-1A, Registration No.
33-44714, filed on February 14, 1992;
(b) Form of Administration and Account Services Agreement Terms
and Conditions is incorporated by reference to Exhibit 9.2
to Pre-Effective Amendment No. 1 to Form N-1A, Registration
No. 33-44714, filed on February 14, 1992;
(10) Opinion and Consent of Counsel is incorporated by reference
to Exhibit 10.1 to Pre-Effective Amendment No. 2 to Form N-
1A, Registration No. 33-44714, filed on March 16, 1992;
(11) (a) Consent of independent public accountants is filed herein as
Exhibit 11.1;
(b) Consent of counsel is filed herein as Exhibit 11.2;
(12) The Fund's financial statements omitted from Item 23 are
filed herein as Exhibit 24(a);
(13) Form of Proposed letter of investment intent is incorporated
by reference to Exhibit 13.1 of Pre-Effective Amendment No.
1 to Form N-1A, Registration No. 33-44714, filed on February
14, 1992;
(14) IRA Plan and Application is incorporated by reference to
Exhibit 14.1 to Post-Effective Amendment No. 3 to Form N-1A,
Registration No. 33-44714, filed on July 29, 1994;
(15) Rule 12b-1 Plan is incorporated by reference to Exhibit 15.1
to Post-Effective Amendment No. 1 to Form N-1A, Registration
No. 33-44714, filed on November 13, 1992; and
(16) Performance Quotation Schedule - None.
<PAGE>
Other Exhibits:
(a) None
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable
Item 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record Holders
Title of Class as of May 31, 1996
-------------- ------------------------
Shares of Common Stock 573
Item 27. INDEMNIFICATION
Article IX of the Corporation's Bylaws provides as follows:
ARTICLE IX
INDEMNITY
Any person who was or is a party or is threatened to be made a party to
any threatened, pending of completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including any action by or in the
right of the Corporation) by reason of the fact that he is or was a Director,
officer, member of the Corporation's Board of Advisers, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust
other enterprise, shall be indemnified by the Corporation against expenses
(including reasonable attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation (and with respect to any criminal action or proceeding, if he had no
reasonable cause to believe his conduct was unlawful), to the maximum extent
permitted by, and in the manner provided by, the Georgia Business Corporation
Code; provided, however, that no such indemnification may be made if it would be
violation of Section 17 of the Investment Company Act of 1940, as now enacted or
hereafter amended.
Reference is also made to the Underwriting and Distribution Agreement, as
amended, incorporated by reference to Exhibit 6.1 Post-Effective Amendment No. 1
to Form N-1A, Registration No. 33-44714, filed on November 13, 1992.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its Bylaws in a manner consistent with Investment Company Act
Release No. 11330 so long as the interpretation of Section 17(h) and 17(i)
therein remains in effect.
C-2
<PAGE>
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The following table describes other businesses, professions, vocations or
employment relationships of a substantial nature in which the Fund's investment
adviser, and each director and officer thereof, is or has been, at any time
during the past two fiscal years, engaged for his own account or in the capacity
of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name of Company,
Principal Business
Name and Address Capacity
- ---- ------------------ --------
<S> <C> <C>
Michael L. Lucas Trias Capital Management, Inc. President
77 West Wacker Drive
27th Floor
Chicago, Illinois 60601
Pryor, McClendon, Counts & Co., Inc. Vice President
Eleven Hundred Peachtree Street, N.E.
Suite 1660
Atlanta, Georgia 30309
PMC/ASTROP Capital Management, Inc. President
Eleven Hundred Peachtree Street, N.E.
Suite 1661
Atlanta, Georgia 30309
Malcolmn D. Pryor Pryor, McClendon, Counts & Co., Inc. Chairman
1515 Market Street
Suite 819
Philadelphia, Pennsylvania 19102
Raymond J. McClendon Pryor, McClendon, Counts & Co., Inc. Vice Chairman,
Eleven Hundred Peachtree Street, N.E. Secretary and Treasurer
Suite 1660
Atlanta, Georgia 30309
Allen W. Counts Pryor, McClendon, Counts & Co., Inc. President
17 State Street, 31st Floor
New York, New York 10004
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) None
(b) The following persons are the directors and officers of the
Underwriter. The principal business address of all such persons is Eleven
Hundred Peachtree Street, Suite 1600, Atlanta, Georgia 30309. None of such
persons occupies any position or office with the Registrant.
Positions and
Offices with
Name Underwriter
- ---- -------------
Malcolmn D. Pryor Chairman of the Board
C-3
<PAGE>
Raymond J. McClendon Vice Chairman of the Board,
Secretary and Treasurer
Allen W. Counts President
(c) Not Applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Physical possession of all accounts, books and other documents (other
than those relating to the Underwriter) required by Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated thereunder will be
maintained by Wedgewood Equities, Inc. at Suite 1661, Eleven Hundred Peachtree
Street, N.E., Atlanta, Georgia 30309. All accounts, books and other documents
relating to the Underwriter will be maintained by Pryor, McClendon, Counts &
Co., Inc. at Eleven Hundred Peachtree Street, Suite 1660, Atlanta, Georgia
30309.
Item 31. MANAGEMENT SERVICES
Not Applicable.
Item 32. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Atlanta, and State of Georgia, on the
25th day of September, 1996.
THE ATLANTA GROWTH FUND, INC.
By: /s/ Michael L. Lucas
------------------------------
Michael L. Lucas, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Michael L. Lucas
- --------------------------- President and Chairman of September 25, 1996
Michael L. Lucas Board of Directors --
/s/ William M. Bauman
- --------------------------- Director September 26, 1996
William M. Bauman --
/s/ Sidney Feldman
- --------------------------- Director September 25, 1996
Sidney Feldman --
- --------------------------- Director September , 1996
Ronald L. Krise --
C-5
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
NO. ----
- -------
11.1 Consent of Independent Accountants . . . . . . . . . . . . . . . .
11.2 Consent of Legal Counsel . . . . . . . . . . . . . . . . . . . . .
24(a) Annual Report to Shareholders for the Period Ended May 31, 1996. .
<PAGE>
EXHIBIT 11.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated July
9, 1996 in this Post-Effective Amendment No. 5 under the Securities Act of
1933, as amended, to this Registration Statement on Form N-1A (No. 33-44714)
of The Atlanta Growth Fund, Inc. We also consent to the reference to our Firm
under the heading "Independent Accountants" in the Prospectus.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
September 25, 1996
<PAGE>
EXHIBIT 11.2
[LETTERHEAD]
September 24, 1996
The Atlanta Growth Fund, Inc.
Suite 1661
1100 Peachtree Street, NE
Atlanta, Georgia 30309
Gentlemen:
We hereby consent to the references to our Firm under the caption
"Legal Counsel" in the Prospectus and on the back page of the Prospectus
contained in Post-Effective Amendment No. 5 to the Registration Statement on
Form N-1A (File No. 33-44714) under the Securities Act of 1933, as amended,
of The Atlanta Growth Fund, Inc.
Very truly yours,
POWELL, GOLDSTEIN, FRAZER & MURPHY
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS
Michael L. Lucas, PRESIDENT
Sidney Feldman
Ronald L. Krise
William M. Bauman
OFFICERS
Michael L. Lucas, PRESIDENT
INVESTMENT ADVISER
Wedgewood Equities, Inc.
1100 Peachtree Street, N.E.
Suite 1661
Atlanta, Georgia 30309
ADMINISTRATOR
PFPC Inc.
P.O. Box 7488
Wilmington, Delaware 19805-7488
DISTRIBUTOR
Pryor, McClendon, Counts & Co., Inc.
1100 Peachtree Street
Suite 1660
Atlanta, Georgia 30309
TRANSFER AGENT
PFPC Inc.
P.O. Box 8950
Wilmington, Delaware 19885-9628
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless
accompanied or preceded by a current effective prospectus of the Fund, which
contains information concerning the investment policies of the Fund as well as
other pertinent information.
THE ATLANTA
GROWTH FUND, INC.
ANNUAL REPORT
MAY 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholder:
I am pleased to send you the annual report of The Atlanta
Growth Fund for the Fund's fiscal year which ended May 31, 1996.
During this period, The Atlanta Growth Fund produced a total
return of 24.56 percent versus the Standard and Poor's 500 Index
at 25.4 percent.
The equity markets performed well during fiscal year 1996 due
to lower expectations for inflation and a moderate economy.
Equities greatly benefited from technological improvements which
enhanced worker productivity and fueled merger activity. The
favorable economic cycle and low interest rates allowed
corporations to also improve balance sheets. Corporations
continued to shed jobs, thereby staving off concerns about wage
inflation.
Technology and telecommunications issues exploded in 1995 and
led the market's performance for much of the calendar year. The
technology sector corrected somewhat during the latter portion of
1995 and the first half of fiscal year 1996. Computer processing
companies, First Financial Management, National Data Corporation,
and Total System Services, Inc., benefited from the rally in the
technology sector. These firms continued to grow their respective
businesses through innovative new products and services, and
non-dilutive acquisitions. Healthcare software producer, HBO &
Company, continues to set the standard for this sector. HBO &
Company has strong cash flow, low debt, and a strong stock price
which allows the firm to make key strategic acquisitions. Turner
Broadcasting Systems, BellSouth Communications, and American
Telephone & Telegraph Company have benefited from proposed
acquisitions, strategic alliances and investments, and
divestitures.
The financial sector performed well during fiscal year 1996,
continuing the outlook from the fiscal year-end 1995 report.
Regional banking companies, including SunTrust Banks, Inc., First
Union Corporation, Savannah Bank Corporation, Synovus Financial
Corporation, and Bank South (purchased by NationsBank), performed
well during the year as interest rates declined and business
prospects improved. Regional banks should continue to perform well
due to clean balance sheets, a greater emphasis on fee generation,
and merger activity.
A mega-trend is developing as America continues to age.
Healthcare will become a larger component of the nation's gross
domestic product as Americans need more medicine, hospital care,
home care, and retirement care. Therefore, the Fund will
opportunistically acquire a more substantial stake in the
healthcare sector.
Management of The Atlanta Growth Fund has continued to adhere
to the strategy of investing for the long-term in high-quality
small-, medium-, and large-size companies with proprietary
products, services, niche positions, and superior management. The
companies are dynamic and occupy leadership or valued positions in
their respective industries. Management has invested its dollars
along with yours in a diverse mix of companies which appear to
have tremendous long-term prospects in the domestic and
international marketplaces.
I am appreciative of your interest in The Atlanta Growth Fund.
I will work hard to reward the trust you have placed in me. If you
should have comments about this report or questions regarding the
portfolio, please let The Atlanta Growth Fund hear from you.
Sincerely,
[sig cut]
Michael L. Lucas
President
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN THE ATLANTA GROWTH FUND, INC.
AND THE S&P 500 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
QUARTER ATLANTA GROWTH S&P 500 STOCK INDEX
<S> <C> <C>
06/22/92 $ 9,625 $ 10,000
08/31/92 9,990 10,264
11/30/92 10,790 10,693
02/28/93 11,211 10,991
05/31/93 11,161 11,160
08/31/93 11,583 11,491
11/30/93 11,482 11,447
02/28/94 11,997 11,580
05/31/94 11,411 11,315
08/31/94 11,809 11,785
11/30/94 11,140 11,244
02/28/95 11,767 12,079
05/31/95 12,222 13,219
08/31/95 13,337 13,971
11/30/95 13,486 15,040
02/29/96 13,948 15,968
05/31/96 15,223 16,579
ATLANTA GROWTH
1-YEAR RETURN 24.56%
FROM INCEPTION 11.24%
</TABLE>
2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and
Board of Directors of
The Atlanta Growth Fund, Inc.:
We have audited the accompanying statement of net assets of The Atlanta Growth
Fund, Inc., as of May 31, 1996, 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 respective
periods presented. These financial statements and financial highlights are the
responsiblity 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 May
31, 1996 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 The
Atlanta Growth Fund, Inc. as of May 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and its financial highlights for each of the respective
periods presented in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
July 9, 1996
3
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF NET ASSETS
MAY 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- -----------
<S> <C> <C>
COMMON STOCK -- 99.5%
ACCIDENT & HEALTH INSURANCE -- 1.1%
AFLAC, Inc. ........................................................ 1,500 $ 45,187
-----------
AIR TRANSPORTATION, SCHEDULED -- 4.5%
Atlantic Southeast Airlines, Inc.................................... 2,000 53,000
Delta Air Lines, Inc................................................ 1,500 124,312
-----------
177,312
-----------
BAKERY PRODUCTS -- 0.9%
Flowers Industries, Inc............................................. 2,250 35,437
-----------
BOTTLED & CANNED SOFT DRINKS -- 7.9%
Coca-Cola Enterprises, Inc.......................................... 3,200 101,600
The Coca-Cola Co. .................................................. 4,600 211,600
-----------
313,200
-----------
CABLE & OTHER PAY TELEVISION SERVICES -- 0.8%
Cox Communications, Inc. Class A*................................... 1,500 33,750
-----------
CARPETS AND RUGS -- 1.2%
Mohawk Industries, Inc.*............................................ 2,000 33,500
Shaw Industries, Inc................................................ 1,000 13,000
-----------
46,500
-----------
COMMERCIAL BANKS -- 8.8%
First Union Corp.................................................... 984 60,147
NationsBank Corporation............................................. 1,760 142,780
SunTrust Banks, Inc................................................. 4,000 146,000
-----------
348,927
-----------
COMMERCIAL PRINTING -- 2.0%
John H. Harland Co. ................................................ 3,000 81,375
-----------
ELECTRIC SERVICES -- 2.3%
The Southern Co..................................................... 4,000 92,500
-----------
ELECTRICAL LIGHTING & WIRING EQUIPMENT -- 1.4%
National Services Industries, Inc. ................................. 1,400 54,425
-----------
ELECTROMEDICAL APPARATUS -- 3.7%
Healthdyne Information Enterprises*................................. 2,200 16,225
Healthdyne Technologies, Inc.*...................................... 1,431 18,961
Medaphis Corp.*..................................................... 3,000 113,250
-----------
148,436
-----------
</TABLE>
4
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF NET ASSETS -- (CONTINUED)
MAY 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- -----------
<S> <C> <C>
ELECTRONIC COMPONENTS -- 0.7%
Electromagnetic Sciences, Inc.*..................................... 2,000 $ 29,000
-----------
FARM MACHINERY & EQUIPMENT -- 2.3%
AGCO Corp........................................................... 3,000 90,375
-----------
IN VITRO DIAGNOSTIC SUBSTANCES -- 0.3%
International Murex Technologies Corp.*............................. 3,500 13,781
-----------
INDUSTRIAL INORGANIC CHEMICALS -- 1.8%
Georgia Gulf Corp. ................................................. 2,100 71,925
-----------
INSURANCE AGENTS, BROKERS & SERVICES -- 2.3%
Crawford & Co. Class B.............................................. 3,200 52,800
Fuqua Enterprises, Inc.*............................................ 1,400 39,900
-----------
92,700
-----------
KNIT OUTERWEAR MILLS -- 1.4%
Oxford Industries, Inc. ............................................ 3,000 54,750
-----------
LAND SUBDIVIDERS & DEVELOPERS -- 1.6%
IRT Property Co..................................................... 6,800 63,750
-----------
MANIFOLD BUSINESS FORMS -- 0.7%
American Business Products, Inc. Ga. ............................... 1,400 30,275
-----------
NATURAL GAS DISTRIBUTION -- 1.3%
AGL Resources, Inc.................................................. 3,000 52,875
-----------
OIL & GAS FIELD EQUIPMENT -- 1.2%
RPC, Inc.*.......................................................... 3,700 46,250
-----------
PAPER MILLS -- 3.6%
Georgia-Pacific Corp................................................ 2,000 144,500
-----------
PAPERBOARD CONTAINERS & BOXES -- 2.0%
Caraustar Industries, Inc. ......................................... 3,100 80,600
-----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.8%
Metromedia International Group, Inc.*............................... 2,200 30,800
-----------
PRIMARY PRODUCTION OF ALUMINUM -- 2.2%
Alumax, Inc.*....................................................... 2,600 86,450
-----------
RADIO & TV BROADCASTING EQUIPMENT -- 1.2%
Scientific-Atlanta, Inc............................................. 2,600 49,075
-----------
</TABLE>
5
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF NET ASSETS -- (CONTINUED)
MAY 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- -----------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUST -- 2.7%
Cousins Properties, Inc. ........................................... 3,500 $ 68,250
Post Properties, Inc................................................ 1,200 40,200
-----------
108,450
-----------
RETAIL -- LUMBER & BUILDING MATERIALS -- 3.3%
The Home Depot, Inc................................................. 2,600 132,925
-----------
SERVICES -- COMMERCIAL SERVICES -- 2.1%
Norrell Corp........................................................ 2,000 82,750
-----------
SERVICES -- COMPUTER PROCESSING -- 12.1%
First Data Corp..................................................... 2,254 179,757
National Data Corp.................................................. 2,750 103,813
Total System Services, Inc. ........................................ 7,800 196,950
-----------
480,520
-----------
SERVICES -- CONSUMER CREDIT REPORTING -- 1.9%
Equifax, Inc........................................................ 3,000 74,250
-----------
SERVICES -- DWELLINGS & OTHER BUILDINGS -- 1.2%
Rollins, Inc........................................................ 2,050 46,637
-----------
SERVICES -- EQUIPMENT RENTAL & LEASING -- 2.6%
Aaron Rents, Inc. Non-Voting........................................ 3,610 102,885
-----------
SERVICES -- HOME HEALTH CARE -- 0.5%
Matria Healthcare, Inc.*............................................ 2,200 18,425
-----------
SERVICES -- NURSING FACILITIES -- 1.0%
Health Images, Inc. ................................................ 4,000 38,500
-----------
SERVICES -- PREPACKAGED SOFTWARE -- 4.7%
HBO & Co............................................................ 1,500 187,313
-----------
STATE COMMERCIAL BANKS -- 2.1%
Savannah Bank Corp.................................................. 2,200 41,800
Synovus Financial Corp. ............................................ 1,875 43,125
-----------
84,925
-----------
TELEPHONE & TELEGRAPH APPARATUS -- 0.8%
American Telephone & Telegraph Co................................... 500 31,188
-----------
TELEPHONE COMMUNICATIONS -- 2.0%
BellSouth Corp...................................................... 2,000 81,250
-----------
TELEVISION BROADCASTING SYSTEMS -- 2.2%
Turner Broadcasting System, Inc. Class B............................ 3,200 87,200
-----------
</TABLE>
6
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF NET ASSETS -- (CONCLUDED)
MAY 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- -----------
<S> <C> <C>
WHOLESALE -- MOTOR VEHICLE SUPPLIES -- 2.3%
Genuine Parts Co. .................................................. 2,000 $ 91,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL COMMON STOCK INVESTMENTS (Cost $2,230,947+)..................... 99.5% 3,962,373
OTHER ASSETS IN EXCESS OF LIABILITIES................................. 0.5% 21,180
----- -----------
NET ASSETS (Equivalent to $12.53 per share based on 317,956 shares
outstanding)........................................................ 100.0% $ 3,983,553
----- -----------
----- -----------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE..................................... $ 12.53
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE ($12.53 DIVIDED BY .9625)........................ $ 13.02
-----------
-----------
</TABLE>
- ------------
* Non-income producing.
+ Aggregate cost for Federal income tax purposes. The aggregate gross unrealized
appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost.................................... $ 1,783,046
Excess of tax cost over value.................................... (51,620)
-----------
$ 1,731,426
-----------
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
MAY 31, 1996
------------
<S> <C>
INVESTMENT INCOME:
Dividends....................................................................................... $ 76,029
Interest........................................................................................ 2,630
------------
Total Income.............................................................................. 78,659
------------
EXPENSES:
Investment advisory fee......................................................................... 23,448
Administration fee.............................................................................. 99,600
Distribution expenses........................................................................... 10,861
Directors fees.................................................................................. 24,000
Custodian fees.................................................................................. 19,306
Transfer agent fee.............................................................................. 46,950
Legal fees...................................................................................... 62,900
Audit fees...................................................................................... 19,610
Registration fees............................................................................... 18,356
Amortization of organizational costs............................................................ 39,528
Printing........................................................................................ 18,350
Insurance....................................................................................... 20,016
Miscellaneous................................................................................... 7,570
------------
Total Expenses............................................................................ 410,495
Less fees waived................................................................................ (47,448)
------------
Net Expenses.............................................................................. 363,047
------------
NET INVESTMENT LOSS............................................................................... (284,388)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions.................................................... 730,337
Net unrealized appreciation of investments...................................................... 500,291
------------
Net gain on investments......................................................................... 1,230,628
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $ 946,240
------------
------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss............................................................. $ (284,388) $ (256,492)
Net realized gain from security transactions.................................... 730,337 224,743
Net unrealized appreciation of investments...................................... 500,291 377,011
------------- -------------
Increase in net assets resulting from operations............................ 946,240 345,262
------------- -------------
Distributions to Shareholders:
Net realized gain on investments................................................ (467,804) (187,475)
------------- -------------
Total distributions......................................................... (467,804) (187,475)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares.................................................... 265,445 196,787
Value of shares issued in reinvestment.......................................... 253,325 99,944
Cost of shares repurchased...................................................... (1,964,189) (2,086,031)
------------- -------------
Decrease in net assets from capital share transactions.......................... (1,445,419) (1,789,300)
------------- -------------
Total decrease in net assets................................................ (966,983) (1,631,513)
------------- -------------
NET ASSETS:
Beginning of period............................................................... 4,950,536 6,582,049
------------- -------------
End of period..................................................................... $ 3,983,553 $ 4,950,536
------------- -------------
------------- -------------
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
THE ATLANTA GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED JUNE 22, 1992(1) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 11.29 $10.92 $11.12 $10.00
------------ ------ ------ ------
Income from investment operations:
Net investment loss (5)............... (.77) (.50) (.33) (.04)
Net realized and unrealized gain on
investments......................... 3.34 1.24 .59 1.20
------------ ------ ------ ------
Total from investment operations........ 2.57 .74 .26 1.16
------------ ------ ------ ------
Less distributions:
Dividends to shareholders from net
investment income................... -- -- -- (.02)
Dividends to shareholders from net
capital gains....................... (1.33) (.37) (.46) (.02)
------------ ------ ------ ------
Total distributions..................... (1.33) (.37) (.46) (.04)
------------ ------ ------ ------
Net asset value, end of period.......... $ 12.53 $11.29 $10.92 $11.12
------------ ------ ------ ------
------------ ------ ------ ------
Total return:........................... 24.56% 7.10% 2.24% 12.40%(2)
Ratios/Supplemental Data:
Net assets, end of period $ (000)....... $ 3,984 $4,951 $6,582 $9,122
Ratio of expenses to average daily net
assets (3)............................ 8.36% 6.49% 4.82% 2.53%(2)
Ratio of net investment loss to average
daily net assets...................... (6.55%) (4.56%) (2.89%) (.36%)(2)
Portfolio turnover rate................. 3.34% .11% 11.56% 8.70%(2)
Average commission rate (4)............. $0.0635 N/A N/A N/A
</TABLE>
- ------------
(1) Commencement of operations.
(2) Annualized.
(3) Without the voluntary fee waivers, the ratio of expenses to average daily
net assets would have been 9.45%, 7.65% and 5.85%, respectively, for each of
the years ended May 31, 1996, 1995 and 1994, and 4.85% (annualized) for the
period ended May 31, 1993.
(4) Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. beginning 1996.
(5) Average shares method used.
See Accompanying Notes to Financial Statements.
10
<PAGE>
THE ATLANTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The Atlanta Growth Fund, Inc. ("the Fund") is a non-diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended, and seeks as its objective long-term growth of capital through
investments in certain publicly traded companies concentrated in the
metropolitan area of Atlanta, Georgia. The Fund commenced operations on June 22,
1992.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statement and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATION -- Securities listed on a national securities
exchange are valued at last sale price. Over-the-counter securities and listed
securities for which a sales price is not available are valued at the last
quoted bid price. When market quotations are not readily available, securities
are valued based on prices received from recognized broker-dealers in the same
or similar securities. Debt securities with a maturity of less than 60 days are
valued at amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
Federal income tax purposes. Dividends are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The policy of the Fund is
to pay dividends from net investment income, if any, and make distributions of
net realized capital gains, if any, at least annually. Income distributions and
capital gain distributions are determined in accordance with U.S. Federal Income
tax regulations which may differ from generally accepted accounting principles.
D. FEDERAL INCOME TAXES -- No provision is made for Federal taxes since the
Fund intends to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders, which will be sufficent to
relieve it from Federal income and excise taxes.
E. ORGANIZATION COSTS -- Costs incurred by the Fund in connection with its
organization, registration and initial public offering of shares have been
deferred and are being amortized using the straight-line method for a five-year
period beginning with commencement of operations.
F. REPURCHASE AGREEMENTS -- The Fund may purchase money market instruments,
subject to the seller's agreement to repurchase them at an agreed upon date and
price. The seller will be required on a daily basis to maintain the value of the
securities subject to the agreement at not less than the repurchase price. The
agreements are conditioned upon collateral being deposited under the Federal
Revenue book-entry system or with the Fund's custodian or a third party
sub-custodian.
11
<PAGE>
THE ATLANTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 2. INVESTMENT ADVISORY, DISTRIBUTOR AND OTHER RELATED PARTY TRANSACTIONS
The Fund has entered into investment advisory agreements with Wedgewood
Equities, Inc. ("Wedgewood") and Astrop Advisory Corporation ("Astrop
Advisory"). Effective April 16, 1996, Astrop Advisory voluntarily resigned as
investment adviser to the Fund. For the advisory services provided, Wedgewood
and Astrop Advisory, in the aggregate, were entitled to receive from the Fund a
fee, computed daily and payable monthly, at an annual rate of 0.54% of the
average daily net assets of the Fund. The advisers may, at their discretion,
voluntarily waive all or any portion of their advisory fees. For the year ended
May 31, 1996, the advisers waived their fee in total, which amounted to $23,448.
The Fund has adopted a plan of distribution with Pryor, McClendon, Counts &
Co., Inc., an affiliate of Wedgewood, whereby the Fund may reimburse the
distributor in an amount up to 0.25% per annum of the Fund's average daily net
assets.
For the year ended May 31, 1996, the Fund's directors waived fees totalling
$24,000.
NOTE 3. PURCHASES AND SALES OF SECURITIES
For the year ended May 31, 1996, purchases and sales of securities, other
than short-term investments, were $142,065 and $2,194,136, respectively.
NOTE 4. CAPITAL SHARES
On May 31, 1996 there were 500 million shares of common stock authorized at
no par value per share.
Transactions in capital shares of the Fund were are follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1996 MAY 31, 1995
------------ ------------
<S> <C> <C>
Shares sold................................................. 23,477 18,437
Shares redeemed............................................. (167,211) (192,470)
Shares reinvested........................................... 23,348 9,601
------------ ------------
Net decrease in shares...................................... (120,386) (164,432)
Shares outstanding:
Beginning of the period................................... 438,342 602,774
------------ ------------
End of period............................................. 317,956 438,342
------------ ------------
------------ ------------
</TABLE>
NOTE 5. NET ASSETS
At May 31, 1996, net assets consisted of the following:
<TABLE>
<S> <C>
Paid-in capital............................................. $ 1,824,381
Accumulated net realized gain............................... 427,746
Net unrealized appreciation of investments.................. 1,731,426
------------
Total Net Assets.......................................... $ 3,983,553
------------
------------
</TABLE>
12
