<PAGE> 1
<TABLE>
<S><C>
TO LEARN MORE ABOUT THE FUND KEELEY
SMALL CAP VALUE FUND, INC.
Ask for a free copy of the following:
A mutual fund investing in
STATEMENT OF ADDITIONAL INFORMATION (SAI).
The SAI gives you more details on other small market cap companies
aspects of the Fund. It's filed with the
Securities and Exchange Commission (SEC) for capital appreciation
and by this reference is incorporated in
this prospectus.
ANNUAL/SEMI-ANNUAL REPORT. These reports
describe the Fund's performance, list its
holdings, and discuss market conditions,
economic trends and Fund strategies that
significantly affected the Fund's performance Prospectus
during its last fiscal year.
January 29, 1999
Here's how you can get this information
without charge. As Supplemented April 7, 1999
BY TELEPHONE
Call Toll Free 1-888-933-5391
BY MAIL
Write to:
KEELEY Small Cap Value Fund, Inc.
401 South LaSalle Street, Suite 1201
Chicago, IL 60605
BY E-MAIL
Send your request to [email protected]
ON THE INTERNET
View online or download Fund prospectus
and application at
KEELEY Website: www.keeleyfunds.com
or
SEC's Website: www.sec.gov
You can also get copies at the SEC Public Neither the SEC nor any state securities
Reference Room in Washington, D.C. Call commission has approved or disapproved
1-800-SEC-0330 for details. Or send your these securities, or determined if this
request and a duplicating fee to the SEC's Prospectus is truthful or complete. Any
Public Reference Section, Washington, representation to the contrary is a
D.C. 20549-6009. criminal offense.
SEC file number 811-7760
</TABLE>
<PAGE> 2
CONTENTS
THE FUND
Investment objective ................................... 2
Principal investment strategy and policies ............. 2
Main risks ............................................. 3
Performance ............................................ 3
Expenses ............................................... 4
Financial highlights ................................... 5
Management ............................................. 6
YOUR INVESTMENT
How shares are priced .................................. 7
How to buy, sell, and exchange shares .................. 8
Distributions and taxes ................................ 12
Shareholder privileges ................................. 13
Right of Accumulation ................................ 13
Letter of Intent ..................................... 13
Automatic Investment Plan ............................ 13
Individual Retirement Accounts ......................... 13
Year 2000 Issues ...................................... 13
TO LEARN MORE ABOUT THE FUND .................... Back cover
1
<PAGE> 3
THE FUND
KEELEY SMALL CAP VALUE FUND, INC.
INVESTMENT OBJECTIVE
This Fund seeks capital appreciation by investing at least 65% of its
total assets in companies with small market capitalization (less than $1 billion
at the time of initial investment).
PRINCIPAL INVESTMENT STRATEGY AND POLICIES
The Fund will invest at least 65% of its total assets in common stocks
and other equity type securities (including preferred stock, convertible debt
securities, and warrants) of small cap companies.
While many mutual funds look for undervalued stocks, the Fund takes a
unique approach: we concentrate on companies going through major changes,
including:
- corporate spin-offs (a tax-free distribution of a parent company's
division to shareholders)
- financial restructuring, including acquisitions, recapitalizations
and companies emerging from bankruptcy
- companies selling at or below actual or perceived book value
We don't concentrate on any sector or industry. Current dividend or
interest income is not a factor when choosing securities. Each stock is judged
on its potential for above-average capital appreciation, using a value approach
that emphasizes:
- equities with positive cash flow
- low market capitalization-to-revenue ratio
- desirable EBITDA (earnings before interest, taxes, depreciation, and
amortization)
- motivated management
- little attention from Wall Street
Research sources include company documents, subscription research
services, select broker/dealers, and direct company contact.
It is our initial intention to typically hold securities for more than
two years to allow the corporate restructuring process to yield results. But we
may sell securities when a more attractive opportunity emerges, when a company
becomes overweighted in the portfolio, or when operating difficulties or other
circumstances make selling desirable.
In times of adverse equity markets, we may take temporary defensive
positions in U.S. Treasury bills and commercial paper of major U.S.
corporations. This could reduce the benefit from an upswing in the market.
The investment strategy and policies are not fundamental; they may be
changed without shareholder approval. You'll get advance notice if we change
that policy. For more about the Fund's investment policies, see the SAI.
2
<PAGE> 4
MAIN RISKS
The Fund is subject to the typical risks of equity investing, including
the effects of interest rate fluctuations, investor psychology, and other
factors. The value of your investment will increase or decrease so your shares
may be worth more or less money than your original investment.
The Fund may be suitable for the more aggressive section of an
investor's portfolio. It's designed for people who want to grow their capital
over the long term and who are comfortable with possible frequent short-term
changes in the value of their investment. An investment in the Fund should not
be considered a complete investment program.
In addition, small cap investing presents more risk than investing in
large cap or more established company securities. Small cap companies often have
more limited resources and greater variation in operating results, leading to
greater price volatility. Trading volumes may be lower, making such securities
less liquid. The focus on corporate restructures means these securities are more
likely than others to remain undervalued.
Other than company-specific problems, the factor most likely to hurt
Fund performance would be a sharp increase in interest rates, which generally
causes equity prices to fall.
PERFORMANCE
The first chart below shows annual total returns for the Fund. The
second compares Fund performance with that of both the Russell 2000 Index, an
unmanaged index made up of smaller capitalization issues and the S&P 500 Index,
a broad market-weighted index dominated by blue-chip stocks. While these two
charts give you some idea of the risks involved in investing in the Fund, please
remember that past performance doesn't guarantee future results.
--------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)
--------------------------------------------------------
1994 1995 1996 1997 1998
--------------------------------------------------------
(8.71)% 32.47% 25.99% 41.01% 0.62%
--------------------------------------------------------
The bar chart and Best and Worst quarters do not reflect the maximum 4.50% sales
load. If these charts reflected the sales load, returns would be less than those
shown.
--------------------------------------------------------
Best Quarter Worst Quarter
--------------------------------------------------------
Q3 '97 21.56% Q3 '98 (20.25)%
--------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
--------------------------------------------------------
INCEPTION
1 YEAR 5 YEARS (10/1/93)
--------------------------------------------------------
FUND* (3.91)% 15.61% 15.77%
--------------------------------------------------------
Russell 2000 (2.55)% 11.87% 11.82%
--------------------------------------------------------
S&P 500 28.58% 24.06% 23.32%
--------------------------------------------------------
*This performance table reflects the payment of the 4.50% sales load on the
purchase of new shares.
3
<PAGE> 5
EXPENSES
The table below shows what fees and expenses you could face as a Fund
shareholder. Keep in mind that future expenses may be higher or lower than those
shown.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------------------------------------------
Maximum Sales Load on Purchases (as a percentage of offering price)(a) 4.50%
- -----------------------------------------------------------------------------------------------------------------
Maximum Sales Load on Reinvested Dividends (as a percentage of offering price) None
- -----------------------------------------------------------------------------------------------------------------
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds as applicable) None
- -----------------------------------------------------------------------------------------------------------------
Redemption Fees (as a percentage of amount redeemed, as applicable)(b) None
- -----------------------------------------------------------------------------------------------------------------
Exchange Fees(b) None
- -----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (As a Percentage of Average Net Assets)
- -----------------------------------------------------------------------------------------------------------------
Management Fees 1.00%
- -----------------------------------------------------------------------------------------------------------------
Distribution (12b-1) Fees(c) 0.25%
- -----------------------------------------------------------------------------------------------------------------
Other Expenses 0.77%
- -----------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses(d) 2.02%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It does not represent the
Fund's actual expenses and returns, either past or future. Actual expenses may
be greater or less than those shown.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $10,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
$646 $1,055 $1,489 $2,692
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Sales charges are reduced for purchases of $50,000 or more. See "How shares
are priced."
(b) The Fund's Transfer Agent charges a fee of $12 for each wire redemption and
$5 for each telephone exchange. At the discretion of the adviser or transfer
agent these fees may be waived.
(c) The Rule 12b-1 Fee is an annual fee paid by the Fund (and indirectly by
shareholders). See "How Shares are Priced." Over time, long-term
shareholders may pay more in distribution-related charges through the
imposition of the Rule 12b-1 Fee than the economic equivalent of the maximum
front-end sales charge applicable to mutual funds sold by members of the
National Association of Securities Dealers, Inc. (the "NASD").
(d) The Adviser has agreed to waive a portion of its fee to the extent that
total ordinary operating expenses during the current fiscal year as a
percentage of average net assets exceed 2.50%.
The Management Fee to be paid by the Fund is higher than that paid by
many other investment companies. The Board of Directors believes that the Fund's
Management Fee is appropriate in light of the Fund's investment objective and
policies.
4
<PAGE> 6
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 5 years. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the Fund's financial
statements, are included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994(2)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data(1)
Net asset value, beginning of period $ 21.48 $ 14.52 $ 12.52 $10.26 $10.00
Income from investment operations:
Net investment loss (0.16) (0.25) (0.19) (0.13) (0.06)
Net realized and unrealized gains (losses)
on investments (2.00) 7.77 2.22 2.39 0.32
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.16) 7.52 2.03 2.26 0.26
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions: Net realized gains (1.01) (0.56) (0.03) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.31 $21.48 $14.52 $12.52 $10.26
- ----------------------------------------------------------------------------------------------------------------------------
Total return(3) (10.50)% 53.51% 16.23% 22.03% 2.60%
Supplemental data and ratios:
Net assets, end of period (in 000's) $ 39,747 $20,824 $10,815 $7,616 $4,503
Ratio of expenses to average net assets 2.02% 2.45% 2.50% 2.50% 2.49%
Ratio of net investment loss to average net assets (1.17)% (1.66)% (1.61)% (1.46)% (0.96)%
Ratio of expenses to average net assets(4) 2.02% 2.45% 2.94% 3.94% 5.98%
Ratio of net investment loss to average net assets(4) (1.17)% (1.66)% (2.05)% (2.90)% (4.45)%
Portfolio turnover rate 33.40% 36.40% 52.43% 70.59% 63.20%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share data is for a share outstanding throughout the period.
(2) The Fund commenced operations on October 1, 1993.
(3) The total return calculation does not reflect the 4.50% sales load imposed
on the purchase of shares.
(4) During the period, certain fees were waived. If such fee waivers had not
occurred, the ratios would have been as indicated.
5
<PAGE> 7
MANAGEMENT
INVESTMENT ADVISER - The Fund's investment adviser is Keeley Asset
Management Corp., 401 South LaSalle Street, Suite 1201, Chicago, IL 60605. The
adviser supervises, administers and continuously reviews the Fund's investment
program, following policies set by the Board of Directors. As of December 31,
1998, the adviser had more than $465 million in assets under management.
John L. Keeley, Jr., president and director of the Fund, is the
adviser's sole shareholder. He has been president and primary investment manager
for the adviser since its incorporation in 1981. He has also been primarily
responsible for day-to-day management of the Fund's portfolio since its
incorporation in 1993.
The Fund pays the adviser a monthly fee at an annual rate of 1.00% of
average daily net assets. While this rate is higher than what most mutual funds
pay, the directors consider it appropriate in light of the Fund's investment
objectives and policies. The adviser will waive part of its fee or reimburse the
Fund if its annual operating expenses exceed 2.50% of net assets. This
limitation excludes taxes, interest charges, litigation and other extraordinary
expenses, and brokerage commissions and other charges from buying and selling
Fund securities.
OTHER SERVICE PROVIDERS
ADMINISTRATOR - Sunstone Financial Group, Inc. oversees the Fund's
custodian and transfer agent; handles required tax returns and various filings;
monitors Fund expenses and compliance issues; and generally administers the
Fund.
DISTRIBUTOR - Keeley Investment Corp. is the general distributor of the
Fund's shares.
CUSTODIAN, TRANSFER AGENT, AND ACCOUNTING SERVICES - Firstar Bank
Milwaukee, N.A. provides for the safekeeping of the Fund's assets. Firstar
Mutual Fund Services, LLC maintains shareholder records and disburses dividends
and other distributions.
6
<PAGE> 8
YOUR INVESTMENT
HOW SHARES ARE PRICED
The public offering price of Fund shares is the net asset value (the
value of one share in the Fund) plus a SALES CHARGE based on the amount of your
purchase.
NET ASSET VALUE - Net asset value (NAV) is calculated by dividing the
Fund's total assets, minus any liabilities, by the number of shares outstanding.
It's determined daily Monday through Friday as of the end of trading hours on
the New York Stock Exchange (currently 4 p.m. Eastern Time), except on these
holidays:
New Year's Day Martin Luther King Jr. Day Presidents' Day
Good Friday Memorial Day Independence Day
Labor Day Thanksgiving Day Christmas Day
The day's NAV will be used for all buy or sell orders received since
the preceding computation.
Here's how the value of Fund assets is determined:
- A security listed on an exchange or quoted on a national market
system is valued at the last sale price or, if it wasn't traded
during the day, at the most recent bid price.
- Securities traded only on over-the-counter markets are valued at the
last sale price on days when the security is traded; otherwise,
they're valued at closing over-the-counter bid prices.
- If a security is traded on more than one exchange, it's valued at the
last sale price on the exchange where it's principally traded.
- Debt securities (other than short-term obligations) in normal
institutional-size trading units are valued by a service that uses
electronic data processing methods, avoiding exclusive reliance on
exchange or over-the-counter prices.
- Short-term obligations (debt securities purchased within 60 days of
their stated maturity date) are valued at amortized cost, which
approximates current value.
- Securities for which market quotes aren't readily available, and
other Fund assets, are valued at their fair value as determined by
the Board of Directors.
7
<PAGE> 9
SALES CHARGE - The chart below shows how the sales charge varies with
the amount of your purchase.
<TABLE>
<CAPTION> Dealer
Reallowance
Sales Charge as a Percentage of as a Percentage of
Single Transaction Amount Offering Price Net Amount Invested Offering Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
- ---------------------------------------------------------------------------------------------------------
$50,000 - less than $100,000 4.00% 4.17% 3.50%
- ---------------------------------------------------------------------------------------------------------
$100,000 - less than $250,000 3.00% 3.09% 2.50%
- ---------------------------------------------------------------------------------------------------------
$250,000 - less than $500,000 2.50% 2.56% 2.00%
- ---------------------------------------------------------------------------------------------------------
$500,000 and over 2.00% 2.04% 1.50%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Various individuals and organizations who meet Fund requirements may
buy shares at NAV - that is, without the sales charge. For a list of those who
may qualify for fee waivers, plus a description of the requirements, see the
SAI.
The Fund has adopted a plan under Rule 12b-1 that allows the Fund to
pay distribution and other fees for the sale and distribution of its shares and
for services provided to shareholders. Under this Plan, the fee is 0.25% per
year of the Fund's Net Asset Value (calculated on a daily basis). Because these
fees are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
See also "Right of Accumulation" and "Letter of Intent" under
"Shareholder Privileges."
HOW TO BUY, SELL AND EXCHANGE SHARES
BUYING SHARES
You can buy Fund shares directly from the distributor, Keeley
Investment Corp., or from selected broker/dealers. If you invest through a third
party, policies and fees may differ from those described here.
The minimum initial investment is $1,000 ($250 for IRAs and Automatic
Investment Plan accounts), and the minimum for additional investments is $50 and
is subject to change at any time.
Your order will be priced at the next NAV calculated after the Fund
receives your order. All purchases must be made in U.S. dollars and checks drawn
on U.S. banks. We don't accept cash. If your check is returned for any reason,
you'll be charged a $25 fee as well as for any loss to the Fund.
While we don't issue stock certificates for shares purchased, you will
receive a statement confirming your purchase.
WE RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER IF WE BELIEVE IT'S IN
THE FUND'S BEST INTEREST TO DO SO.
8
<PAGE> 10
By wire transfer
OPENING AN ACCOUNT
- Call the Fund's transfer agent at 1-888-933-5391 to get a Fund
account number.
- Have your bank wire the amount you want to invest to:
Firstar Bank Milwaukee, N.A.
ABA routing number 075000022
Credit Firstar Mutual Fund Services, LLC, account number 112952137
further credit KEELEY Small Cap Value Fund, Inc.
Be sure to include your name, address, account number, and taxpayer ID
or Social Security Number. Your bank may charge a wire transfer fee.
- As soon as possible, mail a completed purchase application (included
with this prospectus) to:
KEELEY Small Cap Value Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
ADDING TO YOUR ACCOUNT
You can add to your account anytime in investments of $50 or more. Have
your bank wire the amount as described above.
By mail
OPENING AN ACCOUNT
- Write a check or money order for the amount you want to invest,
payable to KEELEY Small Cap Value Fund, Inc.
- Mail your payment with a completed purchase application (included
with this prospectus) to:
<TABLE>
<S><C>
KEELEY Small Cap Value Fund, Inc. For overnight delivery, use this address:
c/o Firstar Mutual Fund Services, LLC KEELEY Small Cap Value Fund, Inc.
P.O. Box 701 c/o Firstar Mutual Fund Services, LLC
Milwaukee, WI 53201-0701 615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
</TABLE>
If your check is returned for any reason, your account will be charged
a $25 processing fee. You will be responsible for any loss to the Fund.
ADDING TO YOUR ACCOUNT
You can add to your account anytime in investments of $50 or more. Mail
your order as described above, including your name, address, and account number.
9
<PAGE> 11
Automatically
OPENING AN ACCOUNT
Complete the Automatic Investment Plan section on the purchase
application, or, after your account is established, complete an AIP application
(available from the Fund).
ADDING TO YOUR ACCOUNT
Each month the amount you specify is automatically withdrawn from your
bank account to purchase Fund shares. There is a $50 minimum to use this
privilege.
The Fund charges no service fee for the AIP. If the designated amount
isn't available in your account, however, you'll be charged a $25 processing
fee. You will be responsible for any loss to the Fund.
See also "Automatic Investment Plan" under "Shareholder Privileges."
SELLING SHARES
You can redeem your shares in the Fund anytime by mail or telephone for
shares you hold directly at the Fund.
If your account is with the distributor or a selected broker/dealer,
you must give your request to that firm. The broker/dealer is responsible for
placing your request and may charge you a fee.
Otherwise, here's how to sell your shares:
By mail
Send the transfer agent a written redemption request in proper order,
including:
- your account name and number
- the number of shares or dollar amount to be redeemed
- the signature of each registered owner, exactly as the shares are
registered
- documentation required from corporations, executors, administrators,
trustees, guardians, agents, and attorneys-in-fact
<TABLE>
<CAPTION>
<S> <C>
Mail to:
KEELEY Small Cap Value Fund, Inc. For overnight delivery, use this address:
c/o Firstar Mutual Fund Services, LLC KEELEY Small Cap Value Fund, Inc.
P.O. Box 701 c/o Firstar Mutual Fund Services, LLC
Milwaukee, WI 53201-0701 615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
</TABLE>
10
<PAGE> 12
SIGNATURE GUARANTEES - If you request a direct redemption of more than
$25,000, or you want the proceeds sent to a location other than the address of
record, or the request comes within 15 days of an address change, we require
signature guarantees. These guarantees may seem inconvenient, but they're
intended to protect you against fraud. The guarantor pledges your signature is
genuine and, unlike a notary public, is financially responsible if it's not.
Eligible guarantors include qualified:
- Banks, credit unions and savings associations
- Broker/dealers
- National securities exchanges
- Registered securities associations
- Clearing agencies
A notary public is not acceptable.
By phone
To redeem shares by phone, call the transfer agent at 1-888-933-5391.
The Fund follows procedures to confirm that telephone instructions are genuine
and sends payment only to the address of record or the designated bank account.
We aren't liable for following telephone instructions reasonably believed to be
genuine.
If you don't want telephone transaction privileges, check the box on
the purchase application.
PAYMENT - When you sell your shares, the amount of money you receive is
based on the NAV next calculated after your request is received. This amount may
be more or less than what you paid for the shares.
When you sell your shares of the Fund, it is a taxable event for
federal tax purposes. You may realize a capital gain or loss. You may want to
check with your tax adviser.
We'll mail payment within five business days of the transfer agent's
receiving your redemption request in proper order. You can also ask to have
redemption proceeds wired to you. The transfer agent charges a $12 wire fee.
The Fund won't send redemption proceeds until checks for the purchase
of the shares have cleared - up to 15 days.
We may suspend redemptions if the New York Stock Exchange closes or for
other emergencies. See the SAI for details.
SMALL ACCOUNTS - If the value of your account falls below $250, we
reserve the right to redeem your shares and send you the proceeds. Currently,
however, the Fund's practice is to maintain small accounts instead of closing
them out. If we change that policy, you'll get advance notice.
11
<PAGE> 13
EXCHANGING SHARES
You can exchange some or all of your Fund shares for Firstar Money
Market Fund shares. The minimum exchange amount is $250, and there's a maximum
of four exchanges over 12 months. The exchange must be between identically
registered accounts.
Fund shares will be redeemed at the next determined NAV after your
request is received, and Firstar Money Market shares will be purchased at the
per share NAV next determined at or after redemption.
You can also move your exchanged shares, plus any Firstar Money Market
Fund shares purchased with reinvested dividends, back into the Fund with no
sales charge (as long as your investment remained continuously in the Firstar
Money Market Fund between withdrawal and reinvestment).
Your exchange is subject to the terms of the Firstar Money Market Fund.
Ask us for a copy of their prospectus, and read it carefully before investing.
Exchanges can be requested by mail or telephone (unless you refuse
telephone transaction privileges on your purchase application). There is a $5
fee for telephone exchanges. The Fund follows procedures to confirm that
telephone instructions are genuine. We aren't liable for following telephone
instructions reasonably believed to be genuine.
An exchange is a taxable event for federal tax purposes. You may
realize a capital gain or loss. Be sure to check with your tax adviser before
making an exchange.
WE RESERVE THE RIGHT TO CHANGE OR ELIMINATE THE EXCHANGE PRIVILEGE. IF
WE CHANGE THAT PRIVILEGE, YOU'LL GET ADVANCE NOTICE.
DISTRIBUTIONS AND TAXES
The Fund distributes its net investment income and realized capital
gains, if any, to shareholders at least once a year. Your dividends and capital
gains will be invested in additional Fund shares unless you write the transfer
agent to request otherwise. There's no sales charge on reinvestments.
If your mailed distribution check can't be delivered by the U.S. Postal
Service, or it remains outstanding for at least six months, we reserve the right
to reinvest the distribution amount at the current NAV until you give us other
instructions.
Dividends and distributions, in the form of cash or additional shares,
are generally taxable. You'll receive an annual statement showing which of your
Fund distributions are taxable as ordinary income and which are capital gains.
It's important you consult with your tax adviser on federal, state and local tax
consequences.
12
<PAGE> 14
SHAREHOLDER PRIVILEGES
RIGHT OF ACCUMULATION (ROA) - Once you've purchased shares in the Fund,
you can qualify for a discount on the sales charge. When you purchase additional
shares at the public offering price, you'll pay the sales charge corresponding
to the total of your current purchase plus either the value of shares you
already own, or their original cost-whichever is greater. (Remember, sales
charges go down as the amount of the transaction increases.) To receive this
discount, you must notify the Fund in writing of your previous purchases when
you make your current purchase. For this purpose, you and your husband or wife
can combine your purchases.
LETTER OF INTENT (LOI) - If you buy more than $50,000 in shares at one
time, your sales charge is lower than 41/2%. There is a table on page 8 which
shows the reductions. If you expect to purchase $50,000 or more of Fund shares
over a period of time (up to 13 months), you can get the same reduced sales
charge as you would if you bought all the shares at once. You do this by signing
a LOI. In the LOI, you fill in the dollar amount of the shares you will buy in
the next 13 months, and the sales charge is based on that amount. Some of your
shares are held by the transfer agent in escrow. If you don't buy all the shares
as indicated in the LOI, and your sales charge should have been higher based on
what you actually bought, some of the shares held by the transfer agent will be
redeemed to pay the difference in the sales charge. To establish a LOI, complete
the appropriate section of the purchase application or, if your account is
established, ask us for a LOI application.
AUTOMATIC INVESTMENT PLAN (AIP) - Buy shares automatically each month,
by having $50 or more withdrawn from your bank account and invested in the Fund.
The minimum to open an AIP account is $250. There's no service fee for this
account. If the designated amount is not available in your bank account,
however, there is a $25 processing fee. To establish the AIP, complete the
appropriate section of the purchase application or, if your account is
established, ask us for an AIP application.
THE FUND RESERVES THE RIGHT TO MODIFY OR ELIMINATE THESE PRIVILEGES
WITH AT LEAST 30 DAYS NOTICE.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund offers a variety of retirement plans that may help you shelter
part of your income from taxes. For complete information, including
applications, call 1-888-933-5391.
YEAR 2000 ISSUES
We could be adversely affected if our service providers' computer
systems do not properly process and calculate date-related information from and
after January 1, 2000, commonly called Y2K problems. We do not have any of our
own systems, and we rely on our service providers for all of our services. Our
investment adviser and distributor have both told us that their internal systems
are all Y2K compliant, and our other service providers are working to fix Y2K
problems prior to January 1, 2000. If any provider fails to adequately address
the problem, we could change service providers. We have no other contingency
plans in place. Any unanticipated change in service providers could be adverse
to our share price. The Y2K problem could also have an adverse effect on
companies whose stock we hold as investments, and on global markets or economies
generally.
13
<PAGE> 15
This page intentionally left blank.
17
<PAGE> 16
This page intentionally left blank.
18
<PAGE> 17
This page intentionally left blank.
19
