Rule 497(c)
File No. 33-7740
File No. 811-6662
FX CURRENCY VALUE FUND
400 HABER ROAD
CARY, ILLINOIS 60013
(800) 282-2319
PROSPECTUS
FX Currency Value Fund (the "Fund") is a non-diversified, open-end management
investment company -- a mutual fund. The Fund is the first of what is
anticipated to be a series of funds, to be known as The Dracena Funds, to be
created by Dracena Funds, Inc.
The Fund's objective is to provide investors with both current income and
capital appreciation in accordance with a global investment strategy, which
means that the Fund's investments will be allocated among securities denominated
in U.S. dollars and securities denominated in the currencies of a number of
foreign countries. The Fund's global approach may allow it to realize a higher
yield than funds which invest in only U.S. securities, as the debt instruments
of many foreign governments currently pay a higher rate of interest than similar
instruments of the United States Government. These potentially higher yields
are generally accompanied by higher risk. See "Risk Factors."
A factor in determining whether the Fund will invest in a particular bond is
the opinion of the Fund's advisers that the Fund's exposure to fluctuations in
the price of the currency in which the bond is denominated can be managed so as
to benefit the Fund. A rise in the price of the currency relative to the U.S.
dollar may result in higher yields to investors, although correspondingly a fall
in the price of the currency relative to the U.S. dollar could result in lower
yields, or losses. If the price of the currency is expected to continue to rise
relative to the U.S. dollar, the Fund may elect to take no specific action with
respect to the Fund's possible exposure to fluctuations in the price of that
currency. If, however, the price of the currency is expected to fall relative
to the U.S. dollar, the Fund will employ an investment technique known as
"Currency Overlay" to manage that currency exposure of its bond portfolios,
principally by purchasing foreign forward currency exchange contracts. The Fund
will also use the speculative technique known as leverage to increase funds
available for investment. See "Investment Objectives" for a more detailed
discussion.
This Prospectus concisely sets forth information about the Fund, including
sales charges and operating and distribution expenses, that prospective
investors will find helpful in making an investment decision. Investors are
encouraged to read this Prospectus carefully and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is contained in a Statement of Additional Information
dated June 20, 1995, as amended or supplemented from time to time, which is
available upon request and without charge by calling or writing the Fund at the
telephone number or address set forth above or by contacting Rodney Square
Distributors, Inc. ("Rodney Square Distributors") or by calling 1-800-282-2319.
The Statement of Additional Information is incorporated by reference into this
Prospectus in its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS DATED JUNE 20, 1995
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TABLE OF CONTENTS
SUMMARY............................................................... 3
THE FUND'S EXPENSES................................................... 4
INVESTMENT OBJECTIVE.................................................. 5
CERTAIN SECURITIES, POLICIES AND INVESTMENT TECHNIQUES................ 8
RISK FACTORS..........................................................11
MANAGEMENT OF THE FUND................................................14
PURCHASE OF SHARES....................................................18
REDEMPTION OF SHARES..................................................22
SERIES FUND EXCHANGE PRIVILEGE........................................24
VALUATION OF SHARES...................................................25
DIVIDENDS AND DISTRIBUTIONS...........................................25
TAX MATTERS...........................................................26
GENERAL INFORMATION...................................................30
BACKUP WITHHOLDING INSTRUCTIONS.......................................31
APPLICATION & NEW ACCOUNT REGISTRATION................................33
APPLICATION FOR TELEPHONE REDEMPTION OPTION...........................36
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SUMMARY
THE FUND. Dracena Funds, Inc. is a Maryland corporation organized as an open-
end, series, management investment company. Currently, Dracena Funds, Inc. has
only one fund, FX Currency Value Fund, a non-diversified, open-end management
investment company _ a mutual fund. The Fund is the first of what is
anticipated to be a series of funds, to be known as The Dracena Funds, to be
created by Dracena Funds, Inc. The Fund's objective is to provide investors
with both current income and capital appreciation in accordance with a global
investment strategy, which means that the Fund's investments will be allocated
among securities denominated in U.S. dollars and securities denominated in the
currencies of a number of foreign countries. The Fund's global approach may
allow it to realize a higher yield than funds which invest in only U.S.
securities, as the debt instruments of many foreign governments currently pay a
higher rate of interest than similar instruments of the United States
Government. These potentially higher yields are generally accompanied by higher
risk. See "Risk Factors." The Fund will employ an investment technique known
as "Currency Overlay" to manage the currency exposure of its bond portfolios,
principally by purchasing foreign forward currency exchange contracts. The Fund
will also use the speculative technique known as leverage to increase funds
available for investment. See "Investment Objectives" for a more detailed
discussion.
THE FUND MANAGER. Dracena Funds Group, Inc. ("DFG" or the "Manager") serves
as the Fund's manager pursuant to a Management Agreement (the "Management
Agreement"). Under the terms of the Management Agreement, DFG supervises all
aspects of the Fund's operations and, with the assistance of three specialist
co-advisers, provides investment advisory services to the Fund. As compensation
for these services, the Manager receives a fee based on the Fund's average daily
net assets. See "Management of the Fund."
PURCHASING SHARES. Shares of the Fund are offered by this Prospectus at net
asset value. The minimum investment in the Fund is $1,000. Additional
investments must be at least $50. The Distributor of the Fund's shares is
Rodney Square Distributors, Inc. The Fund may reduce or waive the minimum
investment under certain conditions. See "Purchase of Shares."
REDEEMING SHARES. Shareholders may redeem all or a portion of their shares
at net asset value at any time and without charge. See "Redemption of Shares."
DISTRIBUTIONS. The Fund declares and pays dividends, if available, at least
annually. Dividends and distributions of the Fund may be paid directly to you
by check, or reinvested in additional shares of the Fund. See "Dividends and
Distributions" and "Tax Matters."
RISK CONSIDERATIONS. An investor should be aware that there are risks
associated with certain investment techniques and strategies employed by the
Fund, including those relating to investments in foreign securities. Such risks
include among others currency fluctuations, expropriation, confiscation,
diplomatic developments, and social instability. By investing in bonds
denominated in currencies other than the U.S. dollar, the value of the Fund's
assets may appreciate in the event of upward fluctuations in currency exchange
rates, but likewise may depreciate in the event of downward fluctuations.
Investors should be aware that the Fund, by employing the investment technique
known as "Currency Overlay," is engaging in transactions the success of which is
dependent on the advisers' judgment as to the timing, direction and amount of
currency price fluctuations. While the use of this technique is intended to
assist the Fund in managing its exposure to currency fluctuations,
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the technique may, if successfully employed, result in gains that would
otherwise not have been realized for the Fund, but likewise may, if
unsuccessful, result in losses. Further, the use of such investment techniques
and strategies could adversely affect the special federal income tax status of
the Fund.
The Fund is classified as non-diversified, which means that there is no
restriction under the Investment Company Act of 1940, as amended (the "1940
Act"), on the percentage that may be invested at any one time in the assets of
any one issuer. To the extent the Fund is not fully diversified, it may be more
susceptible to adverse economic, political or regulatory developments affecting
a single issuer, or single country, than would be the case if it were more
broadly diversified. Further, the extent to which the Fund is not fully
diversified could adversely affect the income tax status of the Fund. See "Risk
Factors" in this Prospectus.
THE FUND'S EXPENSES
The following table lists the costs and expenses that an investor will incur
either directly or indirectly as a shareholder of the Fund, based upon the
maximum sales charge that may be incurred at the time of purchase and the Fund's
operating expenses for its most recent fiscal year.
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge imposed on purchases
(as a percentage of offering price).............. 4.50%*
Sales Charge Imposed on Reinvested
Dividends........................................ None
Deferred Sales Charge Imposed on
Redemptions...................................... None
Redemption Fee................................... None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management fees.................................. 1.70%**
Rule 12b-1 fees.................................. 0.40%
Other expenses................................... 0.80%
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Total Fund Operating Expenses.................... 2.90%
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* The sales charge set forth in the above table is the maximum charge
imposed on purchases of shares of the Fund, and investors may pay actual
charges of less than 4.5%, as described under "Purchase of Shares." Long
term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
** Management fees payable by the Fund include management fees payable
monthly to Dracena Funds Group, Inc. at the annual rate of 0.60% of the
Fund's average daily net assets, and include investment advisory fees
payable monthly to KAM, Inc. ("KAM"), Rohden Capital Management, Ltd. and
Princeton International L.L.P. at the annual rate in the aggregate of
1.10% of the Fund's average daily net assets. The nature of the services
for which the Fund pays management fees is described under "Management of
the Fund." The management fees are higher than the management fee paid
by most other investment companies.
For additional disclosure relating to the management fees, see "Management
of the Fund," which appears at page 13 of this Prospectus.
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EXAMPLE*
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Fund. These amounts are based upon (a) payment
by an investor of a sales charge at the maximum 4.5% rate, (b) payment by the
Fund of operating expenses at the levels set forth in the table above, and (c)
the following assumptions:
1 Year 3 Years
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A shareholder would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each
time period:.................................. $73 $131
* This example is based on estimated operating expenses for the
Fund's first fiscal year. Actual expenses may be greater or
less than those shown. Moreover, while the table assumes a 5%
annual return, the Fund's actual performance will vary and may
result in an actual return greater or less than 5%.
INVESTMENT OBJECTIVE
The Fund intends to provide investors with current income while seeking
opportunities for capital appreciation. The Fund's portfolio is managed in
accordance with a global investment strategy, which means that the Fund's
investments will be allocated among securities denominated in the U.S. dollar
and securities denominated in the currencies of a number of foreign countries.
Fundamental economic strength, credit quality, interest rate trends and currency
exchange rates are the principal factors considered by the Fund's manager,
Dracena Funds Group, Inc. (the "Manager"), in association with the Fund's co-
advisers, in determining whether to increase or decrease the emphasis placed on
a particular type of security in the Fund's portfolio. Although the Fund
intends to invest substantially all of its total assets directly in the debt of
governments (or any of their political subdivisions, authorities, agencies or
instrumentalities), or of supranational entities, throughout the world, the Fund
may also invest in certain foreign currency contracts, futures, options, and
other investments described below. The Fund's investment objective is a
fundamental policy and may not be changed without the affirmative vote of the
majority of the outstanding shares of the Fund. All other investment policies
of the Fund that are not specified as fundamental may be changed by the Board of
Directors without the approval of the shareholders.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in bonds or other debt securities denominated in currencies other than
the U.S. dollar issued by the governments or governmental agencies of at least
three different countries other than the United States. For the purpose of this
policy, a bond is a debt instrument. The Fund will not be limited to
investments in bonds of any particular duration, and may therefore invest in
long or short term bonds. The Fund will not invest more than 25% of its net
assets in securities issued by a single foreign government or entity, other than
the United States, or more than 25% of its net assets in securities issued by
supranational entities individually or as a group. The Fund may invest its net
assets in securities denominated in currencies other than the U.S. dollar,
including, among others: British pound sterling, Canadian dollar, French franc,
German mark, Spanish peseta, Portuguese escudo, Austrian schilling, Swedish
krona, Finnish markka, Singapore dollar and Japanese yen.
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The Fund is not limited to investments in any particular countries or
currencies. The Fund's investments may be issued by organizations located
anywhere and may be traded inside or outside the countries that issue the
currencies in which the respective investments are denominated. The Fund can
invest in obligations of any type or issuer, including governments and their
agencies, instrumentalities or political subdivisions; corporations, banks and
other business organizations; and supranational organizations, such as the Asian
Development Bank, the European Economic Community, the European Investment Bank,
the Inter-American Development Bank, the International Monetary Fund, the United
Nations and the World Bank, which are chartered to promote economic development
and are supported by various governments and governmental entities. The Fund is
not diversified and may be invested in relatively few issuers at any given time.
The Fund may invest in instruments denominated in any currency. Debt
instruments of emerging market countries may be below investment grade, commonly
referred to as "junk bonds." The Fund will not invest more than 5% of its net
assets in debt instruments that are below investment grade. "Investment grade"
debt instruments are those rated within the four highest quality grades as
determined by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("Standard & Poor's"). Securities rated Aaa by Moody's and AAA by
Standard & Poor's are judged to be of the best quality and carry the smallest
degree of risk. Securities rated at the fourth highest category, Baa by Moody's
and BBB by Standard & Poor's, lack high quality investment characteristics and,
in fact, have speculative characteristics as well. Debt instruments that are
deemed to be below investment grade entail greater risks of untimely interest
and principal payments, default, and price volatility than investment grade
securities, and may present problems of liquidity and valuation. See Appendix A
of the Statement of Additional Information for additional information concerning
investment grade debt ratings.
The Fund will invest in foreign government bonds, including bonds denominated
in foreign currencies and issued or guaranteed by foreign national, provincial,
state, municipal, or other governments with taxing authority, or by their
agencies or instrumentalities, and supranational entities (e.g., international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies). The obligation of foreign government
entities, including supranational issuers, have various kinds of government
support. Although obligations of foreign governmental entities include
obligations issued or guaranteed by national, provincial, state or other
governments with taxing power, or by their agencies, these obligations may or
may not be supported by the full faith and credit of a foreign government.
Specific investment decisions will be made by the co-investment advisers
specializing in particular instruments under the general supervision of the
Manager. In making international investments in debt instruments, the Manager
(through the co-investment advisers) may consider, among other things, the
relative growth and inflation rates of different countries. The Manager may
also consider expected changes in foreign currency exchange rates, including the
prospects for central bank intervention, in determining the anticipated returns
of securities denominated in foreign currencies. The Manager may further
evaluate, among other things, foreign yield curves and regulatory and political
factors, including the fiscal and monetary policies of such countries.
In order to protect and enhance the capital value of the Fund, the Manager
will from time to time employ a technique known as "Currency Overlay." A factor
in determining whether the Fund will invest in a particular bond is the opinion
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of the Fund's advisers that the Fund's exposure to fluctuations in the price of
the currency in which the bond is denominated, relative to the U.S. dollar, can
be managed so as to benefit the Fund. A rise in the price of the currency
relative to the U.S. dollar may result in higher yields to investors, although
correspondingly a fall in the price of the currency relative to the U.S. dollar
could result in lower yields, or losses. If the price of the currency is
expected to continue to rise relative to the U.S. dollar, the Fund may elect to
take no specific action with respect to the Fund's possible exposure to
fluctuations in the price of that currency. If, however, the price of the
currency is expected to fall relative to the U.S. dollar, the Fund will employ
an investment technique known as "Currency Overlay."
A "Currency Overlay," then, is used to manage the exposure of the Fund to
fluctuations in prices of foreign currencies. As indicated, when the Fund's
advisers are analyzing a particular bond to determine whether or not it is a
good investment, one factor in the analysis, for a foreign bond, will be the
exposure to currency fluctuations that an investment in the security creates.
Thus, the Fund endeavors to manage separately the currency exposure created by
its international investment decisions. Typically, this will mean that the Fund
will take offsetting currency hedging positions to reduce the currency risk for
the Fund. For instance, the Fund may intend to invest in a bond denominated in
Japanese yen because the fundamentals of that investment, apart from the
currency exposure, seem sound. If the outlook for the yen itself is negative
relative to the U.S. dollar, however, the Fund may, for example, enter into a
forward contract to sell an amount of yen equal to the principal plus interest
on the bond for a fixed amount of U.S. dollars. The Fund could also in these
circumstances, for example, enter into a forward contract to buy a currency that
is expected to move inversely to the yen. This hedge of the currency exposure
is known as a "Currency Overlay."
Thus, in determining whether to invest in a particular bond, the Manager will,
among other factors, analyze the Fund's exposure to fluctuations in the currency
in which the bond is denominated. If the Manager determines that it is
appropriate to hedge against the risk of a downward fluctuation of that currency
vis-a-vis the U.S. dollar or other currencies in which the Fund holds a
position, the Manager may purchase a forward contract in another currency that
the Manager believes will rise in price. Thus, the risk of a fluctuation in the
currency in which the bond is denominated, and in which both interest and
principal payments are made, may be hedged against a different currency, or
currencies, so that the currency exposure is no longer simply an exposure to
fluctuations in the currency in which the bond is denominated.
The use of this technique will allow the Manager to invest in the bond markets
that it believes offer the best opportunities for total return regardless of the
prospects for the currencies involved, and then to invest in the currencies that
the Manager believes offer the best opportunities to protect and enhance
capital. The Manager principally will use forward contracts to construct the
"Currency Overlay." The Manager could use futures and options also, but intends
to do so, if at all, only in the occasional event of a short term fluctuation in
the price of a currency where there is insufficient time to arrange a forward
contract.
The Manager intends to place the Fund in the major currencies perceived to be
in, or about to enter, a strengthening phase and to avoid those in, or about to
enter, a phase of relative weakness. In making currency decisions, a wholly
global stance will be pursued by the Manager. Consideration will be given to
both fundamental economic and financial data such as relative GNP growth, the
balance of payments position, inflation and interest rates, as well as short
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term factors such as political events and market sentiment. The Currency
Overlay will be employed on a medium to long term basis and not on a day to day
trading approach. Not more than 5% of the Fund's assets may be invested in
futures and options needed to construct the Currency Overlay, although more than
5% may be invested in forward currency contracts. Should the Manager
misperceive certain economic trends, the Fund's net asset value may be affected
adversely as a result of this investment technique.
The Manager will also invest Fund assets in United States government
securities, and in options, futures contracts and repurchase transactions with
respect to such securities. As used in this prospectus, the term "United States
government securities" refers to debt securities denominated in U.S. dollars,
issued or guaranteed by the United States Government, or by its various agencies
or instrumentalities.
The foregoing represent examples of the foreign instruments in which the Fund
may invest as of the date of this Prospectus that are denominated in the foreign
currencies. New instruments, however, are evolving continually and the Fund
reserves authority to invest in those new instruments to the extent consistent
with investment objective and policies. To the extent that those new
instruments would involve a material change in the information contained herein,
they will not be purchased until such time as this Prospectus is appropriately
supplemented to disclose their use.
When purchasing foreign debt and United States government securities, the
Manager may take full advantage of the entire range of maturities of such
securities and may adjust the average maturity of the investments held in the
portfolio from time to time, depending upon its assessment of relative yields of
securities of different maturities and its expectations of future changes in
interest rates.
Notwithstanding the above, the Fund reserves the right to invest up to 100% of
its assets in cash, cash equivalents, high quality short term money market
instruments, and in bills, notes or bonds issued by the United States Treasury
Department or by other agencies of the United States Government for temporary
defensive purposes during periods that the Manager considers to be unsuitable
for the Fund's normal investment strategy.
CERTAIN SECURITIES, POLICIES AND INVESTMENT TECHNIQUES
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency exchange contracts
("forward contracts") as part of its portfolio investment strategy. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and privately traded by
currency traders and their customers. The Fund may enter into a forward
contract, for example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security ("transaction hedge"). Additionally, for example,
when a Fund believes that a foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency, or when the
Fund believes that the U.S. dollar may suffer a substantial decline against
foreign currency, it may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount ("position hedge"). In this
situation, the Fund may, in the alternative, enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount where the Fund
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believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such contracts.
The Fund may maintain "short" positions in forward currency exchange
transactions, which would involve the Fund's agreeing to exchange currency that
it currently does not own for another currency - for example, to exchange an
amount of Japanese yen that it does not own for a certain amount of U.S. dollars
- - at a future date in anticipation of a decline in the value of the currency
sold short relative to the currency that the Fund has contracted to receive in
the exchange. In order to ensure that the short position is not used to achieve
leverage with respect to the Fund's investments, the Fund would establish with
its custodian a segregated account consisting of cash, United States government
securities or other high grade debt securities equal to the fluctuating market
value of the currency as to which the short position is being maintained. The
segregated account will be adjusted at least daily to reflect changes in the
market value of the short position. Unanticipated increases in the price of the
currency as to which the short position is being maintained will result in
losses for the Fund.
CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS
Through the purchase of foreign currency futures contracts, and the purchase
and sale of related options on such futures contracts, the Manager may also at
times, when there is insufficient time to arrange a suitable forward contract,
seek to hedge against a decline in the value of securities included in the
Fund's portfolio or an increase in the price of securities which it plans to
purchase for the Fund, especially a decline in value or increase in price caused
by currency fluctuations, or to reduce risk or volatility while seeking to
enhance investment performance. Expenses and losses incurred as a result of
such hedging strategies will reduce the Fund's current return. In order to
hedge its portfolio at times when, in the opinion of the Manager, a suitable
forward contract is not available, the Fund may invest in currency futures
contracts and related options. If a fall in exchange rates for a particular
currency is anticipated, the Fund may sell a currency futures contract or a call
option thereon or purchase a put option on such futures contract as a hedge in
circumstances where the Fund either owns or anticipates owning securities
denominated in the particular currency. If it is anticipated that exchange
rates will rise, the Fund may purchase a currency futures contract or a call
option thereon or sell (write) a put option to protect against an increase in
the price of securities denominated in a particular currency the Fund intends to
purchase. These futures contracts and related options thereon will be used only
as a hedge against anticipated currency rate changes, again in circumstances
where the Fund either owns or anticipates owning securities denominated in the
particular currency. The Fund will write (sell) only covered call options on
currency futures. This means that the Fund will provide for its obligations
upon exercise of the option by segregating sufficient cash or short term
obligations or by holding an offsetting position in the option or underlying
currency future, or a combination of the foregoing.
While forward contracts are privately negotiated, futures contracts are
standardized and are traded on designated commodities markets. In many other
respects, however, forward contracts and futures are similar. Like a forward
contract, a currency futures contract sale creates an obligation by the Fund, as
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seller, to deliver the amount of currency called for in the contract at a
specified future time for a specified price. A currency futures contract
purchase creates an obligation by the Fund, as purchaser, to take delivery of an
amount of currency at a specified future time at a specified price. Although
the terms of currency futures contracts specify actual delivery or receipt, in
most instances the contracts are closed out before the settlement date without
the making or taking of delivery of the currency. Closing out of a currency
futures contract is effected by entering into an offsetting purchase or sale
transaction. Unlike a currency futures contract, which requires the parties to
buy and sell currency on a set date, an option on a currency futures contract
entitles its holder to decide on or before a future date whether to enter into
such a contract or let the option expire.
BORROWING
The Fund may borrow for investment purposes. This borrowing for investment,
which is known as leverage, generally will be unsecured, except as described
below. Leveraging investments, by purchasing securities with borrowed money, is
a speculative technique which increases investment risk, but also increases
investment opportunity. See "Risk Factors." The Fund intends to use leverage
during periods when the Manager believes that the interest payments and other
costs with respect to such borrowings or indebtedness will be exceeded by the
anticipated total returns (a combination of income and appreciation) on such
available investments.
As required by the 1940 Act, the Fund must maintain continuous asset coverage
(total assets, including assets acquired with borrowed funds, less liabilities
exclusive of borrowings) of 300% of all amounts borrowed, and, as a matter of
fundamental policy, the Fund, in leveraging its investments, will borrow money
only from banks and only in amounts not to exceed in the aggregate 331/3% of the
value of the Fund's net assets. The Fund will borrow only to the extent that
the Fund meets the 300% coverage test described above. If, at any time, the
value of the Fund's assets should fail to meet this 300% coverage test, the
Fund, within three business days, will reduce the amount of the Fund's
borrowings to the extent necessary to meet this 300% coverage. Both the
maintenance of this percentage limitation and the need to give effect to
redemption requests may result in the sale of the Fund's portfolio securities at
a time when investment considerations otherwise indicate that it would be
disadvantageous to do so. The Fund may pledge portfolio securities as the
Manager deems appropriate in connection with the borrowings employed to purchase
or carry securities as described above. The Fund also may borrow up to 5% of
its net assets as a temporary measure for extraordinary or emergency purposes.
ILLIQUID AND RESTRICTED SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements with maturities in excess of seven
days. Subject to such limitation, the Fund may invest in securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"). These securities are
sometimes referred to as private placements. Although securities which may be
resold only to "qualified institutional buyers" in accordance with the
provisions of Rule 144A under the 1933 Act are technically considered
"restricted securities," the Fund may purchase Rule 144A securities without
regard to the limitation on investments in illiquid securities described above,
provided that a determination is made that such securities have a readily
available trading market. The Manager, under the supervision and direction of
the Board of Directors, will determine the liquidity of Rule 144A securities.
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If as a result of changed conditions it is determined that a Rule 144A security
is no longer liquid, the Fund's holdings of illiquid securities will be reviewed
by the Manager, under the supervision and direction of the Board of Directors,
to determine what, if any, action is required to assure that the Fund does not
exceed its applicable percentage limitation for investments in illiquid
securities. The Board of Directors is ultimately responsible for determining
the liquidity of Rule 144A Securities.
PORTFOLIO TURNOVER
The Manager anticipates that the annual portfolio turnover rate will not
exceed 200% for the Fund. Any particular security will be sold, and the
proceeds reinvested, whenever such action is deemed prudent from the viewpoint
of the Fund's investment objective, regardless of the holding period of that
security. A higher rate of portfolio turnover may cause the Fund's brokerage
commissions and other transaction costs to be higher than those of most other
mutual funds, and might cause the Fund to lose its status as a regulated
investment company if, generally, 30% or more of the Fund's gross income is
derived from the sale or other disposition of stock or securities that have been
held by the Fund for less than 3 months. To the extent that higher portfolio
turnover results in a higher rate of net realized capital gains to a Fund, the
portion of the Fund's distributions constituting taxable capital gains may
increase. See "Dividends and Distributions" and "Tax Matters."
For further discussion with regard to the Fund's investment strategies,
policies and investment techniques, see "Investment Strategies and Risks" in the
Fund's Statement of Additional Information.
RISK FACTORS
By itself, the Fund does not constitute a balanced investment plan. Unlike
funds that emphasize U.S. dollar-denominated securities, the Fund's net asset
value per share can change significantly when the underlying foreign currencies
in which the Fund may be invested strengthen or weaken against the U.S. dollar.
The following general factors that may affect the Fund's values and yields
should be considered when making your investment decision.
FOREIGN SECURITIES GENERALLY
The Fund's investing in foreign securities involves considerations that are
not typically associated with investing in securities of U.S. issuers. Less
information may be available about foreign securities issuers than about
domestic issuers and foreign issuers generally are not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Foreign securities and their markets may not be as liquid as U.S. securities and
their markets. Securities of some foreign issuers may involve greater market
risk than securities of U.S. issuers. Investment in foreign securities may
result in higher expenses than investing in domestic securities because of the
cost of converting foreign currencies to U.S. dollars and expenses relating to
foreign custody. Investment in foreign securities may also be subject to local
economic or political risks, including instability of some foreign governments,
the possibility of currency blockage or the imposition of withholding taxes on
dividend or interest payments and the potential for exploration, nationalization
or confiscatory taxation and limitations on the use or removal of funds or other
assets.
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FX CURRENCY VALUE FUND
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GENERAL ECONOMIC AND POLITICAL RISKS
The economies of foreign countries may differ unfavorably from the U.S.
economy in such respects as growth of domestic product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
positions. Further, such economies generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be adversely
affected by trade barriers, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by countries with which they
trade. These economies also have been and may continue to be affected adversely
by economic conditions in countries in which they trade.
With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulations, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the Fund's
investments in those countries. In addition, it may be more difficult to obtain
and/or enforce collection of a judgment in a court outside of the United States.
DEBT SECURITIES
Generally, the value of debt instruments will change as interest rates
fluctuate. During periods of falling interest rates, the values of outstanding
long term debt obligations generally rise. Conversely, during periods of rising
interest rates, the value of such securities generally decline. The magnitude
of these fluctuations generally will be greater for securities with longer
maturities. Investment in the Fund's shares also involves special consideration
of the risks relating to the ability of the Fund to invest in lower rated
securities, including a risk of untimely payment or loss of income or principal.
See "Investment Objective."
INVESTMENT AND REPATRIATION RESTRICTIONS
Some foreign countries have laws and regulations which currently preclude
direct foreign investment in the securities of their companies. However,
indirect foreign investment in the securities listed and traded on the stock
exchanges in these countries is permitted by certain foreign countries through
investment funds which have been specially authorized. The Fund may invest in
these investment funds subject to the provisions of the 1940 Act. If the Fund
invests in such investment funds, the Fund's shareholders will bear not only
their proportionate share of the expenses of the Fund, but also will bear
indirectly similar expenses of the underlying investment funds.
In addition to the foregoing investment restrictions, prior governmental
approval for foreign investments may be required under certain circumstances in
some foreign countries, and the extent of foreign investment in foreign
companies may be subject to limitation. Foreign ownership limitations also may
be imposed by the charters of individual companies in foreign countries to
prevent, among other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
foreign countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental approval for such repatriation.
FOREIGN CURRENCY CONSIDERATIONS
Although the Fund's investments generally will be denominated in foreign
currencies and most income paid by such investments will be in foreign
currencies, the Fund will compute and distribute its income in U.S. dollars.
The computation of income will be made on the date of its receipt by the Fund at
the foreign exchange rate in effect on that date. Therefore, if the value of the
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FX CURRENCY VALUE FUND
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foreign currencies in which the Fund receives its income falls relative to the
U.S. dollar between the receipt of the income and the making of Fund
distributions, the Fund will be required to liquidate securities in order to
make distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements.
The value of the assets of the Fund as measured in U.S. dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, the Fund may incur costs in connection with
conversions between various currencies. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a
foreign currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire immediately to resell that currency to the
dealer. The Fund will conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward or futures contracts to
purchase or sell foreign currencies.
In addition, investors should be aware that the Fund, by employing the
investment technique known as "Currency Overlay," is engaging in transactions
the success of which is dependent on the advisers' judgment as to the timing,
direction and amount of currency price fluctuations. While the use of this
technique is intended to assist the Fund in managing its exposure to currency
fluctuations, the technique may, if successfully employed, result in gains that
would otherwise not have been realized for the Fund, but likewise may, if
unsuccessful, result in losses. Further, the use of such investment techniques
and strategies could adversely affect the special federal income tax status of
the Fund.
BORROWING
Leveraging investments, by purchasing securities with borrowed money, is a
speculative technique which increases investment risk, but also increases
investment opportunity. Since substantially all of the Fund's assets will
fluctuate in value, whereas the interest obligations on borrowings may be fixed,
the net asset value per share of the Fund will increase more when the Fund's
portfolio assets increase in value and decrease more when the Fund's portfolio
assets decrease in value than would otherwise be the case. Moreover, interest
costs on borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the returns on the borrowed funds. Under adverse
conditions, the Fund might have to sell portfolio securities to meet interest or
principal payments at a time investment considerations would not favor such
sales.
NON-DIVERSIFICATION
The Fund is non-diversified, which means that there is no restriction under
the 1940 Act on the percentage that may be invested at any one time in the
assets of any one issuer. To the extent the Fund is not fully diversified, it
may be more susceptible to adverse economic, political or regulatory
developments affecting a single issuer, or single country, than would be the
case if it were more broadly diversified. The Fund's assumption of large
positions in the obligations of a small number of issuers may cause the Fund's
share price to fluctuate to a greater extent than that of a diversified
investment company as a result of changes in the financial condition or in the
market's assessment of the issuers.
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FX CURRENCY VALUE FUND
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Under normal market conditions, the Fund may have up to, but never more than,
25% of its assets invested in securities issued by a single foreign government
or entity or 25% of its assets invested in securities issued by supranational
entities individually or as a group, other than the United States. During
periods when the Fund's advisors determine that the Fund should be in a
temporary defensive position with respect to any such country or industry, the
Fund may reduce its assets in such country or industry in favor of investing
elsewhere. The Fund's advisors may determine that the adoption of a temporary
defensive position with respect to issuers in a specific country or industry is
appropriate on the basis of such factors as political, economic, market or
regulatory developments affecting that industry, as well as on the basis of
factors that may affect the advisability of engaging in combined or synthetic
investment positions, such as relative yields, the liquidity of relevant
markets, the existing currency exchange controls or limitations and the Fund's
liquidity needs. A focus on any country or industry may result in increased
exposure to the specific risks pertaining to that industry or government and may
subject the Fund to greater risk and price fluctuation due to the more limited
number of issuers potentially represented in its portfolio.
TAX STATUS
The Fund intends to qualify annually and elect to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund generally will not be
subject to U.S. federal income tax on its net investment taxable income and net
capital gains that it distributes to shareholders.
To qualify as a regulated investment company, the Fund must, among other
things, satisfy certain source of income and asset diversification tests. The
Fund intends to employ certain investment techniques involving foreign
currencies and options, futures and forward contracts thereon, the gain on which
could be disqualified income for purposes of the source of income test.
Moreover, certain of these investment techniques could be considered
disqualified assets for purposes of the asset diversification test. The Fund
intends to invest substantially all of its total assets directly in, among
others, the debt securities of governments (or any of their political
subdivisions, authorities, agencies or instrumentalities) or supranational
entities supported thereby. As to any government, its political subdivisions,
authorities, agencies or instrumentalities, or supranational entities supported
thereby, such debt securities could be treated as debt securities of a single
"issuer" for purposes of the asset diversification test, which treatment may
negatively impact the Fund's ability to qualify as a regulated investment
company. See "Tax Matters."
For further discussion with regard to the Fund's other risk considerations,
see "Other Risk Factors and Special Considerations" in the Fund's Statement of
Additional Information.
MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the Fund rests with
the directors of Dracena Funds, Inc., who approve all significant agreements
between Dracena Funds, Inc., the Fund and the persons or companies that furnish
day-to-day services to the Fund, including agreements with the Fund manager,
investment advisers, administrator, distributor, custodian and transfer agent.
As of the date of this Prospectus, Alfred R. Gerebizza and Daniel H. Spitzer
each owned 50% of the outstanding common stock of KAM, and Mr. Gerebizza owned
45%, and Mr. Spitzer owned 46% of the outstanding common stock of Dracena Funds
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FX CURRENCY VALUE FUND
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Group, Inc. (formerly known as FX Currency Management, Inc. and Haven Fund
Group, Inc.). Van K. Tharp owns non-voting, convertible preferred stock and a
note issued by DFG. As of the date of this Prospectus the Ronald G. Herdman
I.R.A. owned 100% of the outstanding common stock of Dracena Funds, Inc.
Accordingly, three members of management, Messrs. Spitzer and Gerebizza, each of
whom is also an officer and director of Dracena Funds, Inc., and Mr. Tharp, who
is a director of Dracena Funds, Inc., are affiliated with Dracena Funds Group,
Inc., and two members of management, Messrs. Spitzer and Gerebizza, are
affiliated with KAM. The Statement of Additional Information contains general
background information regarding each individual member of management.
FUND MANAGER - DRACENA FUNDS GROUP, INC.
Dracena Funds Group, Inc., located at 400 Haber Road, Cary, Illinois, 60013,
was formed in 1991. DFG manages the Fund's operations pursuant to a signed
agreement with the Fund. Although at the present time DFG manages only the
Fund, it is anticipated, should the Fund be successful, that it will take on
additional clients. DFG has been responsible for the Fund's organization and
the negotiation of all administrative and advisory agreements. Although the
Fund's officers and directors have final authority relative to these issues,
they rely substantially on the guidance of DFG.
Subject to overall supervision by the Fund's Board of Directors, and in
accordance with the Fund's stated policies, each of DFG and the advisers has
investment discretion and may make investment decisions affecting the Fund's
portfolio. DFG and the Fund's advisers select all investments for the Fund and
place purchase and sale orders on behalf of the Fund. DFG and KAM are
affiliates. DFG has not previously acted as manager to any other mutual funds.
The Fund will pay a monthly fee at an annualized rate of 0.6% of the average
daily net asset value of the Fund for all management services of DFG. The
management fee, in combination with the fees of the co-advisers, described
below, is higher than that paid by most other mutual funds.
CO-INVESTMENT ADVISER - KAM, INC.
Subject to the supervision and direction of the Fund's Board of Directors and
the Manager, KAM concentrates on currencies, in accordance with the Fund's
investment objectives and stated investment policies, pursuant to an investment
advisory agreement executed by Dracena Funds, Inc. (the "Advisory Agreement").
KAM is a newly organized registered investment adviser established to provide
investment management services, primarily in the form of investment programs
offering diversified portfolios in international currencies, to institutions.
KAM employs professional portfolio managers who provide research services to the
Fund. KAM, an investment adviser registered under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), was organized in 1992 under the laws
of the State of Colorado and is located at 400 Haber Road, Cary, Illinois,
60013.
KAM has not previously acted as investment adviser to an investment company.
Pursuant to the Advisory Agreement, KAM will receive a monthly fee at an
annualized rate of 0.5% of the Fund's average daily net assets for the
performance of its services thereunder, a portion of which may be re-allowed or
paid to others. The advisory fee is higher than that paid by most other mutual
funds.
CO-INVESTMENT ADVISER - PRINCETON INTERNATIONAL L.L.P.
Princeton International L.L.P. ("PI"), is a co-adviser to the Fund,
concentrating in sovereign debt and cash investing, pursuant to an advisory
agreement with Dracena Funds, Inc. PI has not previously acted as an investment
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FX CURRENCY VALUE FUND
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adviser to an investment company. PI will receive a monthly fee at an
annualized rate of 0.3% of the Fund's average daily net assets for the
performance of its services to the Fund. PI, an investment adviser registered
under the Advisers Act was organized in 1992 as a partnership, under the laws of
the State of Texas and is located at 12695 Whittington Drive, Houston, Texas
77077. Robert D. Watson, the majority partner of Princeton International
L.L.P., is also a licensed broker and an associated person with Makefield
Securities, a brokerage firm which has entered into a selected dealer's
agreement with the Fund's Distributor. Pursuant to the selected dealer's
agreement, Mr. Watson will receive standard reallowances of the sales charge and
trail commissions as a result of investments by his brokerage clients in the
Fund.
CO-INVESTMENT ADVISER - ROHDEN CAPITAL MANAGEMENT, LTD.
Rohden Capital Management, Ltd. ("RCM"), is a co-adviser to the Fund,
concentrating in debt investments, pursuant to an advisory agreement with
Dracena Funds, Inc. RCM has not previously acted as an investment adviser to an
investment company. RCM will receive a monthly fee at an annualized rate of
0.3% of the Fund's average daily net assets for the performance of its services
to the Fund. RCM, an investment adviser registered under the Advisers Act, was
organized in 1990 under the laws of the State of Illinois, is wholly owned by
Lawrence R. Powell, and is located at 38 Blaine Avenue, Hinsdale, Illinois
60521.
PERSONNEL
Daniel H. Spitzer and Alfred R. Gerebizza are primarily responsible, with the
assistance of Messrs. Watson and Powell, for the day-to-day management of the
Fund's portfolio. Messrs. Spitzer and Gerebizza have owned and operated Kenzie
Asset Management, Inc. ("Kenzie") since 1990. Kenzie is a consulting company
specializing in consulting for banks and other institutions on foreign exchange
transactions. Messrs. Spitzer and Gerebizza previously had been principals,
since 1984, in a consulting company named Alfred Gerebizza, Ltd. Mr. Spitzer,
36, graduated with a B.S. from Northern Illinois University in 1982. In 1993
Mr. Spitzer formed, and is presently an officer of, the Fixed Income Group of
the Investment Analysts' Society. Mr. Gerebizza, 40, graduated with a B.A. from
Northern Illinois University in 1977.
The individuals at PI who are principally responsible for advising the Manager
are Robert D. Watson and W. Scott Hill. Mr. Watson, 34, has been a sovereign
asset manager for over ten years, specializing in U.S. Treasury and agency
securities. He received his Bachelor of Science in Business, with a major in
accounting and a minor in finance, from Texas A&M University in 1987. While
pursuing his formal education, he served in the U.S. Army Reserve as an
intelligence analyst concentrating on the economic analysis of Eastern Europe
and the Balkan countries. Since 1987, through PI, he has provided sovereign
fixed income research and management to public and private investors throughout
the United States and abroad. He is presently managing principal at PI. W.
Scott Hill, 27, joined PI in 1991 as an Economic Analyst focusing on factors
that effect the movements of inflation and consequently interest rates. Mr.
Hill subsequently served as an internal administrator and later as trader.
During his tenure with PI, he has had extensive experience working with many
different types of fixed-income instruments and their portfolio applications.
He now serves as a Portfolio Manager. He received his Bachelor of Arts in
Economics at Texas A&M University in 1991.
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The individual at RCM who is principally responsible for advising the Manager
is Lawrence R. Powell. Mr. Powell, 33, has since November, 1990, been President
and sole shareholder of RCM. From May, 1988 to November, 1990, Mr. Powell was
personally registered as a commodity trading adviser. From 1987-1988, he was a
principal of A.P. Financial, Inc., an introducing broker, and from 1985-1987 he
was an options and futures trader. Mr. Powell graduated from the University of
Arizona in 1983 with a Bachelor of Science degree in Finance and Real Estate.
ADMINISTRATOR - RODNEY SQUARE MANAGEMENT CORPORATION
The Fund has entered into an Administration Agreement and an Accounting
Services Agreement with Rodney Square Management Corporation, ("Rodney Square"),
located at 1100 North Market Street, Wilmington, Delaware, 19890 (the
"Administrator"), pursuant to each of which the Fund pays Rodney Square a fee at
an annual rate based upon the average daily net assets of the Fund, with a
minimum annual fee of $50,000 under the Administration Agreement and $75,000
under the Accounting Services Agreement. As the Administrator, Rodney Square
provides certain administrative and accounting services, including among other
responsibilities, coordinating relationships with independent contractors and
agents, preparing for signature by officers and filing of certain documents
required for compliance with applicable laws and regulations, preparing,
financial statements, and arranging for the maintenance of books and records.
DISTRIBUTOR - RODNEY SQUARE DISTRIBUTORS INC.
Rodney Square Distributors, Inc. ("Rodney Square Distributors" or the
"Distributor") is located at 1100 North Market Street, Wilmington, DE. 19890 and
serves as distributor of the Fund's shares. Rodney Square Distributors is paid
an annual fee by the Fund of 0.40% of average daily net assets, plus
reimbursement of actual expenses incurred above the amount of the fee up to a
combined maximum of 0.75% of average daily net assets, for certain expenses
incurred in connection with the offering and sale of shares. The annual fee,
authorized pursuant to a Distribution Plan (the "Plan") adopted by the Fund
pursuant to Rule 12b-1 under the 1940 Act, is calculated at the annual rate of
0.40% of the value of the average daily net assets of the Fund and is used by
Rodney Square Distributors to cover expenses that are primarily intended to
result in, or that are primarily attributable to, the sale of shares of the
Fund. In addition to the annual fee, the Plan also provides for the further
reimbursement of allowable expenses above 0.40% up to 0.75% of average daily net
assets). The Fund does not presently anticipate that the aggregate of payments
under the Plan will exceed 0.40% of average daily net assets for its first full
year of operations. Payments of the annual fee of 0.40% to the Distributor
under the Plan are not directly tied to expenses and payments under the Plan and
may be more or less than actual expenses incurred by the Distributor. The
excess of fees received over expenditures may constitute a "profit" to the
Distributor. The expenses that the Plan is intended to authorize expenses
include: costs of printing and distributing the Fund's Prospectus, Statement of
Additional Information and sales literature to prospective investors; an
allocation of overhead and other Rodney Square Distributors branch office
distribution-related expenses; and payments to and expenses of persons who
provide support services in connection with the distribution of shares of the
Fund. In addition, a related Shareholder Servicing Plan authorizes up to 0.25%
of average daily net assets for shareholder servicing. The Shareholder
Servicing Plan authorizes expenses relating to shareholder account adminstration
and servicing such as: answering inquiries regarding account status; answering
inquiries regarding the Fund; and assisting in processing purchase and
redemption transaction.
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Although it is anticipated that some promotional activities will be conducted
in common for the Fund and any other existing or future fund in the same series
as the Fund ("Series Fund"), payments made by the Fund under its Plan generally
will be used to finance the distribution of shares of the Fund. Common expenses
incurred in connection with activities on behalf of the Fund and those of other
funds may be allocated pro rata among all such entities on the basis of their
relative net assets.
Payments under the Plan are not tied exclusively to the distribution expenses
actually incurred by Rodney Square Distributors and such payments may exceed
distribution expenses actually incurred by Rodney Square Distributors. The
Board of Directors of the Fund will evaluate the appropriateness of the Plan and
the payment terms on a continuing basis and in doing so will consider all
relevant factors, including all expenses borne, and amounts received, by Rodney
Square Distributors under the Plan.
Rodney Square Distributors, Inc. is a member of the National Association of
Securities Dealers, Inc. (the "NASD"). In the event that any amendments to Rule
12b-1 under the 1940 Act or the NASD's Rules of Fair Practice are adopted that
are inconsistent with the Plan, the Fund's management would consider various
actions, including proposing amendments to, or causing the termination of, the
Plan. The Fund is unable to predict whether such amendments will be proposed,
or, if proposed, whether they will be adopted at any time in the future.
CUSTODY ARRANGEMENTS
Barclays Bank plc (the "Custodian") serves as custodian of the Fund's
investments. The Custodian acts as the depository for the Fund, safekeeps
certain of its portfolio securities, collects all income and other payments with
respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties. The Custodian's address is
Barclays Bank plc, 75 Wall Street, New York, New York, 10265.
TRANSFER AGENCY ARRANGEMENTS
Rodney Square serves as the Fund's transfer agent pursuant to a transfer
agency agreement (the "Transfer Agent"). As transfer agent, it maintains the
records of each shareholder's account, answers shareholder inquiries concerning
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
services functions. Rodney Square's address is Rodney Square North, 1100 N.
Market Street, Wilmington, Delaware, 19890-0001.
PURCHASE OF SHARES
Purchase of the Fund's shares must be made through Rodney Square Distributors
or a broker that has a selected dealer's agreement with Rodney Square
Distributors (a "Participating Dealer"). The Fund and Rodney Square
Distributors each reserve the right to reject any purchase order and to suspend
the offering of shares for a period of time.
The minimum initial investment in the Fund is $1,000, except that the minimum
initial investment for individual retirement accounts, Keogh plans, 401(k) plans
and other retirement plans ("retirement plans") is $250, and the minimum initial
investment for certain directors, officers and employees of the Fund and the
Manager, among others, is $500. Subsequent investments must be at least $50,
except that the minimum subsequent investment for retirement accounts is $25.
The Manager or the Distributor, in their discretion, may waive these minimums
for qualifying programs with broker-dealers. The Fund reserves the right at any
time to vary the initial and subsequent investment minimums.
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FX CURRENCY VALUE FUND
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The Fund's shares are offered on a continuous basis by Rodney Square
Distributors. All investments must be made in U.S. dollars and, to avoid fees
and delays, checks should be drawn only on U.S. banks. A charge may be imposed
if any check used for investment does not clear. The Fund and Rodney Square
Distributors reserve the right to reject any purchase order in whole or in part.
If an order, together with payment in proper form, is received by Rodney
Square, as transfer agent, by the close of regular trading on the New York Stock
Exchange (the "Exchange"), generally 4:00 p.m., Eastern time, Fund shares will
be purchased at the Fund's next determined net asset value. Orders for Fund
shares received after the close of regular trading on the Exchange, generally
4:00 p.m., Eastern time, will be purchased at the net asset value determined on
the next day the Exchange is open for trading.
Investors may purchase shares of the Fund from Rodney Square Distributors or
other Participating Dealers who have entered into a selected dealer's agreement
with Rodney Square Distributors. Investors should contact their securities
dealer directly for appropriate instructions, as well as information pertaining
to accounts and any related fees. Purchase orders through Participating Dealers
are effected, plus applicable charges, at the next determined net asset value
after receipt of the order by such Participating Dealer, and it is the
responsibility of the Participating Dealer to transmit orders on a timely basis
to Rodney Square as the Fund's transfer agent. Other investors may purchase
Fund shares by mail or by wire as specified below.
BY MAIL: You may purchase shares by sending a check drawn on a U.S. bank
payable to FX Currency Value Fund, along with a completed Application, to FX
Currency Value Fund, c/o Rodney Square Management Corporation, P.O. Box 8987,
Wilmington, DE 19899-9752. A purchase order sent by overnight mail should be
sent to FX Currency Value Fund, c/o Rodney Square Management Corporation, Rodney
Square North, 1105 N. Market Street, Wilmington, DE 19801. If a subsequent
investment is being made, the check should also indicate your Fund account
number. When you purchase by check, the Fund may withhold payment on
redemptions until it is reasonably satisfied that the funds are collected (which
can take up to 10 days). If you purchase shares with a check that does not
clear, your purchase will be cancelled and you will be responsible for any
losses or fees incurred in that transaction.
BY WIRE: You may purchase shares by wiring federal funds. To advise the Fund
of the wire, and if making an initial purchase, to obtain an account number, you
must telephone Rodney Square at (800) 282-2319. Once you have an account
number, instruct your bank to wire federal funds to Rodney Square Distributors,
c/o Wilmington Trust Company, Wilmington, DE - ABA #0311-0009-2, attention: FX
Currency Value Fund, DDA #2670-9504, Attn: David Young, further credit - your
account number and your name. If you make an initial purchase by wire, you must
promptly forward a completed Application to Rodney Square Distributors at the
address stated above under "By Mail."
INDIVIDUAL RETIREMENT ACCOUNTS. Fund shares may be purchased for a tax-
deferred retirement plan such as an individual retirement account ("IRA"). For
an application for an IRA and a brochure describing a Fund IRA, call Rodney
Square Distributors at (800) 282-2319. Wilmington Trust Company makes available
its services as IRA custodian for each shareholder account that is established
as an IRA. For these services, Wilmington Trust Company receives an annual fee
of $10.00 per account, which fee is paid directly to Wilmington Trust Company by
the IRA shareholder. If the fee is not paid by the date due, Fund shares owned
by the IRA will be redeemed automatically for purposes of making the payment.
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AUTOMATIC INVESTMENT PLAN. Shareholders may purchase Fund shares through an
Automatic Investment Plan. Under the plan, Rodney Square Distributors, at
regular intervals, will automatically debit a shareholder's bank checking
account in an amount of $50 or more (subsequent to the $1,000 minimum initial
investment), as specified by the shareholder. A shareholder may elect to invest
the specified amount monthly, bimonthly, quarterly, semiannually or annually.
The purchase of Fund shares will be effected at their offering price at the
close of regular trading on the Exchange (the "Exchange") (currently 4:00 p.m.,
Eastern time) on or about the 20th day of the month. To obtain an Application
for the Automatic Investment Plan, check the appropriate box of the Application
at the end of this Prospectus or call Rodney Square Distributors at (800) 282-
2319.
OFFERING PRICE. Except as noted below, effective June 20, 1995, the public
offering price of shares of the Fund is the net asset value per share plus a
sales charge, which is imposed in accordance with the following schedule:
AMOUNT OF SALES
CHARGE REALLOWED
SALES CHARGE SALES CHARGE TO DEALERS AS A
AS % OF AS % OF NET PERCENTAGE OF
AMOUNT OF INVESTMENT OFFERING PRICE ASSET VALUE OFFERING PRICE*
-------------------- -------------- ------------ ----------------
Less than $50,000....... 4.50% 4.71% 4.00%
$50,000 to $99,000...... 4.00% 4.17% 3.50%
$100,000 to $249,000.... 3.50% 3.63% 3.10%
$250,000 to $499,000.... 2.00% 2.04% 1.70%
$500,000 to $999,999.... 1.00% 1.01% 0.70%
$1,000,000 or more...... No Charge 0.25%**
* At the discretion of the Manager, the entire sales charge may
at times be reallowed to dealers. The Staff of the Securities
and Exchange Commission has indicated that dealers who receive
more than 90% of the sales charge may be considered
underwriters.
** This figure is 0.25% of the amount of the transaction, and is
paid by the Manager, but the Manager will be reimbursed by the
Fund therefor.
The Fund receives the net asset value. The sales charge is allocated between
the investor's investment dealer and Rodney Square Distributors. At the
discretion of Rodney Square Distributors, however, the entire sales charge may
at times be reallowed to Participating Dealers. The Manager or Rodney Square
Distributors may, at their expense, provide additional promotional incentives or
payments to dealers that sell shares of the Fund. In some instances, these
incentives or payments may be offered only to certain dealers who have sold or
may sell significant amounts of shares.
In addition, the Fund pays ongoing trail commissions to brokerage firms,
financial institutions (including banks) and others that facilitate the
administration and servicing of shareholder accounts at the annual rate of 25
basis points (0.25%) of the average balance of accounts for which such persons
are the dealers of record. These trail commissions constitute expenses
authorized under the Shareholder Servicing Plan.
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FX CURRENCY VALUE FUND
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RIGHT OF ACCUMULATION
Reduced sales charges apply on a cumulative basis over any period of time.
Thus, the value of all shares of the Fund owned by an investor, taken at the
current net asset value, can be combined with a current purchase to determine
the rate of sales charges applicable to the current purchase. In order to
receive the cumulative quantity reduction, the existing shares of the Fund held
by an investor must be called to the attention of the Transfer Agent at the time
of the current purchase; otherwise, the investor will not be able to receive the
cumulative quantity reduction with respect to that current purchase.
LETTER OF INTENT
You may qualify for a reduced sales charge on your purchase of shares of the
Fund immediately by completing the Letter of Intent section of the application
for investment (the "Letter of Intent"), in which you state your intention to
invest during the next 13 months a specified amount which, if made at one time,
would qualify for a reduced sales charge. The terms of the Letter of Intent
include provisions granting an escrow of 5% of the amount of your total intended
purchase to Rodney Square Distributors to assure that the full applicable sales
charge will be paid if you do not complete the intended purchase. Additional
information regarding the Letter of Intent is provided in the Statement of
Additional Information.
Rights of accumulation and letter of intent applies to purchases by a "single
purchaser," i.e.: (a) an individual; (b) an individual, his or her spouse and
their children under the age of 21 purchasing shares for his or her own
accounts; (c) a pension, profit-sharing or other employee benefit plan qualified
or nonqualified under Section 401 of the Code; and (d) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Code.
REDUCED SALES CHARGES
Reduced sales charges are available to investors who are eligible to combine
their purchases of shares of the Fund to receive volume discounts. Investors
eligible to receive volume discounts include individuals and their immediate
families, tax-qualified employee benefit plans and trustees or other
professional fiduciaries (including banks, and investment advisers registered
with the Securities and Exchange Commission under the Advisers Act) purchasing
shares for one or more trust estates or fiduciary accounts even though more than
one beneficiary is involved. In the event that Dracena Funds, Inc. establishes
additional funds, reduced sales charges will also be available under a combined
right of accumulation under which an investor may combine the value of shares of
the Fund that he or she already holds with the value of shares of other mutual
funds in The Dracena Funds Group of funds that are sold with a sales charge,
along with the value of the Fund shares being purchased, to qualify for a
reduced sales charge in accordance with the schedule set forth above. For
example, if an investor owns shares of the Fund and other series funds sold with
a sales charge that have an aggregate value of $92,000, and makes an additional
investment in the Fund of $9,000, the sales charge applicable to the additional
investment would be 3.5% rather than the 4.0% normally charged on a $9,000
purchase. Investors interested in further information regarding volume
discounts should contact the Fund.
Shares of the Fund may be offered without a sales charge to (a) employees of
DFG, KAM, RCM, and PI, and IRAs and employee benefit plans for those employees
and the spouses and minor children of those employees when orders on their
behalf are placed by the employees; (b) any other investment company in
connection with the combination of the company with the Fund by merger,
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FX CURRENCY VALUE FUND
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acquisition of assets or otherwise; (c) shareholders who have redeemed shares in
the Fund (or in another fund in The Dracena Funds Group of funds that is sold
with a sales charge of at least 2%) and who wish to reinvest their redemption
proceeds in the Fund, so long as the reinvestment is made within 30 days of the
redemption.
GENERAL
Federal tax regulations require that investors provide a certified Taxpayer
Identification Number and certain other required certifications upon opening or
reopening an account in order to avoid withholding of taxes on distributions or
redemptions by the Fund. See the Fund's New Account Application attached to
this Prospectus for further information concerning this requirement. Share
certificates will only be issued by the Fund if necessary or if requested by the
investor.
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any date that the Fund
calculates its net asset value (see "Valuation of Shares"). Shareholders may,
however, incur a charge from a broker if the shareholder utilizes the services
of such broker in effecting the redemption of his or her shares. Redemption
will be effected at the net asset value per share next determined after receipt
of a redemption request meeting the requirements described below. Redemption
proceeds are transmitted to the shareholder for credit to the shareholder's
account at the Participating Dealer generally on the business day following
receipt of a redemption request but, in any event, payment will be made within
seven (7) days thereafter.
The Fund will normally transmit redemption proceeds for credit to the
shareholder's account at the Participating Dealer at no charge on the business
day following receipt of a redemption request. Generally, these proceeds will
not be invested for the shareholder's benefit without specific instruction, and
the Participating Dealer will benefit from the use of temporarily uninvested
proceeds. A shareholder who pays for shares by personal check will be credited
with the proceeds of a redemption of those shares when the purchase check has
been collected, which may take up to ten (10) days. A shareholder who
anticipates the need for more immediate access to his or her investment should
purchase the shares with federal funds, a bank wire or by a certified or
cashier's check.
A Fund account which is reduced by a shareholder to a value of $500 or less is
subject to involuntary redemption by the Fund, but only after the shareholder
has been given at least 30 days prior notice in which to increase the account
balance to $500 or more.
SHARES MAY BE REDEEMED IN ANY OF THE FOLLOWING WAYS THROUGH THE TRANSFER AGENT
OR A PARTICIPATING DEALER:
* Redemption by Mail
* Redemption by Telephone
* Redemption by Systematic Withdrawal
WRITTEN REDEMPTION
Shares may be redeemed by submitting a written request for redemption to:
FX Currency Value Fund
c/o Rodney Square Management Corporation
P.O. Box 8987
Wilmington, Delaware 19899-9752
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FX CURRENCY VALUE FUND
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A written redemption request to the Fund's Transfer Agent must (a) state the
number of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the recorded in the
account registration. Any signature appearing on a redemption request must be
guaranteed by a national bank or trust company (not a savings bank), a member
bank of the Federal Reserve System or a member firm of a national securities
exchange. The Fund's Transfer Agent may require additional supporting documents
for redemptions made by corporations, executors, administrators, trustees or
guardians. A redemption request will not be deemed to be properly received
until the Fund's Transfer Agent receives all required documents in proper form.
TELEPHONE REDEMPTION
If the shareholder has actively selected telephone redemption privileges by
completing the Telephone Application at the end of the Prospectus, shareholder
may redeem valid shares by calling the Fund's Transfer Agent at (800) 282-2319
before the close of regular trading on the Exchange, generally 4:00 p.m. Eastern
time, on any business day of the Fund. Redemption proceeds will be mailed to
the shareholder's address of record as promptly as possible, but not later than
seven days after receipt of the request by the Fund's Transfer Agent.
Shareholders may elect to establish telephone redemption and exchange
privileges. Such privileges will not be made available automatically without an
election by the shareholder. By electing to establish telephone redemption or
exchange privileges, a shareholder authorizes the Fund and its Transfer Agent to
act upon the instruction of the shareholder by telephone to redeem a minimum of
$2,000 but not more than $25,000 from the account for which such service has
been authorized, or to effect an exchange pursuant to the Exchange Privilege
(defined below under "Series Fund Exchange Privilege"). The shareholder is also
agreeing that neither the Fund nor the Transfer Agent will be liable for any
loss, expense or cost arising out of any telephone redemption request or
telephonic exercise of the Exchange Privilege, including any fraudulent or
unauthorized requests, AND THE SHAREHOLDER ALONE WILL BEAR THE RISK OF LOSS, so
long as reasonable procedures are employed and the Fund or the Transfer Agent
reasonably believes that the telephonic instructions are genuine.
The Fund's Transfer Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These reasonable procedures
may include (1) establishing the identity of the caller by confirming the
shareholder's name, address and Social Security Number; (2) redemption proceeds
will be mailed/wired only according to the previously established instructions;
and, (3) a statement confirming each redemption will be mailed to the
shareholder. If the Fund or the Transfer Agent does not follow such reasonable
procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. Shareholders may experience delays in exercising telephone
redemption privileges or telephone exercise of the Exchange Privilege during
periods of abnormal market activity, in which case shareholders may wish to send
a written redemption request or exercise of the Exchange Privilege to the Fund's
Transfer Agent by overnight mail to the following address: Rodney Square
Management Corp., 1105 N. Market Street, Wilmington, Delaware, 19801.
Shareholders may request telephone redemption privileges after an account is
opened; however, the authorization form will require a signature guarantee.
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FX CURRENCY VALUE FUND
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SYSTEMATIC WITHDRAWAL PLAN
The Fund also provides a systematic plan to be established on shareholder
accounts following completion of the new account application. This account
privilege is subject to the following conditions:
(1) Establishing a withdrawal plan on a Fund account requires a minimum
account balance of $10,000.
(2) Withdrawals must be in the amounts of $50 or more and may be taken on a
monthly, quarterly, semi-annual or annual basis.
(3) Dividend and capital gain distributions must be reinvested in the
account as full and fractional shares.
(4) Redemptions are made at net asset value as of the close of regular
trading on the Exchange on the 25th of each month (or the next business
day).
(5) The systematic withdrawal plan may be terminated by either the Fund or
the shareholder at any time, without penalty, by written notification
to the other party.
SERIES FUND EXCHANGE PRIVILEGE
The Distributor has arranged for the availability of shares of any other
future fund in The Dracena Funds group of funds in exchange for shares of the
Fund; and, shares of such other funds so acquired plus any shares acquired
through reinvestment of dividends on such series fund shares may be re-exchanged
for shares of the Fund without a sales charge ("Exchange Privilege"). A
shareholder will be able to exercise the Exchange Privilege from each account in
the Fund into Series Fund shares a maximum of four times per calendar year.
This Exchange Privilege does not constitute an offering or recommendation by the
Fund of any Series Fund, and is only available in states in which the shares to
be acquired may be legally sold. A Series Fund may be separately managed. The
Fund is at the date of this Prospectus the only Series Fund.
The above-described Exchange Privilege will be exercisable by sending written
instructions to the Transfer Agent or by telephone if the shareholder has
affirmatively selected telephone privileges by submitting an application for
telephone redemption. (See "Written Redemption" and "Telephone Redemption,"
under "Redemption of Shares," above.) Exchange redemptions and purchases will
be effected on the basis of the net asset values next determined after receipt
of the request in proper order by the Transfer Agent. In the case of exchanges
into Series Fund shares, dividends, if applicable, will generally commence on
the business day following the exchange. For federal and state income tax
purposes, an exchange is treated as a sale and may result in a capital gain or
loss, although if the shares exchanged have been held less than 91 days, the
sales charge paid on such shares is not included in the tax basis of the
exchanged shares, but is carried over and included in the tax basis of the
shares acquired. See "Purchase of Shares" in the Statement of Additional
Information.
Additional information concerning this privilege and prospectuses for any
Series Fund, when available, may be obtained from Rodney Square Distributors,
from a Participating Dealer, or by calling (800) 282-2319. A shareholder should
read the prospectus and consider differences in objectives and policies before
making any exchange. Questions concerning any Series Fund account should be
addressed to the Transfer Agent. The Fund or Rodney Square Distributors can
change or discontinue this privilege, although shareholders generally would be
given 60 days advance notice of any termination or material amendment of the
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FX CURRENCY VALUE FUND
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Exchange Privilege and shareholders who had exchanged into a Series Fund
generally would be permitted to reacquire shares of the Fund without a sales
charge for at least 60 days after notice of termination of the Exchange
Privilege.
VALUATION OF SHARES
The Fund's net asset value per share is calculated on each day, Monday through
Friday, except on days that the Exchange is closed. The Exchange is currently
scheduled to be closed on New Years's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas as well as
the preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
The Fund's net asset value per share is determined as of the close of regular
trading on the Exchange, generally 4:00 p.m., eastern time, and is computed by
dividing the value of the Fund's net assets by the total number of its shares
outstanding. Generally, the Fund's investments are valued at market value or in
the absence thereof with respect to any portfolio securities, at fair value as
determined in good faith by the Board of Directors. Further information
regarding the Fund's valuation policies is contained in the Statement of
Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund currently intends to distribute substantially all of its net
investment income and net capital gain, if any, at least annually. It is
anticipated that the first such distributions will be declared and made in
December of each year. Such distributions may consist of long and short term
capital gain for the twelve-month period ending on December 31 of such calendar
year. The second such distribution, if required to avoid the imposition of tax
on the Fund, will be declared and made following the end of the Fund's taxable
year and will include any undistributed net investment income and net capital
gain for such taxable year, to the extent deemed necessary by the Fund. The
amount and frequency of distributions by the Fund are not guaranteed and are
subject to the discretion of the Fund's Board of Directors. There are two types
of distributions which the Fund will make to its shareholders.
1. Net Investment Income Distributions. Income in the form of dividends and
interest received by the Fund in connection with its investment activities, less
the expenses incurred by the Fund in its operations, is the Fund's net
investment income, substantially all of which will be distributed as dividends
to the Fund's shareholders.
Any net short term capital gain realized by the Fund (taking into account any
carryover of capital loss from previous years), while technically a distribution
from capital gains, will be distributed to shareholders with and as a part of
net investment income distributions.
2. Net Capital Gain Distributions. Net gain recognized by the Fund on
transactions involving investments held for the period required for long term
capital gain or loss treatment (currently more than one year) after deduction of
any net short term capital loss, which includes any capital loss carried over
from previous years, will be distributed and treated as long term capital gain
income in the hands of the shareholders regardless of the length of time they
have held the Fund's shares.
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FX CURRENCY VALUE FUND
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Unless investors request cash distributions in writing or on the Application
and New Account Registration at the back of this Prospectus, all Fund
distributions will be automatically reinvested in additional shares of the Fund
and credited to the shareholder's account at the closing net asset value on the
reinvestment date. Investors have the right to change their election with
respect to the receipt of distributions by notifying the Transfer Agent in
writing, but any such change will be effective only as to distributions for
which the record date is seven or more business days after the Fund has received
the written request.
For shareholders who have requested cash distributions, in the event the U.S.
Postal Service is unable to deliver a check to the authorized address, the
Fund's Transfer Agent will mail the check a second time. If the check is
returned for the second time as undeliverable, the Fund will terminate the
shareholder's election to receive dividends and other distributions in cash.
The returned distribution will be reinvested and subsequent dividends and other
distributions will be automatically reinvested in additional shares of the Fund.
The shareholder will need to notify the Fund's Transfer Agent in writing of his
or her correct address and request that dividends and other distributions be
received in cash if the shareholder wishes to reinstate that option.
TAX MATTERS
The Fund intends to qualify annually and elect to be treated as a regulated
investment company under the Code. To qualify as a regulated investment
company, the Fund must, among other things, (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to loans of stock and
securities, gains from the sale or other disposition of stock or securities, or
foreign currencies, or other income (generally including gains from options,
futures or forward contracts, but excluding futures contracts on commodities
such as gold or oil) derived with respect to the business of investing in stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of stock or securities (or options, futures, or
forward contracts thereon), or foreign currencies (or options, futures or
forward contracts thereon) that are not directly related to the business of
investing in stock or securities (or options and futures thereon) held less than
three months; and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of its assets is represented by
cash, cash items, United States government securities, securities of other
regulated investment companies and other securities (provided that the
securities of any one issuer shall not exceed 5% of the Fund's assets or 10% of
the outstanding voting securities of the issuer), and (ii) not more than 25% of
the value of the Fund's assets is invested in the securities of any one issuer
(other than United States government securities or the securities of other
regulated investment companies).
The Fund intends to employ certain investment techniques involving foreign
currencies and options, futures and forward contracts thereon that are designed
to manage the Fund's foreign currency exposure. Employment of such techniques
may affect the Fund's status as a regulated investment company in the following
ways. First, the Fund may be restricted in effecting closing transactions
within three months after entering into these transactions in order to comply
with the 30% gross income test. Second, the Internal Revenue Service (the
"IRS") has been granted legislative regulatory authority to exclude from
qualifying income under the 90% gross income test described above, foreign
currency gains that are not directly related to the Fund's business of investing
in stock and securities (or options, futures and forward contracts thereon).
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FX CURRENCY VALUE FUND
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Currently, no regulations have been issued by the IRS pursuant to this grant of
authority. However, it is possible that the IRS could issue regulations in the
future that would disqualify all or a part of the foreign currency gains
realized by the Fund for purposes of the 90% gross income test. Finally,
certain of these investment techniques may involve the acquisition of
disqualified assets for purposes of the 50% asset diversification test described
above, or may involve the acquisition of one or more assets, which together
could be considered securities of a single issuer for purposes of the 50% and
25% asset diversification tests described above. The Fund intends to limit its
use of these investment techniques so as to satisfy the 50% and 25% asset
diversification tests. See "Certain Securities, Policies and Investment
Techniques."
The Fund intends to invest substantially all of its total assets directly in,
among others, the securities of governments (or any of their political
subdivisions, authorities, agencies or instrumentalities), or of supranational
entities which are supported by various governments and governmental entities.
Because the Fund is classified as "non-diversified for purposes of the
securities laws," it may invest a relatively high percentage of its assets in
the securities of a limited number of issuers located in a limited number of
countries. It is possible that a government and certain of its political
subdivisions, authorities, agencies, and instrumentalities, and supranational
entities supported thereby will be treated as a single "issuer" for purposes of
the 50% and 25% asset diversification tests described above, which could
negatively impact the Fund's status as a regulated investment company under the
Code. The Fund intends to limit its investments in such securities so as to
satisfy the 50% and 25% asset diversification tests.
As a regulated investment company, the Fund generally will not be subject to
U.S. federal income tax on its investment company taxable income (which includes
dividends, interest and net short term capital gain in excess of any net long
term capital loss) and net capital gain (any net long term capital gain in
excess of the sum of net short term capital loss) designated by the Fund as
capital gain dividend, if any, that it distributes to shareholders, provided it
distributes (or is deemed to distribute) at least 90% of its investment company
taxable income each taxable year. Amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. In order to avoid the payment of the 4% excise
tax, the Fund generally must declare and make (or be deemed to make)
distributions on or before December 31 of each year at least equal to 98% of its
ordinary income for that calendar year and at least 98% of the excess of any net
capital gains for the 12 month period ending October 31 of that year, together
with any undistributed amounts of ordinary income and net capital gains from the
previous calendar year on which no U.S. federal income tax was paid. The Fund
intends to distribute to its shareholders, at least annually, substantially all
of its investment company taxable income, any net capital gain and any "Section
988" gains (described below). A distribution will be treated as paid on
December 31 of the calendar year if declared in October, November or December of
that year to shareholders of record on a specific date in such a month and paid
by the Fund during January of the following year. Such distributions will be
taxable to shareholders subject to tax on such amounts in the calendar year in
which the distributions are declared, rather than the calendar year in which the
distributions are received. To avoid application of the excise tax, the Fund
intends to make its distributions in accordance with the calendar year
distribution requirement.
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FX CURRENCY VALUE FUND
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Many of the options, futures contracts and forward contracts used by the Fund
will be "Section 1256 contracts." Any gains or losses on Section 1256 contracts
generally will be considered 60% long term and 40% short term capital gains or
losses, although certain foreign currency gains and losses from such contracts
may be treated as ordinary in character. Also, Section 1256 contracts held by
the Fund at the end of each taxable year (and, for purposes of the 4% excise tax
(described above), at other times prescribed under the Code) will be "marked to
market," with the result that unrealized gains or losses will be treated as
though they were realized during the year and the resulting gain or loss will be
treated as ordinary or 60%/40% gain or loss, depending on the circumstances.
Generally, the hedging transactions and other transactions in options, futures
contracts and forward contracts undertaken by the Fund may result in "straddles"
for U.S. federal income tax purposes. The straddle rules may affect the
character and timing of gains or losses realized by the Fund. Application of
the straddle rules therefore may increase the amount of short term capital gain
realized by the Fund which is taxed as ordinary income when distributed to
shareholders. The Fund may make one or more of the elections available under
the Code which are applicable to straddles. If the Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the elections made. The rules applicable under certain of the
elections operate to accelerate the recognition of gains or losses from the
affected straddle positions. Because application of the straddle rules may
affect the character of gains or losses, defer losses or accelerate the
recognition of gains or losses from the affected straddle positions, the amount
which must be distributed to shareholders, and which will be taxed to sharehold
ers as ordinary income or long term capital gain, may be increased or decreased
substantially as compared to a fund that does not engage in such hedging
transactions.
The hedging transactions and other transactions in options, futures and
forward contracts undertaken by the Fund also may result in "conversion
transactions." Application of the conversion transaction rules may result in
all or a portion of any long term capital gain realized by the Fund from such
transactions being treated as ordinary income. Because application of the
conversion transaction rules may affect the character of capital gains, the
amount which must be distributed to shareholders, and which will be taxed to
shareholders as ordinary income or long term capital gain, may be increased or
decreased as compared to a fund that does not engage in such transactions.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues interest or other receivables, or
accrues expenses or other liabilities, denominated in a foreign currency and the
time the Fund actually collects such receivables, or pays such liabilities,
generally will be treated as ordinary income or loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition of
certain futures contracts, forward contracts and options, gains and losses
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security or contract and the date of disposition also
will be treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "Section 988" gains or losses, may increase or decrease the
amount of the Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
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FX CURRENCY VALUE FUND
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Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. In addition, the Manager and Advisers will manage the
Fund with the intention of minimizing foreign taxation in cases where it is
deemed prudent to do so. If more than 50% of the value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible to elect to "pass-through" to the Fund's
shareholders the amount of foreign income and similar taxes paid by the Fund.
If this election is made, a shareholder generally subject to tax will be
required to include in gross income (in addition to taxable dividends actually
received) his pro rata share of the foreign income taxes paid by the Fund, and
may be entitled either to deduct (as an itemized deduction) his or her pro rata
share of foreign taxes in computing his taxable income or to use it (subject to
limitations) as a foreign tax credit against his or her U.S. federal income tax
liability. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Each shareholder will be notified within 60 days
after the close of the Fund's taxable year whether the foreign taxes paid by the
Fund will "pass-through" for that year. Generally, a credit for foreign taxes
is subject to the limitation that it may not exceed the shareholder's U.S. tax
attributable to his or her total foreign source taxable income.
Distributions of investment company taxable income and net capital gains will
be taxable to shareholders whether made in cash or reinvested in shares. In
determining amounts of net capital gains to be distributed, any capital loss
carryovers from prior years will be applied against capital gain. Shareholders
receiving distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share so received equal to the net asset
value of a share of the Fund on the reinvestment date.
Any distribution of the Fund's net capital gains is treated as long term
capital gain regardless of the length of time the Fund's shares have been held
by the shareholder. The maximum federal income tax rate on long term capital
gain income for individuals is currently 28%, as contrasted with a maximum
federal income tax rate of 39.6% on ordinary income distributions. For
corporate shareholders, the maximum federal income tax rate for long term
capital gain income as well as ordinary income is currently 35%. Dividends paid
by the Fund generally are not expected to qualify for the deduction for
dividends received by corporations.
Sales, redemptions and exchanges of shares of the Fund may result in gains or
losses for tax purposes to the extent of the difference between the proceeds
from the shares redeemed and the shareholder's adjusted tax basis for such
shares. Any loss realized upon the redemption of shares within six months from
their date of purchase will be treated as long term capital loss to the extent
of distributions of long term capital gain dividends during such six-month
period. All or a portion of a loss realized upon the redemption of shares may
be disallowed to the extent shares are purchased (including shares acquired by
means of reinvested dividends) within 30 days before or after such redemption.
Any dividends or distributions paid shortly after a purchase by an investor
will have the effect of reducing the per share net asset value of the investor's
shares by the per share amount of the dividends or distributions. Furthermore,
such dividends or distributions, although in effect a return of invested
principal, will be taxable to the shareholders as ordinary income or long term
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FX CURRENCY VALUE FUND
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capital gain, as described above. Accordingly, prior to purchasing shares of
the Fund, an investor should carefully consider the impact of dividends or
capital gains distributions which are expected to be or have been announced.
Distributions also may be subject to additional state, local and foreign taxes,
depending on each shareholder's particular situation.
The foregoing discussion is included for informational purposes only. It is
not intended to be a full discussion of all tax implications of an investment in
the Fund. Prospective investors are urged to consult with their tax advisors
with respect to the federal, state, local, foreign and other tax consequences of
an investment in the Fund.
GENERAL INFORMATION
THE COMPANY
The Fund is a series of a Maryland corporation called Dracena Funds, Inc. (the
"Company"), which was organized on March 21, 1994. The Articles of Incorpora
tion permit the Board of Directors to issue up to 200 million full and
fractional shares of common stock, $.01 par value per share, which may be issued
in any number of series. While the Fund is currently the only series of the
Company, the Board of Directors may from time to time issue other series, the
assets and liabilities of which will be separate and distinct from any other
series.
SHAREHOLDER RIGHTS
Shares issued by the Fund have no preemptive, conversion or subscription
rights. Each whole share will be entitled to one vote as to any matter on which
it is entitled to vote and each fractional share shall be entitled to a
proportionate fractional vote. Shareholders have equal and exclusive rights as
to dividends and distributions as declared by the Fund and to the net assets of
the Fund upon liquidation or dissolution. The Fund, as a separate series of the
Company, votes separately on matters affecting only the Fund (e.g., approval of
the Investment Management Agreement); all series of the Company will vote as a
single class on matters affecting all series jointly or the Company as a whole
(e.g., election or removal of Directors). Voting rights are not cumulative, so
that the holders of more than 50% of the shares voting in any election of
Directors can, if they so choose, elect all of the Directors. While the Company
is not required and does not intend to hold annual meetings of shareholders,
such meetings may be called by the Directors in their discretion, or upon demand
by the holders of 10% or more of the outstanding shares of the Company for the
purpose of electing or removing Directors. Shareholders may receive assistance
from the Company in communicating with other shareholders in connection with the
election or removal of Directors pursuant to the provisions contained in Section
16(c) of the 1940 Act.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its "average annual total return"
over various periods of time. Such total return figures show the average
percentage change in the value of an investment in the Fund from the beginning
date of the measuring period to the end of the measuring period. These figures
reflect changes in the price of the Fund's shares and assume that any income
dividends and/or capital gains distributions made by the Fund during the period
were reinvested in shares of the Fund. Figures will be given for recent one,
five and ten year periods, or the life of the Fund to the extent that it has not
been in existence for any such periods, and may be given for other periods as
well, such as on a year-by-year basis. When considering "average" total return
figures for periods longer than one year, it is important to note that the
30
<PAGE>
FX CURRENCY VALUE FUND
- ----------------------
Fund's annual total return for any one year in the period might been greater or
less than the average for the entire period. The Fund also may use "aggregate"
total return figures for various periods, representing the cumulative change in
value of and investment in the Fund for the specific period (again reflecting
changes in share prices and assuming reinvestment of dividends and
distributions). Both average and aggregate total returns may be calculated
either with or without the effect of the maximum 4.5% sales charge and may be
shown by means of schedules, charts or graphs and may indicate subtotals of the
various components (i.e. change in value of initial investment, income dividends
and capital gains distributions).
In reports or other communications to shareholders or in advertising material,
the Fund may compare its performance with that of other mutual funds as listed
in the rankings prepared by Lipper Analytical Services, Inc., or similar
independent services which monitor the performance of mutual funds, or other
industry or financial publications such as BARON'S, FORBES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, MORNINGSTAR MUTUAL FUND VALUES, MONEY, CHANGING TIMES,
THE WALL STREET JOURNAL, FORTUNE, USA TODAY AND THE NEW YORK TIMES. Any given
performance comparison should not be considered as representative of the Fund's
performance for any future period. The Statement of Additional Information
further describes the method used to determine the Fund's performance. Current
yield quotations or total return figures may be obtained by calling (800) 282-
2319.
SHAREHOLDERS INQUIRIES
Shareholder inquiries concerning purchases, redemptions and matters relating
to accounts generally should be directed to Rodney Square at (800) 282-2319, and
shareholders should call their Participating Dealer or call (800) 282-2319 for
general information concerning the Fund.
BACKUP WITHHOLDING INSTRUCTIONS
Shareholders are required by law to provide the Fund with their correct social
security or other taxpayer identification number ("TIN"), regardless of whether
they file tax returns. Failure to do so may subject a shareholder to penalties.
Failure by a shareholder to provide a correct TIN or properly to complete the
Application and New Account Registration, including Section 1, or to sign the
shareholder's name in Section 1 could result in backup withholding by the Fund
of an amount of income tax equal to 31% of any distributions, redemptions or
other payments made to the shareholder's account. Any taxes so withheld may be
credited against taxes owed on the shareholder's federal income tax return.
A shareholder who does not have a TIN should apply for one immediately by
contacting the local office of the Social Security Administration or Internal
Revenue Service. Special rules apply for shareholders who are in specialized
tax categories. For example, for an account established under the Uniform Gift
to Minors Act, the TIN of the minor should be furnished.
If a shareholder is a nonresident of the United States or other foreign
entity, Sections 1 and 4 should be properly completed, and a completed Form W-8
should be provided to the Fund in order to avoid backup withholding on
distributions, redemptions or other payments made by the Fund. Payments made to
the account of such a shareholder by the Fund may be subject to federal income
tax withholding of up to 30% of the amount of such payments in lieu of backup
withholding.
31
<PAGE>
FX CURRENCY VALUE FUND
- ----------------------
A shareholder which is an exempt recipient should furnish its TIN in Section
4. Exempt recipients include: certain corporations, tax-exempt pension plans,
Keogh and IRA accounts, government agencies, financial institutions and
registered securities and commodities dealers.
For further information regarding backup withholding, see Section 3406 of the
Code and consult with a tax adviser.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE IN WHICH THE OFFERING IS UNAUTHORIZED. NO SALESPERSON, DEALER OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN THE STATEMENT OF ADDITIONAL
INFORMATION.
32
<PAGE>
[Dracena Logo Graphic] DRACENA FUNDS, INC.
FX CURRENCY VALUE FUND
APPLICATION & NEW ACCOUNT REGISTRATION
- -----------------------------------------------------------------------------
INSTRUCTIONS: RETURN THIS COMPLETED FORM TO:
FOR WIRING INSTRUCTIONS OR FOR DRACENA FUNDS, INC.
ASSISTANCE IN COMPLETING THIS C/O RODNEY SQUARE
FORM CALL (800) 282-2319 MANAGEMENT CORPORATION
P.O. BOX 8987
WILMINGTON, DE 19899-9752
- -----------------------------------------------------------------------------
PORTFOLIO SELECTION ($1,000 MINIMUM)
AMOUNT TO BE INVESTED $ __________________
___ By check. (Make payable to "FX Currency Value Fund")
___ By wire. Call 1-800-282-2319 for Instructions.
Bank from which funds will be
wired ___________________________wire date _________________
- -----------------------------------------------------------------------------
ACCOUNT REGISTRATION -- JOINT TENANTS USE LINES 1 AND 2; CUSTODIAN FOR A MINOR,
USE LINES 1 AND 3; CORPORATION, TRUST OR OTHER ORGANIZATION OR ANY FIDUCIARY
CAPACITY, USE LINE 4.
1. Individual __________________ ____ ___________________ __________________
First Name M.I. Last Name Customer Tax
ID No.*
2. Joint Tenancy** ________________ ____ ___________________ __________________
First Name M.I. Last Name Customer Tax
ID No.*
3. Gifts to Minors*** __________________________ __________________
Minor's Name Customer Tax ID No.*
under the ______
State
4. Other Registration ___________________________________ __________________
Customer Tax ID No.*
5. If Trust, Date of Trust Instrument: ________________________________________
6. ____________________________________________
Your Occupation
7. _____________________________________ ____________________________________
Employer's Name Employer's Address
* Customer Tax Identification No.: (a) for an individual, joint tenants, or
a custodial account under the Uniform Gifts/Transfers to Minors Act, supply
the Social Security number of the registered account owner who is to be
taxed; (b) for a trust, a corporation, a partnership, an organization, a
fiduciary, etc., supply the Employer Identification number of the legal
entity or organization that will report income and/or gains.
** "Joint Tenants with Rights of Survivorship" unless otherwise specified.
*** Regulated by the state's Uniform Gift/Transfers to Minors Act.
33
<PAGE>
- -----------------------------------------------------------------------------
ADDRESS OF RECORD
_______________________________________________________________________________
Street
_______________________________________________________________________________
City State Zip Code
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
DISTRIBUTION OPTIONS IF THESE BOXES ARE NOT CHECKED, ALL DISTRIBUTIONS
WILL BE INVESTED IN ADDITIONAL SHARES.
Pay Cash for:
Income Dividends Other
FX CURRENCY VALUE FUND ___ ___
- -----------------------------------------------------------------------------
CHECK ANY OF THE FOLLOWING IF YOU WOULD LIKE ADDITIONAL INFORMATION ABOUT A
PARTICULAR PLAN OR SERVICE SENT TO YOU.
___ AUTOMATIC INVESTMENT PLAN ___ SYSTEMATIC WITHDRAWAL PLAN
- -----------------------------------------------------------------------------
RIGHTS OF ACCUMULATION (SEE PROSPECTUS) INDICATE ANY RELATED ACCOUNT(S) IN
FUNDS OR PORTFOLIOS IN THE DRACENA FUNDS, INC. COMPLEX WHICH WOULD QUALIFY FOR
A REDUCED SALES LOAD AS OUTLINED UNDER "PURCHASE OF SHARES - RIGHTS OF
ACCUMULATION" IN THE PROSPECTUS.
______________________ ___________ ______________________ ________________
Fund/Portfolio Account No. Registered Owner Relationship
______________________ ___________ ______________________ ________________
Fund/Portfolio Account No. Registered Owner Relationship
- ------------------------------------------------------------------------------
LETTER OF INTENT
I agree to the Letter of Intent provisions set forth below. I am not obligated
but intend to invest an aggregate amount of at least:
___ $50,000 ___ $100,000 ___ $250,000 ___ $500,000 ___ $1,000,000
Under the terms described under "PURCHASE OF SHARES-Letter of Intent" in the
Prospectus, over a thirteen-month period beginning ___________________________.
I hereby irrevocably constitute and appoint Rodney Square Management
Corporation ("Rodney Square") as my agent and attorney to surrender for
redemption any or all escrowed shares with full power of substitution in the
premises.
I understand that this letter is not effective until it is accepted by Rodney
Square.
_______________________________________ __________________________________
Authorized Signature Authorized Signature
34
<PAGE>
- -----------------------------------------------------------------------------
SALES LOAD WAIVERS PLEASE INDICATE IN THE SPACE PROVIDED THE NATURE OF YOUR
ELIGIBILITY FOR A WAIVER OF SALES LOADS. (SEE "PURCHASE OF SHARES-REDUCED
SALES CHARGES" IN THE PROSPECTUS.)
Nature of Affiliation _______________________________________________________
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
CERTIFICATIONS AND SIGNATURE(S) PLEASE SIGN EXACTLY AS REGISTERED UNDER
"ACCOUNT REGISTRATION."
I have received and read the Prospectus for the Dracena Funds, Inc. and agree
to its terms; I am of legal age. I understand that investment in these shares
involves investment risks, including possible loss of principal. If a
corporate customer, I certify that appropriate corporate resolutions
authorizing investment in the Dracena Funds, Inc. have been duly adopted.
I certify under penalties of perjury that the Social Security number or
taxpayer identification number shown above is correct. Unless the box below is
checked, I certify under penalties of perjury that I am not subject to backup
withholding because the Internal Revenue Service (a) has not notified me that I
am as a result of failure to report all interest or dividends, or (b) has
notified me that I am no longer subject to backup withholding. The
certifications in this paragraph are required from all nonexempt persons to
prevent backup withholding of 31% of all taxable distributions and gross
redemption proceeds under the federal income tax law.
___ Check here if you are subject to backup withholding.
Signature _______________________________________ Date _______________
Signature _______________________________________ Date _______________
Joint Owner/Trustee
Check one: ___ Owner ___ Trustee ___ Custodian ___ Other __________________
- -----------------------------------------------------------------------------
IDENTIFICATION OF SERVICE ORGANIZATION
We authorize Rodney Square and Rodney Square Distributors, Inc. ("Rodney Square
Distributors"), in the case of transactions by telephone, to act as our agents
in connection with transactions authorized by this order form.
Service Organization Name and Code _____________________________________ ______
Branch Address and Code ________________________________________________ _____
Representative or Other Employee Code _________________________________________
Authorized Signature of Service Organization __________________________________
Telephone ( ) _________________
35
<PAGE>
[Dracena Logo Graphic] DRACENA FUNDS, INC.
FX CURRENCY VALUE FUND
APPLICATION FOR TELEPHONE REDEMPTION OPTION
- -----------------------------------------------------------------------------
Telephone redemption permits redemption of fund shares by telephone, with
proceeds directed only to the fund account address of record or to the bank
account designated below. For investments by check, telephone redemption is
available only after these shares have been on the Fund's books for 10 days.
This form is to be used to add or change the telephone redemption option on
your Dracena Funds, Inc. account(s).
- -----------------------------------------------------------------------------
ACCOUNT INFORMATION
Portfolio Name(s): ______________________________________
Fund Account Number(s): __________________________________
(Please provide if you are a
current account holder:)
REGISTERED IN THE NAME(S) OF: __________________________________
__________________________________
__________________________________
REGISTERED ADDRESS: __________________________________
__________________________________
NOTE: If this form is not submitted together with the application, a corporate
resolution must be included for accounts registered to other than an
individual, a fiduciary or partnership.
- -----------------------------------------------------------------------------
REDEMPTION INSTRUCTIONS
___ Add ___ Change
CHECK ONE OR MORE.
___ Mail proceeds to my fund account address or record (must be
$10,000 or less and address must be established for a minimum
of 60 days)
___ Mail proceeds to my bank
___ Wire proceeds to my bank (minimum $2,000)
___ All of the above
Telephone redemption by wire can be used only with financial institutions that
are participants in the Federal Reserve Bank Wire System. If the financial
institution you designate is not a Federal Reserve participant, telephone
redemption proceeds will be mailed to the named financial institution. In
either case, it may take a day or two, upon receipt for your financial
institution to credit your bank account with the proceeds, depending on its
internal crediting procedures.
36
<PAGE>
- -----------------------------------------------------------------------------
BANK INFORMATION PLEASE COMPLETE THE FOLLOWING INFORMATION ONLY IF PROCEEDS
MAILED/WIRED TO YOUR BANK WAS SELECTEED. A VOIDED BANK CHECK MUST BE ATTACHED
TO THIS APPLICATION.
Name of Bank _____________________________________________
Bank Routing Transit # _____________________________________________
Bank Address _____________________________________________
City/State/Zip _____________________________________________
Bank Account Number _____________________________________________
Name(s) on Bank Account _____________________________________________
- -----------------------------------------------------------------------------
AUTHORIZATIONS
By electing the telephone redemption option, I appoint Rodney Square
Management Corporation ("Rodney Square"), my agent to redeem shares of any
designated Dracena Fund when so instructed by telephone. This power will
continue if I am disabled or incapacitated. I understand that a request for
telephone redemption may be made by anyone, but the proceeds will be sent only
to the account address of record or to the bank listed above. Proceeds in
excess of $10,000 will only be sent to your predesignated bank. By signing
below, I agree on behalf of myself, my assigns, and successors, not to hold
Rodney Square and any of its affiliates, or any Dracena Fund responsible for
acting under the powers I have given Rodney Square. I also agree that all
account and registration information I have given will remain the same unless I
instruct Rodney Square otherwise in a written form, including a signature
guarantee. If I want to terminate this agreement, I will give Rodney Square at
least ten days notice in writing. If Rodney Square or the Dracena Funds want
to terminate this agreement, they will give me at least ten days notice in
writing.
ALL OWNERS ON THE ACCOUNT MUST SIGN BELOW AND OBTAIN SIGNATURE GUARANTEE(S).
____________________________________ ____________________________________
Signature of Individual Owner Signature of Joint Owner (if any)
___________________________________________________________________________
Signature of Corporate Officer, Trustee or other -- please include your title
You must have a signature(s) guaranteed by an eligible institution acceptable
to the Fund's transfer agent, such as a bank, broker/dealer, government
securities dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association. A Notary
Public is not an acceptable guarantor.
SIGNATURE GUARANTEE(S) (stamp)
37
<PAGE>
MANAGEMENT COMPANY FX
DRACENA FUNDS GROUP, INC. CURRENCY
VALUE
CO-INVESTMENT ADVISER FUND
KAM, INC.
CO-INVESTMENT ADVISER
PRINCETON INTERNATIONAL L.L.P.
CO-INVESTMENT ADVISER PROSPECTUS
ROHDEN CAPITAL MANAGEMENT, LTD. JUNE 20, 1995
ADMINISTRATOR
RODNEY SQUARE MANAGEMENT CORP. --------------------------
DISTRIBUTOR
RODNEY SQUARE DISTRIBUTORS, INC.
CUSTODIAN MANAGEMENT COMPANY:
BARCLAYS BANK PLC DRACENA FUNDS GROUP, INC.
DRACENA LOGO
