As filed with the Securities and Exchange Commission on February 27, 1998
Registration No. 333-9217
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [X]
ORCHARD SERIES FUND
(Exact Name of Registrant as Specified in Charter)
8515 E. Orchard Road, Englewood, Colorado 80111
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (303) 689-3000
W.T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copies of Communications to:
James F. Jorden, Esquire
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson St. N. W., Suite 400 East
Washington, D. C. 20007-0805
Approximate Date of Proposed Public Offering: Upon this Registration
Statement being declared effective.
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485 [ ] on
pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to
paragraph (a)(1) of Rule 485 [ ] on pursuant to paragraph (a)(1) of Rule
485 [ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485 [ ]
on pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of 1940,
Registrant has elected to register an indefinite number of shares.
<PAGE>
ORCHARD SERIES FUND
REGISTRATION STATEMENT ON FORM N-1A
CROSS-REFERENCE SHEET
PROSPECTUS
(PART A)
Item Caption
1 Cover Page
2 Summary of Expenses
3 Important Information about Your Investment - How the Funds Report
Performance
4 Investment Objectives and Policies; Common Investment Policies,
Practices and Risk Factors
5 Management of the Funds; Back Cover
6 Management of the Funds; Important Information about Your Investment
- Dividends, Other Distributions and Taxes
7 Investing in the Funds - How to Buy Shares; Investing in the Funds How
to Exchange Shares; Investing in the Funds - Other Information;
Important Information about Your Investment - How the Funds Value Their
Shares
8 Investing in the Funds - How to Buy Shares; Investing in the Funds
Other Information; Important Information about Your Investment - How
the Funds Value Their Shares
9 Not Applicable
STATEMENT OF ADDITIONAL INFORMATION
(PART B)
Item Caption
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Objectives; Investment Policies and Practices; Investment
Limitations
14 Management of the Funds
15 Management of the Funds
16 Management of the Funds
17 Portfolio Transactions
18 Other Information
19 Valuation of Portfolio Securities; Additional Purchase and
Redemption Information
20 Dividends, Distributions and Taxes
21 Not Applicable
22 Investment Performance
23 Financial Statements
<PAGE>
OTHER INFORMATION
(PART C)
Item Caption
24 Financial Statements and Exhibits
25 Persons Controlled by or under Common Control
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment adviser
29 Principal Underwriter
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE>
ORCHARD SERIES FUNDSM
8515 East Orchard Road
Englewood, Colorado 80111
(800) 338-4015
PROSPECTUS
The Orchard Series Fund is an open-end management investment company organized
as a Delaware business trust (the "Trust"). The Trust offers seven diversified
investment portfolios, commonly known as mutual funds (the "Funds"). The Funds
are "no-load," meaning you pay no sales charges or distribution fees. GW Capital
Management, LLC("GW Capital Management"), a wholly-owned subsidiary of
Great-West Life & Annuity Insurance Company, serves as the Funds' investment
adviser. The Funds and a brief description of their investment objectives are
listed below.
Orchard Money Market Fund. This Fund seeks as high a level of current income as
is consistent with the preservation of capital and liquidity by investing in
high-quality, short-term debt securities. An investment in the Fund is neither
insured nor guaranteed by the U.S. government. While the Fund seeks to maintain
a stable net asset value of $1.00 per share, there is no assurance that it will
be able to do so.
Orchard Preferred Stock Fund. This Fund seeks a high level of dividend income
qualifying for the corporate dividends received deduction under applicable
federal tax law by investing primarily in cumulative preferred stocks issued by
domestic corporations.
The Orchard Stock Index Funds. Each of the following Funds (the "Index Funds")
seeks long-term growth of capital and a modest level of income by investing in
the common stocks that comprise a specified benchmark index.
Fund Benchmark
Orchard Index 600 Fund S&P Small Cap 600 Stock Index
Orchard Index 500 Fund S&P 500 Composite Stock
Price Index
Orchard Index Pacific Fund Financial Times/S&P-
Actuaries Large-Cap
Pacific Index
Orchard Index European Fund Financial Times/S&P-
Actuaries Large-Cap
European Index
Orchard Value Fund. This Fund seeks to achieve long-term capital appreciation
by investing primarily in common stocks issued by U.S. companies when it is
believed that such stocks are undervalued.
This prospectus gives you information about the Funds that you should know
before investing. You should read this prospectus carefully and retain it for
future reference. A Statement of Additional Information dated as of the date of
this Prospectus has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. It provides additional information about
the Funds and is available free of charge upon request. To obtain a copy call
(303) 689-3000 or write: Orchard Series Fund, 8515 East Orchard Road, Englewood,
Colorado 80111.
Shares of the Funds are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, the federal reserve
board, or any other agency, and are subject to investment risk, including the
possible loss of principal.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 27, 1998.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY OF EXPENSES..........................................................1
INVESTMENT OBJECTIVES AND POLICIES...........................................3
MONEY MARKET FUND.......................................................3
PREFERRED STOCK FUND....................................................4
INDEX 600 FUND.........................................................5
INDEX 500 FUND.........................................................5
INDEX PACIFIC FUND.....................................................5
INDEX EUROPEAN FUND.....................................................5
VALUE FUND...............................................................
COMMON INVESTMENT POLICES, PRACTICES AND RISK FACTORS........................9
MANAGEMENT OF THE FUNDS.....................................................12
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT.................................14
HOW THE FUNDS VALUE THEIR SHARES.......................................14
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES...............................14
HOW THE FUNDS REPORT PERFORMANCE.......................................16
INVESTING IN THE FUNDS......................................................17
HOW TO BUY SHARES......................................................17
HOW TO EXCHANGE SHARES.................................................18
HOW TO SELL SHARES.....................................................18
OTHER INFORMATION......................................................19
<PAGE>
2
SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases...........................................NONE
Sales Load Imposed on Reinvested Dividends................................NONE
Deferred Sales Load.......................................................NONE
Redemption Fees...........................................................NONE
Exchange Fees.............................................................NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Money Preferred Index Index
Market Stock 600 500
Fund Fund Fund Fund
Management Fees 0.20% 0.90% 0.60% 0.60%
12b-1 Fees NONE NONE NONE NONE
Other Expenses 0.26% 0.00% 0.00% 0.00%
Total Fund
Operating Expenses 0.46% 0.90% 0.60% 0.60%
(after reimbursement)
Index Index
Pacific European Value
Fund Fund Fund
Management Fees 1.00% 1.00% 1.00%
12b-1 Fees NONE NONE NONE
Other Expenses 0.20% 0.20% 0.00%
Total Fund
Operating Expenses 1.20% 1.20% 1.00%
(after reimbursement)
"Other Expenses" are based on estimated amounts for the Funds' fiscal year.
Subject to revision, GW Capital Management has voluntarily agreed to reimburse
"Other Expenses" for the Index Pacific Fund, the Index European Fund, and the
Money Market Fund to the extent that total operating expenses exceed 1.20%,
1.20%, and 0.46%, respectively, of average net assets. If this agreement were
not in effect, it is estimated that total operating expenses would have been
1.50%, 1.50%, and 0.52% for the Index Pacific Fund, the Index European Fund, and
the Money Market Fund, respectively. Interest, taxes, brokerage commissions, and
extraordinary expenses are not expenses eligible for reimbursement.
Example
To illustrate the various expenses that you will bear by investing in shares of
a Fund, assume that each Fund's annual return is 5% and that its operating
expenses are exactly as just described. Then, for every $1,000 you invested, the
following shows how much you would have to pay in total expenses if you redeemed
your investment after the number of years indicated.
Fund 1 Year 3 Years
- -------------------- ------ -------
Money Market Fund $ 5 $ 16
Preferred Stock Fund $ 9 $ 31
Index 600 Fund $ 6 $ 21
Index 500 Fund $ 6 $ 21
Index Pacific Fund $ 12 $ 41
Index European Fund $ 12 $ 41
Value Fund $ 10 $ 34
THIS EXAMPLE ILLUSTRATES THE EFFECT OF EXPENSES AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF ACTUAL OR EXPECTED EXPENSES OR RETURNS. ACTUAL EXPENSES AND
RETURNS MAY VARY.
<PAGE>
3
FINANCIAL HIGHLIGHTS (Audited) For the
period February 3, 1997 (inception) to October 31, 1997
The following table should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information
ORCHARD MONEY MARKET FUND
-------------------------------------
February 3, 1997 to
October 31, 1997
-------------
Net Asset Value,
Beginning of Period $1.0000
Income from Investment
Operations
Net Investment Income 0.0363
Net Gains or Losses on
Securities (realized
and unrealized)
Total from Investment 0.0363
Operations
Less Distributions
Dividends (from net
investment income) (0.0363)
Distributions (from
capital gains)
Initial Capitalization
Returns of Capital
Total
Distributions
Net Asset Value-End of $1.0000
Period
Net Assets-End of $3,110,727
Period
Ratio of Expenses to
Average Net Assets 0.46%*
Ratio of Net Income to
Average Net Assets 4.88%*
Portfolio Turnover Rate
-------------------------------------
* Annualized
<PAGE>
4
FINANCIAL HIGHLIGHTS (Audited) For the
period February 3, 1997 (inception) to October 31, 1997
The following table should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information
ORCHARD PREFERRED STOCK FUND
-------------------------------------
February 3,1997 to
October 31, 1997
-------------
-------------
Net Asset Value, $ 10.0000
Beginning of Period
Income from Investment
Operations
Net Investment Income 0.4544
Net Gains or Losses on
Securities (realized 0.1372
and unrealized)
Total from Investment 0.5916
Operations
Less Distributions
Dividends (from net
investment income) (0.4544)
Distributions (from
capital gains)
Initial Capitalization
Returns of Capital
Total
(0.4544)
Distributions
Net Asset Value-End of $10.1372
Period
Total Return 6.04%
Net Assets-End of $4,242,086
Period
Ratio of Expenses to
Average Net Assets 0.90%*
Ratio of Net Income to 6.07%*
Average Net Assets
Portfolio Turnover Rate 10.05%
-------------------------------------
* Annualized
<PAGE>
5
FINANCIAL HIGHLIGHTS (Audited) For the
period February 3, 1997 (inception) to October 31, 1997
The following table should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information
ORCHARD INDEX 500 FUND
-------------------------------------
February 3, 1997 to
October 31, 1997
-------------
-------------
Net Asset Value,
Beginning of Period $10.0000
Income from Investment
Operations
Net Investment Income 0.0388
Net Gains or Losses on 1.6936
Securities (realized
and unrealized)
Total from Investment 1.7324
Operations
Less Distributions
Dividends (from net (0.0388)
investment income)
Distributions (from
capital gains)
Initial Capitalization
Returns of Capital
Total
Distributions
Net Asset Value-End of $11.6936
Period
Total Return 17.38%
Net Assets-End of $492,866,332
Period
Average Commission $0.0318
Rate Paid Per Share
Bought or Sold
Ratio of Expenses to 0.60%*
Average Net Assets
Ratio of Net Income to 1.67%*
Average Net Assets
Portfolio Turnover Rate 0.45%
-------------------------------------
* Annualized
<PAGE>
6
FINANCIAL HIGHLIGHTS (Audited)
<PAGE>
24
For the period February 3, 1997 (inception) to October 31, 1997
The following table should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information
ORCHARD INDEX 600 FUND
-------------------------------------
February 3, 1997 to
October 31, 1997
-------------
-------------
Net Asset Value,
Beginning of Period $10.0000
Income from Investment
Operations
Net Investment Income 0.0238
Net Gains or Losses on 2.1191
Securities (realized
and unrealized)
Total from Investment 2.1429
Operations
Less Distributions
Dividends (from net (0.0238)
investment income)
Distributions (from
capital gains)
Initial Capitalization
Returns of Capital
Total
Distributions
Net Asset Value-End of $12.1191
Period
Total Return 21.46%
Net Assets-End of $5,469,919
Period
Average Commission $0.0345
Rate Paid Per Share
Bought or Sold
Ratio of Expenses to 0.60%*
Average Net Assets
Ratio of Net Income to 0.30%*
Average Net Assets
Portfolio Turnover Rate 21.58%
-------------------------------------
*Annualized
<PAGE>
FINANCIAL HIGHLIGHTS (Audited) For the
period February 3, 1997 (inception) to October 31, 1997
The following table should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information
ORCHARD INDEX EUROPEAN FUND
------------------------------------
February 3, 1997 to
October 31, 1997
-------------
-------------
Net Asset Value,
Beginning of Period $10.0000
Income from
Investment Operations
Net Investment Income 0.0343
Net Gains or Losses 1.6147
on Securities
(realized and
unrealized)
Total from Investment 1.6490
Operations
Less Distributions
Dividends (from net (0.0343)
investment income)
Distributions (from
capital gains)
Initial Capitalization
Returns of Capital
Total
Distributions
Net Asset Value-End $11.6147
of Period
Total Return 16.47%
Net Assets-End of $62,147,578
Period
Average Commission $0.0639
Rate Paid Per Share
Bought or Sold
Ratio of Expenses to 1.20%*
Average Net Assets
Ratio of Net Income 0.83%*
to Average Net Assets
Portfolio Turnover 5.69%
Rate
------------------------------------
* Annualized
<PAGE>
FINANCIAL HIGHLIGHTS (Audited) For the
period February 3, 1997 (inception) to October 31, 1997
The following table should be read in conjunction with the
financial statements and related notes included in the
Statement of Additional Information
ORCHARD INDEX PACIFIC FUND
---------------------------------------
February 3, 1997 to
October 31, 1997
-------------
-------------
Net Asset Value,
Beginning of Period $10.0000
Income from Investment
Operations
Net Investment Income 0.0163
Net Gains or Losses on (06833)
Securities (realized and
unrealized)
Total from Investment (0.0163)
Operations
Less Distributions
(0.0163)
Dividends (from net
investment income)
Distributions (from
capital gains)
Initial Capitalization
Returns of Capital Total
Distributions
Net Asset Value-End of $9.3167
Period
Total Return -6.67%
Net Assets-End of Period $48,444,931
Average Commission Rate $0.0093
Paid Per Share Bought or
Sold
Ratio of Expenses to 1.20%*
Average Net Assets
0.42%*
Ratio of Net Income to
Average Net Assets
Portfolio Turnover Rate 0.04%
---------------------------------------
*Annualized
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each of the Funds is a diversified investment portfolio of the Trust, an
open-end investment management company organized as a Delaware business trust on
July 23, 1996. The Funds are commonly known as mutual funds. By investing in a
mutual fund, you and other shareholders pool money together to be invested
toward a specified investment objective.
Each Fund has its own investment objective and policies. In addition, each Fund
is subject to certain fundamental investment restrictions that cannot be changed
without shareholder approval. These are set forth in the Statement of Additional
Information. All investment policies not designated in the Statement of
Additional Information as being fundamental may be changed without shareholder
approval.
The following is a description of the Funds' investment objectives and policies.
There is no assurance that the Funds will meet their investment objectives.
Additional investment policies, as well as various investment practices and
techniques in which the Funds may engage, are described under "COMMON INVESTMENT
POLICIES, PRACTICES AND RISKS FACTORS."
MONEY MARKET FUND
This Fund seeks as high a level of current income as is consistent with the
preservation of capital and liquidity by investing in high-quality, short-term
debt securities.
The Fund may invest in a variety of high-quality, short-term debt securities,
including but not limited to: (1) securities issued or guaranteed as to
principal and interest by the United States or its agencies or instrumentalities
("U.S. government securities"); (2) certificates of deposit, time deposits and
bankers' acceptances; (3) commercial paper and other short-term corporate debt
instruments; (4) repurchase agreements; and (5) from time to time, floating rate
notes and Eurodollar certificates of deposit.
The Fund generally invests in securities that when acquired are (i) rated in the
highest rating category for short-term debt obligations by at least one
nationally recognized statistical rating organization ("NRSRO"), such as Moody's
Investor Services, Inc. and Standard & Poor's Corporation; or (ii) deemed by GW
Capital Management under the guidelines of the Funds' Board of Trustees (the
"Board of Trustees") to be of comparable quality to such rated securities. The
Fund only enters into repurchase agreements that are entirely collateralized by
U.S. government securities or securities that, at the time the repurchase
agreement is entered into, are rated in the highest rating category for
short-term debt obligations by at least one NRSRO or deemed to be of comparable
quality to a security so rated.
All securities purchased by the Fund are denominated in U.S. dollars. The Fund
invests in securities with remaining maturities not exceeding 13 months, and
maintains a dollar weighted average portfolio maturity of 90 days or less.
PREFERRED STOCK FUND
This Fund seeks a high level of dividend income qualifying for the corporate
dividends received deduction under applicable federal tax law by investing
primarily in cumulative preferred stocks issued by domestic corporations. Under
normal circumstances, at least 65% of the Fund's total assets will be invested
in preferred stocks.
The Fund invests in preferred stocks that when acquired are rated by one or more
NRSROs in one of the four highest rating categories for such securities.
Securities having such a rating are commonly known as "investment grade
securities." The Fund is not required to sell securities whose ratings are later
downgraded below investment grade.
The Fund may also invest in unrated and non-cumulative preferred stocks. Before
investing in any unrated preferred stocks a thorough risk analysis will be
performed. This analysis must reveal that the securities would be of investment
grade quality prior to purchase by the Fund. Any unrated or non-cumulative
preferred stock purchases by the Fund will be made only after the portfolio
manager has determined that these investments represent superior expected return
potential versus comparable rated, cumulative preferred issues.
The Fund will purchase money market securities as a cash reserve and may invest
in such securities for investment purposes as warranted by market conditions. In
addition, the Fund may invest in convertible preferred stocks. The Fund will
convert its shares of preferred stock into common stock if the conversion
becomes attractive, or if forced to convert by the issuing company. This may
result in the realization of capital gains, in addition to gains and losses
realized as a result of the Fund's normal trading activities.
Most cumulative, non-participating, non-convertible preferred stocks are issued
with a fixed dividend rate, with no fixed maturity date. These features produce
an equity security with fixed rate bond-like characteristics. The price of this
type of preferred stock, like the price of fixed rate bonds, tends to fluctuate
inversely with the general level of interest rates. Convertible preferred stocks
may have the support of the market value of the underlying common stock into
which the preferred is convertible. A stable or rising market value for the
underlying common stock can mitigate the effect of adverse interest rate
movements on the market price of a convertible preferred stock. However, because
of the conversion feature, a convertible preferred stock is typically issued
with a lower dividend rate per share than a non-convertible preferred stock. A
lower dividend rate per share may result in a convertible preferred stock having
greater price volatility in response to a change in market interest rates than a
non-convertible preferred stock. The lower yield could result in a more dramatic
price reaction to a change in market yields. This could be expected to occur in
the case where the price of the underlying common stock languishes, so the
potential for future conversion is low.
Under section 243 of the Internal Revenue Code, corporations (but not
individuals) generally are allowed a federal income tax deduction of 70% of the
amount of the dividends they receive from other corporations. In order for a
corporation to qualify for this deduction, it generally is necessary for the
corporation to hold the underlying stock for at least 45 days. The applicable
holding period is 90 days in the case of certain preferred stock. Each corporate
shareholder in the Fund generally will be eligible for a dividends received
deduction for such shareholder's pro rata share of dividends received by the
Fund which qualify for the dividends received deduction and which are designated
by the Fund as qualifying dividends.
INDEX 600 FUND
INDEX 500 FUND
INDEX PACIFIC FUND
INDEX EUROPEAN FUND
Each Index Fund seeks investment results that track the total return of the
common stocks that comprise its benchmark index by investing in such stocks in
approximately the same proportions as the stocks are represented in the index.
The Index Funds normally invest at least 80% of their total assets in the stocks
comprising their respective benchmarks. However, initially and until such time
as an Index Fund's total assets exceed $25 million, or if total assets drop
below $25 million, the percentage of an Index Fund's assets invested in such
securities may be as low as 65%. Although they focus on common stocks, the Index
Funds may also invest in other equity securities and in other types of
instruments. The Index Funds purchase short-term debt securities for cash
management purposes and use various techniques, such as futures contracts, to
adjust their exposure to their benchmarks.
As a mutual fund, each Index Fund seeks to spread investment risk by
diversifying its holdings among the many companies and industries that are
included in the respective indices. Stock values fluctuate in response to the
activities of individual companies and general market and economic conditions.
GW Capital Management may use various investment techniques to hedge the Index
Funds' risks, but there is no guarantee that these strategies will work as
intended.
Although the Index Funds normally invest their assets according to their
investment strategy, they reserve the right to invest without limitation in
preferred stocks and investment grade debt instruments for temporary, defensive
purposes.
Index Investing
The Index Funds buy and sell stocks to duplicate the compositions of their
benchmark indexes. Their composition may not always be identical to that of
their benchmarks. If extraordinary circumstances warrant, an Index Fund may
exclude a stock held in the corresponding index and include a similar stock in
its place if doing so will help the Fund achieve its objective. It is, however,
intended the Index Funds will generally invest in stocks in approximately the
same proportions as the stocks are represented in their respective benchmark
indexes.
Statistical techniques are generally used to determine which stocks to buy and
sell, rather than traditional economic, financial and market analysis. This
"passive" or "indexing" investment technique tends to result in a lower
portfolio turnover rate than that experienced by many other mutual funds. Lower
portfolio turnover reduces brokerage commissions and other transaction costs
that would otherwise be borne by shareholders. It also acts to reduce
shareholders' current tax liability for capital gains by reducing the level of
realized capital gains.
While the Index Funds seek to maximize the correlation between their performance
and that of their benchmarks, certain factors not associated with the benchmarks
but which affect the Index Funds will account for differences in performance.
Such factors include the amount of the Index Fund's total assets, management
fees and expenses, brokerage commissions and other transaction costs, and
changes in the composition of the benchmark. Accordingly, there is no assurance
as to the actual degree of correlation that will be achieved by the Index Funds.
Each Index Fund seeks to achieve a 95% or better long-term correlation between
its total return and that of its benchmark index. GW Capital Management monitors
the correlation between the performance of the Index Funds and their benchmarks
on a regular basis. In the unlikely event that an Index Fund cannot achieve a
long-term correlation of 95% or better, the Board of Trustees will consider
alternative arrangements. There is no assurance as to how closely an Index
Fund's performance will correspond to the performance of its respective
benchmark index. Moreover, the benchmark index may not perform favorably in
which case the respective Index Fund's performance would similarly be
unfavorable.
Each Index Fund may use futures contracts on market indexes ("index futures
contracts") and options on such index futures contracts for hedging purposes or
as a substitute for a comparable market position in the underlying securities.
An index futures contract obligates the seller to deliver, and the purchaser to
take, an amount of cash equal to a specific dollar amount times the difference
between the value of a specific index at the close of the last trading day and
the price at which the agreement is made.
Risks associated with the use of futures contracts are: (i) imperfect
correlation between the change in value of securities included on the index and
the prices of futures contracts; and (ii) possible lack of a liquid secondary
market for a futures position when desired. The risk that an Index Fund will be
unable to close out a futures position will be minimized to the extent that such
transactions are entered into on a national exchange with an active and liquid
secondary market. In addition, because of the low margin deposits normally
required in futures trading, a high degree of leverage is typical of a futures
trading account. As a result, a relatively small price movement in a futures
contract may result in substantial losses to a Fund.
About the Benchmark Indexes
Fund Benchmark
Index 600 Fund S&P Small Cap 600 Stock Index
Index 500 Fund S&P 500 Composite Stock Price
Index
Index Pacific Fund Financial Times/S&P-Actuaries
Large-Cap Pacific Index
Index European Fund Financial Times/S&P-Actuaries
Large-Cap European Index
The S&P Small Cap 600 Stock Index (the "S&P 600") is a widely recognized,
unmanaged index of 600 stock prices. The index is market-value weighted, meaning
that each stock's influence on the index's performance is directly proportional
to that stock's "market value" (stock price multiplied by the number of
outstanding shares). The stocks which make up the S&P 600 trade on the New York
Stock Exchange, American Stock Exchange, or NASDAQ quotation system. The S&P 600
is designed to monitor the performance of publicly traded common stocks of the
small company sector of the United States equities market. The stocks of small
companies often involve more risk and volatility than those of larger companies.
The S&P 500 Composite Stock Price Index (the "S&P 500") is a widely recognized,
unmanaged, market-value weighted index of 500 stock prices. The stocks which
make up the S&P 500 trade on the New York Stock Exchange, the American Stock
Exchange, or the NASDAQ National Market System. It is generally acknowledged
that the S&P 500 broadly represents the performance of publicly traded common
stocks in the United States.
Both the S&P 600 and the S&P 500 are sponsored by the Standard & Poor's, which
is responsible for determining which stocks are represented on the indexes.
Total returns for the S&P 600 and the S&P 500 assume reinvestment of dividends,
but do not include the effect of taxes, brokerage commissions or other costs you
would pay if you actually invested in those stocks.
The Financial Times/S&P-Actuaries Large-Cap Pacific Index (the "Pacific Index")
and the Financial Times/S&P-Actuaries Large-Cap European Index (the "European
Index") are unmanaged, market-value weighted indexes of equity securities traded
on the stock exchanges of the countries represented in the respective indexes.
They are designed to represent the performance of stocks in the large-cap sector
of the markets from the countries included in the European and Pacific Rim
regions of the world.
The Pacific Index and European Index are sponsored by the Financial Times-Stock
Exchange International; Standard & Poor's; Goldman, Sachs and Company; and Nat
West Securities, Ltd. Each of these entities has voting rights on a committee
that is responsible for determining the composition of the stocks comprising the
indexes.
None of the Funds is endorsed, sold or promoted by any of the sponsors of the
Benchmark Indexes (the "Sponsors"), and no Sponsor is an affiliate or a sponsor
of the Trust, the Funds, or GW Capital Management. The Sponsors are not
responsible for and do not participate in the operation or management of any
Fund, nor do they guarantee the accuracy or completeness of their respective
Benchmark Indexes or the data therein. Inclusion of a stock in a Benchmark Index
does not imply that it is a good investment.
"Financial Times/S&P Actuaries Large-Cap Pacific Index" and "Financial Times/S&P
Actuaries Large-Cap European Index" are trademarks of The Financial Times
Limited and Standard & Poor's Corporation. "S&P SmallCap 600 Stock Index," "S&P
600," "S&P 500 Composite Stock Price Index," and "S&P 500," are trademarks of
The McGraw-Hill Companies, Inc. These trademarks have been licensed for use by
the Trust.
VALUE FUND
The investment objective of the Orchard Value Fund is to achieve long-term
capital appreciation by investment in stocks that are believed to be
undervalued. To achieve this objective, the Fund will invest primarily in common
stocks issued by U.S. companies traded on the various U.S. stock exchanges and,
to a limited extent, in the over-the-counter markets.
CIC Asset Management, Inc. (the "Sub-Adviser) serves as sub-adviser to this
Fund. As such, it is responsible for the day-to-day management of the Fund,
subject to the overall supervision of the Fund's Board of Trustees and GW
Capital Management.
The Fund invests primarily in common stocks which the Sub-Adviser believes
are undervalued at the time of acquisition. The stocks are normally sold when it
is believed that they are fairly valued. Using this approach, the Sub-Adviser
seeks to identify, in advance of purchase, stocks which are inexpensive and a
catalyst which will drive the price back to fair value. In making this
determination, the Sub-Adviser will look for dividend yields greater than the
S&P 500 Index, price/earnings ratios less than the S&P 500 Index and
price-to-book ratios less than the S&P 500 Index. In keeping with a long-term
approach, a security will not be sold because of a short-term earnings
disappointment.
The Fund may invest a limited portion (up to a maximum of 5% at the time
of acquisition) of its assets in debt securities (both domestic and foreign debt
securities) including mortgage-and asset-backed securities, zero coupon and
high-yield/high-risk bonds (commonly referred to as "junk bonds"). Debt
securities in which the Fund may invest may be both investment grade and below
investment grade. Lower rated fixed-income securities generally provide higher
yields, but are subject to greater credit and market risk than higher quality
fixed-income securities and are considered predominately speculative with
respect to the ability of the issuer to meet principal and interest payments. In
addition, the secondary market may be less liquid for lower-rated fixed-income
securities which may make the valuation and sale of these securities more
difficult. Securities in the lowest investment grade category--BBB by Standard &
Poor's Corporation ("S&P") or Baa by Moody's Investor Service, Inc.
("Moody's")--have some speculative characteristics. Please see the Statement of
Additional Information for more information about asset-backed and mortgage-
backed securities.
The Fund may invest in certain foreign securities. Investments in foreign
securities involve risks that differ in some respects from investment in
securities of U.S. issuers. See "Foreign Investing" in this prospectus.
The Fund also may invest in money market securities for temporary or
emergency purposes or solely as a cash reserve. The Fund may also invest to a
lesser degree in restricted or preferred stock or warrants. Warrants are options
to buy a stated number of shares of common stock at a specified price anytime
during the life of the warrants (generally, two or more years).
The Fund may enter into futures contracts on financial indices and foreign
currencies and options on such contracts ("futures contracts") and may invest in
options on securities, financial indices and foreign currencies ("options"),
forward contracts and interest rate swaps and swap-related products
(collectively "derivative instruments"). The Fund intends to use these
derivative instruments primarily to hedge the value of the Fund against
potential adverse movements in securities prices, foreign currency markets or
interest rates. To a limited extent, the Fund may also use derivative
instruments for non-hedging purposes such as seeking to increase the Fund's
income or otherwise seeking to enhance returns. The Fund may engage in "short
sales against the box." See "Adjusting Investment Exposure" in this prospectus.
COMMON INVESTMENT POLICES, PRACTICES AND RISK FACTORS
The following pages contain more detailed information about certain types of
instruments in which the Funds may invest, strategies GW Capital Management may
employ in pursuit of the Funds' investment objectives, and a summary of related
risks. Any investment limitations listed supplement those discussed earlier. A
complete listing of the Funds' investment limitations and more detailed
information about their investment practices are contained in the Statement of
Additional Information. Securities that met applicable investment policies and
limitations when acquired need not be sold in the event of a later change in
circumstances.
GW Capital Management may not buy all of these securities or use all of these
techniques unless it believes that they are consistent with the Funds'
investment objectives and policies and that doing so will help the Funds achieve
their objectives.
Money Market Instruments and Temporary Investment Strategies
In addition to the Money Market Fund, the other Funds each may hold cash or cash
equivalents and may invest in short-term, high-quality debt instruments (that is
in "money market instruments") as deemed appropriate by GW Capital Management,
or may invest any or all of their assets in money market instruments as deemed
necessary by GW Capital Management for temporary defensive purposes.
The types of money market instruments in which the Funds may invest
include, but are not limited to: (1) bankers' acceptances; (2) obligations of
U.S. and non-U.S. governments and their agencies and instrumentalities; (3)
short-term corporate obligations, including commercial paper, notes, and bonds;
(4) obligations of U.S. banks and non-U.S. branches of such banks (Eurodollars),
U.S. branches and agencies of non-U.S. banks (Yankee dollars), and non-U.S.
branches of non-U.S. banks; (5) asset-backed securities; and (6) repurchase
agreements.
<PAGE>
Repurchase Agreements
Each Fund may enter into repurchase agreements. In a repurchase agreement, the
Fund buys a security at one price and simultaneously agrees to sell it back at a
higher price. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Funds may be delayed or
limited.
Equity Securities
Each Fund, except the Money Market Fund, invests directly or indirectly in
equity securities, such as common stocks, preferred stocks, convertible stocks,
and warrants. Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's financial
condition and on overall market and economic conditions. Equity securities of
smaller companies are especially sensitive to these factors.
Illiquid Securities
Each Fund may invest up to 15% of its net assets in illiquid securities, except
the Money Market Fund which may invest up to 10% of its net assets in illiquid
securities. The term "illiquid securities" means securities that cannot be sold
in the ordinary course of business within seven days at approximately the price
used in determining a Fund's net asset value. Under the supervision of the Board
of Trustees, GW Capital Management determines the liquidity of portfolio
securities and, through reports from GW Capital Management, the Board of
Trustees monitors investments in illiquid securities. Certain types of
securities are generally considered to be illiquid. Included among these are
"restricted securities" which are securities whose public resale is subject to
legal restrictions. However, certain types of restricted securities (commonly
known as "Rule 144A securities") that can be resold to qualified institutional
investors may be treated as liquid if they are determined to be readily
marketable pursuant to policies and guidelines of the Board of Trustees.
A Fund may be unable to sell illiquid securities when desirable or may be forced
to sell them at a price that is lower than the price at which they are valued or
that could be obtained if the securities were more liquid. In addition, sales of
illiquid securities may require more time and may result in higher dealer
discounts and other selling expenses than do sales of securities that are not
illiquid. Illiquid securities may also be more difficult to value due to the
unavailability of reliable market quotations for such securities.
<PAGE>
Adjusting Investment Exposure
Each Fund, other than the Money Market Fund, can use various techniques to
increase or decrease its exposure to changing security prices, currency exchange
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and futures
contracts, including futures on market indexes and options on such futures on
market indexes, and entering into currency exchange contracts.
GW Capital Management can use these practices to adjust the risk and return
characteristics of a Fund's portfolio of investments. If GW Capital Management
judges market conditions incorrectly or employs a strategy that does not
correlate well with a Fund's investments, these techniques could result in a
loss, regardless of whether the intent was to reduce risk or increase return.
These techniques may increase a Fund's volatility and may involve a small
investment relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction does
not perform as promised. A Fund will not enter into futures contracts or options
if the aggregate initial margin and premium required to do so will exceed 5% of
the Fund's total assets.
Foreign Investments
Each Fund, except the Money Market Fund, may invest in foreign securities and
securities issued by U.S. entities with substantial foreign operations in a
manner consistent with its investment objective and policies. Such foreign
investments may involve additional risks and considerations. These include risks
relating to political or economic conditions in foreign countries, fluctuations
in foreign currencies, withholding or other taxes, operational risks, increased
regulatory burdens, and the potentially less stringent investor protection and
disclosure standards of foreign markets. Furthermore, the securities of some
foreign companies and foreign securities markets are less liquid and at times
more volatile than securities of comparable U.S. companies and U.S. securities
markets. Foreign brokerage commissions and other fees are also generally higher
than those imposed in the United States. There are also special tax
considerations that apply to securities of foreign issuers and securities
principally traded overseas.
A Fund's investments in foreign securities may include investments in countries
whose economies or securities markets are not yet highly developed. Investments
in these "emerging market securities" include additional risks to those
generally associated with foreign investing. The extent of economic development,
political stability, and market liquidity varies widely in comparison to more
developed nations. The economies of these countries may be subject to greater
social, economic, and political uncertainties or may be based only a few
industries. These factors can make emerging market securities more volatile.
The Index Pacific Fund and the Index European Fund have substantial exposure to
foreign markets since these Funds invest primarily in securities of foreign
issuers. The other Funds may have some exposure to foreign markets, but their
exposure is minimized since these Funds invest primarily in securities of
domestic issuers.
Lending
Each Fund may lend its portfolio securities to brokers or dealers and other
institutions as a means of earning interest income. The Funds may lend
securities only if (i) the loan is at all times fully collateralized by cash,
cash equivalents, U.S. government securities or other high-quality debt
securities, and (ii) the value of all loaned securities is not more than 33 1/3
percent of the Fund's total assets at the time of the loan.
Borrowing
Each Fund may borrow from banks for temporary and emergency purposes, but not in
an amount exceeding 33 1/3 percent of its total assets. If a Fund borrows money,
its share price may be subject to greater fluctuation until the borrowing is
paid off. A Fund will repay all borrowings in excess of 5 percent of its total
assets before any investments are made.
Other Risk Factors
As a mutual fund, each Fund is subject to market risk. The value of a Fund's
shares will fluctuate in response to changes in economic conditions, interest
rates, and the market's perception of a Fund's underlying portfolio securities.
No Fund should be considered to be a complete investment program by itself. You
should consider your own investment objectives as well as your other investments
when deciding whether to purchase shares of any Fund.
MANAGEMENT OF THE FUNDS
The Trust is governed by the Board of Trustees which is responsible for overall
management of the Funds' business affairs. The Trustees meet at least 4 times
during the year to, among other things, oversee the Funds' activities, review
contractual arrangements with companies that provide services to the Funds, and
review performance.
<PAGE>
Investment Adviser
The Funds are managed by GW Capital Management, which selects the Funds'
portfolio investments and handles their business affairs. GW Capital Management
is a registered investment adviser under the Investment Advisers Act of 1940.
Paul Desmarais and his associates, a group of private holding companies, have
indirect voting control over GW Capital Management.
GW Capital Management is a wholly-owned subsidiary of Great-West Life & Annuity
Insurance Company ("GWL&A"). GW Capital Management serves as the investment
adviser for: Maxim Series Fund, Inc., a registered open-end management
investment company (shares of the Maxim Series Fund are sold only in connection
with certain insurance contracts); Great-West Variable Annuity Account A, a
separate account of GWL&A, registered as a management investment company; and
certain non-registered, tax-qualified corporate pension plan separate accounts
of GWL&A.
GW Capital Management provides investment advisory services and pays all the
expenses, except extraordinary expenses, incurred for providing such services
for the Funds. As compensation for its services, GW Capital Management receives
monthly compensation at the annual rate of 0.20% for the Orchard Money Market
Fund; 0.60% for the Orchard Index 500 and Orchard Index 600 Funds; .90% for the
Orchard Preferred Stock Fund; and, 1.00% for the Orchard Index European, Orchard
Index Pacific and Orchard Value Funds.
With respect to the Orchard Money Market, Orchard Index European and Orchard
Index Pacific Funds, GW Capital Management pays all compensation of, and
furnishes office space for, officers and employees of GW Capital Management
connected with investment management for these Funds, as well as the fees of all
directors of the Fund who are affiliated persons of the GW Capital Management or
any of its affiliates. All other expenses incurred in the operation of these
Funds, including general administrative expenses, are borne by these Funds,
respectively. Accounting services are provided for these Funds by GW Capital
Management and these Funds reimburse GW Capital Management for its costs in
connection with such services. However, GW Capital Management has agreed to pay
any expenses of the Funds which exceed the annual rate of 0.46% of the average
daily net assets of the Orchard Money Market Fund; and, 1.20% of the average
daily net assets of the Orchard Index European and Orchard Index Pacific Funds.
Sub-Advisers
CIC Asset Management, Inc. is a 100% employee owned and managed firm, registered
with the Securities and Exchange Commission as an investment adviser under the
Investment Advisers Act of 1940. It is a California corporation with its
principal business address at 633 West Fifth Street, Suite 1180, 11th Floor, Los
Angeles, California 90017. Subject generally to review and supervision by GW
Capital Management and the Board of Trustees, CIC is responsible for the actual
daily management of the Value Fund and for making decisions to buy, sell or hold
any particular security.
CIC bears all expenses in connection with the performance of its services, such
as compensating and furnishing office space for its officers and employees
connected with investment and economic research, trading and investment
management of the Orchard Value Fund.
CIC utilizes teams of portfolio managers and analysts acting together to manage
the assets of the Value Fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the Fund's portfolio as it deems appropriate in pursuit of the Fund's investment
objectives.
The Investment Adviser is responsible for compensating CIC, which receives
monthly compensation from the Investment Adviser at the annual rate of .50% of
the average daily net asset value of the Orchard Value Fund up to $25 million,
.40% on the next $75 million and .30% of such value in excess of $100 million.
Portfolio Managers
Jim Desmond, Vice President, GW Capital Management, is responsible for the
day-to-day management of the Preferred Stock Fund. He is also an Assistant Vice
President at GWL&A where he has managed GWL&A's separate account assets since
1991. From September, 1987, to December, 1991, he was an equity portfolio
manager for the Colorado Public Employees Retirement Association. Mr. Desmond
has approximately fifteen years equity analysis and portfolio management
experience.
Other Information
The Trust has authorized capital of an unlimited number of shares of beneficial
interest in the Trust. Shares may be issued in one or more series of shares, and
each series may be issued in one or more classes of shares. Presently, each Fund
represents a separate series of shares. The Trust may establish additional
series or classes in the future.
The Trust is not required to hold an annual shareholders meetings, although
special meetings may be called for a specific Fund or the Trust as a whole for
purposes such as electing or removing trustees, changing fundamental investment
policies, or approving a new or amended investment advisory agreement. As a
shareholder, you receive one vote for each share of a Fund you own and a
proportionate vote for each fractional interest you own.
Shareholder inquiries can be made by telephone at (800) 338-4015, or by
mail to the Trust at 8515 East Orchard Road, Englewood, Colorado 80111.
One Orchard Equities, Inc. distributes and markets the Trust's Funds. Financial
Administrative Services Corporation ("FASCorp" or the "Transfer Agent") performs
transfer agent servicing functions for the Funds. FASCorp is a wholly owned
subsidiary and One Orchard Equities is an indirect wholly owned subsidiary of
GWL&A.
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT
HOW THE FUNDS VALUE THEIR SHARES
The price of a Fund's shares is based on the net asset value of that Fund. Each
Fund's per share net asset value is determined by dividing the value of its net
assets by the number of its outstanding shares. A Fund's net asset value per
share will normally be determined as of the close of regular trading on the New
York Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern Time) Monday through
Friday, except on holidays on which the NYSE is closed.
Assets of the Funds other than the Money Market Fund are valued primarily on the
basis of market quotations. Foreign securities are valued on the basis of
quotations from the primary market in which they are traded, and are translated
from the local currency into U.S. Dollars using current exchange rates. If
quotations are not readily available, or if values have been materially affected
by events occurring after the close of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
Assets of the Money Market Fund are valued on an amortized-cost basis. Under
this method, securities are valued at their acquisition cost as adjusted for
amortization of premium or accretion of discount rather than at their value
based on current market factors. While this method attempts to provide certainty
in valuation, the value of securities based on amortized cost value may differ
from that based on market value. Short-term investments of all Funds that will
mature in not more than 60 days are also valued at amortized cost.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
You are entitled to your share of the earnings of each Fund in which you are a
shareholder, which are passed along to shareholders as "distributions." Earnings
from net investment income, such as stock dividends and interest from short-term
debt instruments and other investments, are passed along as "dividend
distributions." Earnings realized when a Fund sells securities for a higher
price than it paid for them are passed along as "capital gains distributions."
Each of the Funds distribute substantially all of its net investment income and
capital gains to shareholders each year.
The Money Market Fund ordinarily declares dividends from net investment income
daily and distributes dividends monthly. The Preferred Stock Fund ordinarily
distributes dividends from net investment income quarterly. The Index 600, Index
500 and Value Funds ordinarily distribute dividends semi-annually, while the
Index Pacific and Index European Funds ordinarily distribute such dividends
annually. All of the Funds generally distribute capital gains, if any, in the
fiscal year in which they were earned.
Distribution Option
Shareholders of a Fund can either receive distributions in cash or reinvest them
in additional shares of the Fund at the net asset value in effect on the
reinvestment date. Unless you elect, by writing to the Trust or Transfer Agent,
to receive your distributions in cash, they will be automatically reinvested.
You can change your election at any time by writing to the Trust or Transfer
Agent.
Taxes
As with any investment, you should consider how your investment in a Fund will
be taxed.
Taxes on distributions. Distributions are subject to federal income tax, and may
also be subject to state or local taxes. If you live outside the United States,
your distributions could also be taxed by the country in which you reside. Your
distributions are taxable when they are paid, whether you take them in cash or
reinvest them. However, distributions declared in December and paid in January
are taxable as if they were paid on December 31.
For federal tax purposes, a Fund's dividend distributions are taxed as dividends
and gain distributions are taxed as long-term capital gains. A portion of the
dividend distributions (but not capital gains distributions) paid by a Fund may
be eligible for the dividends received deduction for corporate shareholders to
the extent that such distributions are attributable to dividends paid by United
States corporations and are so designated by the Fund.
Every January, the Trust will send you and the IRS a statement showing the
taxable distributions paid to you in the previous year.
Taxes on transactions. Redemptions and exchanges of shares in any Fund may be
subject to federal income tax. In general, your gain or loss on any redemption,
sale, or other exchange will equal the difference between the cost of the shares
you redeem, sell or exchange, and the price you receive when you redeem, sell,
or exchange them.
You will receive a consolidated transaction statement at least quarterly. You
should keep your regular account statements, because the information they
contain will be essential in calculating the amount and character of your gains
and losses. However, it is the responsibility of you and your tax preparer to
determine whether a given transaction will result in taxable gain or loss and
the amount of tax to be paid, if any.
"Buying a dividend." If you buy shares shortly before a Fund declares a
distribution from its net asset value, you will pay the full price for the
shares and then receive a portion of the price back in the form of a taxable
distribution. Any capital loss arising from the sale or redemption of shares
held for six months or less will be disallowed to the extent of exempt-interest
dividends received on such shares, and (to the extent not disallowed) generally
will be treated as long-term capital loss to the extent of the amount of capital
gain dividends received on such shares.
Effect of foreign taxes. Dividends and interest received by the Funds on foreign
securities may give rise to withholding and other taxes imposed by foreign
governments. These taxes generally will reduce the amount of their
distributions.
There are tax requirements that all investment companies must follow in order to
avoid federal taxation. In order to comply with these requirements, the Funds
may be required to limit their investment activity in some types of instruments.
HOW THE FUNDS REPORT PERFORMANCE
From time to time, the Trust may include a Fund's yield and total return in
advertisements, sales literature, and shareholder reports. In addition, the
Trust may advertise the Money Market Fund's yield and effective yield. These
measures of a Fund's performance are based on past results and are not intended
to indicate future performance.
Yield
A Fund's "yield" refers to the income generated by an investment in the Fund
over a specified 30-day period (7-day period for the Money Market Fund)
expressed as an annual percentage rate. The Money Market Fund's "effective
yield" is calculated similarly, but the income earned by an investment in the
Fund, when annualized, is assumed to be reinvested. The effective yield will be
slightly higher than the yield because of the compounding effect of the assumed
reinvestment.
<PAGE>
Total Return
A Fund's "total return" refers to the average annual rate of return of an
investment in the Fund. Total return is computed by calculating the percentage
change in the value of an investment of $1,000 to the end of a specified period,
assuming all dividends and capital gain distributions are reinvested.
Annual and Semi-Annual Shareholder Reports
The fiscal year of the Funds ends on October 31 of each year. Twice a year
shareholders of each Fund will receive a report containing a summary of the
Fund's performance and other information.
INVESTING IN THE FUNDS
HOW TO BUY SHARES
Shares of a Fund can be purchased at the next share price calculated after your
order is received in good form by the Transfer Agent. Because you pay no
commissions or sales charges when you purchase shares, a Fund's share price is
equivalent to the Fund's net asset value per share.
If you do not already have an account with the Trust, you can purchase shares by
mailing a completed account application to the Transfer Agent. In addition, you
must either (i) include with your application a check or money order made
payable to the appropriate Fund in the amount that you wish to invest, or (ii)
wire (that is electronically transfer) such amount to an account designated by
the Transfer Agent.
Once you have an account with the Trust, you can purchase shares by mailing a
check or money order made payable to the appropriate Fund to the Transfer Agent,
together with instructions specifying the name and number of the account. You
can also purchase shares by wiring the amount that you wish to invest to your
account.
If you wish to make an initial purchase of shares by wiring your investment, you
must first telephone the Transfer Agent at 1-800-338-4015 between the hours of
8:00 a.m. and 4:00 p.m. (Eastern Time) on any day that the NYSE is open for
trading to receive an account number with the Trust. You will be asked to
provide the following information: the name in which the account will be
established, the account holder's address, tax identification number, and
dividend distribution election. If requested, the Transfer Agent will provide
the instructions that your bank will need to complete the transfer.
The Funds and Transfer Agent reserve the right to reject any order to purchase
shares, and the Funds reserve the right to cancel any purchase order for which
payment has not been received within three business days following receipt of
the order. If the Transfer Agent deems it appropriate, additional documentation
or verification of authority may be required and an order will not be deemed
accepted unless and until such additional documentation or verification is
received by the Transfer Agent.
Your bank may charge a fee for its services. Presently, the Transfer Agent does
not charge a fee for its wire transfer services, but reserves the right to
charge for these services.
HOW TO SELL SHARES
You can withdraw money from your account by selling (that is by "redeeming")
some or all of your shares. Your shares will be sold at the next share price
calculated after your order is received in good form by the Transfer Agent.
Because you pay no commissions or sales charges when you sell shares of the
Funds, each Fund's share price is equivalent to the Fund's net asset value per
share. You can arrange to sell shares of a Fund only by mail. Redemptions may
not be made by telephone.
By Mail
You can redeem shares by sending a "letter of instruction" by regular or express
mail to the Transfer Agent at 8515 East Orchard Road, Englewood, Colorado 80111.
The letter should include: (1) the name of the account from which shares are to
be redeemed; (2) the account number; (3) the name of the Fund; (4) the dollar
amount or number of shares to be redeemed; (5) any special payment instructions;
(6) the signatures of the person or persons authorized to effect redemptions of
shares held by the account; and (7) any special requirements or documents
requested by the Transfer Agent to assure proper authorization of such persons.
HOW TO EXCHANGE SHARES
You can exchange shares of a Fund that you own for shares of another Fund. There
are no sales charges or distribution fees. To complete the exchange, shares of
the Fund to be exchanged will be sold, and shares of the another Fund will be
purchased, at their respective share prices next calculated after the exchange
request is received by the Transfer Agent. The minimum amount that may exchanged
is the lesser of $500 or the remaining value of the investment in the Fund to be
exchanged.
You can request an exchange in writing or by telephone. Written requests should
be submitted to the Transfer Agent by mail at 8515 East Orchard Road, Englewood,
Colorado 80111. The form must be signed by the account owner(s) and include the
following information: (1) the name of the account for which shares are to be
exchanged; (2) the account number; (3) the name of the Fund, the shares of which
are to be exchanged; (4) the dollar amount or number of shares to be exchanged;
(5) the name of the Fund(s) to be acquired in the exchange; (6) the signatures
of the person or persons authorized to effect exchanges of shares held by the
account; and (7) any special requirements or documents requested by the Transfer
Agent to assure proper authorization of such persons.
You can request an exchange by telephoning the Transfer Agent at 1-800-338-4015.
The Funds reserve the right to refuse exchanges if, in the Board of Trustees' or
GW Capital Management's judgment, a Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
potentially be otherwise adversely affected.
Exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets. In
particular, a pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to the Fund.
Although a Fund will attempt to provide prior notice whenever it is reasonably
able to do so, it may impose these restrictions at any time. Each Fund reserves
the right to terminate or modify the exchange privilege in the future.
OTHER INFORMATION
Telephone transaction privileges for purchases or exchanges may be modified,
suspended, or terminated by a Fund at any time. If an account has more than one
owner of record, the Funds and the Transfer Agent may rely on the instructions
of any one owner. Each account owner has telephone transaction privileges unless
the Transfer Agent receives cancellation instructions from an account owner.
The Transfer Agent will record telephone calls and has adopted other procedures
to confirm that telephone instructions are genuine. The Funds will not be liable
for losses or expenses arising from unauthorized telephone transactions,
provided they use reasonable procedures to avoid such losses or expenses. If you
are unable to reach the Transfer Agent during periods of unusual market
activity, severe weather, or other unusual, extreme, or emergency conditions,
you may not be able to complete a telephone transaction and should consider
placing your order by mail.
<PAGE>
INVESTMENT ADVISER
GW Capital Management, LLC
8515 East Orchard Road
Englewood, Colorado 80111
------------------------
DISTRIBUTOR
One Orchard Equities, Inc.
8515 East Orchard Road
Englewood, Colorado 80111
------------------------
TRANSFER AGENT
Financial Administrative Services Corporation
8515 East Orchard Road
Englewood, Colorado 80111
------------------------
CUSTODIAN
Bank of New York
One Wall Street
New York, New York 10286
------------------------
AUDITORS
Deloitte & Touche LLP
555 17th Street
Suite 3600
Denver, Colorado 80202
<PAGE>
ORCHARD SERIES FUND
(the "Trust")
Orchard Money Market Fund
Orchard Preferred Stock Fund
Orchard Index 600 Fund
Orchard Index 500 Fund
Orchard Index Pacific Fund
Orchard Index European Fund
Orchard Value Fund
(the "Funds")
STATEMENT OF ADDITIONAL INFORMATION
The date of the Trust's current Prospectus to which this Statement of
Additional Information relates and the date of this Statement of
Additional Information is
February 27, 1998
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Trust's current
Prospectus. A copy of the Prospectus may be obtained by writing the Trust
at 8515 East Orchard Road, Englewood, Colorado 80111, or by calling (303)
689-3000.
<PAGE>
i
TABLE OF CONTENTS
Cross-reference
to page(s) in
Page Prospectus
INVESTMENT OBJECTIVES ..................... 1 9
INVESTMENT POLICIES AND PRACTICES ......... 1 9
INVESTMENT LIMITATIONS .................... 15 9
MANAGEMENT OF THE FUND .................... 18 18
PORTFOLIO TRANSACTIONS .................... 21 18
VALUATION OF PORTFOLIO SECURITIES ......... 24 19
INVESTMENT PERFORMANCE .................... 25 22
ADDITIONAL PURCHASE
AND REDEMPTION INFORMATION ............. 28 22
DIVIDENDS, DISTRIBUTION AND TAXES ......... 29 20
OTHER INFORMATION ......................... 36 24
PRICE MAKE-UP SHEETS ...................... 39 --
APPENDIX .................................. 45 --
FINANCIAL STATEMENTS ...................... 49 --
<PAGE>
41
INVESTMENT OBJECTIVES
The Orchard Series Fund is an open-end management investment company organized
as a Delaware business trust (the Trust). The Trust offers seven diversified
investment portfolios, commonly known as mutual funds (the Funds). The Funds are
"no-load," meaning you pay no sales charges or distribution fees. GW Capital
Management, LLC("GW Capital Management"), a wholly-owned subsidiary of
Great-West Life & Annuity Insurance Company ("GWL&A"), serves as the Funds'
investment adviser. The Funds and a brief description of their investment
objectives are listed below.
Orchard Money Market Fund. This Fund seeks as high a level of current income as
is consistent with the preservation of capital and liquidity by investing in
high-quality, short-term debt securities. An investment in the Fund is neither
insured nor guaranteed by the U.S. government. While the Fund seeks to maintain
a stable net asset value of $1.00 per share, there is no assurance that it will
be able to do so.
Orchard Preferred Stock Fund. This Fund seeks a high level of dividend income
qualifying for the corporate dividends received deduction under applicable
federal tax law by investing primarily in cumulative preferred stocks issued by
domestic corporations.
The Orchard Stock Index Funds. Each of the following Funds (the "Index Funds")
seeks long-term growth of capital and a modest level of income by investing in
the common stocks that comprise a specified benchmark index.
Fund Benchmark
Orchard Index 600 Fund S&P Small-Cap 600 Stock Index
Orchard Index 500 Fund S&P 500 Composite Stock Price
Index
Orchard Index Pacific Fund Financial Times/S&P-Actuaries
Large-Cap Pacific Index
Orchard Index European Fund Financial Times/S&P-Actuaries
Large-Cap European Index
Orchard Value Fund. This Fund seeks to achieve long-term capital
appreciation by investing primarily in common stocks issued by U.S.
companies when it is believed that such stocks are undervalued.
INVESTMENT POLICIES AND PRACTICES
Except as described below and except as otherwise specifically stated in the
Prospectus or this Statement of Additional Information, the Funds' investment
policies set forth in the Prospectus and in this Statement of Additional
Information are not fundamental and may be changed without shareholder approval.
A listing of the Funds' fundamental investment limitations is contained in this
Statement of Additional Information under "INVESTMENT LIMITATIONS." These
limitations are fundamental policies of each Fund, which means that they may not
be changed without shareholder approval. Securities that met applicable
investment policies and limitations when acquired need not be sold in the event
of a later change in circumstances.
The following pages contain more detailed information about types of securities
in which the Funds may invest, investment practices and techniques that GW
Capital Management may employ in pursuit of the Funds' investment objectives,
and a discussion of related risks. GW Capital Management may not buy all of
these securities or use all of these techniques to the full extent permitted
unless it believes that they are consistent with the Funds' investment
objectives and policies and that doing so will help the Funds achieve their
objectives. Unless otherwise provided, each Fund may invest in all these
securities or use all of these techniques.
Asset-Backed Securities. Asset-backed securities may be classified as
pass-through certificates of collateralized obligations. They depend primarily
on the credit quality of the assets underlying such securities, how well the
entity issuing the security is insulated from the credit risk of the originator
or any other affiliated entities and the amount and quality of any credit
support provided to the securities. The rate of principal payment on
asset-backed securities generally depends on the rate of principal payments
received on the underlying assets which in turn may be affected by a variety of
economic and other factors. As a result, the yield on any asset-backed security
is difficult to predict with precision and actual yield to maturity may be more
or less than the anticipated yield to maturity.
Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in any underlying pool of assets.
Pass-through certificates usually provide for payments of principal and interest
received to be passed through to their holders, usually after deduction for
certain costs and expenses incurred in administering the pool. Because
pass-through certificates represent an ownership interest in the underlying
assets, the holders thereof bear directly the risk of any defaults by the
obligors on the underlying assets not covered by any credit support.
Asset-backed securities issued in the form of debt instruments, also known as
collateralized obligations, are generally issued as the debt of a special
purpose entity organized solely for the purposes of owning such assets and
issuing such debt. Such assets are most often trade, credit card or automobile
receivables. The assets collateralizing the debt instrument are pledged to a
trustee or custodian for the benefit of the holders thereof. Such issuers
generally hold no assets other than those underlying the security and any credit
support provided. As a result, although payments on such securities are
obligations of the issuers, in the event of a default on the underlying assets
not covered by credit support, the issuing entities are unlikely to have
sufficient assets to satisfy their obligations on the related asset-backed
securities.
Bankers' Acceptances. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower, usually in connection with international
commercial transactions (to finance the import, export, transfer or storage of
goods). The borrower is liable for payment as well as the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity. The Funds generally will not invest in
acceptances with maturities exceeding 7 days where to do so would tend to create
liquidity problems.
Certificates of Deposit. A certificate of deposit generally is a short-term,
interest bearing negotiable certificate issued by a commercial bank or savings
and loan association against funds deposited in the issuing institution.
Commercial Paper. Commercial paper is a short-term promissory note issued
by a corporation primarily to finance short-term credit needs.
Eurodollar Certificates of Deposit. A Eurodollar certificate of
deposit is a short-term obligation of a foreign subsidiary of a U.S.
bank payable in U.S. dollars.
Foreign Currency Transactions. The Funds, other than the Money Market Fund, may
conduct foreign currency transactions on a spot (i.e., cash) basis or by
entering into forward contracts to purchase or sell foreign currencies at a
future date and price. The Funds will convert currency on a spot basis from time
to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers generally do not charge a fee for conversion,
they do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to sell
a foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the dealer. Forward
contracts are generally traded in an interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated currency exchange.
A Fund may use currency forward contracts for any purpose consistent with its
investment objective. The following discussion summarizes the principal currency
management strategies involving forward contracts that could be used by a Fund.
A Funds may also use options and futures contracts relating to foreign
currencies for the same purposes.
When a Fund agrees to buy or sell a security denominated in a foreign currency,
it may desire to "lock in" the U.S. dollar price for the security. By entering
into a forward contract for the purchase or sale, for a fixed amount of U.S.
dollars, of the amount of foreign currency involved in the underlying security
transaction, the Fund will be able to protect itself against an adverse change
in foreign currency values between the date the security is purchased or sold
and the date on which payment is made or received. This technique is sometimes
referred to as a "settlement hedge" or "transaction hedge." The Funds may also
enter into forward contracts to purchase or sell a foreign currency in
anticipation of future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected by GW
Capital Management.
The Funds may also use forward contracts to hedge against a decline in the value
of existing investments denominated in foreign currency. For example, if a Fund
owned securities denominated in pounds sterling, it could enter into a forward
contract to sell pounds sterling in return for U.S. dollars to hedge against
possible declines in the pound's value. Such a hedge, sometimes referred to as a
"position hedge," would tend to offset both positive and negative currency
fluctuations, but would not offset changes in security values caused by other
factors. A Fund could also hedge the position by selling another currency
expected to perform similarly to the pound sterling, for example, by entering
into a forward contract to sell Deutsche marks or European Currency Units in
return for U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a simple hedge
into U.S. dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged securities
are denominated.
Each Fund may enter into forward contracts to shift its investment exposure from
one currency into another. This may include shifting exposure from U.S. dollars
into a foreign currency, or from one foreign currency into another foreign
currency. For example, if a Fund held investments denominated in Deutschemarks,
the Fund could enter into forward contracts to sell Deutschemarks and purchase
Swiss Francs. This type of strategy, sometimes known as a "cross-hedge," will
tend to reduce or eliminate exposure to the currency that is sold, and increase
exposure to the currency that is purchased, much as if the Fund had sold a
security denominated in one currency and purchased an equivalent security
denominated in another. Cross-hedges protect against losses resulting from a
decline in the hedged currency, but will cause the Fund to assume the risk of
fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover currency
forward contracts. As required by SEC guidelines, the Funds will segregate
assets to cover currency forward contracts, if any, whose purpose is essentially
speculative. The Funds will not segregate assets to cover forward contracts
entered into for hedging purposes, including settlement hedges, position hedges,
and proxy hedges.
Successful use of currency management strategies will depend on GW Capital
Management's skill in analyzing and predicting currency values. Currency
management strategies may substantially change a Fund's investment exposure to
changes in currency exchange rates, and could result in losses to the Fund if
currencies do not perform as GW Capital Management anticipates. For example, if
a currency's value rose at a time when GW Capital Management had hedged a Fund
by selling that currency in exchange for dollars, the Fund would be unable to
participate in the currency's appreciation. If GW Capital Management hedges
currency exposure through proxy hedges, a Fund could realize currency losses
from the hedge and the security position at the same time if the two currencies
do not move in tandem. Similarly, if GW Capital Management increases a Fund's
exposure to a foreign currency, and that currency's value declines, the Fund
will realize a loss. There is no assurance that GW Capital Management's use of
currency management strategies will be advantageous to the Funds or that it will
hedge at an appropriate time.
Foreign Securities. Each Fund, except the Money Market Fund, may
invest in foreign securities and securities issued by U.S. entities
with substantial foreign operations in a manner consistent with its
investment objective and policies. Such foreign investments may
involve significant risks in addition to those risks normally
associated with U.S. equity investments.
There may be less information publicly available about a foreign corporate or
government issuer than about a U.S. issuer, and foreign corporate issuers are
not generally subject to accounting, auditing and financial reporting standards
and practices comparable to those in the United States. The securities of some
foreign issuers are less liquid and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage commissions and securities custody
costs are often higher than those in the United States, and judgments against
foreign entities may be more difficult to obtain and enforce. With respect to
certain foreign countries, there is a possibility of governmental expropriation
of assets, confiscatory taxation, political or financial instability and
diplomatic developments that could affect the value of investments in those
countries. The receipt of interest on foreign government securities may depend
on the availability of tax or other revenues to satisfy the issuer's
obligations.
A Fund's investments in foreign securities may include investments in countries
whose economies or securities markets are not yet highly developed. Special
considerations associated with these investments (in addition to the
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or developmental assistance,
currency transfer restrictions, illiquid markets, delays and disruptions in
securities settlement procedures.
Most foreign securities in a Fund will be denominated in foreign currencies or
traded in securities markets in which settlements are made in foreign
currencies. Similarly, any income on such securities is generally paid to a Fund
in foreign currencies. The value of these foreign currencies relative to the
U.S. dollar varies continually, causing changes in the dollar value of a Fund's
investments (even if the price of the investments is unchanged) and changes in
the dollar value of a Fund's income available for distribution to its
shareholders. The effect of changes in the dollar value of a foreign currency on
the dollar value of a Fund's assets and on the net investment income available
for distribution may be favorable or unfavorable.
A Fund may incur costs in connection with conversions between various
currencies. In addition, a Fund may be required to liquidate portfolio assets,
or may incur increased currency conversion costs, to compensate for a decline in
the dollar value of a foreign currency occurring between the time when a Fund
declares and pays a dividend, or between the time when a Fund accrues and pays
an operating expense in U.S. dollars.
American Depository Receipts ("ADRs"), as well as other "hybrid" forms of ADRs
including European depository Receipts and Global Depository Receipts, are
certificates evidencing ownership of shares of a foreign issuer. These
certificate are issued by depository banks and generally trade on an established
market in the United States or elsewhere. The underlying shares are held in
trust by a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the underlying
security at all times and may charge fees for various services, including
forwarding dividends and interest and corporate actions. ADRs are an alternative
to directly purchasing the underlying foreign securities in their national
markets and currencies. However, ADRs continue to be subject to the risks
associated with investing directly in foreign securities. These risks include
foreign exchange risks as well as the political and economic risks of the
underlying issuer's country.
Futures. See "Futures and Options" below.
Illiquid Securities. Each Fund may invest up to 15% of its net assets in
illiquid securities, except the Money Market Fund which may invest up to 10% of
its net assets in illiquid securities. The term "illiquid securities" means
securities that cannot be sold in the ordinary course of business within seven
days at approximately the price used in determining a Fund's net asset value.
Under the supervision of the Board of Trustees, GW Capital Management determines
the liquidity of portfolio securities and, through reports from GW Capital
Management, the Board of Trustees monitors investments in illiquid securities.
Certain types of securities are considered generally to be illiquid. Included
among these are "restricted securities" which are securities whose public resale
is subject to legal restrictions. However, certain types of restricted
securities (commonly known as "Rule 144A securities") that can be resold to
qualified institutional investors may be treated as liquid if they are
determined to be readily marketable pursuant to policies and guidelines of the
Board of Trustees.
A Fund may be unable to sell illiquid securities when desirable or may be forced
to sell them at a price that is lower than the price at which they are valued or
that could be obtained if the securities were more liquid. In addition, sales of
illiquid securities may require more time and may result in higher dealer
discounts and other selling expenses than do sales of securities that are not
illiquid. Illiquid securities may also be more difficult to value due to the
unavailability of reliable market quotations for such securities.
Lending of Portfolio Securities. Each Fund from time-to-time may lend its
portfolio securities to brokers, dealers and financial institutions and receive
as collateral cash, U.S. Treasury securities or other high-qualify, short-term
securities which, at all times while the loan is outstanding, will be maintained
in amounts equal to at least 100% of the current market value of the loaned
securities. Any cash collateral will be invested in short-term securities, which
will increase the current income of the Fund. Such loans will not have terms
longer than 30 days and will be terminable at any time. The Fund will have the
right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights, subscription rights and rights to dividends,
interest or other distributions. The Fund may pay reasonable fees to persons
unaffiliated with the Fund for services in arranging such loans. Delays or
losses could result if the borrower becomes bankrupt or defaults on its
obligation to return the loaned securities.
Money Market Instruments and Temporary Investment Strategies. In addition to the
Money Market Fund, the other Funds each may hold cash or cash equivalents and
may invest in short-term, high-quality debt instruments (that is in "money
market instruments") as deemed appropriate by Capital management, or may invest
any or all of their assets in money market instruments as deemed necessary by GW
Capital Management for temporary defensive purposes.
The types of money market instruments in which the Funds may invest
include, but are not limited to: (1) acceptances; (2) obligations of U.S. and
non-U.S. governments and their agencies and instrumentalities; (3) short-term
corporate obligations, including commercial paper, notes, and bonds; (4)
obligations of U.S. banks, non-U.S. branches of such bank (Eurodollars), U.S.
branches and agencies of non-U.S. banks (Yankee dollars), and non-U.S. branches
of non-U.S. banks; (5) asset-backed securities; and (6) repurchase agreements.
Mortgage-Backed Securities. Mortgage backed securities may be issued by
government and non-government entities such as banks, mortgage lenders, or other
financial institutions. A mortgage security is an obligation of the issuer
backed by a mortgage or pool of mortgages or a direct interest in an underlying
pool of mortgages. Some mortgage-backed securities, such as collateralized
mortgage obligations or CMOs, make payments of both principal and interest at a
variety of intervals; others make semi-annual interest payments at a
predetermined rate and repay principal at maturity (like a typical bond).
Mortgage-backed securities are based on different types of mortgages including
those on commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
investment in such securities may be made if deemed consistent with investment
objectives and policies.
The value of mortgage-backed securities may change due to shifts in the market's
perception of issuers. In addition, regulatory or tax changes may adversely
affect the mortgage securities market as a whole. Non-government mortgage-backed
securities may offer higher yields than those issued by government entities, but
also may be subject to greater price changes than government issues.
Mortgage-backed securities are subject to prepayment risk. Prepayment, which
occurs when unscheduled or early payments are made on the underlying mortgages,
may shorten the effective maturities of these securities and may lower their
total returns.
Options. See "Futures and Options" below.
Repurchase Agreements. A repurchase agreement is an instrument under which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a mutually agreed upon time and price. The total
amount received on repurchase is calculated to exceed the price paid by the
purchaser, reflecting an agreed upon market rate of interest for the period from
the time of purchase of the security to the settlement date (i.e., the time of
repurchase), and would not necessarily relate to the interest rate on the
underlying securities. A purchaser will only enter into repurchase agreements
with underlying securities consisting of securities of the U.S. government and
its agencies and instrumentalities, certificates of deposit, commercial paper,
bankers' acceptances, and other high-quality, short-term debt securities and
will be entered only with counterparties approved pursuant to creditworthiness
standards established by the Funds' board of trustees (the "Board of Trustees").
While investment in repurchase agreements may be made for periods up to 30 days,
it is expected that typically such periods will be for a week or less. The staff
of the Securities and Exchange Commission has taken the position that repurchase
agreements of greater than 7 days are illiquid securities; accordingly, such
repurchase agreements are subject to a Fund's policy regarding illiquid
securities.
Although repurchase transactions usually do not impose market risks on the
purchaser, the purchaser would be subject to the risk of loss if the seller
fails to repurchase the securities for any reason and the value of the
securities is less than the agreed upon repurchase price. In addition, if the
seller defaults, the purchaser may incur disposition costs in connection with
liquidating the securities. Moreover, if the seller is insolvent and bankruptcy
proceedings are commenced, under current law, the purchaser could be ordered by
a court not to liquidate the securities for an indeterminate period of time and
the amount realized by the purchaser upon liquidation of the securities may be
limited.
Reverse Repurchase Agreements. In a reverse repurchase agreement, the Fund sells
a portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, the Fund will
maintain appropriate liquid assets in a segregated custodial account to cover
its obligation under the agreement. The Fund will enter into reverse repurchase
agreements only with parties whose credit-worthiness has been found satisfactory
by GW Capital Management. Such transactions may increase fluctuations in the
market value of the Fund's assets and may be viewed as a form of leverage. The
Funds currently do not intend to invest in reverse repurchase agreements within
the coming year.
Stripped Treasury Securities. Each Fund may invest in zero-coupon bonds. These
securities are U.S. Treasury bonds which have been stripped of their unmatured
interest coupons, the coupons themselves, and receipts or certificates
representing interests in such stripped debt obligations and coupons. Interest
is not paid in cash during the term of these securities, but is accrued and paid
at maturity. Such obligations have greater price volatility than coupon
obligations and other normal interest-paying securities, and the value of zero
coupon securities reacts more quickly to changes in interest rates than do
coupon bonds. Since dividend income is accrued throughout the term of the zero
coupon obligation, but not actually received until maturity, a Fund may have to
sell other securities to pay said accrued dividends prior to maturity of the
zero coupon obligation. Zero coupon securities are purchased at a discount from
face value, the discount reflecting the current value of the deferred interest.
The discount is taxable even though there is no cash return until maturity.
Short Sales "Against the Box." If a Fund enters into a short sale against the
box, it will be required to set aside securities equivalent in kind and amount
to the securities sold short (or securities convertible or exchangeable into
such securities) and will be required to hold such securities while the short
sale is outstanding. The Fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short sales
against the box.
Time Deposits. A time deposit is a deposit in a commercial bank for a specified
period of time at a fixed interest rate for which a negotiable certificate is
not received.
U.S. Government Securities. These are securities issued or guaranteed as to
principal and interest by the U.S. government or its agencies or
instrumentalities. U.S. Treasury bills and notes and certain agency securities,
such as those issued by the Government National Mortgage Association, are backed
by the full faith and credit of the U.S. government. Securities of other
government agencies and instrumentalities are not backed by the full faith and
credit of U.S. government. These securities have different degrees of government
support and may involve the risk of non-payment of principal and interest. For
example, some are supported by the agency's right to borrow from the U.S.
Treasury under certain circumstances, such as those of the Federal Home Loan
Banks. Others are supported by the discretionary authority of the U.S.
government to purchase certain obligations of the agency or instrumentality,
such as those of the Federal National Mortgage Association. Still other are
supported only by the credit of the agency that issued them, such as those of
the Student Loan Marketing Association. The U.S. government and its agencies and
instrumentalities do not guarantee the market value of their securities, and
consequently, the value of such securities may fluctuate.
Variable Amount Master Demand Notes. A variable amount master demand note is a
note which fixes a minimum and maximum amount of credit and provides for lending
and repayment within those limits at the discretion of the lender. Before
investing in any variable amount master demand notes, the liquidity of the
issuer must be determined through periodic credit analysis based upon publicly
available information.
Variable or Floating Rate Securities. These securities have interest rates that
are adjusted periodically, or which "float" continuously according to formulas
intended to stabilize their market values. Many of them also carry demand
features that permit the Funds to sell them on short notice at par value plus
accrued interest. When determining the maturity of a variable or floating rate
instrument, the Fund may look to the date the demand feature can be exercised,
or to the date the interest rate is readjusted, rather than to the final
maturity of the instrument.
Warrants. Warrants basically are options to purchase equity securities at a
specific price valid for a specific period of time. They do not represent
ownership of the securities, but only the right to buy them. Warrants are
speculative in that they have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. Warrants
differ from call options in that warrants are issued by the issuer of the
security which may be purchased on their exercise, whereas call options may be
written or issued by anyone. The prices of warrants do not necessarily move
parallel to the prices of the underlying securities.
When-Issued and Delayed-Delivery Transactions. When-issued or delayed-delivery
transactions arise when securities are purchased or sold with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous price and yield at the time of entering into the transaction.
While the Funds generally purchase securities on a when-issued basis with the
intention of acquiring the securities, the Funds may sell the securities before
the settlement date if GW Capital Management deems it advisable. At the time a
Fund makes the commitment to purchase securities on a when-issued basis, the
Fund will record the transaction and thereafter reflect the value, each day, of
such security in determining the net asset value of the Fund. At the time of
delivery of the securities, the value may be more or less than the purchase
price. A Fund will maintain, in a segregated account, liquid assets having a
value equal to or greater than the Fund's purchase commitments; likewise a Fund
will segregate securities sold on a delayed-delivery basis.
Futures and Options
Futures Contracts. When a Fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When a
Fund sells a futures contract, it agrees to sell the underlying instrument at a
specified future date. The price at which the purchase and sale will take place
is fixed when the Fund enters into the contract. Futures can be held until their
delivery dates, or can be closed out before then if a liquid secondary market is
available.
The value of a futures contract tends to increase and decrease in tandem with
the value of its underlying instrument. Therefore, purchasing futures contracts
will tend to increase a Fund's exposure to positive and negative price
fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When a Fund sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the market.
Futures Margin Payments. The purchaser or seller of a futures contract is not
required to deliver or pay for the underlying instrument unless the contract is
held until the delivery date. However, both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a futures
commission merchant ("FCM"), when the contract is entered into. Initial margin
deposits are typically equal to a percentage of the contract's value. If the
value of either party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value on a daily
basis. The party that has a gain may be entitled to receive all or a portion of
this amount. Initial and variation margin payments do not constitute purchasing
securities on margin for purposes of a Fund's investment limitations. In the
event of a bankruptcy of an FCM that holds margin on behalf of a Fund, the Fund
may be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to the
Fund.
Index Futures Contracts. An index futures contract obligates the seller to
deliver (and the purchaser to take) an amount of cash equal to a specific dollar
amount times the difference between the value of a specific index at the close
of the last trading day of the contract and the price at which the agreement is
made. No physical delivery of the underlying security in the index is made.
Purchasing Put and Call Options. By purchasing a put option, a Fund obtains the
right (but not the obligation) to sell the option's underlying instrument at a
fixed strike price. In return for this right, the Fund pays the current market
price for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indices of securities
prices, and futures contracts. The Fund may terminate its position in a put
option it has purchased by allowing it to expire or by exercising the option. If
the option is allowed to expire, the Fund will lose the entire premium it paid.
If the Fund exercises the option, in completes the sale of the underlying
instrument at the strike price. A Fund may also terminate a put option position
by closing it out in the secondary market (that is by selling it to another
party) at its current price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain or security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the underlying instrument at the option's strike price. A call buyer
typically attempts to participate in potential price increases of the underlying
instrument with risk limited to the cost of the option if security prices fall.
At the same time, the buyer can expect to suffer a loss if security prices do
not rise sufficiently to offset the cost of the option.
Writing Put and Call Options. When a Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract, the Fund will be
required to make margin payments to an FCM as described above for futures
contracts. A Fund may seek to terminate its position in a put option it writes
before exercise by closing out the option in the secondary market at is current
price. If the secondary market is not liquid for a put option the Fund has
written, however, the Fund must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must continue
to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit, although
its gain would be limited to the amount of the premium it received. If security
prices remain the same over time, it is likely that the writer will also profit,
because it should be able to close out the option at a lower price. If security
prices fall, the put writer would expect to suffer a loss from purchasing the
underlying instrument directly, which can exceed the amount of the premium
received.
Writing a call option obligates a Fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer can mitigate the effect of a price decline. At the same
time, because a call writer gives up some ability to participate in security
price increases.
OTC Options. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of over-the-counter ("OTC") options (options not traded on exchanges)
generally are established through negotiation with the other party to the option
contract. While this type of arrangement allows the Funds greater flexibility to
tailor an option to its needs, OTC options generally involve greater credit risk
than exchange-traded options, which are guaranteed by the clearing organization
of the exchanges where they are traded.
Options and Futures Relating to Foreign Currencies. Currency futures contracts
are similar to forward currency exchange contracts, except that they are traded
on exchanges (and have margin requirements) and are standardized as to contract
size and delivery date. Most currency futures contracts call for payment or
delivery in U.S. dollars. The underlying instrument of a currency option may be
a foreign currency, which generally is purchased or delivered in exchange for
U.S. dollars, or may be a futures contract. The purchaser of a currency call
option obtains the right to purchase the underlying currency, and the purchaser
of a currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options and
futures relating to securities or indices, as discussed above. The Funds may
purchase and sell currency futures and may purchase and write currency options
to increase or decrease their exposure to different foreign currencies. A Fund
may also purchase and write currency options in conjunction with each other or
with currency futures or forward contracts. Currency futures and options values
can be expected to correlate with exchange rates, but may not reflect other
factors that affect the value of a Fund's investments. A currency hedge, for
example, should protect a Yen-denominated security from a decline in the Yen,
but will not protect a Fund against a price decline resulting from deterioration
in the issuer's creditworthiness. Because the value of a Fund's
foreign-denominated investments changes in response to many factors other than
exchange rates, it may not be possible to match the amount of currency options
and futures to the value of the Fund's investments exactly over time.
Asset Coverage for Futures and Options Positions. The Funds will comply with
guidelines established by the Securities and Exchange Commission with respect to
coverage of options and futures strategies by mutual Funds, and if the
guidelines so require will set aside appropriate liquid assets in a segregated
custodial account in the amount prescribed. Securities held in a segregated
account cannot be sold while the futures or option strategy is outstanding,
unless they are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of a Fund's assets could
impede portfolio management or the Fund's ability to meet redemption requests or
other current obligations.
Combined Positions. A Fund may purchase and write options in combination with
each other, or in combination with futures or forward contracts, to adjust the
risk and return characteristics of the overall position. For example, a Fund may
purchase a put option and write a call option on the same underlying instrument,
in order to construct a combined position whose risk and return characteristics
are similar to selling a futures contract. Another possible combined position
would involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in the
event of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
Correlation of Price Changes. Options and futures prices can also diverge from
the prices of their underlying instruments, even if the underlying instruments
match a Fund's investments well. Options and futures prices are affected by such
factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Fund may purchase or sell options and
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in order to attempt to compensate differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in a Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.
Limitations on Futures and Options Transactions. The Trust has filed a notice of
eligibility for exclusion from the definition of the term "commodity pool
operator" with the Commodity Futures Trading Commission and the National Futures
Association, which regulate trading in the futures markets. The Funds intend to
comply with Rule 4.5 under the Commodity Exchange Act, which limits the extent
to which the Funds can commit assets to initial margin deposits and option
premiums. Accordingly, to the extent that a Fund may invest in futures contracts
and options, a Fund may only enter into futures contract and option positions
for other than bona fide hedging purposes to the extent that the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the liquidation value of the Fund. This limitation on a Fund's permissible
investments in futures contracts and options is not a fundamental investment
limitation and may be changed as regulatory agencies permit.
Liquidity of Options and Futures Contracts. There is no assurance that a liquid
secondary market will exist for any particular option or futures contract at any
particular time. Options may have relatively low trading volume and liquidity if
their strike prices are not close to the underlying instrument's current price.
In addition, exchanges may establish daily price fluctuation limits for options
and futures contracts, and may halt trading if a contract's price moves upward
or downward more than the limit in a given day. On volatile trading days when
the price fluctuation limit is reached or a trading halt is imposed, it may be
impossible for a Fund to enter into new positions or close out existing
positions. If the secondary market for a contract is not liquid because of price
fluctuation limits or otherwise, it could prevent prompt liquidation of
unfavorable positions, and potentially could require a Fund to continue to hold
a position until delivery or expiration regardless of changes in its value. As a
result, a Fund's access to assets held to cover its options or futures positions
could also be impaired.
INVESTMENT LIMITATIONS
Below is a description of certain limitations that constitute the Funds'
fundamental policies, which means that they may not be changed with respect to
any Fund without approval by vote of a majority of the outstanding voting shares
of such Fund. For this purpose, "majority" means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding share
are represented or (ii) more than 50% of the outstanding shares.
Each Fund will not:
(1) Invest more than 25% of its total assets (taken at market value at the
time of each investment) in the securities of issuers primarily engaged in
the same industry; provided that with respect to the Money Market Fund
there shall be no limitation on the purchase of U.S. government securities
or of certificates of deposit and bankers' acceptances; utilities will be
divided according to their services; for example, gas, gas transmission,
electric and telephone each will be considered a separate industry for
purposes of this restriction.
(2) Purchase or sell interests in commodities, commodities contracts, oil, gas
or other mineral exploration or development programs, or real estate,
except that a Fund may purchase securities of issuers which invest or deal
in any of the above; provided, however, that the Funds, except the Money
Market Fund, may invest in futures contracts on financial indexes, foreign
currency transactions and options on permissible futures contracts.
(3) (a) purchase any securities on margin, (b) make short sales of securities,
or (c) maintain a short position, except that a Fund (i) may obtain such
short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities, (ii) other than the Money Market Fund, may
make margin payments in connection with transactions in futures contracts
and currency futures contracts and enter into permissible options
transactions, and (iii) may make short sales against the box.
(4) Make loans, except as provided in limitation (5) below and except through
the purchase of obligations in private placements (the purchase of
publicly-traded obligations are not being considered the making of a loan)
and through repurchase agreements.
(5) Lend its portfolio securities in excess of 33 1/3% of its total assets,
taken at market value at the time of the loan, provided that such loan
shall be made in accordance with the guidelines set forth under "Lending
of Portfolio Securities" in this Statement of Additional Information.
(6) Borrow, except that a Fund may borrow for temporary or emergency purposes.
The Fund will not borrow unless immediately after any such borrowing there
is an asset coverage of at least 300 percent for all borrowings of the
Fund. If such asset coverage falls below 300 percent, the Fund will within
three days thereafter reduce the amount of its borrowings to an extent
that the asset coverage of such borrowings will be at least 300 percent.
Reverse repurchase agreements and other investments which are "covered" by
a segregated account or an offsetting position in accordance with
applicable SEC requirements ("covered investments") do not constitute
borrowings for purposes of the 300% asset coverage requirement. The Fund
will repay all borrowings in excess of 5% of its total assets before any
additional investments are made. Covered investments will not be
considered borrowings for purposes of applying the limitation on making
additional investments when borrowings exceed 5% of total assets.
(7) Mortgage, pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by the Fund except as may be
necessary in connection with borrowings mentioned in limitation (6) above,
and then such mortgaging, pledging or hypothecating may not exceed 10% of
the Fund's total assets, taken at market value at the time thereof. A Fund
will not, as a matter of operating policy, mortgage, pledge or hypothecate
its portfolio securities to the extent that at any time the percentage of
the value of pledged securities will exceed 10% of the value of the Fund's
shares. This limitation shall not apply to segregated accounts.
(8) Underwrite securities of other issuers except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
(9) Issue senior securities. The issuance of more than one series or classes
of shares of beneficial interest, obtaining of short-term credits as may
be necessary for the clearance of purchases and sales of portfolio
securities, short sales against the box, the purchase or sale of
permissible options and futures transactions (and the use of initial and
maintenance margin arrangements with respect to futures contracts or
related options transactions), the purchase or sale of securities on a
when issued or delayed delivery basis, permissible borrowings entered into
in accordance with a Fund's investment objectives and policies, and
reverse repurchase agreements are not deemed to be issuances of senior
securities.
Diversified Portfolio of Securities
Each Fund will operate as a diversified investment portfolio of the Trust,
meaning that at least 75% of the value of its total assets will be represented
by cash and cash items (including receivables), U.S. government securities,
securities of other investment companies, and other securities, the value of
which with respect to any one issuer is neither more than 5% of the Fund's total
assets nor more than 10% of the outstanding voting securities of such issuer.
MANAGEMENT OF THE FUND
Investment Adviser
GW Capital Management, LLC(GW Capital Management), a Colorado corporation,
located at 8515 East Orchard Road, Englewood, Colorado 80111, serves as
investment adviser to the Trust pursuant to an Investment Advisory Agreement
dated December 5, 1997. GW Capital Management is a wholly-owned subsidiary of
GWL&A, which is a wholly-owned subsidiary of The Great-West Life Assurance
Company ("Great-West"), a Canadian stock life insurance company. Great-West is a
99.4% owned subsidiary of Great-West Lifeco Inc., which in turn is an 86.4%
owned subsidiary of Power Financial Corporation, Montreal, Quebec. Power
Corporation of Canada, a holding and management company, has voting control of
Power Financial Corporation of Canada. Mr. Paul Desmarais, and his associates, a
group of private holding companies, have voting control of Power Corporation of
Canada.
<PAGE>
Trustees and Officers
The trustees and executive officers of the Trust, their ages, position(s) with
the Trust, and principal occupations during the past 5 years (or as otherwise
indicated) are set forth below. The business address of each trustee and officer
is 8515 East Orchard Road, Englewood, Colorado 80111 (unless otherwise
indicated). Those trustees and officers who are "interested persons" (as defined
in the Investment Company Act of 1940, as amended) by virtue of their
affiliation with either the Trust or GW Capital Management are indicated by an
asterisk (*).
Rex Jennings (72), Trustee; President Emeritus, Denver Metro Chamber of Commerce
Richard P. Koeppe (65), Trustee; Retired Superintendent, Denver Public Schools.
*Douglas L. Wooden (40), Trustee; Senior Vice President, Financial Services of
GWL&A.
*James D. Motz (47), Trustee and President; Senior Vice President,
Employee Benefits, of GWL&A.
Sanford Zisman (57), Trustee; Attorney, Zisman & Ingraham, P.C.
*Glen R. Derback (45), Treasurer; Vice President, Financial Control, of GWL&A.
*Mark J. Pavlik (36), Controller, is Manager, Financial Control, of GWL&A.
*Beverly A. Byrne (41), Secretary, is Assistant Counsel and Assistant Secretary
of GWL&A.
Compensation
The Trust pays no salaries or compensation to any of its officers or Trustees
affiliated with GW Capital Management or its affiliates. The chart below sets
forth the annual fees paid or expected to be paid to the non-interested Trustees
and certain other information.
<PAGE>
R.P. Koeppe R. Jennings S. Zisman
Compensation
Received from the
Trust $8,000 $7,500 $8,000
Pension or
Retirement
Benefits Accrued as
Fund Expense* $0 $0 $0
Total Compensation
Received from the
Trust and All
Affiliated Funds* $16,500 $16,000 $16,000
* As of October 31 , 1997 there were forty funds for which the Trustees
serve as Trustees or Directors of which six are Funds of the Trust. The
total compensation paid is comprised of the amount estimated to be paid
during the Trust's current fiscal year by the Trust and all affiliated
investment companies.
As of October 31, 1997, no person owns of record or beneficially 5% or more of
the shares outstanding of the Trust or any Fund except GW Capital Management and
its affiliates which owned 100% of the Funds' outstanding shares as of the date
of this Statement of Additional Information. Therefore, GWL&A would be deemed to
control each Fund as the term "control" is defined in the Investment Company Act
of 1940. As of the date of this Statement of Additional Information, the
trustees and officers of the Trust, as a group, owned of record or beneficially
less than 1% of the outstanding share of each Fund.
Investment Advisory Agreement
The Investment Advisory Agreement became effective on December 5, 1997 and as
amended effective March 1, 1998. As approved, the Agreement will remain in
effect until December 4, 1998, and will continue in effect from year to year if
approved annually by the Board of Trustees including the vote of a majority of
the trustees who are not parties to the Agreement or interested persons of any
such party, or by vote of a majority of the outstanding shares of each Fund. Any
amendment to the Agreement becomes effective with respect to a Fund upon
approval by vote of a majority of the voting securities of the Fund. The
agreement is not assignable and may be terminated without penalty with respect
to any Fund either by the Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund or by GW Capital Management, each on
60 days notice to the other party.
The Investment Advisory Agreement provides that GW Capital Management, subject
to the direction of the Board of Trustees, is responsible for selecting the
Funds' investments and for managing their business affairs. GW Capital
Management provides the Funds' portfolio managers who consider analyses from
various sources, make the necessary investment decisions, and effect
transactions accordingly. GW Capital Management also performs certain
administrative and management services for the Fund and provides all the office
space, facilities, equipment and personnel necessary to perform its duties under
the Agreement.
The Investment Advisory Agreement provides that GW Capital Management shall not
be subject to any liability in connection with the performance of its services
thereunder in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Management Fees
Each Fund pays a management fee to GW Capital Management for managing its
investments and business affairs. GW Capital Management is paid monthly at an
annual rate of a Fund's average net assets according to the following schedule.
MANAGEMENT FEE
(as a percentage of average net assets)
-------------------
Money Market Fund 0.20%
Preferred Stock Fund 0.90%
Index 600 Fund 0.60%
Index 500 Fund 0.60%
Index Pacific Fund 1.00%
Index European Fund 1.00%
Value Fund 1.00%
For the period February 3, 1997 to October 31, 1997, the Investment Adviser was
paid a fee for its services as follows: Money Market $4,526; Preferred Stock
$27,298; Index 600 $21,804; Index 500 $53,983; Index Pacific $198,749; and,
Index European $219,272.
<PAGE>
Sub-Adviser
CIC Management, Inc. serves as the sub-adviser to the Value Fund pursuant to a
sub-advisory agreement dated March 1, 1998. CIC is a 100% employee owned and
managed firm, registered with the Securities and Exchange Commission as an
investment adviser under the Investment Advisers Act of 1940. It is a California
corporation with its principal business address at 707 Wilshire Boulevard, 55th
Floor, Los Angeles, California 90017.
The Sub-Adviser provides investment advisory assistance and portfolio management
advice to the Investment Adviser for the Value Fund. Subject to review and
supervision by the Investment Adviser and the Board of Trustees, the Sub-Adviser
is responsible for the actual management of the Value Fund and for making
decisions to buy, sell or hold any particular securities. The Sub-Adviser bears
all expenses in connection with the performance of its services, such as
compensating and furnishing office space for its employees and officers
connected with the investment and economic research, trading and investment
management for the Value Fund.
Sub-Advisory Fees
The method of computing the sub-advisory fees is fully described in the
Prospectus.
Expenses of the Funds
In addition to the management fees paid to GW Capital Management, the Trust pays
certain other costs including, but not limited to, (a) brokerage commissions;
(b) federal, state and local taxes, including issue and transfer taxes incurred
by or levied on the Funds; (c) interest charges on borrowing; (d) fees and
expenses of registering the shares of the Funds under the applicable federal
securities laws and of qualifying shares of the Fund under applicable state
securities laws including expenses attendant upon renewing and increasing such
registrations and qualifications; (e) expenses of printing and distributing the
Funds' prospectus and other reports to shareholders; (f) costs of proxy
solicitations; (g) transfer agent fees; (h) charges and expenses of the Trust's
custodian; (i) compensation and expenses of the "independent" trustees; and (j)
such nonrecurring items as may arise, including expenses incurred in connection
with litigation, proceedings and claims and the obligations of the Trust to
indemnify its trustees and officers with respect thereto.
Subject to revision, GW Capital Management has voluntarily agreed to reimburse
the Index Pacific Fund, the Index European Fund, and the Money Market Fund to
the extent that total operating expenses, but excluding interest, taxes,
brokerage commissions, and extraordinary expenses, exceed 1.20%, 1.20%, and
0.46%, respectively, of average net assets.
PORTFOLIO TRANSACTIONS
Subject to the direction of the Board of Trustees, GW Capital Management is
primarily responsible for placement of Funds' portfolio transactions. GW Capital
Management has no obligation to deal with any broker, dealer or group of brokers
or dealers in the execution of transactions in portfolio securities. In placing
orders, it is the policy of the Trust to obtain the most favorable net results,
taking into account various factors, including price, dealer spread or
commissions, if any, size of the transaction and difficulty of execution. While
GW Capital Management generally will seek reasonably competitive spreads or
commissions, the Funds will not necessarily pay the lowest spread or commission
available.
Transactions on U.S. futures and stock exchanges and other agency transactions
involve the payment of negotiated brokerage commissions. Commissions vary among
different brokers and dealers, which may charge different commissions according
to such factors as the difficulty and size of the transaction. Transactions in
foreign securities often involve the payment of fixed brokerage commissions,
which may be higher than those for negotiated transactions in the United States.
Prices for over-the-counter transactions usually include an undisclosed
commission or "mark-up" that is retained by the broker or dealer effecting the
trade. The cost of securities purchased from an underwriter or from a dealer in
connection with an underwritten offering usually includes a fixed commission
which is paid by the issuer to the underwriter or dealer. Transactions in U.S.
government securities occur usually through issuers and underwriters of and
major dealers in such securities, acting as principals. These transactions are
normally made on a net basis and do not involve payment of brokerage
commissions.
In placing portfolio transactions, GW Capital Management may give consideration
to brokers or dealers which provide supplemental investment research, in
addition to such research obtained for a flat fee, and pay commissions to such
brokers or dealers furnishing such services which are in excess of commissions
which another broker or dealer may charge for the same transaction. Such
supplemental research ordinarily consists of assessments and analyses of the
business or prospects of a company, industry, or economic sector. Supplemental
research obtained through brokers or dealers will be in addition to and not in
lieu of the services required to be performed by GW Capital Management. The
expenses of GW Capital Management will not necessarily be reduced as a result of
the receipt of such supplemental information. GW Capital Management may use any
supplemental investment research obtained for the benefit of the Funds in
providing investment advice to its other investment advisory accounts, and may
use such information in managing its own accounts. Conversely, such supplemental
information obtained by the placement of business for GW Capital Management will
be considered by and may be useful to GW Capital Management in carrying out its
obligations to the Trust.
If in the best interests of both one or more Funds and other client accounts of
GW Capital Management, GW Capital Management may, to the extent permitted by
applicable law, but need not, aggregate the purchases or sales of securities for
these accounts to obtain favorable overall execution. When this occurs, GW
Capital Management will allocate the securities purchased and sold and the
expenses incurred in a manner that it deems equitable to all accounts. In making
this determination, GW Capital Management may consider, among other things, the
investment objectives of the respective client accounts, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally, and the
opinions of persons responsible for managing the Funds and other client
accounts. The use of aggregated transactions may adversely affect the size of
the position obtainable for the Funds, and may itself adversely affect
transaction prices to the extent that it increases the demand for the securities
being purchased or the supply of the securities being sold.
Portfolio Turnover
The turnover rate for each Fund is calculated by dividing (a) the lesser of
purchases or sales of portfolio securities for the fiscal year by (b) the
monthly average value of portfolio securities owned by the Fund during the
fiscal year. In computing the portfolio turnover rate, certain U.S. government
securities (long-term for periods before 1986 and short-term for all periods)
and all other securities, the maturities or expiration dates of which at the
time of acquisition are one year or less, are excluded.
There are no fixed limitations regarding the portfolio turnover of the Funds.
Portfolio turnover rates are expected to fluctuate under constantly changing
economic conditions and market circumstances. Securities initially satisfying
the basic policies and objectives of each Fund may be disposed of when
appropriate in GW Capital Management's judgment.
With respect to any Fund, a higher portfolio turnover rate may involve
correspondingly greater brokerage commissions and other expenses which might be
borne by the Fund and, thus, indirectly by its shareholders. Higher portfolio
turnover may also increase a shareholder's current tax liability for capital
gains by increasing the level of capital gains realized by a Fund.
Based upon the formula for calculating the portfolio turnover rate, as stated
above, the annualized portfolio turnover rate for each Fund (other than the
Money Market Fund) in 1997 is as follows:
Fund 1997
- ---- ----
Preferred Stock Fund 10.05%
Index 600 Fund 21.58%
Index 500 Fund 0.45%
Index Pacific Fund 0.04%
Index European Fund 5.69%
Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary from year to year, the portfolio turnover
rate of the Value Fund is not expected to exceed 100% in the coming year.
VALUATION OF PORTFOLIO SECURITIES
The net asset value of each Fund is determined in the manner described in the
Prospectus. Securities held by each Fund other than the Money Market Fund will
be valued as follows: portfolio securities which are traded on stock exchanges
are valued at the last sale price on the principal exchange as of the close of
business on the day the securities are being valued, or, lacking any sales, at
the mean between the bid and asked prices. Securities traded in the
over-the-counter market and included in the National Market System are valued at
the mean between the bid and asked prices which may be based on the valuations
furnished by a pricing service or from independent securities dealers.
Otherwise, over-the-counter securities are valued at the mean between the bid
and asked prices or yield equivalent as obtained from one or more dealers that
make markets in the securities. Portfolio securities which are traded both in
the over-the-counter market and on an exchange are valued according to the
broadest and most representative market, and it is expected that for debt
securities this ordinarily will be the over-the-counter market. Securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under procedures or guidelines
established by the Board of Trustees, including valuations furnished by pricing
services retained by GW Capital Management.
The net asset value per share of the Money Market Fund is determined by using
the amortized cost method of valuing its portfolio instruments. Under the
amortized cost method of valuation, an instrument is valued at cost and the
interest payable at maturity upon the instrument is accrued daily as income over
the remaining life of the instrument. Neither the amount of daily income nor the
net asset value is affected by unrealized appreciation or depreciation of the
Fund's investments assuming the instrument's obligation is paid in full on
maturity. In periods of declining interest rates, the indicated daily yield on
shares of the portfolio computed using amortized cost may tend to be higher than
a similar computation made using a method of valuation based upon market prices
and estimates. In periods of rising interest rates, the indicated daily yield on
shares of the portfolio computed using amortized costs may tend to be lower than
a similar computation made using a method of valuation based upon market prices
and estimates. For all Funds, securities with remaining maturities of not more
than 60 days are valued at amortized cost, which approximates market value.
The amortized cost method of valuation permits the Money Market Fund to maintain
a stable $1.00 net asset value per share. The Board of Trustees periodically
reviews the extent of any deviation from the $1.00 per share value that would
occur if a method of valuation based on market prices and estimates were used.
In the event such a deviation would exceed one-half of one percent, the Board of
Trustees will promptly consider any action that reasonably should be initiated
to eliminate or reduce material dilution or other unfair results to
shareholders. Such action may include selling portfolio securities prior to
maturity, not declaring earned income dividends, valuing portfolio securities on
the basis of current market prices, if available, or if not available, at fair
market value as determined in good faith by the Board of Trustees, and in kind
redemption of portfolio securities (considered highly unlikely by management of
the Trust).
INVESTMENT PERFORMANCE
The Funds may quote measure of investment performance in various ways. All
performance information supplied by the Funds in advertising is historical and
is not intended to indicated future returns.
<PAGE>
Money Market Fund
In accordance with regulations prescribed by the SEC, the Trust is required to
compute the Money Market Fund's current annualized yield for a seven-day period
in a manner which does not take into consideration any realized or unrealized
gains or losses on its portfolio securities. This current annualized yield is
computed by determining the net change (exclusive of realized gains and losses
on the sale of securities and unrealized appreciation and depreciation) in the
value of a hypothetical account having a balance of one share of the Money
Market Fund at the beginning of such seven-day period, dividing such net change
in account value by the value of the account at the beginning of the period to
determine the base period return and annualizing this quotient on a 365-day
basis.
The SEC also permits the Trust to disclose the effective yield of the Money
Market Fund for the same seven-day period, determined on a compounded basis. The
effective yield is calculated by compounding the annualized base period return
by adding one to the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting one from the result.
The yield on amounts held in the Money Market Fund normally will fluctuate on a
daily basis. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. The Fund's
actual yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the Fund, the types and quality of
portfolio securities held by the Fund, and its operating expenses.
Other Funds
Standardized Average Annual Total Return Quotations. Average annual total return
quotations for shares of a Fund are computed by finding the average annual
compounded rates of return that would cause a hypothetical investment made on
the first day of a designated period to equal the ending redeemable value of
such hypothetical investment on the last day of the designated period in
accordance with the following formula:
P(I+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $ 1,000
initial payment made at the beginning of the designated
period (or fractional portion thereof)
The computation above assumes that all dividends and distributions made by a
Fund are reinvested at net asset value during the designated period. The average
annual total return quotation is determined to the nearest 1/100 of 1%.
One of the primary methods used to measure performance is "total return." Total
return will normally represent the percentage change in value of a Fund, or of a
hypothetical investment in a Fund, over any period up to the lifetime of the
Fund. Unless otherwise indicated, total return calculations will usually assume
the reinvestment of all dividends and capital gains distributions and will be
expressed as a percentage increase or decrease from an initial value, for the
entire period or for one or more specified periods within the entire period.
Total return percentages for periods longer than one year will usually be
accompanied by total return percentages for each year within the period and/or
by the average annual compounded total return for the period. The income and
capital components of a given return may be separated and portrayed in a variety
of ways in order to illustrate their relative significance. Performance may also
be portrayed in terms of cash or investment values, without percentages. Past
performance cannot guarantee any particular result. In determining the average
annual total return (calculated as provided above), recurring fees, if any, that
are charged to all shareholder accounts are taken into consideration.
Each Fund's average annual total return quotations and yield quotations as they
may appear in the Prospectus, this Statement of Additional Information or in
advertising are calculated by standard methods prescribed by the SEC.
Each Fund may also publish its distribution rate and/or its effective
distribution rate. A Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current net asset value
per share. A Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio used to annualize the most recent monthly
distribution and reinvesting the resulting amount for a full year on the basis
of such ratio. The effective distribution rate will be higher than the
distribution rate because of the compounding effect of the assumed reinvestment.
A Fund's yield is calculated using a standardized formula, the income component
of which is computed from the yields to maturity of all debt obligations held by
the Fund based on prescribed methods (with all purchases and sales of securities
during such period included in the income calculation on a settlement date
basis), whereas the distribution rate is based on a Fund's last monthly
distribution. A Fund's monthly distribution tends to be relatively stable and
may be more or less than the amount of net investment income and short- term
capital gain actually earned by the Fund during the month.
Other data that may be advertised or published about each Fund include the
average portfolio quality, the average portfolio maturity and the average
portfolio duration.
Standardized Yield Quotations. The yield of a Fund is computed by dividing the
Fund's net investment income per share during a base period of 30 days, or one
month, by the maximum offering price per share on the last day of such base
period in accordance with the following formula:
2[( a - b + 1 )6 - 1 ]
(cd)
Where: a = net investment income earned during the period
b = net expenses accrued for the period
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share
Net investment income will be determined in accordance with rules established by
the SEC.
Performance Comparisons
Performance information contained in reports to shareholders, advertisement, and
other promotional materials may be compared to that of various unmanaged
indexes. These indexes may assume the reinvestment of dividends, but generally
do not reflect deductions for operating expenses.
Advertisements quoting performance rankings of a Fund as measured by financial
publications or by independent organizations such as Lipper Analytical Services,
Inc. and Morning Star, Inc., and advertisements presenting a Fund's the
historical performance, may form time to time be sent to investors or placed in
newspapers and magazines such as The New York Times, The Wall Street Journal,
Barons, Investor's Daily, Money Magazine, Changing Times, Business Week and
Forbes or any other media on behalf of the Funds.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each Fund is open for business and its net asset value per share is calculated
each day that the New York Stock Exchange ("NYSE") is open for trading. The
Funds anticipates that the NYSE will be closed for trading on: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. Though it is expected that the same holiday
schedule will be observed in the future, the NYSE may modify its holiday
schedule at any time. In addition, the Funds will not process wire purchase and
redemptions on days when the Federal Reserve Wire System is closed, and may be
unable to do so during periods of severe weather or other emergency conditions.
Payment to shareholders for shares redeemed, that is sold back to a Fund, will
be made within seven days after receipt by the Transfer Agent of a request for
redemption in proper form, except that a Fund may suspend the right of
redemption or postpone the date of payment for more than seven days (a) for any
period (i) during which the New York Stock Exchange ("NYSE") is closed other
than customary week-end and holiday closings or (ii) during which trading on the
NYSE is restricted; (b) for any period during which an emergency exists as a
result of which (i) disposal by the Fund of securities owned by it is not
reasonably practicable or (ii) it is not reasonably practicable for the Fund
fairly to determine the value of its net assets; or (c) for such other period as
the SEC may permit for the protection of a Fund's shareholders.
If a Fund is requested to redeem shares for which it has not yet received good
payment, the Fund may delay the payment of redemption proceeds until such time
as it has received good funds for the purchase of the shares being redeemed.
The value of shares redeemed may be more or less than the shareholder's cost,
depending upon the market value of the portfolio securities at the time of
redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following is only a summary of certain tax considerations generally
affecting the Funds and their shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of any Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning.
Qualification as a Regulated Investment Company
The Internal Revenue Code of 1986, as amended (the "Code"), provides that each
investment portfolio of a series investment company is to be treated as a
separate corporation. Accordingly, each of the Funds will seek to be taxed as a
regulated investment company under Subchapter M of the Code. As a regulated
investment company, each Fund will not be subject federal income tax on the
portion of its net investment income (i.e., its taxable interest, dividends and
other taxable ordinary income, net of expenses) and net realized capital gain
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) and at least 90% of its
tax-exempt income (net of expenses allocable thereto) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. Each Fund will be subject to tax at regular
corporate rates on any income or gains that it does not distribute.
Distributions by a Fund made during the taxable year or, under specified
circumstances, within one month after the close of the taxable year, will be
considered distributions of income and gains of the taxable year and can
therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, each Fund must derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies (to the extent such currency gains are
ancillary to the Fund's principal business of investing in stock and securities)
and other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities, currencies (the "Income Requirement").
Certain debt securities purchased by a Fund (such as zero-coupon bonds) may be
treated for federal income tax purposes as having original issue discount.
Original issue discount, generally defined as the excess of the stated
redemption price at maturity over the issue price, is treated as interest for
Federal income tax purposes. Whether or not a Fund actually receives cash, it is
deemed to have earned original issue discount income that is subject to the
distribution requirements of the Code. Generally, the amount of original issue
discount included in the income of a Fund each year is determined on the basis
of a constant yield to maturity that takes into account the compounding of
accrued interest.
In addition, a Fund may purchase debt securities at a discount that exceeds any
original issue discount that remained on the securities at the time the Fund
purchased the securities. This additional discount represents market discount
for income tax purposes. Treatment of market discount varies depending upon the
maturity of the debt security and the date on which it was issued. For a debt
security issued after July 18, 1984 having a fixed maturity date or more than
six months from the date of issue and having market discount, the gain realized
on disposition will be treated as interest to the extent it does not exceed the
accrued market discount on the security (unless a Fund elects for all its debt
securities having a fixed maturity date or more than one year from the date of
issue to include market discount in income in taxable years to which it is
attributable). Generally, market discount accrues on a daily basis. For any debt
security issued on or before July 18, 1984 (unless a Fund makes the election to
include market discount in income currently), or any debt security having a
fixed maturity date of not more than six months from the date of issue, the gain
realized on disposition will be characterized as long-term or short-term capital
gain depending on the period a Fund held the security. A Fund may be required to
capitalize, rather than deduct currently, part of all of any net direct interest
expense on indebtedness incurred or continued to purchase or carry any debt
security having market discount (unless such Fund makes the election to include
market discount in income currently).
At the close of each quarter of its taxable year, at least 50% of the value of a
Fund's assets must consist of cash or cash items, U.S. Government securities,
securities of other regulated investment companies and securities of other
issuers (as to which the Fund has not invested more than 5% of the value of its
total assets in securities of such issuer and the Fund does not hold more than
10% of the outstanding voting securities of such issuer), and no more than 25%
of the value of its total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses (the "Asset
Diversification Test").
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the current and accumulated earnings and
profits of the Fund. In such event, such distributions generally will be
eligible for the dividends-received deductions in the case of corporate
shareholders.
If a Fund were to fail to qualify as a RIC for one or more taxable years, the
Fund could then qualify (or requalify) as a RIC for subsequent taxable year only
if the Fund had distributed to the Fund's shareholders a taxable dividend equal
to the full amount of any earnings or profits (less the interest charge
mentioned below, if applicable) attributable to such period. The Fund might also
be required to pay to the U.S. Internal Revenue Service interest on 50% of such
accumulated earnings and profits. In addition, pursuant to the Code and an
interpretative notice issued by the IRS, if the Fund should fail to qualify as a
RIC and should thereafter seek to requalify as a RIC, the Fund may be subject to
tax on the excess (if any) of the fair market of the Fund's assets over the
Fund's basis in such assets, as of the day immediately before the first taxable
year for which the Fund seeks to requalify as a RIC.
If a Fund determines that the Fund will not qualify as a RIC under Subchapter M
of the Code, the Fund will establish procedures to reflect the anticipated tax
liability in the Fund's net asset value.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on regulated investment companies that
fail to distribute in each calendar year an amount equal to 98% of ordinary
taxable income for the calendar year and 98% of capital gain net income for the
one-year period ended on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. For the foregoing
purposes, a regulated investment company is treated as having distributed any
amount on which it is subject to income tax for any taxable year ending in such
calendar year.
U.S. Treasury regulations may permit a regulated investment company, in
determining its investment company taxable income and undistributed net capital
for any taxable year, to treat any capital loss incurred after October 31 as if
it had been incurred in the succeeding year. For purposes of the excise tax, a
regulated investment company may: (I) reduce its capital gain net income by the
amount of any net ordinary loss for any calendar year; and (ii) exclude foreign
currency gains and losses incurred after October 31 of any year in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that a Fund may in certain circumstances be required to liquidate portfolio
investments to make sufficient distributions to avoid excise tax liability.
Distributions
Each Fund anticipates distributing substantially all of its investment company
taxable income for each taxable year. Such distributions will be taxable to
shareholders as ordinary income and treated as dividends for federal income tax
purposes, but they will generally not qualify for the 70% dividends-received
deduction for corporations.
A Fund may either retain or distribute to shareholders the Fund's net capital
gain (i.e., the excess of net long-term capital gain over net short-term capital
loss) for each taxable year. Each Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his or her shares or
whether such gain was recognized by the Fund prior to the date on which the
shareholder acquired his or her shares. Conversely, if a Fund elects to retain
net capital gain, it will be taxed thereon (except to the extent of any
available capital loss carryovers) at the then current applicable corporate tax
rate. If a Fund elects to retain its net capital gain, it is expected the Fund
will also elect to have shareholders treated as having received a distribution
of such gain, with the result that the shareholders will be required to report
their respective shares of such gain on their returns as long-term capital gain,
will receive a refundable tax credit for their allocable share of tax paid by
the Fund on the gain, and will increase the tax basis for their shares by an
amount equal to the deemed distribution less the tax credit.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those purchasing just prior to an ordinary income
dividend or capital gain dividend will be taxed on the entire amount of the
dividend received, even though the net asset value per share on the date of such
purchase reflected the amount of such dividend.
Distributions by a Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital to the extent of
(and will reduce) the shareholder's tax basis in his or her shares; any excess
will be treated as gain from the sale of his or her shares, as discussed below.
Distributions by a Fund will be treated in the manner described above regardless
of whether such distributions are paid in cash or reinvested in additional
shares of the Fund. Shareholders receiving a distribution in the form of
additional shares will be treated as receiving a distribution in an amount equal
to the fair market value of the shares received, determined as of the
reinvestment date. Ordinarily, shareholders are required to take distributions
by a Fund into account in the year in which the distributions are made. However,
distributions declared in October, November or December of any year and payable
to shareholders of record on a specified date in such month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31, of
such calendar year if such distributions are actually made in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
Sale or Redemption of Fund Shares
A shareholder will recognize gain or loss on the sale or redemption of shares in
an amount equal to the difference between the proceeds of the sale or redemption
and the shareholder's adjusted tax basis in the shares. In general, any gain or
loss arising from (or treated as arising from) the sale or redemption of shares
of a Fund will be considered capital gain or loss and will be long-term capital
gain or loss if the shares were held for longer than 18 months. However, any
capital loss arising from the sale or redemption of shares held for six months
or less will be disallowed to the extent of the amount of exempt-interest
dividends received on such shares and (to the extent not disallowed) will be
treated as long-term capital loss to the extent of the amount of capital gain
dividends received on such shares. For this purpose, special holding period
rules provided in Code Section 246(c)(3) and (4) generally will apply in
determining the holding period of shares. For shareholders who are individuals,
long term capital gains (those arising from sales of assets held for more than
18 months) are currently taxed at rates of 10-20%; mid-term gains (those arising
from sales of assets for more than 12 months) are currently taxed at the same
rate as the individual's ordinary income, subject to a maximum rate of 28
percent and the deduction of capital losses is subject to limitation. Each
January, the Fund will provide to each investor and to the IRS a statement
showing the tax characterization of distributions paid during the prior year.
Backup Withholding
Each Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (i) who has provided
either an incorrect tax identification number or no number at all, (ii) who is
subject to backup withholding by the Internal Revenue Service for failure to
report the receipt of interest or dividend income properly, or (iii) who has
failed to certify to the Fund that it is not subject to backup withholding or
that it is a corporation or other "exempt recipient." Each Fund also reserves
the right to close accounts that fail to provide a certified tax identification
number, by redeeming such accounts in full at the current net asset value.
Foreign Shareholders
The U.S. federal income taxation of a shareholder who, as to the United States,
is a nonresident alien individual, foreign trust or estate, foreign corporation,
or foreign partnership ("foreign shareholder") depends on whether the income for
a Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by the foreign shareholder, ordinary income dividends will
be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate, if
applicable) upon the gross amount of the dividend. Such foreign shareholders
generally would be exempt from U.S. federal income tax on gains realized on the
sale of shares of the Fund and on capital gain dividends and amounts retained by
the Fund that are designated as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or business
carried on by the foreign shareholder, then ordinary income dividends, capital
gain dividends, and any gains realized upon the sale of shares of the Fund will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens
and residents or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be required to
withhold U.S. federal income tax at a rate of 20% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may differ from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Funds, including the
applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital gain
dividends from regulated investment companies often differ from the rules for
U.S. federal income taxation described above. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investments in the Funds.
OTHER INFORMATION
Organization of the Trust
The Trust is an open-end management investment company organized as a Delaware
business trust on July 23, 1996. The Trust has authorized capital of an
unlimited number of shares of beneficial interest in the Trust. Shares may be
issued in one or more series of shares, and each series may be issued in one or
more classes of shares. Presently, each Fund represents a separate series of
shares. The Trust may establish additional series or classes in the future.
The assets of the Trust received for the sale of shares of a Fund and all
income, earnings, profits, and proceeds thereof, subject only to the rights of
creditors, are allocated to such Fund, and constitute the underlying assets of
such Fund. The underlying assets of a Fund are accounted for separately on the
books of the Trust, and are to be charged with the liabilities with respect to
such Fund and with a share of the general expenses of the Trust. Expenses with
respect to the Trust are to be allocated between the Funds in a manner deemed to
be fair and equitable by the Board of Trustees. In the event of dissolution or
liquidation of a Fund, the Board of Trustees will distribute the remaining
proceeds or assets of the Fund ratably among its shareholders.
Shareholder and Trustee Liability
Shareholders of a business trust such as the Trust may, under certain
circumstance, be held personally liable for the obligations of the trust. The
Declaration of Trust provides that the Trust shall not have any claim against
shareholders except for the payment of the purchase price of shares and requires
that every note, bond, contract or other undertaking entered into or executed by
the Trust or the trustees shall include a provision limiting the obligations
created thereby to the Trust and its assets. The Declaration of Trust provides
for indemnification out of each Fund's assets of any shareholders held
personally liable for the obligations of the Fund. The Declaration of Trust also
provides that each Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. In addition, under Delaware law, shareholders of the Funds
are entitled to the same limitation of personal liability extended to
stockholders of Delaware corporations. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations. In view of the
above, the risk of personal liability to shareholders is remote.
The Declaration of Trust further provides that the trustees will not be liable
for any neglect or wrongdoing, but nothing in the Declaration of Trust protects
the trustees against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Voting Rights
The shares of the Funds have no preemptive or conversion rights. Voting and
dividends rights, the right or redemption, and exchange privileges are described
in the Prospectus. Shares are fully paid and nonassessable, except as set forth
under "Shareholder and Trustee Liability" above. Shareholders representing 10%
or more of the Trust or any Fund may, as set forth in the Declaration of Trust,
call meetings of the Trust or a Fund for any purpose related to the Trust or
Fund, as the case may be, including in the case of a meeting of the entire
Trust, the purpose of voting on removal of one or more trustees. The Trust or
any Fund may be terminated upon the sale of its assets to another investment
company (as defined in the Investment Company Act of 1940, as amended), or upon
liquidation and distribution of its assets, if approved by vote of the holders
of a majority of the outstanding shares of the Trust or the Fund. If not so
terminated, the Trust or the Fund will continue indefinitely.
Custodian
The Bank of New York, One Wall Street, New York, New York 10286, is custodian of
the Funds' assets. The custodian is responsible for the safekeeping of a Fund's
assets and the appointment of the subcustodian banks and clearing agencies. The
custodian takes no part in determining the investment policies of a Fund or in
deciding which securities are purchased or sold by a Fund. However, a Fund may
invest in obligations of the custodian and may purchase securities from or sell
securities to the custodian.
Independent Public Accountant
Deloitte & Touche LLP, 555 17th Street, Suite 3600, Denver, Colorado 80202,
serves as the Funds' independent public accountant. Deloitte & Touche LLP
examines financial statements for the Funds and provides other audit, tax, and
related services.
FINANCIAL STATEMENTS
The Trust's and each Fund's audited financial statements as of October 31, 1997,
together with the notes thereto and the report of Deloitte & Touche LLP are
attached to this Statement of Additional Information.
<PAGE>
44
Price Make-up Sheet
Orchard Money Market Fund
Period
Ended Per Share Amount
10/31/97
Undistributed Net Investment Income -
Beginning of Year
0
Dividend Income 0
Ordinary Income 121,136
Operational Expenses (10,409)
--------
Net Investment Income 110,727
Dividend Distribution - End of Year (110,727)
---------
Undistributed Net Investment Income -
End of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - End of Year
0
Distribution from Net Short-Term Gain
Accumulated Undistributed Net
Short-Term Realized Gain (Loss) on
Investment 0
Net Long-Term Realized Gain (Loss) on
Investments - Beginning of Year
Net Long-Term Realized Gain (Loss) on
Investments - End of Year
0
Distribution from Net Long-Term
Realized Gain
Accumulated Undistributed Net
Long-Term Realized Gain (Loss) on
Investment 0
Net Unrealized Appreciation
(Depreciation) on Investments
0
Capital Stock at Par 3,110,727 1.0000
Additional Paid-in Capital 0 0.0000
------
Net Assets 3,110,727 1.0000
--------- ------
Shares Outstanding 3,110,727
<PAGE>
Price Make-up Sheet
Orchard Preferred Stock Fund
Period
Ended Per Share Amount
10/31/97
Undistributed Net Investment Income -
Beginning of Year
0
Dividend Income 205,885
Ordinary Income 5,953
Operational Expenses (27,297)
--------
Net Investment Income 184,541
Dividend Distribution - End of Year (184,541)
---------
Undistributed Net Investment Income -
End of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - Beginning of Year
(8,998)
Net Short-Term Realized Gain (Loss) on
Investments - End of Year
0
Distribution from Net Short-Term Gain 0
Accumulated Undistributed Net
Short-Term Realized Gain (Loss) on
Investment (8,998) (0.0215)
------- --------
Net Long-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Long-Term Realized Gain (Loss) on
Investments - End of Year
0
Distribution from Net Long-Term 0
Realized Gain
Accumulated Undistributed Net
Long-Term Realized Gain (Loss) on
Investment 0
Net Unrealized Appreciation 66,221 0.1583
(Depreciation) on Investments
Capital Stock at Par 4,184,863 10.0004
Additional Paid-in Capital 0 0.0000
- ------
Net Assets 4,242,086 10.1372
--------- -------
Shares Outstanding 418,466
<PAGE>
Price Make-up Sheet
Orchard Index 500 Fund
Period
Ended Per Share Amount
10/31/97
Undistributed Net Investment Income -
Beginning of Year
0
Dividend Income 266,932
Ordinary Income 2,613
Operational Expenses (53,983)
--------
Net Investment Income 215,562
Dividend Distribution - End of Year (215,562)
---------
Undistributed Net Investment Income -
End of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - End of Year
(1,000)
Distribution from Net Short-Term Gain 0
Accumulated Undistributed Net
Short-Term Realized Gain (Loss) on
Investment (1,000) (0.0000)
--------
Net Long-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Long-Term Realized Gain (Loss) on
Investments - End of Year
0
Distribution from Net Long-Term 0
Realized Gain
Accumulated Undistributed Net
Long-Term Realized Gain (Loss) on
Investment 0
Net Unrealized Appreciation (13,691,428) (0.3248)
(Depreciation) on Investments
Capital Stock at Par 506,558,760 12.0184
Additional Paid-in Capital 0 0.0000
- ------
Net Assets 492,866,332 11.6936
----------- -------
Shares Outstanding 42,148,295
<PAGE>
3
<PAGE>
Price Make-up Sheet
Orchard Index 600 Fund
Period
Ended Per Share Amount
10/31/97
Undistributed Net Investment Income -
Beginning of Year
0
Dividend Income 29,963
Ordinary Income 2,554
Operational Expenses (21,804)
--------
Net Investment Income 10,713
Dividend Distribution - End of Year (10,713)
--------
Undistributed Net Investment Income -
End of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - End of Year
147,248
Distribution from Net Short-Term Gain 0
Accumulated Undistributed Net
Short-Term Realized Gain (Loss) on
Investment 147,248 0.3262
------- ------
Net Long-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Long-Term Realized Gain (Loss) on
Investments - End of Year
0
Distribution from Net Long-Term 0
Realized Gain
Accumulated Undistributed Net
Long-Term Realized Gain (Loss) on
Investment 0
Net Unrealized Appreciation 807,573 1.7893
(Depreciation) on Investments
Capital Stock at Par 4,515,098 10.0036
Additional Paid-in Capital 0 0.0000
- ------
Net Assets 5,469,919 12.1191
--------- -------
Shares Outstanding 451,349
<PAGE>
Price Make-up Sheet
Orchard Index Pacific Fund
Period
Ended Per Share Amount
10/31/97
Undistributed Net Investment Income -
Beginning of Year
0
Dividend Income 245,002
Ordinary Income 78,232
Operational Expenses (238,499)
---------
Net Investment Income 84,735
Dividend Distribution - End of Year (84,735)
--------
Undistributed Net Investment Income -
End of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - End of Year
(1)
Distribution from Net Short-Term Gain 0
Accumulated Undistributed Net
Short-Term Realized Gain (Loss) on
Investment (1)
Net Long-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Long-Term Realized Gain (Loss) on
Investments - End of Year
0
Distribution from Net Long-Term 0
Realized Gain
Accumulated Undistributed Net
Long-Term Realized Gain (Loss) on
Investment 0
Net Unrealized Appreciation (11,498,520) (2.2113)
(Depreciation) on Investments
Capital Stock at Par 59,943,452 11.5280
Additional Paid-in Capital 0 0.0000
- ------
Net Assets 48,444,931 9.3167
---------- - ------
Shares Outstanding 5,199,803
<PAGE>
Price Make-up Sheet
Orchard Index European Fund
Period
Ended Per Share Amount
10/31/97
Undistributed Net Investment Income -
Beginning of Year
0
Dividend Income 393,856
Ordinary Income 52,427
Operational Expenses (263,126)
---------
Net Investment Income 183,157
Dividend Distribution - End of Year (183,157)
---------
Undistributed Net Investment Income -
End of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Short-Term Realized Gain (Loss) on
Investments - End of Year
8,353
Distribution from Net Short-Term Gain 0
Accumulated Undistributed Net
Short-Term Realized Gain (Loss) on
Investment 8,353 0.0016
----- - ------
Net Long-Term Realized Gain (Loss) on
Investments - Beginning of Year
0
Net Long-Term Realized Gain (Loss) on
Investments - End of Year
0
Distribution from Net Long-Term 0
Realized Gain
Accumulated Undistributed Net
Long-Term Realized Gain (Loss) on
Investment 0
Net Unrealized Appreciation 1,330,040 0.2486
(Depreciation) on Investments
Capital Stock at Par 60,809,185 11.3645
Additional Paid-in Capital 0 0.0000
- ------
Net Assets 62,147,578 11.6147
---------- -------
Shares Outstanding 5,350,769
<PAGE>
APPENDIX
Corporate Bond Ratings by Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class. B - Bonds where are rated B generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Corporate Bond Ratings by Standard & Poor's Corporation
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity for bonds rated BBB than for bonds in the A category.
BB, B, CCC, and CC - Standard & Poor's describes the BB, B, CCC and CC rated
issues together with issues rated CCC and CC. Debt in these categories is
regarded on balance as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C - The rating C is reserved for income bonds on which no interest is being
paid.
D - Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Commercial Paper Ratings by Moody's Investors Service, Inc.
Prime-1 - Commercial Paper issuers rated Prime-1 are judged to be of the best
quality. Their short-term debt obligations carry the smallest degree of
investment risk. Margins of support for current indebtedness are large or stable
with cash flow and asset protection well assured. Current liquidity provides
ample coverage of near-term liabilities and unused alternative financing
arrangements are generally available. While protective elements may change over
the intermediate or longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Prime-2 - Issuers in the Commercial Paper market rated Prime-2 are high quality.
Protection for short-term holders is assured with liquidity and value of current
assets as well as cash generation in sound relationship to current indebtedness.
They are rated lower than the best commercial paper issuers because margins of
protection may not be as large or because fluctuations of protective elements
over the near or immediate term may be of greater amplitude. Temporary increases
in relative short and overall debt load may occur. Alternative means of
financing remain assured.
Prime-3 - Issuers in the Commercial Paper market rated Prime-3 have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earning and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Commercial Paper Ratings by Standard & Poor's Corporation
A - Issuers assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issuers in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2 - Capacity for timely payment for issuers with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1".
A-3 - Issuers carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designation.
THE ORCHARD SERIES FUND
Financial Statements and Financial Highlights for the Period
February 3, 1997 (Inception) to October 31, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Orchard Series Fund:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Orchard Index 500 Fund, Orchard Index 600
Fund, Orchard Index European Fund, Orchard Index Pacific Fund, Orchard Money
Market Fund, and Orchard Preferred Stock Fund, portfolios of Orchard Series
Fund, as of October 31, 1997, the related statements of operations, and the
statements of changes in net assets and financial highlights for the period
indicated. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Orchard Index
500 Fund, Orchard Index 600 Fund, Orchard Index European Fund, Orchard Index
Pacific Fund, Orchard Money Market Fund, and Orchard Preferred Stock Fund,
portfolios of Orchard Series Fund, at October 31, 1997, and the results of their
operations, the changes in their net assets and the financial highlights for the
period indicated, in conformity with generally accepted accounting principles.
December 5, 1997
<PAGE>
<TABLE>
THE ORCHARD SERIES FUND
STATEMENTS OF ASSETS AND
LIABILITIES
OCTOBER 31, 1997
- -------------------------------------------------------------------------------------------------------------------------------
ORCHARD ORCHARD ORCHARD ORCHARD ORCHARD ORCHARD
INDEX 500 INDEX 600 INDEX INDEX MONEY PREFERRED
EUROPEAN PACIFIC MARKET
FUND FUND FUND FUND FUND STOCK FUND
---------- ---------- ------------- ---------- ------------ -------------
ASSETS:
Investments at value:
<S> <C> <C> <C> <C> <C>
Short-term investments $ 1,095,658 $ 2,556,202 $ 3,236,625 $ 3,034,517
Common stocks 491,923,17$ 5,424,843 59,131,836 44,745,833
Preferred stocks 352,427 $ 4,202,664
----------
---------- ------------- ---------- ------------ -------------
Total investments (cost
$506,710,257; $4,617,270; 493,018,829 5,424,843 62,040,465 47,982,458 3,034,517 4,202,664
$60,710,425; $59,480,978;
$3,034,517; $4,136,443)
Cash 704,375 29,492 674,288 608,129 71,105 35,168
Dividends and interest receivable 206,951 1,762 85,056 148,816 6,315 7,447
Subscriptions receivable 26 26
Receivables for investments sold 20,210
---------- ---------- ------------- ---------- ------------ -------------
Total assets 493,930,155 5,476,333 62,799,809 48,739,403 3,111,937 4,245,305
---------- ---------- ------------- ---------- ------------ -------------
LIABILITIES:
Dividend payable
Due to GW Capital Management 34,555 2,919 64,906 53,551 1,210 3,219
Redemptions payable 336,286 43,305 57,438
Payables for investments purchased 692,982 3,495 544,020 183,483
---------- ---------- ------------- ---------- ------------ -------------
Total liabilities 1,063,823 6,414 652,231 294,472 1,210 3,219
---------- ---------- ------------- ---------- ------------ -------------
NET ASSETS $ 492,866,33$ 5,469,919 $ 62,147,578 $ 48,444,931$ 3,110,727 $ 4,242,086
========== ========== ============= ========== ============ =============
NET ASSETS REPRESENTED BY:
Capital stock, no par value $ 506,558,76$ 4,515,098 $ 60,809,185 $ 59,943,452$ 3,110,727 $ 4,184,863
Net unrealized appreciation (13,691,428) 807,573 186,821 (9,136,965) 66,221
(depreciation) on investments
Accumulated net short-term (1,000) 147,248 8,353 (1) (8,998)
realized gain (loss) on investments
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities 1,143,219 (2,361,555)
denominated in foreign currencies
---------- ---------- ------------- ---------- ------------ -------------
NET ASSETS $ 492,866,33$ 5,469,919 $ 62,147,578 $ 48,444,931$ 3,110,727 $ 4,242,086
========== ========== ============= ========== ============ =============
NET ASSET VALUE PER OUTSTANDING $ 11.6936$ 12.1191$ 11.6147 $ 9.3167$ 1.0000 $ 10.1372
SHARE
========== ========== ============= ========== ============ =============
SHARES OF CAPITAL STOCK OUTSTANDING: 42,148,295 451,349 5,350,769 5,199,803 3,110,727 418,466
</TABLE>
See notes to financial statements.
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
STATEMENTS OF OPERATIONS
FOR THE PERIOD FEBRUARY 3, 1997 (INCEPTION) TO OCTOBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
ORCHARD ORCHARD ORCHARD ORCHARD ORCHARD ORCHARD
INDEX INDEX INDEX INDEX MONEY MARKET PREFERRED
500 600 EUROPEAN PACIFIC
FUND FUND FUND FUND FUND STOCK FUND
--------- --------- ------------ ----------- ------------ -----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C>
Interest $ 2,613 $ 2,554 $ 52,427 $ 78,232 $121,136 $ 5,953
Dividends 267,224 29,971 457,051 253,874 205,885
Less: Foreign withholding tax (292) (8) (63,195) (8,872)
--------- --------- ------------ ----------- ------------ -----------
Total income 269,545 32,517 446,283 323,234 121,136 211,838
--------- --------- ------------ ----------- ------------ -----------
EXPENSES:
Salaries 1,440 1,440 1,440
Legal and SEC fees 1,105 978 125
Directors' fees 436 386 49
Audit fees 10,248 10,252 4,219
Investment administration 90,537 90,538 22,635
Bank and custodial fees 37,780 32,811 1,613
Other expenses 24,335 24,282 457
Management fee 53,983 21,804 219,272 198,749 4,526 27,297
--------- --------- ------------ ----------- ------------ -----------
Total expenses 53,983 21,804 385,153 359,436 35,064 27,297
Less amount paid by GW Capital Management 122,027 120,937 24,655
--------- --------- ------------ ----------- ------------ -----------
Net expenses 53,983 21,804 263,126 238,499 10,409 27,297
--------- --------- ------------ ----------- ------------ -----------
NET INVESTMENT INCOME 215,562 10,713 183,157 84,735 110,727 184,541
--------- --------- ------------ ----------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net short-term realized gain (loss) on (1,000) 147,248 8,353 (1) (8,998)
investments
Change in net unrealized appreciation (13,691,428) 807,573 186,821 (9,136,965) 66,221
(depreciation) on investments
Change in net unrealized appreciation
(depreciation) on translation of
assets and liabilities denominated in 1,143,219 (2,361,555)
foreign currencies
--------- --------- ------------ ----------- ------------ -----------
Net change in realized and unrealized
appreciation (depreciation) on (13,692,428) 954,821 1,338,393 (11,498,521) 57,223
investments
--------- --------- ------------ ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING
FROM OPERATIONS (13,476,866) $965,534 $ 1,521,550 $ (11,413,786) $ 110,727 $ 241,764
========= ========= ============ =========== ============ ===========
</TABLE>
See notes to financial statements
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FEBRUARY 3, 1997 (INCEPTION) TO OCTOBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
ORCHARD ORCHARD ORCHARD ORCHARD ORCHARD ORCHARD
INDEX 500 INDEX 600 INDEX INDEX MONEY MARKET PREFERRED
EUROPEAN PACIFIC
FUND FUND FUND FUND FUND STOCK FUND
----------- ---------- ----------- ----------- ---------- ------------
INCREASE IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income 215,562 10,713 183,157 $ 84,735 110,727 184,541
Net short-term realized gain (loss) (1,000) 147,248 8,353 (1) (8,998)
on investments
Change in net unrealized (13,691,428) 807,573 186,821 (9,136,965) 66,221
appreciation (depreciation) on
investments
Change in net unrealized
appreciation (depreciation) on 1,143,219 (2,361,555)
translation
of assets and liabilities
denominated in foreign currencies
----------- ----------- ------------ ------------ ------------- -----------
Net increase (decrease) in net (13,476,866) 965,534 1,521,550 (11,413,786) 110,727 241,764
assets resulting from operations
----------- ----------- ------------ ------------ ------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (215,562) (10,713) (183,157) (84,735) (110,727) (184,541)
----------- ----------- ------------ ------------ ------------- -----------
Total distributions (215,562) (10,713) (183,157) (84,735) (110,727)
(184,541)
----------- ----------- ------------ ------------ ------------- -----------
SHARE TRANSACTIONS:
Net proceeds from sales of shares 506,935,891 4,504,385 61,503,150 60,643,718 3,000,000 4,000,322
Reinvestment of distributions 215,562 10,713 183,157 84,735 110,727 184,541
Cost of shares redeemed (592,693) (877,122) (785,001)
----------- ----------- ------------ ------------ ------------- -----------
Net increase in net assets
resulting from
share transactions 506,558,760 4,515,098 60,809,185 59,943,452 3,110,727 4,184,863
----------- ----------- ------------ ------------ ------------- -----------
Total increase in net assets 492,866,332 5,469,919 62,147,578 48,444,931 3,110,727 4,242,086
----------- ----------- ------------ ------------ ------------- -----------
NET ASSETS:
Beginning of period 0 0 0 0 0 0
=========== =========== ============ ============ ============= ===========
End of period 492,866,332 5,469,919 62,147,578 $ 48,444,931 3,110,727 4,242,086
=========== =========== ============ ============ ============= ===========
OTHER INFORMATION:
SHARES:
Sold 42,180,500 450,337 5,408,490 5,262,973 3,000,000 400,031
Issued in reinvestment of 18,642 1,012 15,769 9,095 110,727 18,435
distributions
Redeemed (50,847) (73,490) (72,265)
----------- ----------- ------------ ------------ ------------- -----------
Net increase 42,148,295 451,349 5,350,769 5,199,803 3,110,727 418,466
=========== =========== ============ ============ ============= ===========
</TABLE>
See notes to financial statements.
<PAGE>
THE ORCHARD SERIES FUND
ORCHARD INDEX 500 FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the period February
3, 1997 (inception) to October 31, 1997 is as follows:
Net Asset Value, Beginning of Period 10.0000
Income From Investment Operations
Net investment income 0.0388
Net realized and unrealized gain 1.6936
-------------
Total Income From Investment Operations 1.7324
Less Distributions
From net investment income (0.0388)
-------------
Total Distributions (0.0388)
-------------
Net Asset Value, End of Period 11.6936
=============
Total Return 17.38%
Net Assets, End of Period 492,866,332
Average Commission Rate Paid Per Share 0.0318
Bought or Sold
Ratio of Expenses to Average Net Assets 0.60%*
Ratio of Net Investment Income to Average 1.67%*
Net Assets
Portfolio Turnover Rate 0.45%
*Annualized
(Continued)
<PAGE>
THE ORCHARD SERIES FUND
ORCHARD INDEX 600 FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the period February
3, 1997 (inception) to October 31, 1997 is as follows:
Net Asset Value, Beginning of Period 10.0000
Income From Investment Operations
Net investment income 0.0238
Net realized and unrealized gain 2.1191
-------------
Total Income From Investment Operations 2.1429
Less Distributions
From net investment income (0.0238)
-------------
Total Distributions (0.0238)
-------------
Net Asset Value, End of Period 12.1191
Total Return 21.46%
Net Assets, End of Period 5,469,919
Average Commission Rate Paid Per Share 0.0345
Bought or Sold
Ratio of Expenses to Average Net Assets 0.60%*
Ratio of Net Investment Income to Average 0.30%*
Net Assets
Portfolio Turnover Rate 21.58%
*Annualized
(Continued)
<PAGE>
THE ORCHARD SERIES FUND
ORCHARD INDEX EUROPEAN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the period February
3, 1997 (inception) to October 31, 1997 is as follows:
Net Asset Value, Beginning of Period 10.0000
Income From Investment Operations
Net investment income 0.0343
Net realized and unrealized gain 1.6147
-------------
Total Income From Investment Operations 1.6490
Less Distributions
From net investment income (0.0343)
-------------
Total Distributions (0.0343)
-------------
Net Asset Value, End of Period 11.6147
=============
Total Return 16.47%
Net Assets, End of Period 62,147,578
Average Commission Rate Paid Per Share 0.0639
Bought or Sold
Ratio of Expenses to Average Net Assets 1.20%*
Ratio of Net Investment Income to Average 0.83%*
Net Assets
Portfolio Turnover Rate 5.69%
*Annualized
(Continued)
<PAGE>
THE ORCHARD SERIES FUND
ORCHARD INDEX PACIFIC FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the period February
3, 1997 (inception) to October 31, 1997 is as follows:
Net Asset Value, Beginning of Period 10.0000
Income From Investment Operations
Net investment income 0.0163
Net realized and unrealized (loss) (0.6833)
--------------
Total (Loss) From Investment Operations (0.6670)
Less Distributions
From net investment income (0.0163)
--------------
Total Distributions (0.0163)
--------------
Net Asset Value, End of Period 9.3167
==============
Total Return (6.67%)
Net Assets, End of Period 48,444,931
Average Commission Rate Paid Per Share 0.0093
Ratio of Expenses to Average Net Assets 1.20%*
Ratio of Net Investment Income to Average 0.42%*
Net Assets
Portfolio Turnover Rate 0.04%
*Annualized
(Continued)
<PAGE>
THE ORCHARD SERIES FUND
ORCHARD MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the period February
3, 1997 (inception) to October 31, 1997 is as follows:
Net Asset Value, Beginning of Period 1.0000
Income From Investment Operations
Net investment income 0.0363
-------------
Total Income From Investment Operations 0.0363
Less Distributions
From net investment income (0.0363)
-------------
Net Asset Value, End of Period 1.0000
=============
Net Assets, End of Period 3,110,727
Ratio of Expenses to Average Net Assets 0.46%*
Ratio of Net Investment Income to Average 4.88%*
Net Assets
*Annualized
(Continued)
<PAGE>
THE ORCHARD SERIES FUND
ORCHARD PREFERRED STOCK FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the period February
3, 1997 (inception) to October 31, 1997 is as follows:
Net Asset Value, Beginning of Period 10.0000
Income From Investment Operations
Net investment income 0.4544
Net realized and unrealized gain 0.1372
-------------
Total Income From Investment Operations 0.5916
Less Distributions
From net investment income (0.4544)
-------------
Total Distributions (0.4544)
-------------
Net Asset Value, End of Period 10.1372
=============
Total Return 6.04%
Net Assets, End of Period 4,242,086
Ratio of Expenses to Average Net Assets 0.90%*
Ratio of Net Investment Income to Average 6.07%*
Net Assets
Portfolio Turnover Rate 10.05%
*Annualized
(Concluded)
<PAGE>
THE ORCHARD SERIES FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
- -------------------------------------------------------------------------------
1. ORGANIZATION
The Orchard Series Fund is an open-end management investment company
organized as a Delaware business trust (the Trust) on July 23, 1996. The
Trust offers six separate diversified portfolios, commonly known as mutual
funds (the Funds), which are registered with the Securities and Exchange
Commission under the provisions of the Investment Company Act of 1940 (as
amended): Orchard Index 500 Fund, Orchard Index 600 Fund, Orchard Index
European Fund, Orchard Index Pacific Fund, Orchard Money Market Fund, and
Orchard Preferred Stock Fund.
Initial capitalization of $100,000 for each Fund was received on January
27, 1997 from Great-West Life & Annuity Insurance Company (GWL&A).
Additional capitalization from GWL&A was received on February 3, 1997 as
follows: $2,900,000 for Orchard Money Market Fund, $3,900,000 for Orchard
Preferred Stock Fund, and $4,400,000 each for Orchard Index 500 Fund,
Orchard Index 600 Fund, Orchard Index European Fund, and Orchard Index
Pacific Fund. At October 31, 1997, GWL&A's investment in the Portfolios
totaled $18,310,171.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
The following is a summary of the significant accounting policies of the
Fund:
Security Valuation - Securities traded on national securities exchanges
are valued daily at the closing prices of the securities on these
exchanges, and securities traded on over-the-counter markets are valued
daily at the average between the quoted bid and asked prices. Short-term
and money market securities are valued at amortized cost which
approximates market value.
Dividend income for the Portfolios is accrued as of the ex-dividend date
and interest income is recorded daily.
Dividends - Dividends from investment income of the Orchard Money Market
Fund are declared daily and reinvested monthly. Dividends from investment
income of the Orchard Preferred Stock Fund are declared and reinvested
quarterly. Dividends from investment income of the Orchard Index 500 and
Orchard Index 600 Funds are declared and reinvested semi-annually while
dividends from investment income of the Orchard Index Pacific and Orchard
Index European Funds are declared and reinvested annually. All of the
Funds generally distribute capital gains, if any, in the fiscal year in
which they were earned.
Security Transactions - Security Transactions are accounted for on the
date investments are purchased or sold (trade date). The cost of
investments sold is determined on the basis of the first-in, first-out
method (FIFO).
Foreign Currency Translation - The accounting records of the Orchard
Index European and Orchard Index Pacific Funds are maintained in U.S.
dollars. Investment securities, and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
current exchange rate. Purchases and sales of securities, income receipts
and expense payments are translated into U.S. dollars at the exchange rate
on the dates of the transactions.
The Orchard Index European and Orchard Index Pacific Funds isolate that
portion of the results of operations resulting from changes in foreign
exchange rates from the fluctuations arising from changes in market prices
of securities held.
<PAGE>
Net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, and
currency gains or losses realized between the amounts of dividends,
interest, and foreign withholding taxes recorded by the Orchard Index
European and Orchard Index Pacific Funds and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and liabilities
including investments in securities at fiscal year end, resulting from
changes in the exchange rate.
Federal Income Taxes - For federal income tax purposes, each Fund intends
to qualify as a regulated investment company under the provisions of the
Internal Revenue Code by distributing substantially all of its taxable net
income (both ordinary and capital gain) to its shareholders and complying
with other requirements for regulated investment companies. Accordingly,
no provision for federal income taxes has been made.
3. INVESTMENT ADVISORY AGREEMENT
GW Capital Management, Inc. ("Capital Management"), a wholly-owned
subsidiary of GWL&A, serves as investment adviser to the Funds pursuant to
an investment advisory agreement, which was approved by the Funds' Board
of Directors. Capital Management is a registered investment adviser under
the Investment Advisers Act of 1940. The investment advisory agreement
provides that Capital Management, subject to the supervision and approval
of the Funds' Board of Directors, is responsible for the day-to-day
management of each Fund which includes selecting the Fund's investments
and handling their business affairs.
As compensation for its services to the Fund, the investment adviser
receives monthly compensation at the annual rate of .20% of the average
daily net assets of the Orchard Money Market Fund, .90% of the average
daily net assets of the Orchard Preferred Stock Fund, .60% of the average
daily net assets of the Orchard Index 500 and Orchard Index 600 Funds and
1.00% of the average daily net assets of the Orchard Index Pacific and
Orchard Index European Funds.
Subject to revision, Capital Management has voluntarily agreed to
reimburse the Orchard Index Pacific Fund, the Orchard Index European Fund,
and the Orchard Money Market Fund to the extent that total operating
expenses exceed 1.20%, 1.20%, and .46%, respectively, of average net
assets. Interest, taxes, brokerage commissions, and extraordinary expenses
are not eligible for reimbursement.
4. OTHER RELATED PARTY TRANSACTIONS
One Orchard Equities ("OOE"), a wholly-owned subsidiary of One Corporation
("One"), which is a wholly-owned subsidiary of GWL&A , distributes and
markets the Trust's Funds. Financial Administrative Services Corporation
("FASCORP"), a wholly-owned subsidiary of GWL&A, performs transfer agent
servicing functions for the Funds.
Certain officers of the Trust are also directors and/or officers of GWL&A
or its subsidiaries. No officer of the Trust receives any compensation
directly from the Funds.
5. CAPITAL STOCK
The Trust has authorized capital of an unlimited number of shares with no
stated par value for each portfolio in the Trust. Shares may be issued in
one or more series of shares, and each series may be issued in one or more
classes of shares. Each Fund represents a separate series of shares.
<PAGE>
6. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation (depreciation) of securities is as follows
as of October 31, 1997:
Orchard Orchard Orchard Orchard Orchard
Index 500 Index 600 Index Index Preferred
European Pacific
Fund Fund Fund Fund Stock Fund
------------ ----------- ----------- ---------- ------------
Gross 1,711,576 1,051,808 3,516,083 208,907 81,949
Gross (15,403,004) (244,235) (2,186,043) (11,707,427) (15,728)
depreciation
------------ ----------- ----------- ---------- ------------
Net
unrealized
appreciation (13,691,428) 807,573 1,330,040 (11,498,520) 66,221
(depreciation)
============ =========== =========== ========== ============
<PAGE>
The Orchard Series Fund
Orchard Index European Fund
COMMON STOCK
AUSTRIA --- 0.5%
ELECTRIC
192 EVN-Energie Versorgung AG* 22,342
254 Oest Elektrizitaetswirtschafts-AG* 20,237
$42,579
FOREIGN BANKS
582 Bank Austria AG* 27,952
126 Bank Austria AG-Vorzug* 5,936
482 Creditanstalt - Bankierein* 31,988
12 Creditanstalt - Bankverein PC Ptg Certs* 2,084
207 Creditanstalt - Bkverein Vorzu* 11,736
$79,696
INDUSTRIAL PRODS & SVCS
252 VA Technologie AG* 44,840
$44,840
MFTG - INDUSTRIAL PRODS
554 Voest-Alpine Stahl AG* 24,038
146 Wienerberger Baust* 29,291
$53,329
OIL & GAS
454 Omv AG* 64,725
$64,725
TOTAL AUSTRIA --- 0.5% $285,169
BELGIUM --- 2.1%
CREDIT INSTITUTIONS
1,200 Societe Generale de Belgique 108,833
$108,833
ELECTRIC
950 Electrabel 213,258
1,399 Tractebel Inv International 119,197
$332,455
FINANCIAL SERVICES
754 Fortis AG 143,138
$143,138
FOREIGN BANKS
350 BQE Brux Lambert 89,018
300 Generale de Banque 122,733
214 Kredietbank NV Series A 89,810
50 Kredietbank NV Series B* 20,808
$322,369
INSURANCE
4 Fortis AG* 1
270 Royale Belge 71,485
$71,486
MFTG - INDUSTRIAL PRODS
1,500 Solvay SA 90,412
$90,412
OIL & GAS
650 Electrafina SA* 60,416
400 Petrofina SA 147,307
$207,723
TOTAL BELGIUM --- 2.1% $1,276,416
DENMARK --- 1.2%
COMMUNICATIONS
1,056 Tele Danmark A/S 62,104
$62,104
CONSUMER SERVICES
1,078 Novo-Nordisk A/S 116,916
15 Sophus Berendsen A/S Series A 2,268
335 Sophus Berendsen A/S Series B 50,661
$169,845
FINANCIAL SERVICES
784 Unidanmark 53,054
$53,054
FOREIGN BANKS
504 BG Bank AS* 32,460
900 Den Danske Bank AS 101,735
$134,195
INSURANCE
15 Codan Forsikring 2,314
$2,314
MFTG - CONSUMER PRODS.
594 Carlsberg Series A* 30,851
198 Carlsberg Series B* 10,435
1,009 Danisco A/S 57,182
$98,468
MFTG - INDUSTRIAL PRODS
2 A/S Dampskibsselskabet Svendborg* 122,205
2 D/S 1912* 87,071
$209,276
TOTAL DENMARK --- 1.2% $729,256
FINLAND --- 1.2%
COMMUNICATIONS
1,500 Nokia Oyj Series K 130,249
$130,249
ELECTRONICS - HIGH TECH
3,500 Nokia AB Series A 306,286
$306,286
FOREIGN BANKS
13,000 Merita Ltd Series A 63,677
100 Merita Ltd Series B 484
$64,161
MFTG - CONSUMER PRODS.
500 Cultor OY* 27,105
300 Huhtamaki Group Class I* 12,371
500 Orion Yhtyma Oy Class A* 18,393
400 Orion Yhtyma Oy Class B* 14,792
$72,661
MFTG - INDUSTRIAL PRODS
900 Kemira OY* 9,148
700 Metra OY Class B* 18,702
1,400 Outokumpu OY 20,871
13 Rauma OY* 244
4,900 UPM-Kymmene Corp 109,192
1,300 Valmet Corp 20,387
$178,544
TOTAL FINLAND --- 1.2% $751,901
FRANCE --- 9.9%
AGRICULTURE
50 Eridania Beghin-SA 7,196
$7,196
COMMUNICATIONS
510 Canal Plus 88,788
5,000 France Telecom SA* 189,267
$278,055
CONSUMER SERVICES
550 Accor 102,428
1,100 Havas 72,481
375 Pin-Printemps-Redo* 171,536
1,750 Sanofi SA 166,291
$512,736
CREDIT INSTITUTIONS
19 Compagnie de Suez* 49
$49
ELECTRONICS - HIGH TECH
2,700 Alcatel Alsthom (Cie Gen El) 325,854
$325,854
FOREIGN BANKS
3,500 Banque Nationale de Paris 154,760
1,550 Societe Generale 212,329
$367,089
HOLDING & INVEST. OFFICES
2,075 Cie Fin Paribas 150,723
$150,723
INSURANCE
5,600 AXA 383,562
$383,562
MFTG - CONSUMER PRODS.
700 Christian Dior 77,683
1,200 Danone 183,527
1,460 LVMH Moet Hennessy 248,101
2,000 Michelin (CGDE) 102,618
320 Promodes 104,207
800 Synthelabo* 94,191
$810,327
MFTG - INDUSTRIAL PRODS
1,225 Air Liquide 190,112
4,000 Renault (Regie NTL)* 111,323
5,500 Rhone-Poulenc SA 239,856
2,300 Schneider SA* 122,837
100 Usinor Sacilor 1,656
$665,784
OIL & GAS
4,600 Elf Aquitaine SA 569,516
4,050 Total SA 449,454
$1,018,970
RETAIL TRADE
645 Carrefour 336,648
200 Cie Gen de Eaux Warrants* 106
1,450 Compagnie de Saint Gobain 208,184
2,050 Eaux (Cie Generale) 239,232
1,130 L'oreal 400,506
1,600 Lafarge 99,990
850 Peugeot SA* 96,246
$1,380,912
UTILITIES
2,340 Lyonnaise Des Eaux 243,001
$243,001
TOTAL FRANCE --- 9.9% $6,144,258
GERMANY --- 12.2%
ELECTRIC
8,300 Veba AG 463,442
$463,442
ELECTRONICS - HIGH TECH
9,450 Siemens AG 582,561
$582,561
FOREIGN BANKS
3,950 Bayer Vereins Bank AG* 229,504
6,800 Commezbank AG 231,131
10,300 Deutsche Bank AG 681,640
9,250 Dresdner Bank AG 378,900
$1,521,175
INSURANCE
4,550 Allianz AG Holdings* 1,028,383
1,500 Munchener Ruckvers* 442,304
$1,470,687
MFTG - INDUSTRIAL PRODS
10,400 BASF AG 353,495
14,150 Bayer Ag 497,400
9,900 Hoechst AG 381,079
615 Mannesmann AG 260,136
450 Viag AG 209,299
$1,701,409
MINING
5,550 Rwe AG* 241,206
$241,206
RETAIL TRADE
3,840 Metro AG* 169,566
480 Volkswagen AG 285,306
$454,872
TELEPHONE
11,600 Deutsche Telekom AG* 217,698
$217,698
TRANSPORTATION EQUIPMENT
320 Bayerische Motoren Werke AG* 232,410
10,100 Daimler-Benz AG 677,793
$910,203
TOTAL GERMANY --- 12.2% $7,563,253
IRELAND --- 1.4%
CREDIT INSTITUTIONS
11,510 Allied Irish Banks PLC* 86,688
8,182 Bank of Ireland Series A* 92,680
14,200 Bank of Ireland Series B* 179,382
$358,750
FOREIGN BANKS
12,000 Allied Irish Banks* 101,720
$101,720
INSURANCE
5,292 Irish Life PLC* 27,789
$27,789
MFTG - CONSUMER PRODS.
8,755 Kerry Group PLC* 105,081
18,536 Smurfit (Jefferson)* 54,785
$159,866
MFTG - INDUSTRIAL PRODS
20,209 CRH PLC* 217,998
$217,998
TOTAL IRELAND --- 1.4% $866,123
ITALY --- 5.5%
COMMERCIAL/OTHER
7,000 Rolo Banca* 91,586
$91,586
COMMUNICATIONS
20,000 Mediaset SPA* 90,935
$90,935
FOREIGN BANKS
10,000 IMI SPA 89,632
14,000 Istituto Banc San Paolo di Torino 106,464
$196,096
HOLDING & INVEST. OFFICES
70,116 Telecom Italia SPA* 283,931
161,111 Telecom Italia SPA RNC* 1,011,999
$1,295,930
INSURANCE
10,000 Alleanza Assicuraz 86,228
1,000 Alleanza Assicuraz non cnv 4,926
15,000 Assic Generali SPA 336,122
67,000 Istituto Nazionale delle Assicurazioni 108,089
1,000 RAS 8,525
$543,890
MFTG - CONSUMER PRODS.
7,000 Montedison SPA 5,694
1,000 Montedison SPA RNC 562
$6,256
MFTG - INDUSTRIAL PRODS
61,600 Fiat SPA 196,384
$196,384
OIL & GAS
75,000 ENI 422,705
$422,705
RETAIL TRADE
13,200 Fiat SPA 23,913
$23,913
TELEPHONE
26,000 Telecom Italia Mobile SPA* 53,412
131,000 Telecom Italia Mobile SPA 487,046
$540,458
TOTAL ITALY --- 5.5% $3,408,153
NETHERLANDS --- 8.6%
COMMUNICATIONS
281 Polygram NV 15,980
$15,980
CONSUMER SERVICES
6,723 Philips Electronics 526,398
$526,398
FOREIGN BANKS
28,876 ABN Amro Holding NV 581,596
$581,596
HOLDING & INVEST. OFFICES
15,942 ING Groep NV 669,280
$669,280
INSURANCE
5,605 Aegon NV 441,748
$441,748
MFTG - CONSUMER PRODS.
12,384 Unilever NV 658,337
$658,337
OIL & GAS
39,778 Royal Dutch Petroleum 2,104,363
$2,104,363
TELEPHONE
9,183 Kon Ptt Nederland 350,991
$350,991
TOTAL NETHERLANDS --- 8.6% $5,348,693
NORWAY --- 0.8%
CONSUMER SERVICES
1,000 Nycomed ASA Class A 26,301
700 Nycomed ASA Class B* 17,410
$43,711
ELECTRIC
300 Hafslund ASA 1,822
$1,822
FOREIGN BANKS
4,600 Christiania Bank og Kreditdasse* 18,411
5,300 Den Danske Bank 24,015
$42,426
INSURANCE
4,600 Storebrand ASA* 34,191
$34,191
MFTG - CONSUMER PRODS.
200 Orkla ASA* 16,495
1,200 Schibsted AS* 22,470
$38,965
MFTG - INDUSTRIAL PRODS
600 Kvaerner AS Series A 30,918
100 Kvaerner AS Series B* 4,824
1,900 Norske Hydro AS 104,697
700 Orkla AS 64,338
$204,777
OIL & GAS
1,700 Saga Petroleum Series A 33,291
600 Saga Petroleum Series B* 10,635
200 Transocean 10,578
$54,504
RETAIL TRADE
1,000 Aker Rgi ASA* 18,439
$18,439
TRANSPORTATION EQUIPMENT
900 Bergesen dy ASA Series A* 26,244
400 Bergesen dy ASA Series B* 11,778
$38,022
TOTAL NORWAY --- 0.8% $476,857
SPAIN --- 3.6%
ELECTRIC
17,500 Empresa Nacional de Electridad SA 329,871
15,315 Iberdrola SA 183,325
$513,196
FOREIGN BANKS
2,125 Argentaria Corp BC 118,121
11,340 BCO Bilbao Vizcaya 303,471
5,512 BCO Central Hispan 103,141
9,900 BCO ESP de Credito* 91,604
2,000 Banco Popular Espanol SA 118,189
8,568 Banco Santander SA 240,194
$974,720
OIL & GAS
5,050 Repsol SA 211,922
$211,922
OTHER UTILITIES
2,500 Gas Natural SDG 115,919
$115,919
TELEPHONE
15,800 Telefonica de Espana 431,522
$431,522
TOTAL SPAIN --- 3.6% $2,247,279
SWEDEN --- 4.3%
COMMUNICATIONS
1,400 Ericsson Tel Series A* 64,459
14,700 Ericsson Tel Series B 649,276
$713,735
CONSTRUCTION
2,000 Skanska AB Class B* 77,362
$77,362
CONSUMER SERVICES
22,400 Astra AB Series A* 362,770
5,133 Astra AB Series B* 79,694
$442,464
ELECTRIC
11,200 ABB AB Series A 131,167
4,500 ABB AB Series B 52,099
$183,266
FOREIGN BANKS
3,100 Nordbanken AB 97,505
8,400 Skand Enskilda BKN 91,067
4,700 Sparbanken Sverige AB, Swedbank* 106,941
3,600 Svenska Handelsbanken 114,195
100 Svenska Handelsbanken* 2,985
$412,693
HOLDING & INVEST. OFFICES
1,300 Investor AB Series A 60,203
1,900 Investor AB Series B 88,752
$148,955
MFTG - INDUSTRIAL PRODS
60 Granges AB* 984
3,500 Sandvik AB Series A 106,339
1,200 Sandvik AB Series B* 36,620
1,700 Scania AB Series A* 41,184
1,700 Scania AB Series B* 41,980
500 Stora Kopparbergs Bergslags Aktiebolag Series A 6,926
$234,033
RETAIL TRADE
3,100 Hennes & Mauritz AB* 127,172
2,400 Volvo Series A 62,478
$189,650
TRANSPORTATION
5,400 Volvo Series B 141,660
$141,660
WHOLESALE TRADE -CONSUMER
1,194 Electrolux AB 99,082
$99,082
TOTAL SWEDEN --- 4.3% $2,642,900
SWITZERLAND --- 10.9%
CONSUMER SERVICES
110 Novartis* 173,672
1,210 Novartis (registered) 1,897,412
$2,071,084
FOREIGN BANKS
1,525 Schweizerischer Bankverein* 410,556
400 Union Bank of Switzerland Bearer 461,065
450 Union Bank of Switzerland Registered* 103,933
$975,554
HOLDING & INVEST. OFFICES
3,800 CS Holding 535,967
770 Nestle SA 1,086,314
$1,622,281
INSURANCE
285 SCHW Ruckversicher 429,793
$429,793
MFTG - INDUSTRIAL PRODS
136 Roche Holding AG 1,196,625
31 Roche Holdings AG* 461,065
$1,657,690
TOTAL SWITZERLAND --- 10.9% $6,756,402
UNITED KINGDOM --- 33.3%
AIR
18,000 BAA PLC 166,132
4,000 British Airways PLC* 39,066
$205,198
COMMERCIAL/OTHER
42,000 Halifax* 475,741
$475,741
COMMUNICATIONS
29,000 British Sky Broadcasting Group PLC 205,853
38,000 Cable and Wireless 303,535
14,000 Granada Group 193,116
28,000 Reuters Holdings PLC 304,005
51,000 Vodafone Group 278,145
$1,284,654
CONSTRUCTION
1,068 Hanson PLC 5,493
$5,493
CONSUMER SERVICES
8,128 BOC Group 136,805
14,532 EMI Group PLC 117,663
31,719 Guinness 283,703
47,559 Marks and Spencer 482,843
10,223 Peninsular & Oriental Steam Navigation Co 118,371
14,000 Rank Group PLC 78,233
92,000 Smithkline Beecham PLC 872,276
$2,089,894
ELECTRIC
855 Energy Group PLC 8,716
3,000 National Grid Group PLC 14,146
11,000 Powergen 122,384
20,000 Scot Power 149,687
$294,933
ELECTRONICS - HIGH TECH
46,636 General Electric Co PLC 297,974
20,000 National Power 166,803
$464,777
ENVIRONMENTAL SERVICES
48,000 Rentokil Initial PLC 193,317
$193,317
FINANCIAL SERVICES
21,000 Legal & General Group PLC* 174,438
$174,438
FOREIGN BANKS
20,000 Bank of Scotland* 165,125
25,442 Barclays PLC 637,425
45,000 HSBC Holdings PLC 1,078,599
89,940 Lloyds TSB Group 1,124,416
29,000 National Westminster Bank PLC 417,058
32,000 Prudential Corp 341,527
13,700 Royal BK Scot Group 145,297
$3,909,447
HOLDING & INVEST. OFFICES
67,603 BTR PLC 228,307
17,000 Standard Chartered 184,574
20,000 Tomkins PLC 102,700
$515,581
INDUSTRIAL PRODS & SVCS
5,914 GKN PLC 132,688
8,000 Siebe PLC 153,714
$286,402
INSURANCE
11,000 Commercial Union 155,056
8,000 General Accident PLC 136,195
26,000 Royal & Sun Alliance Insurance Group PLC* 249,349
$540,600
MFTG - CONSUMER PRODS.
51,000 ASDA Group 132,654
15,000 Associated British Foods 120,823
52,046 BAT Industries 455,470
34,000 British Steel 90,148
16,873 Cadbury Schweppes PLC 169,887
9,590 Pearson PLC 125,525
18,864 Reed International PLC 186,610
18,000 Safeway 117,274
6,000 Vendome Luxury Group PLC 36,549
$1,434,940
MFTG - INDUSTRIAL PRODS
2,000 British Aerospace PLC* 53,095
60,000 Glaxo Wellcome PLC 1,286,767
12,000 Imperial Chemical Industry 177,207
5,000 Rolls-Royce PLC* 17,956
54,656 Unilever PLC* 407,229
16,000 Zeneca Group 505,041
$2,447,295
MINING
17,959 RTZ Corp 231,452
$231,452
OIL & GAS
81,000 British Gas PLC 356,126
95,294 British Petroleum Company PLC 1,400,837
7,000 Centrica PLC* 9,838
136,000 Shell Transport & Trading 964,807
$2,731,608
REAL ESTATE
8,665 Land Securities 145,407
$145,407
RETAIL TRADE
17,420 Allied Domecq 142,216
14,847 Bass PLC 206,294
15,188 Boots Co 217,659
35,000 Grand Metropolitan 315,986
17,000 Great Universal Stores PLC 201,548
30,866 J Sainsbury PLC 257,686
11,000 Kingfisher 158,379
10,000 Scot & Newcastle 113,188
36,469 Tesco 292,070
8,000 Whitbread 106,996
$2,012,022
TELEPHONE
106,577 British Telecommunications PLC 810,176
$810,176
WHOLESALE TRADE -CONSUMER
24,000 Abbey National 381,801
$381,801
TOTAL UNITED KINGDOM --- 33.3% $20,635,176
TOTAL COMMON STOCK --- 95.3% $59,131,836
(Cost $57,785,975)
PREFERRED STOCK
GERMANY --- 0.5%
OIL & GAS
3,350 RWE AG* 123,501
$123,501
RETAIL TRADE
360 Metro AG* 12,759
300 Volkswagen AG* 136,308
$149,067
TRANSPORTATION EQUIPMENT
100 Bayerische Motoren Werke* 50,840
$50,840
TOTAL GERMANY --- 0.5% $323,408
ITALY --- 0.0%
MFTG - INDUSTRIAL PRODS
17,600 Fiat SPA 29,019
$29,019
TOTAL ITALY --- 0.0% $29,019
TOTAL PREFERRED STOCK --- 0.6% $352,427
(Cost $368,248)
SHORT-TERM INVESTMENTS
UNITED STATES --- 4.1%
CREDIT INSTITUTIONS
2,557,000 Prudential Funding Corp 2,556,202
$2,556,202
TOTAL UNITED STATES --- 4.1% $2,556,202
TOTAL SHORT-TERM INVESTMENTS --- 4.1% $2,556,202
(Cost $2,556,202)
TOTAL ORCHARD INDEX EUROPEAN FUND --- 100.0% $62,040,465
(Cost $60,710,425)
The Orchard Series Fund
Orchard Index Pacific Fund
COMMON STOCK
AUSTRALIA --- 6.3%
CONSUMER SERVICES
1,800 Publishing & Broadcasting Ltd* 10,443
$10,443
CREDIT INSTITUTIONS
6,450 Commonwealth Instalment Receipt Trustee Ltd 47,669
$47,669
FOREIGN BANKS
31,400 Australia & New Zealand Banking Group Ltd* 218,973
9,750 Commonwealth Bank of Australia 112,098
31,000 National Australia Bank 423,994
37,300 Westpac Banking Corporation Ltd* 217,179
$972,244
INSURANCE
5,250 Lend Lease Corp Ltd 107,505
36,100 National Mutual Holdings Ltd 62,194
$169,699
MFTG - CONSUMER PRODS.
19,850 Coca-Cola Amatil Ltd 149,356
41,100 Foster's Brewing Group Ltd 78,034
16,400 News Corp Ltd 78,536
21,400 Pacific Dunlop Ltd 45,702
$351,628
MFTG - INDUSTRIAL PRODS
13,300 Amcor Ltd 62,736
23,900 Boral Ltd 62,856
21,200 CSR Ltd 73,659
6,200 ICI Australia Ltd 46,650
3,400 M.I.M. Holdings Ltd 2,988
18,600 Pioneer International Ltd 49,179
$298,068
MINING
47,200 Broken Hill Proprietary Company Ltd 467,993
13,500 CRA Ltd 164,232
11,800 Comalco Ltd 48,292
$680,517
OIL & GAS
23,700 WMC Ltd 84,162
13,950 Woodside Petroleum Ltd 117,814
$201,976
OTHER TRANS. SERVICES
4,700 Brambles Industries Ltd 90,359
$90,359
RETAIL TRADE
24,000 Coles Myer Ltd 115,437
23,500 Woolworths Ltd 75,851
$191,288
TOTAL AUSTRALIA --- 6.3% $3,013,891
BERMUDA --- 0.0%
HOLDING & INVEST. OFFICES
1,000 Jardine Matheson Holdings Ltd* 6,400
$6,400
TOTAL BERMUDA --- 0.0% $6,400
HONG KONG --- 8.5%
AIR
73,000 Cathay Pacific Air 76,966
$76,966
COMMUNICATIONS
272,800 Hong Kong Telecommunications Ltd 522,307
$522,307
CONSUMER SERVICES
51,000 Sun Hung Kai Properties 376,002
20,500 Swire Pacific Ltd Series A 109,528
65,000 Swire Pacific Ltd Series B 68,952
$554,482
ELECTRIC
52,500 China Light & Power Company Ltd 276,423
$276,423
ELECTRONICS - HIGH TECH
43,000 Hongkong Electric Holdings Ltd 145,743
$145,743
FOREIGN BANKS
28,000 Bank of East Asia 62,664
41,000 Hang Seng Bank Ltd 356,695
$419,359
GAS
76,200 Hong Kong and China Gas Company Ltd 143,922
$143,922
HOLDING & INVEST. OFFICES
45,000 Citic Pacific Ltd 215,394
36,000 Henderson Land Development Company Ltd 199,327
91,000 Hutchison Whampoa Ltd 629,818
15,000 Jardine Matheson Holdings Ltd 96,000
38,000 New World Development Company Ltd 133,713
$1,274,252
REAL ESTATE
54,000 Cheung Kong Holdings Ltd 375,420
57,000 Hongkong Land Holdings Ltd 129,960
20,000 Tsim Sha Tsui Properties Ltd* 24,450
48,000 Wharf Holdings Ltd 98,111
43,000 Wheelock & Company Ltd 48,952
$676,893
TOTAL HONG KONG --- 8.5% $4,090,347
INDONESIA --- 0.3%
CONSTRUCTION
6,500 PT Semen Gresik 6,302
$6,302
CONSUMER SERVICES
11,700 Indocement Tunggal Prakarsa 6,319
11,500 PT Astra International 8,521
$14,840
CREDIT INSTITUTIONS
32,000 PT Bank Internasional Indonesia 6,869
$6,869
MFTG - INDUSTRIAL PRODS
21,500 PT Gudang Garam 60,747
2,500 PT HM Sampoerna 4,345
$65,092
TELEPHONE
48,500 PT Telekomunikasi 45,007
10,500 Pt Indosat* 23,632
$68,639
TOTAL INDONESIA --- 0.3% $161,742
JAPAN --- 75.2%
AIR
13,000 Japan Airlines* 47,115
$47,115
COMMUNICATIONS
16 DDI Corp* 53,466
3 Japan Telecom Co* 41,895
300 KDD 15,261
1,000 Oki Electric Industry Co 2,718
84,000 Toshiba Corp 380,549
$493,889
CONSTRUCTION
11,000 Daiwa House Industry Company Ltd 106,068
21,000 Komatsu Ltd 112,244
17,000 Shimizu Corporation* 77,581
22,000 Taisei Corp* 77,174
$373,067
CONSUMER SERVICES
6,000 Eisai Company Ltd* 94,264
13,000 Kao Corp 181,546
2,000 Oriental Land Co Ltd* 103,907
10,000 Sankyo Co Ltd 330,008
300 Sony Music Entertainment Inc 10,549
7,000 Taisho Pharmaceutical Co 179,219
22,000 Takeda Chemical Industry 599,834
7,000 Yamanouchi Pharmaceutical Co Ltd 172,236
$1,671,563
ELECTRIC
16,400 Chubu Electric Power Company Inc 278,104
8,200 Chugoku Electric Power Company Ltd 133,599
500 Hokkaido Electric Power 8,187
25,100 Kansai Electric Power Company Inc 444,413
6,300 Shikoku Electric Power 102,643
11,000 Tohoku Electric Power 179,219
36,700 Tokyo Electric Power 701,663
$1,847,828
ELECTRONICS - HIGH TECH
20,000 Canon Inc 485,453
23,000 Denso Corp* 497,026
5,300 Fanuc 214,110
74,000 Hitachi Ltd* 568,994
4,000 Hoya Corp* 138,985
10,400 Kyushu Electric Power 172,901
49,000 Matsushita Electric Industrial Company Ltd 822,711
47,000 Mitsubishi Electric Corp 156,666
35,000 NEC Corp 384,040
3,200 Nintendo Corp Ltd 276,642
6,000 Omron Corp 101,746
3,000 Rohm Company* 296,758
43,000 Sanyo Electric Co 142,976
4,000 Secom* 258,622
24,000 Sharp Corp 186,534
9,500 Sony Corp 788,903
17,000 Sumitomo Electric Industries 224,688
$5,717,755
FINANCIAL SERVICES
1,000 Nichiei Company Ltd* 109,726
$109,726
FOREIGN BANKS
51,000 Asahi Bank 264,538
1,000 Bank of Fukuoka Ltd 4,247
109,000 Bank of Tokyo-Mitsubishi 1,422,462
26,000 Bank of Yokohama 107,847
18,000 Chiba Bank Ltd 89,476
68,000 Dai-Ichi Kangyo Bank Ltd 576,493
34,000 Daiwa Bank Ltd 126,616
63,000 Fuji Bank Ltd* 544,573
11,000 Gunma Bank 89,975
12,000 Hachijuni Bank 118,703
56,000 Industrial Bank of Japan 553,948
19,000 Joyo Bank* 87,182
52,000 Long-Term Credit Bank of Japan 175,926
37,000 Mitsubishi Trust & Banking 455,195
27,000 Mitsui Trust & Banking 93,815
33,000 Nikko Securities Company Ltd 119,327
37,000 Nippon Credit Bank 47,057
76,000 Sakura Bank Ltd 310,191
63,000 Sanwa Bank Ltd 633,601
17,000 Shizuoka Bank* 172,402
70,000 Sumitomo Bank 744,805
28,000 Sumitomo Trust & Banking 213,433
45,000 Tokai Bank* 262,594
17,000 Toyo Trust & Banking 127,041
2,000 Yasuda Trust & Banking 5,337
$7,346,784
GAS
55,000 Osaka Gas Co 121,613
61,000 Tokyo Gas Co 139,950
$261,563
INDUSTRIAL SERVICES
24,000 Sumitomo Corp 171,571
$171,571
INSURANCE
2,000 Mitsui Marine and Fire Insurance Company Ltd 11,771
16,000 Sumitomo Marine & Fire 106,602
36,000 Tokio Marine & Fire Insurance Co 359,102
19,000 Yasuda Fire & Marine Insurance 105,345
$582,820
LEASING
3,000 Acom Company Ltd* 164,588
21,000 Mitsubishi Motor Credit 92,169
$256,757
MFTG - CONSUMER PRODS.
14,000 Ajinomoto Co 126,849
18,000 Dai Nippon Printing Co Ltd 359,102
24,000 Kirin Brewery Company Ltd 201,496
8,000 Nikkon Corporation* 89,111
20,000 Nippon Paper Industries Co 109,393
9,000 Shiseido Company Ltd* 122,693
3,000 TDK Corp* 248,878
15,000 Toppan Printing Company Ltd 188,279
$1,445,801
MFTG - INDUSTRIAL PRODS
43,000 Asahi Chemical Industry Company Ltd 195,811
25,000 Asahi Glass Company Ltd 168,329
41,000 Fujitsu* 449,875
29,000 Ishikawajima-Harima Heavy Industries Co Ltd 65,810
32,000 Itochu Corp 109,858
22,000 Kajima Corp 98,570
92,000 Kawasaki Steel Corp 161,363
62,000 Kobe Steel Ltd* 74,729
30,000 Kubota Corp 116,708
4,000 Kyocera Corp* 229,093
48,000 Mitsubishi Chemical Corp 108,129
89,000 Mitsubishi Heavy Industries Ltd 437,231
6,000 Murata Mfg Co Ltd 243,391
78,000 NKK Corp 108,279
22,000 New Oji Paper Co 111,554
151,000 Nippon Steel Co 311,288
65,000 Nissan Motor Company Ltd 346,277
14,000 Ricoh Corp Ltd 180,382
2,000 SMC* 172,901
12,000 Sekisui Chemical Co 94,464
9,000 Shin-Etsu Chemical Co 219,950
36,000 Sumitomo Chemical Co 128,379
70,000 Sumitomo Metal Industries 140,233
5,000 Tokyo Electron Ltd* 249,377
30,000 Toray Industries Inc 167,082
5,000 Tostem Corp* 69,410
5,000 Toyo Seikan Kaisha* 78,554
8,000 Toyoda Automatic Loom Works Ltd* 156,941
$4,993,968
MINING
33,000 Marubeni Corp 103,142
24,000 Mitsubishi Materials Corp 67,830
$170,972
OIL & GAS
13,000 Tonen Corp 96,717
$96,717
OTHER TRANS. SERVICES
10,000 All Nippon Airways Company Ltd 49,875
38,000 Kawasaki Heavy Industries 88,445
25,000 Nippon Yusen Kabushiki Kaisha 91,230
$229,550
RAILROADS
89 East Japan Railway Co 432,793
18,000 Hankyu Corp 90,374
36,000 Kinki Nippon Railway 204,389
2,000 Odakyu Electric Railway 9,759
10,000 Seibu Railway 408,146
18,000 Tobu Railway Co* 68,828
25,000 Tokyu Corp 103,907
$1,318,196
REAL ESTATE
29,000 Mitsubishi Estate Company Ltd 366,417
19,000 Mitsui Fudosan 214,796
16,000 Obayashi Corp 84,190
15,000 Sekisui House Ltd 128,429
$793,832
RETAIL TRADE
15,000 Daiei Inc 69,326
10,000 Ito-Yokado Co Ltd 497,090
7,000 JUSCO Co 156,525
8,000 Marui Co* 134,995
16,000 Matsushita Electric Works 144,970
26,000 Nippon Oil Co 106,550
10,000 Seven - Eleven Japan 748,130
11,000 Suzuki Motor Company Ltd 117,041
$1,974,627
SECURITIES & COMMODITIES
30,000 Daiwa Securities Co Ltd 181,546
43,000 Nomura Securities Co Ltd 500,416
25,000 Yamaichi Securities Company Ltd 47,382
$729,344
TELEPHONE
80 Nippon Telegraph & Telephone Corp 678,239
$678,239
TRANSPORTATION EQUIPMENT
23,000 Honda Motor Company Ltd 774,314
23,000 Nippon Express Co Ltd 123,890
89,000 Toyota Motor Corp 2,478,387
$3,376,591
WHOLESALE TRADE - INDL
2,000 Hitachi Zosen Corp 4,405
35,000 Mitsubishi Corp 299,602
35,000 Mitsui & Co 265,627
$569,634
WHOLESALE TRADE -CONSUMER
19,000 Bridgestone Corp 410,640
12,000 Fuji Photo Film 434,912
$845,552
TOTAL JAPAN --- 75.2% $36,103,461
MALAYSIA --- 0.1%
AGRICULTURE
1,000 Kuala Lumpur Kepong Bhd 2,409
$2,409
COMMUNICATIONS
1,500 Telekom Malaysia Bhd 3,908
$3,908
CONSUMER SERVICES
3,000 Renong Bhd* 2,765
2,000 Resorts World Bhd 3,584
$6,349
CREDIT INSTITUTIONS
1,000 Technology Resources Industries Bhd 976
$976
ELECTRIC
1,000 Tenaga Nasional Bhd 2,169
$2,169
FOREIGN BANKS
2,000 Malayan Banking Bhd 7,771
2,000 Malayan United Industries Bhd 879
800 Malayan United Industries Rights* 0
1,000 Public Bank Bhd 630
$9,280
FORESTRY
1,000 Lingui Developments Bhd* 716
$716
HIGHWAYS
1,000 UTD Engineers Bhd 2,380
$2,380
HOLDING & INVEST. OFFICES
800 AMMB Holdings Bhd 1,313
1,000 Affin Holdings Bhd 768
1,000 Berjaya Sports Toto Bhd 2,740
6,000 Faber Group Bhd* 1,753
3,000 Magnum Corporation Bhd 2,358
1,000 Malaysian Helicopter Services Bhd 331
1,000 Multi-Purpose Holdings Bhd 527
1,500 YTL Corporation Bhd* 1,671
$11,461
MFTG - INDUSTRIAL PRODS
1,000 Land & General Holdings Bhd 436
1,000 Perusahaan Otomobil Nasional Bhd 2,410
$2,846
OIL & GAS
1,000 Petronas Gas Bhd 2,711
$2,711
REAL ESTATE
1,333 Malaysian Resources Corporation Bhd 794
$794
RETAIL TRADE
4,000 Sime Darby Bhd 5,783
$5,783
TOTAL MALAYSIA --- 0.1% $51,782
NEW ZEALAND --- 1.5%
COMMUNICATIONS
77,200 Telecom Corporation of New Zealand Ltd 373,763
$373,763
HOLDING & INVEST. OFFICES
115,000 Brierley Investments Ltd 88,739
$88,739
MFTG - CONSUMER PRODS.
24,800 Lion Nathan Ltd* 59,880
$59,880
MFTG - INDUSTRIAL PRODS
74,000 Carter Holt Harvey Ltd 128,940
56 Fletcher Challenge Ltd* 54
27,800 Fletcher Challenge Paper 45,671
$174,665
TOTAL NEW ZEALAND --- 1.5% $697,047
PHILIPPINES --- 0.2%
CONSUMER SERVICES
83,900 SM Prime Holdings 14,841
13,620 San Miguel Corp 15,349
$30,190
ELECTRIC
6,980 Manila Electric Co 21,507
$21,507
FOREIGN BANKS
1,443 Metropolitan Bank & Trust Co* 10,086
900 Philippine Commercial International Bank* 3,415
$13,501
REAL ESTATE
56,000 Ayala Corp Class B 20,770
16,925 Ayala Land Inc Class B 6,639
35,200 C & P Homes Inc 2,661
$30,070
TELEPHONE
900 Philippine Long Distance 22,468
$22,468
TOTAL PHILIPPINES --- 0.2% $117,736
SINGAPORE --- 0.9%
AIR
7,000 Singapore Airlines Ltd 52,478
$52,478
COMMUNICATIONS
36,000 Singapore Telecommunications Ltd 57,179
$57,179
CONSUMER SERVICES
3,000 Singapore Press* 41,360
$41,360
FOREIGN BANKS
6,000 Development Bank of Singapore Ltd 56,035
10,200 Oversea-Chinese Banking Corporation Ltd 56,703
4,000 Overseas Union Bank Ltd 13,342
8,000 United Overseas Bank Ltd 44,219
$170,299
MFTG - INDUSTRIAL PRODS
14,250 Keppel Corporation Ltd 45,085
$45,085
REAL ESTATE
17,000 City Developments Ltd 71,283
$71,283
TOTAL SINGAPORE --- 0.9% $437,684
THAILAND --- 0.1%
COMMUNICATIONS
2,000 Advanced Info Service Public Co Ltd 10,679
$10,679
CREDIT INSTITUTIONS
2,000 Bank of Ayudhra Ltd 1,582
$1,582
ELECTRONICS - HIGH TECH
1,000 Shinawatra Computer Co 3,956
$3,956
FINANCIAL SERVICES
5,700 Industrial Finance Corporation of Thailand* 4,509
$4,509
FOREIGN BANKS
5,300 Bangkok Bank Public Company Ltd 18,343
7,800 Krung Thai Bank Public Company Ltd 2,699
2,000 Siam Commercial Bank Public Company Ltd 3,881
4,200 Thai Farmers Bank Public Company Ltd 11,422
100 Thai Military Bank Public Company Ltd 40
$36,385
MFTG - INDUSTRIAL PRODS
700 Siam Cement Public Company Ltd 5,918
$5,918
TELEPHONE
6,100 TelecomAsia Corporation Public Company Ltd* 2,714
$2,714
TOTAL THAILAND --- 0.1% $65,743
TOTAL COMMON STOCK --- 93.3% $44,745,833
(Cost $56,244,353)
SHORT-TERM INVESTMENTS
UNITED STATES --- 6.7%
CREDIT INSTITUTIONS
2,438,000 Prudential Funding Corp 2,437,239
$2,437,239
ELECTRONICS - HIGH TECH
800,000 General Electric Co 799,386
$799,386
TOTAL UNITED STATES --- 6.7% $3,236,625
TOTAL SHORT-TERM INVESTMENTS --- 6.7% $3,236,625
(Cost $3,236,625)
TOTAL ORCHARD INDEX PACIFIC FUND --- 100.0% $47,982,458
(Cost $59,480,978)
The Orchard Series Fund
Orchard Index 500 Fund
COMMON STOCK
AGENCY --- 0.7%
73,520 Federal National Mortgage Association (nonvtg) 3,561,088
$3,561,088
AIR --- 0.4%
6,470 AMR Corp* 753,347
5,050 Delta Air Lines Inc 508,788
10,310 Southwest Airlines Co 336,364
6,140 US Air Group Inc* 287,813
$1,886,312
COMMUNICATIONS --- 3.8%
112,620 AT&T Corp 5,511,285
34,880 Airtouch Communications Inc* 1,347,240
10,910 Cabletron Systems Inc* 316,390
6,900 Clear Channel Communications Inc* 455,400
24,340 Comcast Corp Class A 669,350
19,700 Gannett Company Inc 1,035,471
35,300 Tele-Communications Inc - TCI Group Class A 809,676
38,830 Time Warner Inc 2,239,986
33,360 US West Communications Group 1,328,128
42,170 US West Media Group* 1,064,793
24,660 Viacom Inc Class B* 745,965
48,970 Westinghouse Electric Corp 1,294,620
62,560 Worldcom Inc* 2,103,580
$18,921,884
CONSTRUCTION --- 0.0%
2,120 Centex Corp 124,020
330 Kaufman & Broad Home Corp 7,033
210 Pulte Corp 7,849
$138,902
CONSUMER SERVICES --- 8.52%
4,650 Allergan Inc 153,157
18,500 Amgen Inc 911,125
3,940 Bausch & Lomb Inc 154,645
19,400 Baxter International Inc 897,250
8,590 Becton Dickinson & Co 395,672
7,670 Beverly Enterprises Inc* 114,567
7,780 Biomet Inc 194,010
69,200 Bristol-Myers Squibb Co 6,072,300
4,040 CR Bard Inc 112,110
28,390 CUC International Inc* 837,505
11,980 CVS Corp 734,518
45,410 Columbia/HCA Healthcare Corp 1,282,832
77,120 Eli Lilly & Co 5,157,400
7,270 H&R Block Inc 268,990
11,090 HFS Inc* 781,845
6,970 Harrah's Entertainment Inc* 137,218
23,940 Healthsouth Corp* 611,954
17,380 Hilton Hotels Corp 535,513
11,420 Humana Inc* 239,820
8,280 ITT Corp* 618,408
9,290 Ikon Office Solutions, Inc. 263,018
92,310 Johnson & Johnson 5,296,286
2,620 King World Productions Inc 123,795
4,540 Manor Care Inc 155,776
8,890 Marriott International Inc 620,078
32,460 Medtronic Inc 1,412,010
83,810 Merck & Company Inc 7,480,043
12,500 Mirage Resorts Inc* 312,500
17,570 Service Corporation International 534,778
6,460 St Jude Medical Inc* 195,816
21,120 Tenet Healthcare Corp* 645,469
46,810 The Walt Disney Co 3,850,123
13,140 United Healthcare Corp 608,540
5,140 United States Surgical Corp 138,456
7,070 Whitman Corp 185,588
$42,033,115
CREDIT INSTITUTIONS --- 9.42%
32,560 American Express Co 2,539,680
40,420 Banc One Corp 2,106,892
26,290 Bank of New York Company Inc 1,237,260
48,340 BankAmerica Corp 3,456,310
10,210 BankBoston Corp 827,643
6,960 Bankers Trust New York Corp 821,280
13,840 Barnett Banks Inc 954,960
3,740 Beneficial Corp 286,809
29,330 Chase Manhattan Corp 3,383,949
31,800 Citicorp 3,976,972
7,380 Comerica Inc 583,477
14,160 Corestates Financial Corp 1,030,140
7,500 Countrywide Credit Industries Inc 257,340
10,720 Fifth Third Bancorp 687,420
20,540 First Chicago NBD Corp 1,494,285
39,020 First Union Corp 1,914,399
17,290 Fleet Financial Group Inc 1,111,954
3,840 Golden West Financial Corp 333,120
6,880 HF Ahmanson & Co 405,920
7,470 Household International Inc 845,978
13,300 Huntington Bancshares Inc 429,750
12,440 JP Morgan & Company Inc 1,365,290
15,070 Keycorp 922,088
34,775 MBNA Corp 915,000
17,480 Mellon Bank Corp 901,304
14,960 National City Corp 893,860
49,380 NationsBank Corp 2,956,628
51,960 Norwest Corp 1,665,942
21,350 PNC Bank Corp 1,014,125
11,100 State Street Boston Corp 618,825
14,870 Suntrust Banks Inc 963,754
16,983 U S Bancorp 1,726,950
11,120 Wachovia Corp 837,469
17,490 Washington Mutual Inc 1,196,963
6,070 Wells Fargo & Co 1,768,646
$46,432,382
ELECTRIC --- 2.3%
13,240 American Electric Power Company Inc 625,590
10,410 Baltimore Gas & Electric Co 285,619
10,610 Carolina Power & Light Co 379,307
14,760 Central & South West Corp 318,255
11,020 Cinergy Corp 363,660
16,470 Consolidated Edison Company of New York Inc 564,097
10,110 DTE Energy Co 310,882
12,930 Dominion Resources Inc 480,828
25,064 Duke Power Co 1,209,338
27,620 Edison International 707,763
16,970 Entergy Corp 414,696
12,730 FPL Group Inc 657,976
8,390 GPU Inc 303,609
20,044 Houston Industries Inc 435,957
10,110 Niagara Mohawk Power Corp* 97,936
5,150 Northern States Power Co 259,431
10,610 Ohio Edison Co 262,598
11,520 PP&L Resources Inc 249,120
20,620 PacifiCorp 447,186
15,460 Peco Energy Co 350,741
16,180 Public Service Enterprise Group Inc 419,661
47,610 Southern Co 1,092,031
16,781 Texas Utilities Co 602,018
15,160 Unicom Corp 424,480
7,070 Union Electric Co 266,447
$11,529,226
ELECTRONICS - HIGH TECH --- 13.6%
15,360 AMP Inc 691,200
5,100 Adobe Systems Inc 243,525
9,800 Advanced Micro Devices Inc* 225,400
2,020 Aeroquip-Vickers Inc 105,165
6,460 Andrew Corp* 149,788
8,890 Apple Computer Inc* 151,405
25,160 Applied Materials Inc* 839,715
6,660 Black & Decker Corp 253,493
13,430 Boston Scientific Corp* 611,065
1,820 Briggs & Stratton Corp 90,545
46,390 Cisco Systems Inc* 3,805,418
52,547 Compaq Computer Corp* 3,349,871
8,280 DSC Communications Corp* 201,825
430 Data General Corp* 8,278
22,960 Dell Computer Corp* 1,839,670
10,710 Digital Equipment Corp* 536,164
22,550 Eastman Kodak Co 1,350,181
30,740 Emerson Electric Co 1,611,913
227,080 General Electric Co 14,660,739
3,630 General Signal Corp 145,654
5,660 Harris Corp 246,918
72,070 Hewlett-Packard Co 4,445,782
8,890 Honeywell Inc 605,071
113,240 Intel Corp 8,719,480
30 Intergraph Corp* 323
68,180 International Business Machines Corp 6,685,867
5,960 Johnson Controls Inc 267,455
5,900 KLA-Tencor Corp* 259,228
9,890 LSI Logic Corp* 215,721
6,970 Maytag Corp 232,624
14,750 Micron Technology Inc* 395,477
41,250 Motorola Inc 2,547,188
10,200 National Semiconductor Corp* 367,200
10,300 NextLevel Systems, Inc.* 139,050
18,290 Northern Telecom Ltd 1,640,375
24,360 Novell Inc* 205,525
30,610 PG&E Corp 782,453
3,130 Perkin-Elmer Corp 195,625
3,130 Polaroid Corp 140,653
16,380 Raytheon Co 888,615
5,550 Scientific-Atlanta Inc 103,019
16,990 Seagate Technology Inc* 460,854
12,430 Silicon Graphics Inc* 182,559
25,570 Sun Microsystems Inc* 875,773
2,320 Tektronix Inc 137,170
12,630 Tellabs Inc* 682,020
13,340 Texas Instruments Inc 1,423,205
10,610 Thermo Electron Corp* 395,880
3,840 Thomas & Betts Corp 191,040
12,230 Unisys Corp* 162,806
3,540 WW Grainger Inc 309,527
5,150 Whirlpool Corp 312,219
22,640 Xerox Corp 1,795,624
$66,883,340
ENVIRONMENTAL SERVICES --- 0.3%
13,560 Browning-Ferris Industries Inc 440,700
22,930 Laidlaw Inc Class B 323,886
4,040 Safety-Kleen Corp 89,385
31,460 Waste Management Inc 735,378
$1,589,349
FINANCIAL SERVICES --- 0.2%
9,500 Green Tree Financial Corp 400,188
3,840 Republic New York Corp 406,318
$806,506
FORESTRY --- 0.5%
3,930 Boise Cascade Corp 136,076
6,370 Georgia-Pacific Corp 540,252
21,020 International Paper Co 945,900
7,680 Louisiana-Pacific Corp 161,280
13,850 Weyerhaeuser Co 661,338
$2,444,846
GAS --- 0.7%
3,940 Columbia Gas System Inc 284,665
6,770 Consolidated Natural Gas Co 366,000
210 Eastern Enterprises 8,229
21,190 Enron Corp 805,220
3,530 Nicor Inc 136,124
220 OneOk Inc 7,549
5,860 Pacific Enterprises 191,546
2,520 Peoples Energy Corp 90,090
6,060 Sonat Inc 278,378
11,730 Tenneco Inc 527,111
11,020 Williams Companies Inc 561,326
$3,256,238
HIGHWAYS --- 0.0%
5,460 Ryder System Inc 191,100
$191,100
HOLDING & INVEST. OFFICES --- 0.19%
11,530 Cognizant Corp 451,826
7,980 MGIC Investment Corp 481,290
$933,116
INDUSTRIAL SERVICES --- 5.2%
3,430 Autodesk Inc 126,910
20,220 Automatic Data Processing Inc 1,033,747
5,750 Ceridian Corp* 224,606
25,170 Computer Associates International Inc 1,876,725
5,450 Computer Sciences Corp* 386,607
5,760 Deluxe Corp 188,640
11,930 Dun & Bradstreet Corp 340,745
330 EG&G Inc 6,827
10,600 Equifax Inc 329,257
30,840 First Data Corp 896,272
5,960 Fluor Corp 245,105
2,930 Foster Wheeler Corp 96,139
13,800 HBO & Co 600,300
8,690 Interpublic Group of Companies Inc 412,775
44,480 Lucent Technologies Inc 3,666,798
83,100 Microsoft Corp* 10,803,000
3,230 National Service Industries Inc 142,928
68,035 Oracle Systems Corp* 2,434,360
8,900 Parametric Technology Corp* 392,713
10,010 Pitney Bowes Inc 793,913
1,810 Shared Medical Systems Corp 99,098
3,740 Western Atlas Inc* 322,339
$25,419,804
INSURANCE --- 4.7%
11,720 AON Corp 632,142
10,410 Aetna Inc 739,755
30,130 Allstate Corp 2,498,892
17,172 American General Corp 875,772
48,625 American International Group Inc 4,962,765
11,930 Chubb Capital Corp 790,362
5,150 Cigna Corp 799,537
13,100 Conseco Inc 571,487
5,560 General Re Corp 1,096,360
8,290 Hartford Financial Services Group Inc 671,490
4,950 Jefferson-Pilot Corp 382,694
6,980 Lincoln National Corp 479,875
7,980 Loews Corp 891,262
6,260 MBIA Inc 374,035
11,700 Marsh & McLennan Companies Inc 830,700
5,000 Progressive Corp 521,250
6,570 Providian Financial Corp 243,090
9,690 SafeCo Corp 461,486
5,860 St Paul Companies Inc 468,431
13,650 SunAmerica Inc 490,540
9,600 Torchmark Corp 382,800
4,550 TransAmerica Corp 459,263
44,480 Travelers Group Inc 3,113,600
7,780 USF&G Corp 157,545
9,800 Unum Corp 477,750
$23,372,883
MFTG - CONSUMER PRODS. --- 10.26%
2,720 Adolph Coors Co Class B 96,049
3,940 Alberto-Culver Co Class B 118,937
5,350 American Greetings Corp Class A 185,576
34,170 Anheuser-Busch Companies Inc 1,364,647
38,830 Archer-Daniels-Midland Co 863,967
9,300 Avon Products Inc 609,150
4,850 Brown-Forman Corp Class B 238,557
6,970 Brunswick Corp 235,237
10,010 CPC International Inc 990,990
31,840 Campbell Soup Co 1,641,734
172,080 Coca-Cola Co 9,722,520
20,520 Colgate-Palmolive Co 1,328,670
32,860 ConAgra Inc 989,907
6,770 Dow Jones & Company Inc 314,805
5,150 Fruit of the Loom Inc Class A* 134,219
11,110 General Mills Inc 733,260
38,820 Gillette Co 3,457,387
25,770 HJ Heinz Co 1,196,681
4,950 Harcourt General Inc 247,807
8,790 Hasbro Inc 254,910
9,810 Hershey Foods Corp 542,003
7,680 International Flavors & Fragrances Inc 371,520
220 John H Harland Co 4,936
330 Jostens Inc 7,693
28,620 Kellogg Co 1,232,434
6,070 Knight-Ridder Inc 317,158
4,950 Liz Claiborne Inc 250,901
11,520 Masco Corp 505,440
20,100 Mattel Inc 781,388
6,870 McGraw-Hill Companies Inc 449,126
3,740 Meredith Corp 127,392
6,770 New York Times Co Class A 370,658
11,120 Newell Co 426,730
106,170 Pepsico Inc 3,908,330
168,030 Philip Morris Companies Inc 6,658,189
7,360 Pioneer Hi-Bred International Inc 674,360
9,600 Quaker Oats Co 459,600
10,310 RR Donnelley & Sons Co 336,364
7,480 Ralston-Ralston Purina Group 671,330
10,510 Rubbermaid Inc 252,892
330 Russell Corp 9,694
33,360 Sara Lee Corp 1,705,530
25,880 Seagram Company Ltd 871,820
210 Springs Industries Inc Class A 9,739
6,670 The Times Mirror Co Class A 361,014
8,690 Tribune Co 479,036
4,240 Tupperware Corp 106,263
12,840 UST Inc 384,391
44,080 Unilever NV ADR 2,352,770
4,440 VF Corp 396,825
7,780 Willamette Industries Inc 257,222
8,080 Wm Wrigley Jr Co 584,790
$50,592,548
MFTG - INDUSTRIAL PRODS --- 11.8%
23,930 3Com Corp* 991,587
53,290 Abbott Laboratories 3,267,316
7,680 Air Products & Chemicals Inc 583,680
15,770 Alcan Aluminium Ltd 450,423
12,330 Allegheny Teledyne Inc 324,427
12,130 Aluminum Company of America 885,490
5,860 Alza Corp 152,723
44,980 American Home Products Corp 3,334,142
880 Armco Inc* 5,060
2,930 Armstrong World Industries Inc 195,027
220 Ball Corp 7,700
14,540 Bay Networks Inc* 459,827
3,740 Bemis Company Inc 142,587
880 Bethlehem Steel Corp* 8,800
5,150 Case Corp 308,032
26,080 Caterpillar Inc 1,336,600
6,670 Champion International Corp 368,097
330 Cincinnati Milacron Inc 9,157
7,180 Clorox Co 502,600
8,580 Cooper Industries Inc 447,232
5,560 Cooper Tire & Rubber Co 117,800
16,170 Corning Inc 729,671
3,230 Crane Co 134,245
8,890 Crown Cork & Seal Company Inc 400,601
17,490 Deere & Co 920,411
7,780 Dover Corp 525,150
15,780 Dow Chemical Co 1,432,035
78,400 EI DuPont De Nemours & Co 4,459,000
17,170 EMC Corp* 961,520
5,550 Eastman Chemical Co 330,919
4,640 Ecolab Inc 220,688
10,010 Engelhard Corp 173,924
13,060 Fort James Corp 518,312
10,810 Goodyear Tire & Rubber Co 676,976
4,140 Great Lakes Chemical Corp 194,580
10,300 Guidant Corp 592,250
3,530 Harnischfeger Industries Inc 138,994
6,870 Hercules Inc 315,161
8,390 ITT Industries Inc 264,805
17,380 Illinois Tool Works Inc 854,870
11,620 Ingersoll-Rand Co 452,448
430 Inland Steel Industries Inc 8,439
38,620 Kimberly-Clark Corp 2,005,807
5,150 Mallinckrodt Inc 193,125
3,740 Mead Corp 226,270
53 Meritor Automotive Inc* 1,183
3,030 Millipore Corp 118,549
28,910 Minnesota Mining & Manufacturing Co 2,645,265
40,940 Monsanto Co 1,750,185
6,170 Moore Corporation Ltd 99,874
9,800 Morton International Inc 323,400
30 Nacco Industries Inc Class A 3,090
4,750 Nalco Chemical Co 190,000
6,160 Nucor Corp 321,860
9,800 Owens-Illinois Inc* 338,100
12,440 PPG Industries Inc 704,415
8,880 Pall Corp 183,701
7,875 Parker Hannifin Corp 329,270
89,760 Pfizer Inc 6,350,520
35,180 Pharmacia & Upjohn Inc 1,116,965
2,020 Potlatch Corp 100,748
11,110 Praxair Inc 483,974
3,030 Raychem Corp 274,403
5,140 Reynolds Metals Co 313,216
14,460 Rockwell International New 708,540
4,340 Rohm & Haas Co 361,574
50,860 Schering-Plough Corp 2,851,313
12,120 Sherwin-Williams Co 336,330
6,970 Sigma Aldrich Corp 244,821
4,240 Snap-On Inc 182,320
6,970 Stone Container Corp Series E 84,072
3,940 Temple-Inland Inc 226,058
3,840 The BF Goodrich Co 171,118
6,260 The Stanley Works 264,485
4,540 The Timken Co 152,090
36,920 Tyco International Ltd 1,393,730
20,110 USX-Marathon Group 718,933
6,060 USX-US Steel Group 206,040
4,850 Union Camp Corp 262,807
8,590 Union Carbide Corp 392,451
5,060 WR Grace & Co 344,080
18,900 Warner-Lambert Co 2,706,234
7,170 Westvaco Corp 235,262
6,760 Worthington Industries Inc 139,844
$58,259,328
MINING --- 0.5%
3,030 Asarco Inc 82,946
25,970 Barrick Gold Corp 533,995
16,170 Battle Mountain Gold Co 99,041
6,570 Cyprus Amax Minerals Co 137,556
1,100 Echo Bay Mines Ltd 4,468
13,740 Freeport-McMoran Copper & Gold Inc Class B 328,894
10,310 Homestake Mining Co 127,586
11,720 Inco Ltd 241,725
10,913 Newmont Mining Corp 381,955
4,150 Phelps Dodge Corp 308,656
16,680 Placer Dome Inc 258,540
$2,505,362
OIL & GAS --- 9.0%
6,370 Amerada Hess Corp 391,354
34,070 Amoco Corp 3,123,776
4,300 Anadarko Petroleum Corp 314,975
6,300 Apache Corp 264,600
5,240 Ashland Inc 249,880
22,240 Atlantic Richfield Co 1,830,619
11,810 Baker Hughes Inc 542,516
12,220 Burlington Resources Inc 598,010
45,390 Chevron Corp 3,764,510
7,380 Coastal Corp 443,722
12,130 Dresser Industries Inc 510,976
171,680 Exxon Corp 10,547,504
17,580 Halliburton Co 1,048,208
1,810 Helmerich & Payne Inc 146,043
3,430 Kerr-McGee Corp 231,738
3,940 McDermott International Inc 143,069
54,580 Mobil Corp 3,974,079
23,150 Occidental Petroleum Corp 645,306
7,380 Oryx Energy Co* 203,408
3,330 Pennzoil Co 246,420
18,200 Phillips Petroleum Co 880,425
6,060 Rowan Companies Inc* 235,583
148,700 Royal Dutch Petroleum Co ADR 7,825,338
60 Santa Fe Energy Resources Inc 784
34,360 Schlumberger Ltd 3,006,500
5,050 Sun Company Inc 202,313
36,600 Texaco Inc 2,083,894
17,690 Union Pacific Resources Group Inc 435,616
17,190 UnoCal Corp 709,088
$44,600,254
OTHER TRANS. SERVICES --- 0.2%
2,730 Caliber System Inc 142,301
2,620 FMC Corp* 211,727
7,980 Federal Express Corp* 532,665
$886,693
RAILROADS --- 0.8%
10,810 Burlington Northern Santa Fe Corp 1,026,950
15,160 CSX Corp 829,055
26,170 Norfolk Southern Corp 840,711
17,180 Union Pacific Corp 1,052,275
$3,748,991
RETAIL TRADE --- 5.2%
17,190 Albertson's Inc 633,881
19,020 American Stores Co 488,567
10,610 Autozone Inc* 313,653
880 Charming Shoppes Inc* 4,564
6,870 Circuit City Stores Inc 273,941
10,720 Darden Restaurants Inc 121,940
15,160 Dayton Hudson Corp 952,230
7,780 Dillards Inc Class A 298,558
14,550 Federated Department Stores Inc* 640,200
11,930 Fortune Brands, Inc 394,430
18,610 Gap Inc 989,810
12,635 Genuine Parts Co 395,627
4,140 Giant Food Inc Class A 126,788
320 Great Atlantic & Pacific Tea Company Inc 9,820
50,640 Home Depot Inc 2,816,850
17,270 JC Penney & Company Inc 1,013,524
33,960 K Mart Corp* 447,831
17,680 Kroger Co* 576,810
19,000 Limited Inc 447,678
330 Longs Drug Stores Corp 8,270
12,230 Lowe's Companies Inc 509,074
16,290 May Department Stores Co 877,624
47,830 McDonald's Corp 2,143,358
2,620 Mercantile Stores Company Inc 154,415
5,460 Nordstrom Inc 334,425
3,840 Owens Corning 131,520
4,440 Pep Boys - Manny Moe & Jack 111,830
8,590 Rite Aid Corp 510,031
27,090 Sears Roebuck & Co 1,134,394
11,400 TJX Companies Inc 337,725
7,480 Tandy Corp 257,125
20,000 Toys R Us Inc* 681,240
10,617 Tricon Global Restaurants* 321,823
157,040 Wal-Mart Stores Inc 5,516,030
34,160 Walgreen Co 960,750
9,290 Wendy's International Inc 195,090
10,510 Winn-Dixie Stores Inc 390,184
9,500 Woolworth Corp* 180,500
$25,702,110
SECURITIES & COMMODITIES --- 1.0%
18,550 Charles Schwab & Company Inc 633,019
23,040 Merrill Lynch & Co Inc 1,558,080
40,721 Morgan Stanley Group 1,995,329
7,480 Salomon Inc 581,099
$4,767,527
TELEPHONE --- 4.2%
13,040 Alltel Corp 461,290
38,110 Ameritech Corp 2,477,150
53,783 Bell Atlantic Corp 4,295,917
68,850 Bellsouth Corp 3,257,431
11,520 Frontier Corp 249,120
66,330 GTE Corp 2,814,846
48,020 MCI Communications Corp 1,704,710
63,384 SBC Communications Inc 4,032,807
29,820 Sprint Corp 1,550,640
$20,843,911
TRANSPORTATION EQUIPMENT --- 3.9%
39,220 Allied-Signal Inc 1,411,920
46,750 Chrysler Corp 1,647,937
2,730 Cummins Engine Company Inc 166,358
7,370 Dana Corp 345,004
5,450 Eaton Corp 526,606
4,440 Echlin Inc 145,410
320 Fleetwood Enterprises Inc 9,700
82,800 Ford Motor Co 3,617,284
4,440 General Dynamics Corp 360,470
50,570 General Motors Corp Ser D 3,245,937
13,440 Lockheed Martin Corp 1,277,633
5,150 Navistar International Corp* 119,413
4,640 Northrop Grumman Corp 506,920
5,560 Paccar Inc 250,545
8,590 TRW Inc 491,778
11,520 Textron Inc 665,994
69,448 The Boeing Co 3,324,823
16,280 United Technologies Corp 1,139,600
$19,253,332
U.S. GOVERNMENTS --- 0.4%
48,240 Federal Home Loan Mortgage Corp 1,827,090
$1,827,090
WHOLESALE TRADE -CONSUMER --- 1.9%
7,180 Avery Dennison Corp 285,850
7,600 Cardinal Health Inc 564,300
14,860 Costco Companies Inc* 572,110
320 Fleming Companies Inc 5,400
20,110 Nike Inc Class B 945,170
93,720 Procter & Gamble Co 6,372,960
3,940 Reebok International Ltd* 145,288
4,250 SuperValu Inc 155,656
12,230 Sysco Corp 489,200
$9,535,934
TOTAL COMMON STOCK --- 99.8% $491,923,171
(Cost $505,614,599)
SHORT-TERM INVESTMENTS
CREDIT INSTITUTIONS --- 0.2%
1,096,000 Prudential Funding Corp 1,095,658
$1,095,658
TOTAL SHORT-TERM INVESTMENTS --- 0.2% $1,095,658
(Cost $1,095,658)
TOTAL ORCHARD INDEX 500 FUND --- 100.0% $493,018,829
(Cost $506,710,257)
The Orchard Series Fund
Orchard Index 600 Fund
COMMON STOCK
AGRICULTURE --- 0.7%
600 Dekalb Genetics Corp Class B 21,525
500 Delta & Pine Land Co 18,625
$40,150
AIR --- 1.1%
450 Air Express International Corp 13,781
700 Comair Holdings Inc 25,725
400 Mesa Air Group Inc* 2,150
300 Offshore Logistics Inc* 6,300
300 Pittston Brink's Group 8,156
200 Skywest Inc 4,850
$60,962
COMMUNICATIONS --- 1.0%
300 ACC Corp* 11,887
400 Allen Group Inc* 7,575
200 Commnet Cellular Inc* 6,925
600 General Communication Inc Class A* 4,500
300 HA-LO Industries Inc* 8,400
300 Metro Networks Inc* 9,300
300 NTN Communications Inc* 581
500 Picturetel Corp* 4,625
300 TCSI Corp* 2,063
$55,856
CONSTRUCTION --- 1.3%
200 Acme Metals Inc* 2,662
400 Apogee Enterprises Inc 9,550
100 Continental Homes Holding Corp 3,012
400 Geon Co 8,675
400 Insituform Technologies Inc Class A* 3,800
300 MDC Holdings Inc 3,338
800 Morrison Knudsen Corp* 9,400
200 Southern Energy Homes Inc* 1,837
500 Standard Pacific Corp 5,438
200 The Ryland Group Inc 3,575
500 Toll Brothers Inc* 11,063
200 US Home Corp* 7,100
$69,450
CONSUMER SERVICES --- 7.4%
100 Angelica Corp 1,950
700 Aztar Corp* 4,987
200 CPI Corp 5,200
200 Carmike Cinemas Inc Class A* 6,500
300 Central Parking Corp 16,387
2,700 Cineplex Odeon Corp* 3,712
500 Coventry Corp* 6,968
500 DeVry Inc* 13,187
400 Enzo Biochem Inc* 6,800
300 Franklin Covey Co* 6,731
300 G&K Services Inc Class A 10,800
100 GC Companies Inc* 4,300
500 Genesis Health Ventures Inc* 12,250
100 Global Motorsport Group Inc* 1,525
400 Grancare Inc* 4,500
600 Grand Casinos Inc* 8,062
300 Hollywood Park Inc* 5,625
200 Insurance Auto Actions Inc* 2,350
632 Integrated Health Services Inc 20,066
600 Interim Services Inc* 15,712
400 Lincare Holdings Inc* 21,450
300 Living Centers of America Inc* 12,094
400 Magellan Health Services Inc* 11,525
400 Mariner Health Group Inc* 5,875
400 National Auto Credit Inc* 2,975
500 North American Vaccine Inc* 12,563
700 Orthodontic Centers of America Inc* 12,118
800 Phycor Inc* 18,450
400 Players International Inc* 1,400
500 Primadonna Resorts Inc* 8,750
600 Prime Hospitality Corp* 12,225
500 Regal Cinemas Inc* 11,500
300 Regis Corp 7,200
500 Renal Care Group Inc* 16,750
400 Renal Treatment Centers Inc* 13,275
700 Rollins Truck Leasing Corp 11,638
400 Sequus Pharmaceuticals Inc* 3,600
200 Showboat Inc 3,975
300 Sierra Health Services Inc* 11,081
300 The Marcus Corp 8,400
500 Universal Health Services Inc Class B* 22,031
500 Westwood One Inc* 15,344
$401,831
CREDIT INSTITUTIONS --- 5.31%
400 Astoria Financial Corp 20,900
300 Commercial Federal Corp 14,550
300 Cullen/Frost Bankers Inc 15,150
600 Deposit Guaranty Corp 22,125
400 First Commercial Corp 19,800
200 FirstBank Puerto Rico 6,725
1,000 FirstMerit Corp 25,500
400 Magna Group Inc 15,800
600 Provident Financial Group Inc 27,600
500 Riggs National Corp 11,500
450 St Paul Bancorp Inc 10,800
700 TCF Financial Corp 39,813
200 US Trust Corp 11,700
300 Whitney Holding Corp 14,850
800 Zions Bancorp 31,100
$287,913
ELECTRIC --- 1.5%
100 Bangor Hydro Electric Co 606
300 Central Hudson Gas & Electric Corp 10,631
200 Central Vermont Public Service Corp 2,675
300 Commonwealth Energy System Co 8,587
300 Eastern Utilities Associates 6,337
200 Energen Corp 7,237
100 Green Mountain Power Corp 1,794
100 Interstate Power Co 3,163
200 Orange & Rockland Utilities Inc 7,162
200 Pennsylvania Enterprises Inc 5,300
500 Sierra Pacific Resources 15,219
200 TNP Enterprises Inc 5,075
200 United Illuminating Co 7,800
$81,586
ELECTRONICS - HIGH TECH --- 14.2%
300 ADAC Laboratories* 5,850
200 Alliant Techsystems Inc* 11,900
200 Amtech Corp* 800
700 Anixter International Inc* 13,212
400 Applied Magnetics Corp* 9,200
700 Aspect Telecommunications Corp* 16,800
400 Auspex Systems Inc* 4,650
400 Baldor Electric Co 11,700
400 Ballard Medical Products Co 9,025
200 Benchmark Electronics Inc* 4,987
500 Boston Technology Inc* 13,562
200 Broadband Technolgies Inc* 1,231
100 C COR Electronics Inc* 1,600
600 C-Cube Microsystems Inc* 14,250
200 California Microwave Inc* 3,212
100 Centigram Communications Corp* 1,662
600 Checkpoint Systems Inc 9,600
300 Chips & Technologies Inc* 4,762
200 Circon Corp* 3,150
600 Cognex Corp* 16,050
200 Coherent Inc* 7,800
100 Collagen Corp 1,975
300 Comverse Technology Inc* 12,375
300 Cyrix Corp* 8,850
400 Dallas Semiconductor Corp 19,550
300 Daniel Industries Inc 6,037
200 Digi International Inc* 3,025
200 Digital Microwave Corp* 7,200
200 Dionex Corp* 9,975
200 Electro Scientific Industries Inc* 9,700
300 Electroglas Inc* 5,700
200 Envoy Corp* 5,600
300 Etec Systems Inc* 13,387
200 Fluke Corp 4,812
900 Geotek Communications Inc* 3,262
300 Gulf South Medical Supply Inc* 9,900
200 Hadco Corp* 11,075
100 Harmon Industries Inc 2,712
200 Hologic Inc* 5,125
700 Input/Output Inc* 18,768
200 Integrated Circuit Systems Inc* 6,850
800 International Rectifier Corp* 10,950
200 Intervoice Inc* 1,875
400 Invacare Corp 9,200
300 Juno Lighting Inc 5,400
600 Kemet Corp* 13,050
800 Komag Inc* 13,850
200 Kuhlman Corp 6,975
300 Lattice Semiconductor Corp* 15,019
300 Marshall Industries* 10,519
400 Mentor Corp 14,575
500 Methode Electronics Inc Class A 9,875
200 National Computer Systems Inc 7,600
300 Network Equipment Technologies Inc* 5,100
300 Oak Industries Inc* 8,606
800 P-Com Inc* 16,100
200 Pacific Scientific Co 2,925
200 Park Electrochemical Corp 5,675
200 Plexus Corp* 5,950
700 Read-Rite Corp* 13,913
300 Resound Corp* 1,650
300 Respironics Inc* 8,438
100 Rival Co 1,550
400 Royal Appliance Manufacturing Co* 3,150
400 Safeskin Corp* 18,150
300 Sanmina Corp* 22,425
200 Spacelabs Inc* 4,425
200 Speedfam International Inc* 7,425
200 Standard Microsystems Corp* 2,312
500 Steris Corp* 19,875
500 Summit Technology Inc* 4,156
300 Sunrise Medical Inc* 4,631
200 Symmetricom Inc* 3,062
300 Tecnol Medical Products Inc* 6,450
200 Thomas Industries Inc 6,000
100 Three Five Systems Inc* 2,075
400 Tracor Inc* 10,700
300 Trimble Navigation Ltd* 6,075
800 Unitrode Corp* 21,450
700 VLSI Technology Inc* 20,738
300 Valence Technology Inc* 2,438
700 Vanstar Corp* 9,143
600 Vicor Corp* 19,350
200 Visx Inc* 4,575
200 Vital Signs Inc 3,875
450 Vitesse Semiconductor Corp* 19,519
100 Watkins Johnson Co 3,100
300 X-Rite Inc 5,813
400 Zebra Technologies Corp Class A* 12,500
300 Zilog Inc* 5,719
100 Zoll Medical Corp* 625
$769,432
ENVIRONMENTAL SERVICES --- 0.1%
400 OHM Corp* 3,450
200 Tetra Technologies Inc* 4,612
$8,062
GAS --- 2.3%
400 Atmos Energy Corp 10,100
200 Cascade Natural Gas Corp 3,337
100 Connecticut Energy Corp 2,419
400 KCS Energy Inc 10,525
500 KN Energy Inc 21,750
300 New Jersey Resources Corp 9,713
300 Northwest Natural Gas Co 7,388
400 Piedmont Natural Gas Company Inc 11,200
500 Pogo Producing Co 18,094
300 Public Service Company of North Carolina Inc 6,056
400 Southwest Gas Corp 7,525
400 Southwestern Energy Co 4,850
300 Wicor Inc 12,938
$125,895
HOLDING & INVEST. OFFICES --- 2.25%
400 Centura Banks Inc 23,150
200 Cilcorp Inc 8,175
300 Coast Savings Financial Inc* 17,606
200 Eaton Vance Corp 7,225
100 JSB Financial Inc 4,819
600 Keystone Financial Inc 20,625
200 Onbancorp Inc 12,987
400 Pioneer Group Inc 12,000
1,340 Sovereign Bancorp Inc 23,785
$122,197
INDUSTRIAL SERVICES --- 7.8%
300 ABM Industries Inc 8,137
800 Acxiom Corp* 13,150
600 Advanced Tissue Sciences Inc* 8,362
400 Advo Inc* 8,975
600 American Management Systems Inc* 12,975
300 Analysts International Corp 13,537
300 Billing Information Concepts* 11,775
400 Bisys Group Inc* 12,450
300 Boole & Babbage Inc* 8,700
300 Broderbund Software Inc* 8,700
300 CDI Corp* 11,775
500 Cerner Corp* 12,125
400 Ciber Inc* 17,700
300 Dames & Moore Inc 3,731
300 Dialogic Corp* 12,375
200 Fair Isaac & Co Inc 8,687
300 Figgie International Inc Class A* 4,012
200 Filenet Corp* 4,500
300 Hyperion Software Corp* 11,437
300 ImmuLogic Pharmaceutical Corp* 863
200 Itron Inc* 4,100
300 Jack Henry & Associates Inc 7,725
1,000 Keane Inc* 29,625
200 Mail Boxes Etc* 5,525
300 NFO Research Inc* 5,400
400 National Data Corp 14,775
700 Network General Corp* 14,175
400 Norrell Corp 11,650
300 Perseptive Biosystems Inc* 3,300
300 Platinum Software Corp* 3,113
900 Platinum Technology Inc* 21,825
400 Primark Corp* 12,000
200 Progress Software Corp* 4,275
700 S3 Inc* 6,213
300 SEI Investments Companies 12,769
600 Sterling Software Inc* 20,475
200 Stone & Webster Inc 9,275
600 System Software Associates Inc* 7,050
400 True North Communications Inc 9,100
300 United States Bioscience Inc* 3,056
500 Vantive Corp* 12,625
300 Viewlogic Systems Inc* 7,275
100 Wall Data Inc* 1,638
$420,930
INSURANCE --- 4.8%
300 Allied Group Inc 14,175
600 American Bankers Insurance Group Inc 22,425
200 Arthur J Gallagher & Co 7,000
300 CMAC Investment Corp 16,406
200 Capital RE Corp 11,787
200 Compdent Corp* 4,137
300 Enhance Financial Services Group Inc 15,844
200 Executive Risk Inc 13,175
200 Fidelity National Financial Inc 4,350
200 First American Financial Corp 12,050
400 Fremont General Corp 18,650
400 Frontier Insurance Group Inc 13,475
200 Hilb Rogal & Hamilton Co 3,625
200 Life Re Corp 11,025
600 Mutual Risk Management Ltd 15,562
400 Orion Capital Corp 18,000
500 Protective Life Corp 26,438
200 Selective Insurance Group Inc 10,825
150 Trenwick Group Inc 5,231
200 Washington National Corp 6,512
300 Zenith National Insurance Corp 8,400
$259,092
MFTG - CONSUMER PRODS. --- 9.1%
200 Ashworth Inc* 1,987
300 Authentic Fitness Corp 5,250
200 Bassett Furniture Industries Inc 5,600
300 Bowne & Company Inc 10,462
300 Brown Group Inc 4,537
300 Buckeye Cellulose Corp* 12,450
500 Canandaigua Wine Company Inc Class B* 24,812
300 Catalina Marketing Corp* 13,706
700 Champion Enterprises Inc* 12,293
800 Chiquita Brands International Inc 13,450
100 Coca-Cola Bottling Co 5,950
400 Cone Mills Corp* 3,475
200 Cyrk Inc* 2,550
400 Delta Woodside Industries Inc 2,525
200 Designs Inc* 875
600 Dimon Inc 15,562
400 Earthgrains Co 16,450
400 Ethan Allen Interiors Inc 14,175
100 Fieldcrest Cannon Inc* 3,344
200 Galey & Lord Inc* 3,675
300 Galoob (Lewis) Toys Inc* 3,956
100 GoodMark Foods Inc 1,650
300 Guilford Mills Inc 7,162
500 Gymboree Corp* 12,125
100 Haggar Corp 1,537
500 Hartmarx Corp* 4,375
200 Innovex Inc 5,162
300 Interface Inc Class A 8,663
100 J&J Snack Foods Corp* 1,700
200 Johnston Industries Inc 1,162
500 Just For Feet Inc* 7,406
400 Justin Industries Inc 5,225
100 K-Swiss Inc 1,638
300 K2 Inc 7,594
300 Kellwood Co 10,369
300 La-Z-Boy Chair Co 11,213
300 Lydall Inc* 6,150
200 Merrill Corp 4,475
500 Mohawk Industries Inc* 15,375
300 Nature's Sunshine Products Inc 6,938
200 New England Business Service Inc 5,825
700 Oakwood Homes Corp 18,418
200 Oshkosh B'Gosh Inc Class A 6,100
100 Oxford Industries Inc 3,475
100 Penwest Ltd 3,750
200 Pharmaceutical Marketing Services Inc* 2,237
400 Phillips Van-Heusen Corp 5,700
200 Pillowtex Corp 5,450
100 Plenum Publishing Corp 5,125
500 Schweitzer-Mauduit International Inc 21,063
600 Smithfield Foods Inc* 17,925
400 Sola International Inc* 13,650
700 Stride Rite Corp 8,225
100 Swiss Army Brands Incorporated* 1,075
200 The Dixie Group Inc.* 2,375
200 The Timberland Co Class A* 14,425
400 Titan International Inc 8,300
400 Tultex Corp* 2,000
200 USA Detergents Inc* 2,100
300 Universal Forest Products Inc 4,500
600 Valassis Communications Inc* 17,700
600 Wolverine World Wide Inc 13,200
600 World Color Press Inc* 15,187
$494,808
MFTG - INDUSTRIAL PRODS --- 15.98%
300 AT Cross Co Class A 3,037
500 Alliance Pharmaceutical Corp* 5,000
350 Alpharma Inc Class A 7,722
100 Amcast Industrial Corp 2,537
400 Applied Power Inc Class A 24,750
300 Aptargroup Inc 16,481
200 Astec Industries Inc* 3,400
400 BMC Industries Inc 12,875
300 Banctec Inc* 6,862
400 Belden Inc 13,700
200 Bell Sports Corp* 1,850
800 Bio-Technology General Corp* 9,800
400 Birmingham Steel Corp 6,650
500 Blount International Inc Class A 26,281
100 Butler Manufacturing Co 3,387
400 COR Therapeutics Inc* 8,925
200 Cambrex Corp 9,587
660 Camco International Inc 47,685
400 Caraustar Industries Inc 13,750
400 Cephalon Inc* 4,650
100 Chemed Corp 4,050
300 Chemfirst Inc 7,575
200 Clarcor Inc 5,737
200 Commonwealth Industries Inc 3,525
300 Cygnus Inc* 6,900
300 Dynatech Corp* 10,237
600 Fedders Corp 3,600
200 Flow International Corp* 2,100
400 Gerber Scientific Inc 8,300
300 Global Industries Technologies Inc* 5,119
200 Greenfield Industries Inc 7,575
400 Griffon Corp* 6,325
200 Handy & Harman 5,087
200 Hauser Inc* 1,425
600 ICN Pharmaceuticals Inc 28,875
600 IDEXX Laboratories Inc* 9,525
200 IMCO Recycling Inc 3,637
300 Immune Response Corp* 3,206
100 Insteel Industries Inc 763
204 Intermagnetics General Corp* 1,913
400 Intermet Corp 7,700
200 Ionics Inc* 7,662
700 JLG Industries Inc 8,881
100 Kronos Inc* 2,900
500 Kulicke & Soffa Industries Inc* 12,875
200 LSB Industries Inc 887
300 Lilly Industries Inc Class A 5,681
150 Lindsay Manufacturing Co 6,506
600 Liposome Company Inc* 3,300
200 Lone Star Industries Inc 10,987
200 MacDermid Inc 14,600
200 Material Sciences Corp* 2,975
200 McWhorter Technologies Inc* 5,162
300 Medimmune Inc* 11,963
200 Medusa Corp 8,450
800 Microchip Technology Inc* 31,900
400 Mississippi Chemical Corp 7,350
300 Modecular Biosystems Inc* 3,000
300 Mosinee Paper Corp 8,475
300 Mueller Industries Inc* 13,256
500 Mycogen Corp* 10,625
330 Myers Industries Inc 5,795
300 NBTY Inc* 6,581
100 Nashua Corp* 1,363
400 Northwestern Steel and Wire Co* 1,425
400 Novellus Systems Inc* 17,800
300 Noven Pharmaceuticals Inc* 2,138
200 O'Sullivan Corp 2,100
200 Paragon Trade Brands Inc* 3,812
700 Paxar Corp* 11,900
200 Photronics Inc* 8,575
200 Pope & Talbot Inc 3,325
200 Protein Design Labs Inc* 9,975
100 Quaker Chemical Corp 1,819
200 Quanex Corp 5,525
100 RailTex Inc* 1,613
300 Regal-Beloit Corp 8,063
400 Regeneron Pharmaceuticals Inc* 4,175
220 Republic Group Inc 4,125
300 Robbins & Myers Inc 11,363
300 Roberts Pharmaceutical Corp* 3,000
400 Roper Industries Inc 10,675
300 Russ Berrie & Company Inc 8,175
200 SPS Technologies Inc* 9,250
300 SciClone Pharmaceuticals Inc* 1,481
300 Scotts Co Class A* 8,025
300 Shorewood Packaging Corp* 7,425
200 Standex International Corp 7,000
200 Steel Technologies Inc 2,300
400 Sturm Ruger Company Inc 7,525
400 TXI Corp* 18,975
200 Telxon Corp 5,150
300 The Manitowoc Company Inc 9,094
300 TheraTech Inc* 3,150
300 Thomas Nelson Inc 3,488
200 Toro Co 8,550
200 Tredegar Industries Inc 13,975
300 Tseng Labs Inc* 675
400 Ultratech Stepper Inc* 10,900
400 Valmont Industries Inc 9,150
300 Vertex Pharmaceuticals Inc* 8,850
200 WD-40 Co 5,750
400 WH Brady Co Class A 12,800
400 WHX Corp* 5,325
100 Walbro Corp 2,075
200 Whittaker Corp* 2,112
400 Williams Industries Inc 9,725
200 Wolverine Tube Inc* 6,200
200 Wynn's International Inc 6,787
300 Xircom Inc* 3,000
200 Zero Corp 5,375
$866,972
MINING --- 0.7%
300 AMCOL International Corp 6,187
300 Coeur D'Alene Mines Co* 3,112
200 Dravo Corp* 2,100
400 Getchell Gold Corp* 14,400
500 Glamis Gold Ltd 2,500
800 Helca Mining Co* 4,100
300 Stillwater Mining Co* 6,225
$38,624
OIL & GAS --- 4.4%
400 Benton Oil & Gas Co* 8,050
300 Box Energy Corp* 2,119
300 Cabot Oil & Gas Corp 7,200
300 Cross Timbers Oil Co 8,006
500 Devon Energy Corp 22,375
300 HS Resources Inc* 5,287
800 Monterey Resources Inc 15,950
500 Newfield Exploration Co* 13,563
400 Oceaneering International Inc* 9,925
300 Plains Resources Inc* 6,000
300 Pool Energy Services Co* 10,181
900 Pride International Inc* 29,700
1,500 Santa Fe Energy Resources Inc 19,593
200 Seitel Inc* 9,425
500 Snyder Oil Corp 11,063
100 St Mary Land & Exploration Co 4,075
600 Tuboscope Vetco International Corp* 19,050
500 United Meridian Corp* 16,969
800 Vintage Petroleum Inc 18,300
100 Wiser Oil Co 1,706
$238,537
OTHER TRANS. SERVICES --- 1.7%
500 American Freightways Corp* 7,750
300 Arkansas Best Corp* 3,450
400 Expeditors International of Washington Inc 14,700
500 Fritz Companies Inc* 6,906
300 Frozen Food Express Industries Inc 2,775
500 Heartland Express Inc* 13,750
200 Landstar System Inc* 5,000
200 MS Carriers Inc* 5,069
300 Rural/Metro Corp* 10,425
300 USFreightways Corp 9,713
600 Werner Enterprises Inc 14,550
$94,088
REAL ESTATE --- 0.6%
400 Amresco Inc* 12,550
200 CCB Financial Corp 18,200
$30,750
RETAIL TRADE --- 8.5%
500 Applebees International Inc 11,093
600 Arbor Drugs Inc 16,050
200 Au Bon Pain Inc* 1,900
100 Bertuccis Inc* 625
600 Bombay Company Inc* 3,637
300 Books-A-Million Inc* 1,875
200 Builders Material Holding Corp* 2,500
500 CKE Restaurants Inc 19,968
200 Carson Pirie Scott & Co* 9,637
400 Caseys General Stores Inc 9,650
400 Cash America International Inc 4,725
400 Cato Corp Class A 3,425
200 Cheesecake Factory Inc* 6,300
300 Consolidated Products Inc* 5,775
100 Danmark International Inc* 1,162
300 Discount Auto Parts Inc* 6,281
400 Eagle Hardware & Garden Inc* 6,800
300 Express Scripts Inc* 16,912
300 Fabri-Centers of America Inc Class A* 6,487
300 Filenes Basement Corp* 2,212
600 Foodmaker Inc* 9,862
500 Footstar Inc* 13,593
200 Gottschalks Inc* 1,625
500 Hancock Fabrics Inc 6,781
100 IHOP Corp* 3,375
200 J Baker Inc 1,450
400 Jan Bell Marketing Inc* 1,175
500 Landrys Seafood Restaurant Co* 14,000
300 Lechters Corp* 1,631
100 Lillian Vernon Corp 1,613
400 Luby's Cafeterias Inc 7,975
400 Michaels Stores Inc* 12,025
400 O'Reilly Automotive Inc* 9,750
1,050 Pier 1 Imports Inc 19,163
1,000 Proffitts Inc* 28,687
800 Ross Stores Inc 29,900
300 Ruby Tuesday Inc* 8,156
800 Ryan's Family Steak Houses Inc* 6,900
200 SPX Corp 13,050
700 Shoney's Inc* 3,281
500 Shopko Stores Inc* 12,531
300 Showbiz Pizza Time Inc* 6,375
200 Sonic Corp* 5,150
300 St John Knits Inc 12,056
300 Stein Mart Inc* 8,775
400 TCBY Enterprises Inc 2,500
300 TJ International Inc 6,900
200 Taco Cabana Inc* 1,000
300 The Dress Barn Inc* 7,612
500 The Men's Wearhouse Inc* 19,375
500 The Sports Authority Inc* 9,469
500 Triarc Companies Inc Class A* 11,313
300 Whole Foods Market Inc* 11,775
400 Williams-Sonoma Inc* 16,050
$461,887
SECURITIES & COMMODITIES --- 1.6%
420 Downey Financial Corp 11,025
200 Interra Financial Inc 11,025
400 Legg Mason Inc 19,625
300 Piper Jaffray Companies Inc 7,519
600 Quick & Reilly Group Inc 21,825
450 Raymond James Financial Inc 13,500
$84,519
TELEPHONE --- 0.4%
1,000 Tel-Save Holdings Inc* 21,500
$21,500
TRANSPORTATION EQUIPMENT --- 2.2%
200 AAR Corp 7,162
300 AO Smith Corp 12,431
400 Arctic Cat Inc 4,700
300 BE Aerospace Inc* 8,437
500 Breed Technologies Inc 11,031
500 Gentex Corp* 12,250
200 Huffy Corp 3,162
500 Orbital Sciences Corp* 12,188
300 Simpson Industries Inc 3,563
200 Skyline Corp 5,800
200 Spartan Motors Inc 1,387
200 Standard Motor Products Inc 4,375
300 Standard Products Co 8,063
100 Thor Industries Inc 2,894
300 Wabash National Corp 8,963
400 Winnebago Industries Inc 3,025
400 Yellow Corp* 10,975
$120,406
WATER --- 0.9%
100 Aquarion Co 2,825
100 Consumers Water Co 1,825
300 Halter Marine Group Inc* 15,694
400 Kirby Corp* 7,900
300 Philadelphia Suburban Corp 6,769
100 Southern California Water Co 2,194
600 United Water Resources Inc 9,937
$47,144
WHOLESALE TRADE - INDL --- 1.6%
200 AM Castle & Co 4,812
300 Applied Industrial Technology Inc 8,719
500 Barrett Resources Corp* 17,593
120 Bell Industries Inc* 1,927
200 MicroAge Inc* 4,400
600 Nautica Enterprises Inc* 15,975
300 OM Group Inc 11,325
300 Patterson Dental Co* 12,000
300 Pioneer Standard Electronics Inc 4,913
400 TBC Corp* 4,100
$85,764
WHOLESALE TRADE -CONSUMER --- 2.4%
200 Commercial Metals Co 6,450
300 Fisher Scientific International Inc 13,800
300 Hughes Supply Inc 10,462
300 Kaman Corp Class A 5,438
400 Kent Electronics Corp* 13,975
200 Nash Finch Co 4,025
500 Owens & Minor Inc 7,000
400 Rexel Inc* 8,950
700 Richfood Holdings Inc 16,888
400 Rykoff-Sexton Inc 8,600
100 Syncor International Corp* 1,575
700 Tech Data Corp* 31,150
$128,313
TOTAL COMMON STOCK --- 100.0% $5,424,843
(Cost $4,617,270)
TOTAL ORCHARD INDEX 600 FUND --- 100.0% $5,424,843
(Cost $4,617,270)
The Orchard Series Fund
Orchard Money Market Fund
SHORT-TERM INVESTMENTS
CREDIT INSTITUTIONS --- 60.9%
150,000 American Express Credit Corp 148,284
150,000 Ford Motor Credit Co 149,542
150,000 Prudential Funding Corp 149,929
400,000 Student Loan Marketing Association 400,267
850,000 Student Loan Marketing Association 849,481
150,000 TransAmerica Financial Corp 149,218
$1,846,721
ELECTRIC --- 4.9%
150,000 Baltimore Gas & Electric Co 148,671
$148,671
ELECTRONICS - HIGH TECH --- 9.8%
150,000 General Electric Co 148,625
150,000 Sharp Electronics Corp 149,218
$297,843
HOLDING & INVEST. OFFICES --- 4.9%
150,000 American General Finance Corp 149,634
$149,634
RETAIL TRADE --- 4.9%
150,000 Wal-Mart Stores Inc 149,791
$149,791
SECURITIES & COMMODITIES --- 9.8%
150,000 Bear Stearns Companies Inc 150,000
150,000 Merrill Lynch & Co Inc 145,914
$295,914
TELEPHONE --- 4.8%
150,000 American Telephone & Telegraph Co 145,943
$145,943
TOTAL SHORT-TERM INVESTMENTS --- 100.0% $3,034,517
(Cost $3,034,517)
TOTAL ORCHARD MONEY MARKET FUND --- 100.0% $3,034,517
(Cost $3,034,517)
The Orchard Series Fund
Orchard Preferred Stock Fund
PREFERRED STOCK
CREDIT INSTITUTIONS --- 22.9%
7,400 Bankers Trust New York Corp 200,725
6,800 Fleet Financial Group Inc 181,472
7,300 Household International Inc 208,962
3,500 JP Morgan & Company Inc 190,750
6,800 MBNA Corp 179,772
$961,681
ELECTRIC --- 25.3%
1,500 Baltimore Gas & Electric Co 163,500
1,600 Duke Power Co 163,200
1,400 Florida Power & Light Co 152,600
1,800 Pennsylvania Power & Light Co 189,900
2,000 South Carolina Electric & Gas 212,000
1,700 Southern California Edison Co 184,025
$1,065,225
ELECTRONICS - HIGH TECH --- 4.4%
6,700 International Business Machines Corp 185,087
$185,087
FINANCIAL SERVICES --- 13.4%
7,000 Comdisco Inc 182,434
7,000 First Maryland Bancorp 181,125
7,500 Republic New York Corp 198,750
$562,309
HOLDING & INVEST. OFFICES --- 4.3%
7,000 Chase Manhattan Corp 179,375
$179,375
INSURANCE --- 8.2%
3,100 Travelers Group Inc 155,775
7,300 WR Berkley Corp 188,428
$344,203
SECURITIES & COMMODITIES --- 12.8%
7,000 Bear Stearns Companies Inc 178,934
5,300 Merrill Lynch & Co Inc 165,291
7,600 Morgan Stanley Group 193,321
$537,546
TRANSPORTATION EQUIPMENT --- 8.7%
6,500 Ford Motor Co 185,250
6,900 General Motors Corp Ser D 181,988
$367,238
TOTAL PREFERRED STOCK --- 100.0% $4,202,664
(Cost $4,136,443)
TOTAL ORCHARD PREFERRED STOCK FUND --- 100.0% $4,202,664
(Cost $4,136,443)
Part C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements to be filed by amendment.
(b) Exhibits
Items (b)(1)-(2) and (b)(4) are incorporated by reference to
Registrant's Registration Statement dated July 30, 1996.
Item (b)(5) will be filed by amendment.
Items (b)(6), (b)(8)-(10) and (b)(13) are incorporated by
reference to Registrant's Pre-Effective Amendment No. 2 to its
Registration Statement dated January 28, 1997.
Items (b)(3), (b)(7), (b)(12) and (b)(14)-(18) are not
applicable.
(11) Written Consent of Deloitte & Touche LLP,
Independent Auditors for the Trust.
Item 25. Persons Controlled by or under Common Control with Registrant.
See page C-2.
Item 26. Number of Holders of Securities.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number of Record Holders
Title of Class as of October 31, 1997
-------------- -------------------------
Orchard Money Market Fund 1
Orchard Preferred Stock Fund 4
Orchard Index 600 Fund 10
Orchard Index 500 Fund 4
Orchard Index Pacific Fund 4
Orchard Index European Fund 6
</TABLE>
Item 27. Indemnification.
Article X of the Declaration of Trust sets forth the reasonable and fair
means for determining whether indemnification shall be provided to any past or
present trustee or officer of the Trust. It states that the Registrant shall
indemnify any present or past trustee or officer to the fullest extent permitted
by law against liability and all expenses reasonably incurred by him or her in
connection with any claim, action suit or proceeding in
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Power Corporation of Canada
100% - Marquette Communications Corporation 100% - 171263 Canada Inc.
68.1% - Power Financial Corporation
77% - Great-West Lifeco Inc.
99.5% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - GW Capital Management, LLC
100% Orchard Capital Management, LLC
100% - Financial Administrative Services
Corporation
100% - One Corporation
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado, Inc.
100% - One Health Plan of Georgia, Inc.
100% - One Health Plan of North Carolina,
Inc.
100% - One Health Plan of Washington, Inc.
100% - One Health Plan of Ohio, Inc.
100% - One Health Plan of Tennessee, Inc.
100% - One Health Plan of Oregon, Inc.
100% - One Health Plan of Florida, Inc.
100% - One Health Plan of Indiana, Inc.
100% - One Health Plan of Massachusetts,
Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
13% - Private Healthcare Systems, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
100% - Greenwood Property Corporation
94% - Maxim Series Fund,
Inc.* 100% - GWL Properties
Inc.
100% - Great-West Realty Investments, Inc.
50% - Westkin Properties Ltd.
100% - Confed Admin Services, Inc.
100% - Orchard Series Fund
</TABLE>
* 5.9% New England Life Insurance Company
0.1% The Great-West Life Assurance Company
<PAGE>
which he or she is involved by virtue of his or her service as a trustee, an
officer, or both. Additionally, amounts paid or incurred in settlement of such
matters are covered by this indemnification. Indemnification will not be
provided in certain circumstances, however. These include instances of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the duties
involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser.
Registrant's investment adviser, GW Capital Management, LLC ("GW Capital
Management"), is a wholly-owned subsidiary of Great-West Life & Annuity
Insurance Company ("GWL&A"), which is a wholly-owned subsidiary of The
Great-West Life Assurance Company. GW Capital Management provides investment
advisory services to various unregistered separate accounts of GWL&A and to
Great-West Variable Annuity Account A and the Maxim Series Fund, Inc., which are
registered investment companies. The directors and officers of GW Capital
Management have held, during the past two fiscal years, the following positions
of a substantial nature.
<TABLE>
<S> <C>
Name Position(s)
- ---- -----------
John T. Hughes Director, Chairman of the Board and
President, GW Capital Management; Senior Vice
President and Chief Investment Officer (U.S.
Operations), Great-West; Senior Vice President,
Chief Investment Officer, GWL&A; Chairman of the
Board, GWL Properties Inc.
Wayne Hoffmann Director, GW Capital Management; Vice President, Investments,
Great-West and GWL&A.
Mark S. Hollen Director, GW Capital Management; Vice
President, Financial Services, Great-West and
GWL&A; Chief Operating Officer, Financial
Administrative Services Corporation.
James M. Desmond Vice President, GW Capital Management; Assistant Vice
President, Investments, Great-West and GWL&A.
David G. McLeod Treasurer, GW Capital Management; Assistant Vice President,
Investment Administration, Great-West, GWL&A and Financial
Administrative Services Corporation.
Beverly A. Byrne
Secretary, GW Capital Management; Assistant Counsel,
Great-West; Assistant Counsel and Assistant Secretary, GWL&A;
Assistant Counsel and Secretary, Financial Administrative
Services Corporation; Secretary, One Orchard Equities, Inc.,
Confed Admin Services, Inc., BenefitsCorp Equities, Inc.,
Great-West Variable Annuity Account A, and Maxim Series Fund,
Inc.; Assistant Secretary, Benefits Communication Corporation,
One Corporation and Great-West Benefit Services, Inc.
</TABLE>
Item 29. Principal Underwriter.
(a) Not applicable.
(b) The principal business address of the
directors and officers of One Orchard
Equities, Inc. named below is 8515 East
Orchard Road, Englewood, Colorado 80111.
<TABLE>
Positions and Offices Positions and Officers
Name with Underwriter with Registrant
- ------ --------------------- --------------------
<S> <C> <C>
Steve Miller Director and President None
Stan Kenyon Director None
Alan D. MacLennan Director None
Glen R. Derback Treasurer Treasurer
Beverly A. Byrne Secretary Secretary
</TABLE>
(c) Not applicable.
Item 30.Location of Accounts and Records.
All accounts, books, and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder
are maintained in the physical possession of: Orchard Series Fund, 8515 East
Orchard Road, Englewood, Colorado 80111; GW Capital Management, LLC, 8515 East
Orchard Road, Englewood, Colorado 80111; or Financial Administrative Services
Corporation, 8515 East Orchard Road, Englewood, Colorado 80111.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to
six months from the effective date of Registrant's Post-Effective
Amendment No. 3 to the Registration Statement.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report
to shareholders upon request and without charge.
(d) Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 as it relates to the assistance to
be rendered to shareholders with respect to the calling of a
meeting to replace a trustee.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused Post-Effective Amendment No. 3 to the
Registration Statement to be signed on its behalf, in the City of Englewood,
State of Colorado on the 27th day of February, 1998.
ORCHARD SERIES FUND
/s/ J.D. Motz
J.D. Motz
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
/s/ J.D. Motz President 2/27/98
J.D. Motz and Trustee
/s/ G.R. Derback Treasurer 2/27/98
G.R. Derback
/s/ R.P. Koeppe* Trustee 2/27/98
R.P. Koeppe
/s/ R. Jennings* Trustee 2/27/98
R. Jennings
<PAGE>
Signature Title Date
/s/ D.L. Wooden Trustee 2/27/98
D.L. Wooden
/s/ S. Zisman* Trustee 2/27/98
S. Zisman
*By: /s/ Beverly A. Byrne
B.A. Byrne
Attorney-in-fact pursuant to Powers of Attorney filed under Post-Effective
Amendment No. 1 to the Registration Statement.
<PAGE>
EXHIBIT INDEX
Exhibit Description
24 Powers of Attorney*
27 Financial Data Schedule+
99.24(b)(1) Declaration of Trust**
99.24(b)(2) Bylaws**
99.24(b)(5) Form of Investment Advisory Agreement+
99.24(b)(6) Form of Principal Underwriting Agreement**
99.24(b)(8) Form of Custodian Agreement**
99.24(b)(9) Form of Transfer Agency Agreement**
99.24(b)(10) Opinion of R.B. Lurie**
99.24(b)(11) Consent of Deloitte & Touche LLP+
99.24(b)(13) Form of Subscription Agreement.**
<PAGE>
Exhibit 24(b)(5)
<PAGE>
INVESTMENT ADVISORY AGREEMENT
<PAGE>
This INVESTMENT ADVISORY AGREEMENT (this "Agreement") is made this 5th
day of December, 1997, by and between Orchard Series Fund, a Delaware business
trust (the "Trust"), and GW Capital Management, Inc., a Colorado corporation
(the "Adviser"), whereby it is agreed as follows:
ARTICLE I
Appointment of the Adviser
A. The Funds. The term "Funds" in this Agreement shall refer,
collectively, to the following series of the Trust:
Orchard Money Market Fund
Orchard Preferred Stock Fund
Orchard Index 600 Fund
Orchard Index 500 Fund
Orchard Index Pacific Fund
Orchard Index European Fund
B. Appointment. The Trust hereby appoints the Adviser to manage the
investment and reinvestment of the assets of the Funds and to administer the
business affairs of the Funds, for the period and on the terms herein set forth.
The Adviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided. The Adviser shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
ARTICLE II
Duties of the Adviser
A. Investment Advisory Services. In carrying out its obligations to
manage the investment and reinvestment of the assets of the Funds, the Adviser
shall, when appropriate and consistent with the limitations set forth in Section
C of this Article:
a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies of the
Funds;
(b) consult with and recommend to the Board of Trustees of the Trust
(the "Board") an overall investment plan with respect to each of the
Funds;
(c) seek out, present, and recommend, specific investment opportunities,
consistent with any overall investment plan approved by the Board;
(d) take such steps as are necessary to implement any overall investment
plan approved by the Board, including making and carrying out decisions
to acquire or dispose of permissible investments, management of
investments and any other property of the Funds, and providing or
obtaining such services as may be necessary in managing, acquiring or
disposing of investments;
(e) regularly report to the Board with respect to the implementation of
any approved overall investment plan and any other activities in
connection with management of the assets of the Funds;
(f) maintain all required accounts, records, memoranda, instructions or
authorizations relating to the acquisition or disposition of investments
for the Funds; and
(g) determine the net asset value of the Funds as required by applicable
law.
If the Funds would, in the judgment of the Adviser, benefit from the use
of supplemental investment research from third parties outside the context of
brokerage transactions, the Adviser is authorized to obtain and pay from the
Funds' assets a reasonable flat fee for such information. It is understood that
expenses incurred by the Adviser may not necessarily be reduced as a result of
the receipt of such information.
B. Administrative Services. In addition to the performance of investment
advisory services, the Adviser shall perform, or supervise the performance of,
administrative services in connection with the management of the Funds,
including all financial reporting for the Funds. In this connection, the Adviser
agrees to (a) assist in supervising all aspects of the Funds' operations,
including the co-ordination of all matters relating to the functions of the
custodian, transfer agent or other shareholder service agents, if any,
accountants, attorneys and other parties performing services or operational
functions for the Funds; (b) provide the Funds, at the Adviser's expense, with
services of persons, who may be the Adviser's officers, competent to perform
such administrative and clerical functions as are necessary in order to provide
effective administration of the Funds, including duties in connection with
certain reports and the maintenance of certain books and records of the Funds;
and (c) provide the Funds, at the Adviser's expense, with adequate office space
and related services necessary for its operations as contemplated in this
Agreement. Nothing contained herein will be construed to restrict the Trust's
right to hire its own employees or to contract for services to be performed by
third parties.
C. Fidelity Bond. The Adviser shall arrange for providing and
maintaining a bond issued by a reputable insurance company authorized to do
business in the place where the bond is issued against larceny and embezzlement
covering each officer and employee of the Trust and/or the Adviser who may
singly or jointly with others have access to funds or securities of the Trust,
with direct or indirect authority to draw upon such funds or to direct generally
the disposition of such funds. The bond shall be in such reasonable amount as a
majority of the trustees of the Trust who are not "interested persons" of the
Trust, as defined in the Investment Company Act of 1940, as amended from time to
time (the "Investment Company Act"), shall determine, with due consideration
given to the aggregate assets of the Trust to which any such officer or employee
may have access. The premium for the bond shall be payable by the Trust in
accordance with Section B of Article III.
D. Limitations on Services. The Adviser shall perform the services under
this Agreement subject to the Board's direction and in accordance with the
investment objectives and policies set forth in the Trust's registration
statement, as amended from time to time (the "Registration Statement"), filed
with the Securities and Exchange Commission.
The Trust has furnished or will furnish the Adviser with copies of its
Registration Statement, declaration of trust, and bylaws, each as currently in
effect, and during the term of this Agreement agrees: (a) to furnish the Adviser
with copies of all registration statements, proxy statements, reports to
shareholders, sales literature, and other material prepared for distribution to
shareholders of the Funds or the public that refer in any way to the Adviser not
later than the date such material is first distributed to the public, or sooner
if practicable, and the Trust shall not use such material, or shall discontinue
use of such material, if the Adviser reasonably objects in writing within five
(5) business days (or within such other time as may be mutually agreed); (b) to
furnish the Adviser with true and correct copies of each amendment or supplement
to its Registration Statement, declaration of trust, or bylaws as soon as
reasonably practicable; and (c) to provide the Adviser (i) with written notice
of any resolutions, policies, restrictions of procedures adopted by the Board
which affect the Adviser's investment management responsibilities hereunder; and
(ii) a list of every natural person or entity deemed by the Trust to be an
"affiliated person" or "promoter" of or "principal underwriter" for the Trust or
an affiliated person of such person, as such terms are defined in the Investment
Company Act, and the Trust shall promptly notify the Adviser of any additions or
deletions to such list.
ARTICLE III
Compensation of the Adviser
A. Investment Management Fee. As compensation for its services to the
Trust under this Agreement, the Adviser shall receive monthly compensation with
respect to each Fund at an annual rate based on a percentage of the average
daily net assets of such Fund, according to the following schedule:
<PAGE>
Fund Fee
Orchard Money Market Fund 0.26%
Orchard Preferred Stock Fund 0.90%
Orchard Index 600 Fund 0.60%
Orchard Index 500 Fund 0.60%
Orchard Index Pacific Fund 1.00%
Orchard Index European Fund 1.00%
In the event of the termination of this Agreement with respect to any
Fund, the fee with respect to such Fund shall be reduced proportionately based
on the number of calendar days during the last month in which this Agreement is
in effect and shall be paid within five (5) business days of the date this
Agreement is terminated with respect to such Fund. For purposes of calculating
the Adviser's fee, the value of the net assets of the Funds shall be determined
in the same manner as the Funds use to compute the value of their net assets in
connection with the determination of the net asset value of their shares, all as
set forth more fully in each of the Fund's current prospectus and statement of
additional information.
B. Expenses of the Adviser. The Adviser shall be responsible for all
expenses incurred in performing the services set forth in Article II. These
expenses include costs incurred in providing investment advisory services;
compensating and furnishing office space for officers and employees of the
Adviser connected with investment and economic research, trading, and investment
management of the Funds; and paying the fees of all trustees of the Trust who
are affiliated persons of the Adviser or any of its affiliates.
C. Expenses of the Trust. The Trust pays all other expenses incurred in
its operation and all of its general administrative expenses, including
redemption expenses, expenses of portfolio transactions, shareholder servicing
costs, pricing costs (including the daily calculation of net asset value),
interest, charges of the custodian and transfer agent, if any, cost of auditing
services, trustees' fees, legal expenses, state franchise taxes, certain other
taxes, expenses of registering the shares under federal and state securities
laws, fees of the Securities and Exchange Commission, advisory fees, certain
insurance premiums (including fidelity bond premiums), costs of maintenance of
corporate existence, investor services (including allocable personnel and
telephone expenses), costs of printing proxies, stock certificates, costs of
board and shareholder meetings (including fees and expenses of the disinterested
trustees), and any extraordinary expenses, including litigation costs.
Accounting services are provided for the Funds by the Adviser and the Trust
reimburses the Adviser for its costs in connection therewith.
D. Expense Limitation. The Adviser agrees that if the total expenses of
any Fund (exclusive of interest, taxes, brokerage expenses and extraordinary
items such as litigation expenses) for any fiscal year of the Trust exceed the
lowest expense limitation imposed in any jurisdiction in which that Fund is then
making sales of its shares or in which its shares are then qualified for sale,
if any, the Adviser will pay or reimburse such Fund for that excess up to the
amount of its management fees payable with respect to that Fund during that
fiscal year. The amount of the monthly management fee payable by any Fund under
Section A of this Article shall be reduced to the extent that the monthly
expenses of that Fund, on an annualized basis, would exceed the foregoing
limitation. At the end of each fiscal year of the Trust, if the aggregate annual
expenses chargeable to any Fund for that year exceed the foregoing limitation,
the Adviser will promptly reimburse that Fund for the amount of such excess to
the extent not already reimbursed by reduction of the monthly management fee
(but only up to the amount of its management fees payable with respect to that
Fund during that fiscal year), but if such expenses are within the foregoing
limitation, any excess amount previously withheld from the monthly management
fee during that fiscal year will be promptly paid over to the Adviser.
In the event that this Agreement (i) is terminated with respect to any
one or more Funds as of a date other than the last day of the fiscal year of the
Trust or (ii) commences with respect to one or more Funds as of a date other
than the first day of the fiscal year of the Trust, then the expenses of such
Fund or Funds shall be annualized and the Adviser shall pay to, or receive from,
the applicable Fund or Funds a pro rata portion of the amount that the Adviser
would have been required to pay or would have been entitled to receive, if any,
had this Agreement been in effect with respect to such Fund or Funds for the
full fiscal year.
ARTICLE IV
Portfolio Transactions and Brokerage
In connection with the management of the investment and reinvestment of
the assets of the Funds, the Adviser is authorized to select the brokers or
dealers that will execute the purchase and sale of portfolio securities for the
Funds. The Adviser will use its best efforts on behalf of the Funds to obtain
the best overall terms available for any transaction, taking into consideration
such factors which the Adviser deems relevant, including the breadth of the
market in and the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any (for the specific transaction and on a continuing basis). The Adviser may
also consider the brokerage and research services (as those term are defined in
Section 28(e) of the Securities and Exchange Act of 1934, as amended from time
to time (the "Exchange Act")) provided to any Fund and/or other account over
which the Adviser or an affiliate of the Adviser exercises investment
discretion. The Adviser may pay a broker or dealer a commission for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting the same transaction if the Adviser
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided (in terms of either that
particular transaction or the Adviser's overall responsibilities). Subject to
the terms of this Agreement and the provisions of the Investment Company Act,
the Exchange Act and other applicable law, the Adviser may select a broker or
dealer with which it or the Funds are affiliated. In addition, subject to
obtaining the best price and execution, the Adviser may also allocate brokerage
transactions of the Funds in a manner which takes into account the sale of
shares of the Funds.
ARTICLE V
Activities of the Adviser
The services of the Adviser to the Trust under this Agreement are not to
be deemed exclusive, and the Adviser and its affiliates shall be free to render
similar services to others, provided its services under this Agreement are not
impaired thereby. It is understood that trustees, officers, and shareholders of
the Trust or a Fund are or may become interested in the Adviser as directors,
officers, and shareholders of the Adviser or otherwise; that directors,
officers, and shareholders of the Adviser are or may become similarly interested
in the Trust or a Fund; and that the Adviser is or may become interested in the
Trust or a Fund as a shareholder or otherwise. The Adviser shall notify the
Trust of any change in its ownership or control that causes an "assignment" of
this Agreement (as that term is defined in the Investment Company Act and the
rules and regulations thereunder) within a reasonable time after such change.
It is agreed that the Adviser may use any supplemental investment
research obtained for the benefit of the Funds in providing investment advice to
its other investment advisory accounts. The Adviser or its affiliates may use
such information in managing their own accounts. Conversely, such supplemental
information obtained by the placement of business for the Adviser or other
entities advised by the Adviser will be considered by and may be useful to the
Adviser in carrying out its obligations to the Trust.
Securities held by the Funds may also be held by separate accounts or
other mutual funds for which the Adviser acts as an investment adviser or by the
Adviser or its affiliates. Because of different investment objectives or other
factors, a particular security may be bought by the Adviser or its subsidiaries
or for one or more clients when one or more clients are selling the same
security. If purchases or sales of securities for the Funds or other entities
for which the Adviser or its subsidiaries act as investment adviser or for their
advisory clients arise for consideration at or about the same time, the Trust
agrees that the Adviser may make transactions in such securities, insofar as
feasible, for the respective entities and clients in a manner deemed equitable
to all. To the extent that transactions on behalf of more than one client of the
Adviser during the same period may increase the demand for securities being
purchased or the supply of securities being sold, the Trust recognizes that
there may be an adverse effect on price.
It is agreed that, on occasions when the Adviser deems the purchase or
sale of a security to be in the best interests of the Funds as well as other
accounts or clients, it may, to the extent permitted by applicable laws and
regulations, but will not be obligated to, aggregate the securities to be sold
or purchased for the Funds with those to be sold or purchased for other accounts
or companies in order to obtain favorable execution and low brokerage
commissions. In that event, allocation of the securities purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Adviser in
the manner it considers to be most equitable and consistent with its fiduciary
obligations to the Trust and to such other accounts or clients. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Funds.
ARTICLE VI
Term of this Agreement
A. Duration. This Agreement shall remain in effect for two years from
the date hereof, unless sooner terminated in accordance with its terms, and
shall continue in effect from year to year thereafter only so long as such
continuance is specifically approved at least annually (a) by the Board,
including the votes of a majority of the trustees who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting such approval, or (b) by vote of a majority of
the outstanding voting securities of such Fund. (As used in this Agreement, the
terms "interested persons" and "vote of a majority of the outstanding voting
securities" shall have meanings given to them in the Investment Company Act.)
B. Amendment. Any amendment to this Agreement shall become
effective with respect to any Fund upon approval of a majority of the
outstanding voting securities of such Fund.
C. Termination. This Agreement may be terminated with respect to any
Fund at any time, without payment of any penalty, by the Board, by vote of a
majority of the outstanding voting securities of such Fund, or by the Adviser,
each on sixty (60) days prior written notice to the other party.
D. Automatic Termination. This Agreement shall automatically
and immediately terminate in the event of its assignment.
E. Approval, Amendment or Termination by Individual Fund. Any approval,
amendment or termination of this Agreement by the vote of a majority of the
outstanding voting securities of any Fund shall be effective to continue, amend
or terminate this Agreement with respect to such Fund notwithstanding (a) that
such action has not been approved by vote of a majority of the outstanding
voting securities of any other Fund, and (b) that such action has not been
approved by vote of a majority of the outstanding voting securities of the
Trust, unless such action shall be required by any applicable law or otherwise.
<PAGE>
ARTICLE VII
Recordkeeping
The Adviser agrees that all accounts and records which it maintains for
the Trust shall be the property of the Trust and that it will surrender promptly
to the designated officers of the Trust any or all such accounts and records
upon request. The Adviser further agrees to preserve for the period prescribed
by the rules and regulations of the Securities and Exchange Commission all such
records as are required to be maintained pursuant to such rules and regulations.
The Adviser also agrees that it will maintain all records and accounts regarding
the investment activities of the Funds in a confidential manner. All such
accounts or records shall be made available within five (5) business days of the
request to the Funds' accountants or auditors during regular business hours at
the Adviser's offices upon reasonable prior written notice. In addition, the
Adviser will provide any materials, reasonably related to the investment
advisory services provided hereunder, as may be reasonably requested in writing
by any trustee or officer of the Trust or as may be required by any governmental
agency having jurisdiction.
ARTICLE VIII
Representations and Warranties
A. The Trust represents and warrants that it is duly registered with the
Securities and Exchange Commission under the Investment Company Act as an
open-end management investment company, and that all required action has been or
will be taken by the Trust under the Securities Act of 1933, as amended from
time to time, and the Investment Company Act to permit the public offering of,
and to consummate the sale of, shares of the Funds.
B. The Adviser represents and warrants that it is duly registered with
the Securities and Exchange Commission under the Investment Advisers Act of
1940.
ARTICLE IX
Liability of the Adviser
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Adviser (or its
officers, directors, agents, employees, controlling persons, shareholders, and
any other person or entity affiliated with the Adviser or retained by it to
perform or assist in the performance of its obligations under this Agreement),
neither the Adviser nor any of its officers, directors, employees or agents
shall be subject to liability to the Trust or to any of its shareholders for any
act or omission in the course of, or connected with, rendering services
hereunder, including without limitation any error of judgment or mistake of law
or for any loss suffered by the Trust or any of its shareholders in connection
with the matters to which this Agreement relates. Any person, even though also
an officer, director, partner, employee or agent of the Adviser, who may be or
becomes an officer, trustee, employee or agent of the Trust, shall be deemed
when rendering services to the Trust or acting on any business of the Trust to
be rendering such services to or acting solely for the Trust and not as the
Adviser's officer, director, partner, employee or agent or as one under the
Adviser's control or direction even though paid by the Adviser. The Adviser
shall not be required to take any legal action on behalf of the Trust unless
fully indemnified to its reasonable satisfaction for all costs and liabilities
likely to be incurred or suffered by it. If the Trust requires the Adviser to
take any action which in the Adviser's opinion may make the Adviser liable for
payment of monies or liable in any other way, the Adviser shall be indemnified
in any reasonable amount and form satisfactory to it as a prerequisite to taking
such action. No provision of this Agreement shall be construed to protect any
trustee or officer of the Trust, or any director or officer of the Adviser, from
liability in violation of Section 17(h) and (i) of the Investment Company Act or
other applicable law.
ARTICLE X
Subcontractors
The Trust hereby agrees that the Adviser may subcontract for the
performance of any of the services contemplated to be rendered by the Adviser to
any Fund hereunder provided, however, that each subcontract meets all of the
requirements of the Investment Company Act.
ARTICLE XI
Limitation of Liability
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any trustee, shareholder, nominee, officer, agent or
employee of the Trust personally, but shall bind only the property of the Trust,
as provided in the Trust's declaration of trust.
ARTICLE XII
Miscellaneous
A. Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for the receipt of such
notices.
B. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
C. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware and the federal
securities laws of the United States.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed of the date first written above.
ORCHARD SERIES FUND
By: /s/ J.D. Motz Attest: /s/ Beverly A. Byrne
Name: J.D. Motz Name: Beverly A. Byrne
Title: President
GW CAPITAL MANAGEMENT, INC.
By: /s/ John T. Hughes Attest: /s/ David G. McLeod
Name: J.T. Hughes Name: David G. McLeod
Title: President
<PAGE>
Amendment to
Investment Advisory Agreement
between
Orchard Series Fund
and
G W Capital Management, LLC
The following amendment is made to the Investment Advisory Agreement
between Orchard Series Fund and G W Capital Management, LLC dated December 5,
1997 ("the Agreement"), and is hereby incorporated into and made a part of the
Agreement:
Article I, Section A is amended by adding the following:
Orchard Value Fund
Article II, Section A is amended by adding the following to the
schedule:
Orchard Value Fund 1.00%
IN WITNESS WHEREOF, the parties hereto have caused this amending
agreement to be executed in duplicate, in their names and on their behalf by and
through their duly authorized officers as of the 27th day of February, 1998.
ORCHARD SERIES FUND
Attest:/s/ Beverly A. Byrne By: /s/ J.D. Motz
Name: Beverly A. Byrne Name: J.D. Motz
Title: President
G W CAPITAL MANAGEMENT, LLC
Attest: /s/ David G. McLeod By: /s/ John T. Hughes
Name: David G. McLeod Name: J.T. Hughes
Title: President
<PAGE>
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT (herein "the Agreement" or "this Agreement") made
this 27th day of February, 1998 by and between G W Capital Management, LLC, a
Colorado limited liability company registered as an investment adviser under the
Investment Advisers Act of 1940 ("the Adviser"), CIC Asset Management, Inc., a
California corporation registered as an investment adviser under the Investment
Advisers Act of 1940 ("the Sub-adviser"), and Orchard Series Fund, a Delaware
business trust ("Orchard"), this Agreement embodying the arrangement whereby the
Sub-adviser will act as an investment adviser to the Orchard CIC Large-Cap Value
Fund (the "Fund"), in conjunction with the Adviser, as follows:
ARTICLE I
Preamble
Orchard entered into an Investment Advisory Agreement with the Adviser,
a copy of which is attached hereto as Appendix A. This advisory agreement and
all amendments thereto are hereinafter referred to as "the GW Agreement". In the
GW Agreement, the Adviser agreed to act as adviser to and manager of Orchard. In
that capacity it agreed to manage the investment and reinvestment of the assets
of any Fund of Orchard in existence or created in the future and to administer
Orchard's affairs. The Adviser wishes to obtain assistance with respect to its
aforesaid advisory and management role with respect to the Fund only to the
extent described herein, and Orchard by this Agreement agrees to such
arrangement.
ARTICLE II
Duties of the Sub-adviser
The Adviser hereby employs the Sub-adviser to act with the Adviser as
investment advisers to and managers of the Fund, and, subject to the review of
the Board of Trustees of Orchard ("the Board"), to manage the investment and
reinvestment of the assets of the Fund and to administer its affairs, for the
period and on the terms and conditions set forth in this Agreement. The
Sub-adviser hereby accepts such employment and agrees during such period to
render the services and to assume the obligations herein set forth for the
compensation provided for herein. The Sub-adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized by this Agreement or otherwise, have no authority to act
for or represent Orchard in any way or otherwise be deemed an agent of Orchard.
A. Investment Sub-Advisory Services. In carrying out its obligations to
assist in managing the investment and reinvestment of the assets of the Fund,
the Sub-adviser shall, when appropriate and consistent with the limitations set
forth in Section B hereof:
(a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies of
the Fund;
<PAGE>
20
(b) consult with the Adviser and with the Board and furnish to
the Adviser and the Board recommendations with respect to an overall
investment plan for the Fund for approval, modification, or rejection by
the Board;
(c) seek out specific investment opportunities for the Fund,
consistent with an overall investment plan approved by the Adviser and
the Board;
(d) take such steps as are necessary to implement any overall
investment plan approved by the Board for the Fund, including making and
carrying out decisions to acquire or dispose of permissible investments
as set forth in Orchard's Registration Statement, management of
investments and any other property of the Fund, and providing or
obtaining such services as may be necessary in managing, acquiring or
disposing of investments, consulting as appropriate with the Adviser;
(e) regularly report to the Adviser and the Board with respect to
the implementation of any approved overall investment plan and any other
activities in connection with management of the assets of the Fund;
(f) communicate as appropriate to the Adviser the purchases and
sales within the Fund;
(g) arrange with the applicable broker or dealer at the time of
the purchase or sale of investments or other assets of the Fund for the
appropriate delivery of the investment or other asset;
(h) report monthly in writing to the Adviser and report at least
annually in person to the Board with respect to the implementation of
the approved investment plan and any other activities in connection with
management of the assets of the Fund;
(i) maintain all records, memoranda, instructions or
authorizations relating to the acquisition or disposition of investments
or other assets of the Fund required to be maintained by Sub-adviser;
(j) arrange with the Investment Operations Department of the
Adviser an administrative process which permits the Adviser to
appropriately reflect in its daily determination of unit values, the
expenses that will be borne directly by the Fund and which are incurred
as a result of providing investment management services to the Fund;
(k) vote all shares held by the Fund.
In connection with the rendering of the services required to be provided
by the Sub-adviser under this Agreement, the Sub-adviser may, to the extent it
deems appropriate and subject to compliance with the requirements of applicable
laws and regulations, and upon receipt of written approval of Orchard, make use
of its affiliated companies, if any, and their employees; provided that the
Sub-adviser shall supervise and remain fully responsible for all such services
in accordance with and to the extent provided by this Agreement.
It is understood that any information or recommendation supplied by the
Sub-adviser in connection with the performance of its obligations hereunder is
to be regarded as confidential and for use only by the Adviser in connection
with the Fund.
The Adviser will continue to provide all of the services described in
the GW Agreement other than the services described above which have been
delegated to the Sub-adviser in this Agreement.
If, in the judgment of the Sub-adviser, the Fund would be benefited by
supplemental investment research from other persons or entities, outside the
context of brokerage transactions referred to in Article IV hereof, the
Sub-adviser is authorized to obtain, and pay at its own expense, for such
information.
B. Limitations on Advisory Services. The Sub-adviser shall perform the
services under this Agreement subject to the review of the Adviser and the Board
and in a manner consistent with the investment objectives, policies, and
restrictions of Orchard as stated in its Registration Statement, as amended from
time to time, filed with the Securities and Exchange Commission, its Articles of
Incorporation and Bylaws, as amended from time to time, and the provisions of
the Investment Company Act of 1940, as amended.
Orchard has furnished or will furnish the Sub-adviser with copies of
Orchard's Registration Statement, Prospectus, Articles of Incorporation, and
Bylaws as currently in effect and agrees during the continuance of this
Agreement to furnish the Sub-adviser with copies of any amendments or
supplements thereto before or at the time the amendments or supplements become
effective. The Sub-adviser will be entitled to rely on all documents furnished
by Orchard.
ARTICLE III
Compensation of the Sub-adviser
A. Investment Advisory Fee. The Adviser, and not Orchard, will pay on
the last day of each month as monthly compensation to the Sub-adviser for the
services rendered by the Sub-adviser with respect to the Fund, as described in
Article II of this Agreement, based on an annual percentage of the assets of the
Fund (the "NAV Fee") as set forth below:
Annual Fee Assets
.50% first $25 million
.40% next $75 million
.30% over $100 million
Payment to the Sub-adviser will be made monthly by the Adviser based on the
average daily net assets of the Fund during each month, calculated as set forth
in the then current Registration Statement of Orchard. If this Agreement is
terminated, the payment shall be prorated to the effective date of termination.
B. Allocation of Expenses. The Sub-adviser shall be responsible for all
expenses incurred in performing the services set forth in Article II hereof.
These expenses include only the costs incurred in providing sub-advisory
services pursuant to this Agreement (such as compensating and furnishing office
space for officers and employees of the Sub-adviser connected with investment
and economic research, trading, and investment management of the Fund).
As described in the GW Agreement, Orchard and/or the Adviser pays all
other expenses incurred in the operation of the Fund and all of its general
administrative expenses.
ARTICLE IV
Fund Transactions and Brokerage
The Sub-adviser agrees to determine the securities to be purchased or
sold by the Fund, subject to the provisions of Article II regarding coordination
with and supervision by the Adviser and Orchard's Board of Trustees, and to
place orders pursuant to its determinations, either directly with the issuer,
with any broker dealer or underwriter that specializes in the securities for
which the order is made, or with any other broker or dealer selected by the
Sub-adviser, subject to the following limitations.
The Sub-adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of Fund securities for the Fund and will use its
best efforts to obtain the most favorable net results and execution of the Fund'
orders, taking into account all appropriate factors, including price, dealer
spread or commission, if any, size of the transaction, and difficulty of the
transaction.
The Sub-adviser is specifically authorized to allocate brokerage and
principal business to firms that provide such services or facilities and to
cause Orchard to pay a member of a securities exchange or any other securities
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange, broker or
dealer would have charged for effecting that transaction, if the Sub-adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services (as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934) provided by
such member, broker or dealer, viewed in terms of either that particular
transaction or the Sub-adviser's over-all responsibilities with respect to the
accounts as to which it exercises investment discretion (as that term is defined
in Section 3(a)(35) of the Securities Exchange Act of 1934). The Sub-adviser
shall regularly report to the Adviser and the Board with respect to the
brokerage commissions incurred by the Fund for the purchases and sales of its
Fund securities. The Adviser and the Board will review the amount of such
brokerage commissions and consult with the Sub-adviser in that regard.
Subject to the above requirements and compliance with the provisions of
the Investment Company Act of 1940, the Securities and Exchange Act of 1934,
other applicable provisions of law, and the terms of any exemption(s) therefrom,
nothing shall prohibit the Sub-adviser from selecting brokers or dealers with
which it or Orchard are affiliated.
ARTICLE V
Activities of the Sub-adviser
The services of the Sub-adviser to Orchard under this Agreement are not
to be deemed exclusive and the Sub-adviser will be free to render similar
services to others so long as the Sub-adviser fulfills its rights and
obligations under this Agreement. It is understood that trustees, officers,
employees and shareholders of Orchard are or may become interested in the
Sub-adviser, as trustees, officers, employees or shareholders or otherwise, and
that trustees, officers, employees or shareholders of the Sub-adviser are or may
become similarly interested in Orchard, and that the Sub-adviser is or may
become interested in Orchard as shareholder or otherwise.
It is agreed that the Sub-adviser may use any supplemental investment
research obtained for the benefit of the Fund in providing investment advice to
its other investment advisory accounts. The Sub-adviser or its affiliates may
use such information in managing their own accounts. Conversely, such
supplemental information obtained by the Sub-adviser for the benefit of the
Sub-adviser or other entities advised by the Sub-adviser may be considered by
and may be useful to the Sub-adviser in carrying out its obligations to Orchard.
Securities held by the Fund may also be held by separate accounts or
other mutual funds for which the Sub-adviser or its affiliates act as an adviser
or sub-adviser, or by the Sub-adviser or its affiliates. Because of different
investment objectives or other factors, a particular security may be bought by
the Sub-adviser or its affiliates or for one or more clients when one or more
clients are selling the same security. If purchases or sales of securities for
the Fund or other entities for which the Sub-adviser or its affiliates act as
investment adviser or sub-adviser or for their advisory clients arise for
consideration at or about the same time, Orchard agrees that the Sub-adviser may
make transactions in such securities, insofar as feasible, for the respective
entities and clients in a manner deemed equitable to all. To the extent that
transactions on behalf of more than one client of the Sub-adviser during the
same period may increase the demand for securities being purchased or the supply
of securities being sold, Orchard recognizes that there may be an adverse effect
on price.
It is agreed that, on occasions when the Sub-adviser deems the purchase
or sale of a security to be in the best interests of the Fund as well as other
accounts or companies, it may, to the extent permitted by applicable laws and
regulations, but will not be obligated to, aggregate the securities to be so
sold or purchased for other accounts or companies in order to obtain favorable
execution and low brokerage commissions. In that event, allocation of the
securities purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-adviser in the manner it considers to be
most equitable and consistent with its fiduciary obligations to the Fund and to
such other accounts or companies.
ARTICLE VI
Effectiveness of the Agreement
The Agreement shall not become effective (and the Sub-adviser shall not
serve or act as investment adviser) unless and until it is approved by the Board
of Trustees of Orchard including a majority of trustees who are not parties to
this Agreement or interested persons of any such party to this Agreement; and
this Agreement shall come into full force and effect on the date on which all of
these conditions are met.
ARTICLE VII
Term of the Agreement; Amendment
The Agreement shall remain in effect until two years from the date first
above-written and shall continue so long as such continuance is annually
approved thereafter (a) by the vote of a majority of the Board of Trustees of
Orchard, or by vote of a majority of the outstanding shares of the Fund, and (b)
by the vote of a majority of the members of the Board, who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. In connection with
such approvals, the Board shall request and evaluate, and the Sub-adviser shall
furnish, such information as may be reasonably necessary to evaluate the terms
of this Agreement. This Agreement:
(a) shall not be terminated by the Sub-adviser without sixty
days prior written notice;
(b) shall be subject to termination, without the payment of any
penalty, by the Board or by vote of a majority of the outstanding
voting securities of the Fund, on sixty days written notice to
the Sub-adviser;
(c) may be amended only by a written instrument signed by Orchard,
the Adviser and the Sub-adviser; provided that no material
amendment of this Agreement shall be effective without specific
approval of such amendment by (i) the Board, including a majority
of those trustees who are not parties to this Agreement or
interested persons of such a party, cast in person at a meeting
called for the purpose of voting on such approval, and (ii) a
majority of the outstanding shares of the Fund; and
(d) shall automatically terminate upon assignment by either party.
ARTICLE VIII
Recordkeeping
The Sub-adviser agrees that all accounts and records which it maintains
for the Fund shall be the property of Orchard and that it will surrender
promptly to the designated officers of Orchard any or all such accounts and
records upon request. The Sub-adviser further agrees to preserve for the period
prescribed by the rules and regulations of the Securities and Exchange
Commission all such records as are required to be maintained pursuant to said
rules. The Sub-adviser also agrees that it will maintain all records and
accounts regarding the investment activities of Orchard in a confidential
manner. All such accounts or records shall be made available, within five (5)
business days of the request, to Orchard's accountants or auditors during
regular business hours at the Sub-adviser's offices upon reasonable prior
written notice; provided, however, that the Sub-adviser shall be permitted to
keep such records or copies thereof for such periods of time as are necessary to
comply with the rules and regulations of the Securities and Exchange Commission
or other applicable provisions of state or federal law. In addition, the
Sub-adviser will provide any materials, reasonably related to the investment
sub-advisory services provided hereunder, as may be reasonably requested in
writing by the trustees or officers of Orchard or as may be required by any
governmental agency or self-regulatory organization having jurisdiction.
ARTICLE IX
Liability of the Sub-adviser
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Sub-adviser or
its officers, trustees, employees, controlling persons, shareholders, and any
other person or entity affiliated with the Sub-adviser, neither the Sub-adviser
nor any of its officers, trustees, employees, controlling persons, shareholders
or any other person or entity affiliated with the Sub-adviser shall be subject
to liability to Orchard or to any shareholder or the Adviser for any act or
omission in the course of, or connected with, rendering services pursuant to
this Agreement, including without limitation any error of judgment or mistake of
law or for any loss suffered by Orchard or any shareholder in connection with
the matters to which this Agreement relates. The federal securities laws impose
liabilities under certain circumstances on persons who act in good faith and,
therefore, nothing herein shall in any way constitute a waiver or limitation of
any rights which Orchard or any shareholder of Orchard may have under any
federal securities laws. The Sub-adviser shall not be liable for the acts and
omissions of any independent contractor used by it nor for those of any bank,
trust company, broker or other person with whom or into whose hands any monies,
shares of Orchard, or securities and investments may be deposited or come,
pursuant to the provisions of this Agreement.
ARTICLE X
Indemnification
Subject to Article IX, the Sub-adviser agrees and undertakes to hold the
Adviser harmless and to indemnify and protect the Adviser from and against any
and all lawsuits or other claims brought against the Adviser as a result of the
activities of the Sub-adviser under this Agreement, including the activities of
the Sub-adviser's officers and trustees, agents, employees, controlling persons,
shareholders, and any other person or entity affiliated with the Sub-adviser or
retained by it to perform or assist in the performance of its obligations under
this Agreement; provided, however, that in no event is Sub-adviser's indemnity
in favor of Adviser deemed to protect Adviser against any liability to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations or duties under this Agreement or the GW
Agreement.
The Adviser agrees and undertakes to hold the Sub-adviser harmless and
to indemnify and protect the Sub-adviser from and against any and all lawsuits
or other claims brought against the Sub-adviser as a result of the activities of
the Adviser under this Agreement and the GW Agreement, including the activities
of the Adviser's officers, trustees, agents, employees, controlling persons,
shareholders, and any other person or entity affiliated with the Adviser or
retained by it to perform or assist in the performance of its obligations under
this Agreement or the GW Agreement; provided, however, that in no event is
Adviser's indemnity in favor of Sub-adviser deemed to protect Sub-adviser
against any liability to which the Sub-adviser would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations or
duties under this Agreement.
ARTICLE XI
Agreements, Representations and Indemnification
Related to Disclosure Documents
A. The Sub-adviser will cooperate with Orchard and the Adviser in
connection with the registration or qualification of units of the Fund for offer
and sale under the securities or Blue Sky laws of such jurisdictions as Orchard
may request and will cooperate with the preparation of the Disclosure Documents
(as defined in Article XI.C. below). Orchard and the Adviser will provide the
Sub-adviser with copies of all Disclosure Documents prior to distribution to
investors or submission to governmental bodies or self-regulatory organizations
and will incorporate its reasonable comments relating to the description of, or
services to be provided by, the Sub-adviser or its affiliates, or relating to
the description of the investment objectives and policies of the Fund.
B. Orchard and the Adviser, jointly and severally, represent and warrant
to the Sub-adviser that the Disclosure Documents will fully comply with the
provisions of the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the Investment Company Act of 1940, as amended, and
other applicable laws, and the Disclosure Documents at all such times will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except that this representation and warranty does not apply to
statements or omissions in the Disclosure Documents made in reliance upon
information furnished to Orchard or the Adviser in writing by the Sub-adviser
which Orchard had informed the Sub-adviser was to be used, or which the
Sub-adviser had acknowledged was to be used, in the particular Disclosure
Document. Orchard and the Adviser will notify the Sub-adviser promptly of the
happening of any event which in the judgment of Orchard or the Adviser makes any
statement made in the Disclosure Documents untrue in any material respect or
requires the making of any changes in the Disclosure Documents in order to make
the statements therein, in the light of circumstances under which they were
made, not misleading in any material respect, except that Orchard and the
Adviser need not make such notification with respect to information in the
Disclosure Documents based upon information furnished in writing to Orchard or
the Adviser by the Sub-adviser which Orchard had informed the Sub-adviser was to
be used, or which the Sub-adviser had acknowledged was to be used, in the
particular Disclosure Document.
The Sub-adviser represents and warrants to Orchard and the Adviser that
the information furnished in writing by it which Orchard has informed it is to
be used, or which the Sub-adviser has acknowledged is to be used, in a
particular Disclosure Document, will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading as required by the
provisions of the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the Investment Company Act of 1940, as amended, and
other applicable laws. The Sub-adviser will notify Orchard and the Adviser
promptly of the happening of any event which in the judgment of the Sub-adviser
makes any statement made in the Disclosure Documents untrue in any material
respect or requires the making of any changes in the Disclosure Documents in
order to make the statements therein, in the light of circumstances under which
they were made, not misleading in any material respect, except that the
Sub-adviser need only make such notification with respect to information in the
Disclosure Documents based upon information furnished in writing to Orchard or
the Adviser by the Sub-adviser which Orchard had informed the Sub-adviser was to
be used, or which the Sub-adviser had acknowledged was to be used, in the
particular Disclosure Statement.
C. Notwithstanding Article X to the contrary, Orchard and the Adviser,
jointly and severally, agree to hold harmless the Sub-adviser, its directors and
officers (each such person a "Sub-adviser Indemnified Party"), and each person,
if any, who controls the Sub-adviser within the meaning of either Section 15 of
the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange
Act of 1934, as amended, from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in Orchard's Registration Statement or Prospectus, or
any amendment or supplement thereto, or in any preliminary prospectus, any other
communication with investors or any other submissions to governmental bodies or
self-regulatory agencies filed or distributed on or subsequent to the date first
above-written (such documents being herein referred to as "Disclosure
Documents") or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any such untrue
statement or omission or allegation thereof based upon information furnished in
writing to Orchard or the Adviser by the Sub-adviser which Orchard had informed
the Sub-adviser was to be used, or which the Sub-adviser had acknowledged was to
be used, in the particular Disclosure Document.
If any action or proceeding (including any governmental investigation)
shall be brought or asserted against the Sub-adviser Indemnified Party in
respect of which indemnity may be sought from Orchard and the Adviser, the
Sub-adviser Indemnified Party shall promptly notify Orchard and the Adviser in
writing, and Orchard and the Adviser shall assume the defense thereof, including
the employment of counsel satisfactory to the Sub-adviser and the payment of all
expenses. The Sub-adviser Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be the expense of the
Sub-adviser Indemnified Party unless (a) Orchard or the Adviser has agreed to
pay such fees and expenses or (b) Orchard or the Adviser shall have failed to
assume the defense of such action or proceeding and to employ counsel
satisfactory to the Sub-adviser in any such action or proceeding or (c) the
named parties to any such action or proceeding (including any impleaded parties)
include both the Sub-adviser Indemnified Party and Orchard or the Sub-adviser
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to any of them which are different from or
additional to those available to Orchard or the Adviser (in which case, if the
Sub-adviser Indemnified Party notifies Orchard and the Adviser in writing that
it elects to employ separate counsel at the expense of Orchard and the Adviser,
Orchard and the Adviser shall not have the right to assume the defense of such
action or proceeding on behalf of the Sub-adviser Indemnified Party), it being
understood, however, that Orchard and the Adviser shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Sub-adviser Indemnified Party, which firm shall be designated in writing by the
Sub-adviser. Neither Orchard nor the Adviser shall be liable for any settlement
of any such action or proceeding effected without their written consent, but if
settled with their written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, Orchard and the Adviser agree to
indemnify and hold harmless the Sub-adviser Indemnified Party from and against
any loss or liability by reason of such settlement or judgment. It is understood
that neither Orchard nor the Adviser may settle on behalf of the Sub-adviser
without the consent of the Sub-adviser.
Notwithstanding Article X to the contrary, the Sub-adviser agrees to
indemnify and hold harmless Orchard and the Adviser, their trustees, directors
and officers, and each person, if any, who controls Orchard or the Adviser
within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities Exchange Act of 1934, as amended, to
the same extent as the foregoing indemnity from Orchard and the Adviser to the
Sub-adviser, but only with respect to information furnished in writing by it
which the Fund had informed the Sub-adviser was to be used, or which the
Sub-adviser had acknowledged was to be used, in the particular Disclosure
Document. In case any action or proceeding shall be brought against Orchard or
the Adviser, their trustees, directors or officers, or any such controlling
persons, in respect of which indemnity may be sought against the Sub-adviser,
the Sub-adviser shall have the rights and duties given to Orchard and the
Adviser, and Orchard or the Adviser, their trustees, directors or officers, or
such controlling persons shall have the rights and duties given to the
Sub-adviser, by the preceding paragraph.
D. The agreements, representations and indemnification contained in this
Article XI shall remain operative and in full force and effect regardless of (a)
any investigation made by or on behalf of the Sub-adviser Indemnified Party or
by or on behalf of Orchard or the Adviser, its trustees, directors and officers,
or any person controlling Orchard or the Adviser or (b) any termination of this
Agreement.
ARTICLE XII
Governing Law
This Agreement shall be construed in accordance with the laws of the
State of Colorado and the applicable provisions of the Investment Company Act of
1940, as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder, including such exemptions therefrom as the Securities and
Exchange Commission may grant. Words and phrases used herein shall be
interpreted in accordance with that Act and those rules and regulations. As used
with respect to the Fund, the term "majority of the outstanding shares" means
the lesser of (i) 67% of the shares represented at a meeting at which more than
50% of the outstanding shares are represented or (ii) more than 50% of the
outstanding shares. To the extent that the applicable laws of the State of
Colorado conflict with applicable provisions of the Investment Company Act of
1940, as amended, or the rules and regulations thereunder, such Act, rules and
regulations shall control.
ARTICLE XIII
Severability
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
ARTICLE XIV
Counterparts
This Agreement may be executed in any number of counterparts, and by
separate parties hereto in separate counterparts, each of which when so executed
and delivered shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument.
ARTICLE XV
Sales Literature
The Adviser will not use the Sub-adviser's name in Fund sales literature
without prior review and approval by the Sub-adviser, which will not be
unreasonably withheld or delayed.
ARTICLE XVI
Notices
Any notice under this Agreement shall be in writing and shall be deemed
given (a) upon person delivery, (b) on the first business day after receipted
delivery to a courier service that guarantees next business day delivery, under
circumstances in which such guaranty is applicable or (c) on the earlier of
delivery or three business days after mailing by United States certified mail,
postage and fees prepaid, to the appropriate party at the address set forth
below, or to such other address as the party so notifies the others in writing.
<PAGE>
C-5
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officials duly authorized, as of the day and year first
above written.
Witness: G W CAPITAL MANAGEMENT, LLC
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
/s/ David G. McLeod By: /s/ John T.
- ---------------------------------------- -------------------------
Hughes
- ------
Name: David G. McLeod Name: J.T. Hughes
Title: President
Address: 8515 East Orchard Road
Englewood, CO 80111
Attn: General Counsel
Witness: CIC ASSET MANAGEMENT, INC.
/s/ Tina Koch By: /s/ Jorge
Castro
Name: Tina Koch Name: Jorge Castro
Title: Principal
Address: 633 W. Fifth Street
Suite 1180
Los Angeles, CA 90017
Attn: Jorge Castro
Witness: ORCHARD SERIES FUND
/s/ Beverly A. Bryne By: /s/ J.D.
Motz
Name: Beverly A. Byrne Name: J.D. Motz
Title: President
Address: 8515 East Orchard Road
Englewood, CO 80111
Attn: Secretary
</TABLE>
<PAGE>
Exhibit 24(b)(11)
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment No
3 to Registration Statement No. 333-9217 of Orchard Series Fund of our report
dated December 5, 1997 in the Statement of Additional Information, which is part
of such Registration Statement, and to the reference to us under the headings,
"Independent Public Accountant" and "Financial Statements," also appearing in
the Statement of Additional Information.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
February 26, 1998
<PAGE>
EXHIBIT 27
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
ORCHARD SERIES FUND FINANCIAL DATA SCHEDULE FOR THE ORCHARD INDEX 500 FUND
</LEGEND>
<CIK> 0001019977
<NAME> Orchard Series Fund
<SERIES>
<NUMBER> 3
<NAME> Orchard Index 500 Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-START> Feb-3-1997
<PERIOD-END> Oct-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 506,710,257
<INVESTMENTS-AT-VALUE> 493,018,829
<RECEIVABLES> 206,951
<ASSETS-OTHER> 704,375
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 493,930,155
<PAYABLE-FOR-SECURITIES> 692,982
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370,841
<TOTAL-LIABILITIES> 1,063,823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 506,558,760
<SHARES-COMMON-STOCK> 42,148,295
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,000)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13,691,428)
<NET-ASSETS> 492,866,332
<DIVIDEND-INCOME> 267,224
<INTEREST-INCOME> 2,613
<OTHER-INCOME> (292)
<EXPENSES-NET> 53,983
<NET-INVESTMENT-INCOME> 215,562
<REALIZED-GAINS-CURRENT> (1,000)
<APPREC-INCREASE-CURRENT> (13,691,428)
<NET-CHANGE-FROM-OPS> (13,476,866)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (215,562)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42,180,500
<NUMBER-OF-SHARES-REDEEMED> 50,847
<SHARES-REINVESTED> 18,642
<NET-CHANGE-IN-ASSETS> 42,148,295
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 53,983
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53,983
<AVERAGE-NET-ASSETS> 17,373,634
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.039
<PER-SHARE-GAIN-APPREC> 1.694
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.039)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.694
<EXPENSE-RATIO> 0.250
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
ORCHARD SERIES FUND FINANCIAL DATA SCHEDULE FOR THE ORCHARD INDEX 600 FUND
</LEGEND>
<CIK> 0001019977
<NAME> Orchard Series Fund
<SERIES>
<NUMBER> 4
<NAME> Orchard Index 600 Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-START> Feb-3-1997
<PERIOD-END> Oct-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,617,270
<INVESTMENTS-AT-VALUE> 5,424,843
<RECEIVABLES> 21,998
<ASSETS-OTHER> 29,492
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,476,333
<PAYABLE-FOR-SECURITIES> 3,495
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,919
<TOTAL-LIABILITIES> 6,414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,515,098
<SHARES-COMMON-STOCK> 451,349
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 147,248
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 807,573
<NET-ASSETS> 5,469,919
<DIVIDEND-INCOME> 29,971
<INTEREST-INCOME> 2,554
<OTHER-INCOME> (8)
<EXPENSES-NET> 21,804
<NET-INVESTMENT-INCOME> 10,713
<REALIZED-GAINS-CURRENT> 147,248
<APPREC-INCREASE-CURRENT> 807,573
<NET-CHANGE-FROM-OPS> 965,534
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,713)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 450,337
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,012
<NET-CHANGE-IN-ASSETS> 451,349
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,804
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,804
<AVERAGE-NET-ASSETS> 4,874,090
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.024
<PER-SHARE-GAIN-APPREC> 2.119
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.024)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.119
<EXPENSE-RATIO> 2.035
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
ORCHARD SERIES FUND FINANCIAL DATA SCHEDULE FOR THE ORCHARD INDEX EUROPEAN FUND
</LEGEND>
<CIK> 0001019977
<NAME> Orchard Series Fund
<SERIES>
<NUMBER> 6
<NAME> Orchard Index European Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-START> Feb-3-1997
<PERIOD-END> Oct-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 60,710,425
<INVESTMENTS-AT-VALUE> 62,040,465
<RECEIVABLES> 85,056
<ASSETS-OTHER> 674,288
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62,799,809
<PAYABLE-FOR-SECURITIES> 544,020
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,211
<TOTAL-LIABILITIES> 652,231
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,809,185
<SHARES-COMMON-STOCK> 5,350,769
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,353
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,330,040
<NET-ASSETS> 62,147,578
<DIVIDEND-INCOME> 457,051
<INTEREST-INCOME> 52,427
<OTHER-INCOME> (63,195)
<EXPENSES-NET> 263,126
<NET-INVESTMENT-INCOME> 183,157
<REALIZED-GAINS-CURRENT> 8,353
<APPREC-INCREASE-CURRENT> 1,330,040
<NET-CHANGE-FROM-OPS> 1,521,550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 183,157
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,408,490
<NUMBER-OF-SHARES-REDEEMED> 73,490
<SHARES-REINVESTED> 15,769
<NET-CHANGE-IN-ASSETS> 5,350,769
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 219,272
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 385,153
<AVERAGE-NET-ASSETS> 29,751,201
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.034
<PER-SHARE-GAIN-APPREC> 1.615
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.034)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.615
<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
ORCHARD SERIES FUND FINANCIAL DATA SCHEDULE FOR THE
ORCHARD INDEX INDEX PACIFIC FUND
</LEGEND>
<CIK> 0001019977
<NAME> Orchard Series Fund
<SERIES>
<NUMBER> 5
<NAME> Orchard Index Pacific Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-START> Feb-3-1997
<PERIOD-END> Oct-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 59,480,978
<INVESTMENTS-AT-VALUE> 47,982,458
<RECEIVABLES> 148,816
<ASSETS-OTHER> 608,129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48,739,403
<PAYABLE-FOR-SECURITIES> 183,483
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 110,989
<TOTAL-LIABILITIES> 294,472
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,943,452
<SHARES-COMMON-STOCK> 5,199,803
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (11,498,520)
<NET-ASSETS> 48,444,931
<DIVIDEND-INCOME> 253,874
<INTEREST-INCOME> 78,232
<OTHER-INCOME> (8,872)
<EXPENSES-NET> 238,499
<NET-INVESTMENT-INCOME> 84,735
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> (11,498,520)
<NET-CHANGE-FROM-OPS> (11,413,786)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (84,735)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,262,973
<NUMBER-OF-SHARES-REDEEMED> 72,265
<SHARES-REINVESTED> 9,095
<NET-CHANGE-IN-ASSETS> 5,199,803
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 198,749
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 359,436
<AVERAGE-NET-ASSETS> 26,883,155
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.016
<PER-SHARE-GAIN-APPREC> (0.683)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.016)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.317
<EXPENSE-RATIO> 2.815
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
ORCHARD SERIES FUND FINANCIAL DATA SCHEDULE FOR THE ORCHARD MONEY MARKET FUND
</LEGEND>
<CIK> 0001019977
<NAME> Orchard Series Fund
<SERIES>
<NUMBER> 1
<NAME> Orchard Money Market Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-START> Feb-3-1997
<PERIOD-END> Oct-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 3,034,517
<INVESTMENTS-AT-VALUE> 3,034,517
<RECEIVABLES> 6,315
<ASSETS-OTHER> 71,105
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,111,937
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,210
<TOTAL-LIABILITIES> 1,210
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,110,727
<SHARES-COMMON-STOCK> 3,110,727
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,110,727
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 121,136
<OTHER-INCOME> 0
<EXPENSES-NET> 10,409
<NET-INVESTMENT-INCOME> 110,727
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 110,727
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (110,727)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 110,727
<NET-CHANGE-IN-ASSETS> 3,110,727
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,526
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 35,064
<AVERAGE-NET-ASSETS> 3,048,511
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.036
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.036
<PER-SHARE-DISTRIBUTIONS> (0.036)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.094
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
ORCHARD SERIES FUND FINANCIAL DATA SCHEDULE FOR THE ORCHARD PREFERRED STOCK FUND
</LEGEND>
<CIK> 0001019977
<NAME> Orchard Series Fund
<SERIES>
<NUMBER> 2
<NAME> Orchard Preferred Stock Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-START> Feb-3-1997
<PERIOD-END> Oct-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,136,443
<INVESTMENTS-AT-VALUE> 4,202,664
<RECEIVABLES> 7,473
<ASSETS-OTHER> 35,168
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,245,305
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,219
<TOTAL-LIABILITIES> 3,219
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,184,863
<SHARES-COMMON-STOCK> 418,466
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,998)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 66,221
<NET-ASSETS> 4,242,086
<DIVIDEND-INCOME> 205,885
<INTEREST-INCOME> 5,953
<OTHER-INCOME> 0
<EXPENSES-NET> 27,297
<NET-INVESTMENT-INCOME> 184,541
<REALIZED-GAINS-CURRENT> (8,998)
<APPREC-INCREASE-CURRENT> 66,221
<NET-CHANGE-FROM-OPS> 241,764
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (184,541)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 400,031
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 18,435
<NET-CHANGE-IN-ASSETS> 418,466
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27,297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27,297
<AVERAGE-NET-ASSETS> 4,087,064
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.454
<PER-SHARE-GAIN-APPREC> 0.137
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.454)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.137
<EXPENSE-RATIO> 0.148
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
