As filed with the Securities and Exchange Commission on July 17, 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. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 7 [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 Boros Cicchetti 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)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485 [ ] on
pursuant to paragraph (b) of Rule 485 [X] 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>
This post-effective amendment relates only to the prospectus of the Orchard
Value Fund as necessary to reflect a second class of shares to Orchard Value
Fund, a series of Orchard Series Fund. Orchard Value Fund shall be comprised of
Class A and Class B shares. This post-effective amendment shall not supersede or
effect this Registration Statement as it applies to the Orchard Money Market
Fund, Orchard Preferred Stock Fund, Orchard Index 500 Fund, Orchard Index 600
Fund, Orchard Index European Fund and Orchard Index Pacific Fund., and shall not
supersede or effect this Registration Statement as it applies to the currently
effective prospectus for the Orchard Value Fund. During the period of review for
this Post-Effective Amendment No. 5, the Class A shares of the Orchard Value
Fund will be sold pursuant to Registrant's Post-Effective Amendment No. 4.
ORCHARD SERIES FUNDSM
8515 East Orchard Road
Englewood, Colorado 80111
(800) 701-8255
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 "Orchard Funds"). The
Orchard 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 Orchard
Funds' investment adviser.
The Orchard Value Fund is divided into Class A and Class B shares. Each Class
incurs different expenses which will affect performance. This prospectus covers
the Class A shares of Orchard Value Fund only (the "Value Fund" or the "Fund").
A brief description of its investment objective follows.
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 Value Fund 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 Orchard Value Fund 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 Orchard Value Fund 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 September , 1998.
To learn more about this Fund and its investments, you may obtain the
Statement of Additional Information which has been filed with the Securities
and Exchange Commission (SEC) along with other related materials
on the SEC's Internet Web site (http://www.sec.gov).
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY OF EXPENSES..........................................................1
INVESTMENT OBJECTIVE AND POLICIES............................................2
INVESTMENT POLICES, PRACTICES AND RISK FACTORS...............................5
MANAGEMENT OF THE FUND.......................................................7
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT..................................8
HOW THE FUND VALUE ITS SHARES...........................................8
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES................................9
HOW THE FUND REPORTS PERFORMANCE........................................9
INVESTING IN THE FUND.......................................................10
HOW TO BUY SHARES......................................................10
HOW TO SELL SHARES.....................................................11
OTHER INFORMATION......................................................13
PERFORMANCE INFORMATION.....................................................13
<PAGE>
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)
Value
Fund
Management Fees 1.00%
12b-1 Fees NONE
Other Expenses 0.00%
Total Fund
Operating Expenses 1.00%
"Other Expenses" are based on estimated amounts for the Fund's fiscal year.
Example
To illustrate the various expenses that you will bear by investing in shares of
the Fund, assume that the 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
- -------------------- ------ -------
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>
INVESTMENT OBJECTIVE AND POLICIES
The Orchard Value Fund 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 Fund is commonly known as a mutual fund. By investing in a
mutual fund, you and other shareholders pool money together to be invested
toward a specified investment objective.
The Value Fund has its own investment objective and policies. In addition, the
Value 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 Value Fund's investment objective and
policies. There is no assurance that the Value Fund will meet its investment
objective. Additional investment policies, as well as various investment
practices and techniques in which the Value Fund may engage, are described under
"INVESTMENT POLICIES, PRACTICES AND RISKS FACTORS."
Orchard 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. The Fund seeks above
average returns while attempting to minimize market risk.
CIC Asset Management, Inc. (the "Sub-Adviser) serves as sub-adviser to
the 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 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.
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.
INVESTMENT POLICES, PRACTICES AND RISK FACTORS
The following pages contain more detailed information about certain types of
instruments in which the Value Fund may invest, strategies which may be employed
in pursuit of the Fund's investment objective, and a summary of related risks.
Any investment limitations listed supplement those discussed earlier. A complete
listing of investment limitations and more detailed information about the Value
Fund's 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.
All of these securities may not be bought and/or all of these techniques may not
be used unless it is believed that they are consistent with the Fund's
investment objective and policies and that doing so will help the Fund achieve
its objective.
Money Market Instruments and Temporary Investment Strategies
The Fund 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, or may invest any or all of its assets in money market instruments
as deemed necessary for temporary defensive purposes.
The types of money market instruments in which the Fund 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.
Repurchase Agreements
The 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 Fund may be delayed or
limited.
<PAGE>
Equity Securities
The 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
The Fund may invest up to 15% 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 the 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.
The 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.
Adjusting Investment Exposure
The 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.
These practices can be used to adjust the risk and return characteristics of the
Fund's portfolio of investments. If the Sub-Adviser judges market conditions
incorrectly or employs a strategy that does not correlate well with the 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 the
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. The 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
The 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.
The 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.
Lending
The Fund may lend its portfolio securities to brokers or dealers and other
institutions as a means of earning interest income. The Fund 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
The 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 the Fund borrows
money, its share price may be subject to greater fluctuation until the borrowing
is paid off. The 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, the Fund is subject to market risk. The value of the Fund's
shares will fluctuate in response to changes in economic conditions, interest
rates, and the market's perception of the Fund's underlying portfolio
securities.
The Fund should not 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 the Fund.
MANAGEMENT OF THE FUND
The Trust is governed by the Board of Trustees which is responsible for overall
management of the Fund's business affairs. The Trustees meet at least 4 times
during the year to, among other things, oversee all of the Orchard Funds'
activities, review contractual arrangements with companies that provide services
to all the Orchard Funds, and review performance.
Investment Adviser
The Orchard Funds are managed by GW Capital Management, which selects the
Orchard 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 Orchard Funds. As compensation for its services, GW Capital Management
receives monthly compensation at the annual rate of 1.00% for the Orchard Value
Fund.
Sub-Adviser
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 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
objective.
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.
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, the Fund
represents one of several separate series of shares of the Trust. 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 series (such as the 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 the
Fund you own and a proportionate vote for each fractional interest you own.
Shareholder inquiries can be made by telephone at (800) 701-8255, or by mail to
the Trust at 8515 East Orchard Road, Englewood, Colorado 80111.
One Orchard Equities, Inc. distributes and markets the Orchard Funds. Financial
Administrative Services Corporation ("FASCorp" or the "Transfer Agent") performs
transfer agent servicing functions for the Orchard 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 FUND VALUES ITS SHARES
The price of the Fund's shares is based on the net asset value of the Fund. The
Fund's per share net asset value is determined by dividing the value of its net
assets by the number of its outstanding shares. The 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 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.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
You are entitled to your share of the earnings of the Fund 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 the Fund sells securities for a higher price than it paid for them are
passed along as "capital gains distributions." The Fund distributes
substantially all of its net investment income and capital gains to shareholders
each year.
The Value Fund ordinarily distributes dividends semi-annually. The Fund also
generally distributes capital gains, if any, in the fiscal year in which they
were earned.
Distribution Option
Shareholders of the 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 the 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, the 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 the
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 the 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 the 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 Fund on foreign
securities may give rise to withholding and other taxes imposed by foreign
governments. These taxes generally will reduce the amount of 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 Fund may
be required to limit its investment activity in some types of instruments.
HOW THE FUND REPORTS PERFORMANCE
From time to time, the Trust may include the Fund's yield and total return in
advertisements, sales literature, and shareholder reports. These measures of the
Fund's performance are based on past results and are not intended to indicate
future performance.
Yield
The Fund's "yield" refers to the income generated by an investment in the Fund
over a specified 30-day period expressed as an annual percentage rate.
Total Return
The 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 Fund ends on October 31 of each year. Twice a year
shareholders of the Fund will receive a report containing a summary of the
Fund's performance and other information.
INVESTING IN THE FUND
HOW TO BUY SHARES
Shares of the Fund can be purchased at the next share price calculated after
your order is received in good order by the Transfer Agent. Because you pay no
commissions or sales charges when you purchase shares, the 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 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 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 1-800-701-8255 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 Fund and Transfer Agent reserve the right to reject any order to purchase
shares, and the Fund reserves 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 order by the Transfer Agent.
Because you pay no commissions or sales charges when you sell shares of the
Fund, the Fund's share price is equivalent to the Fund's net asset value per
share. You can arrange to sell shares of the 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 the 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 other Fund
designated by you 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.
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 1-800-701-8255.
The Fund reserves the right to refuse exchanges if, in the Board of Trustees' or
GW Capital Management's judgment, the 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 the 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 the Fund will attempt to provide prior notice whenever it is reasonably
able to do so, it may impose these restrictions at any time. The Fund reserves
the right to terminate or modify the exchange privilege in the future.
CLASS A AND B SHARES
In addition to Class A shares, the Fund also offers Class B shares of Orchard
Value Fund. Class A and B shares generally have similar operating expenses,
except for certain distribution fees. Please call 1-800-701-8255 or by mail at
8515 East Orchard Road, Englewood, Colorado 80111 for additional
information on the purchase of Class A shares.
OTHER INFORMATION
Telephone transaction privileges for purchases or exchanges may be modified,
suspended, or terminated by the Fund at any time. If an account has more than
one owner of record, the Fund 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 Fund 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.
PERFORMANCE RELATED INFORMATION
The Fund may advertise certain performance related information. The Fund may
include total return in advertisements or other sales materials regarding the
fund.
The following table sets forth the composite performance data relating to the
historical performance of institutional private accounts managed by the
Sub-Adviser that have investment objectives, policies, strategies and risks
substantially similar to those of the Orchard Value Fund. The data is provided
to illustrate the past performance of the Sub-Adviser in managing substantially
similar accounts as measured against specified market indices and does not
represent the performance of the Orchard Value Fund. Investors should not
consider this performance data as an indication of future performance of the
Fund or of the Sub-Adviser.
All returns are calculated on a total return basis and include all dividends and
interest, accrued income and realized and unrealized gains and losses. All
returns reflect the deduction of investment advisory fees, brokerage commissions
and execution costs paid by the Sub-Adviser's institutional private accounts,
without provision for federal or state income taxes. Custodial fees, if any, are
not included in the calculation. The Sub-Adviser's composites include all actual
fee-paying, discretionary institutional private accounts managed by the
Sub-Adviser that have investment objectives, policies and strategies and risks
substantially similar to those of the Orchard Value Fund. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns.
The institutional private accounts that are included in the Sub-Adviser's
composite are not subject to the same types of expenses to which the Orchard
Value Fund is subject nor to the diversification requirements, specific tax
restrictions and investment limitations imposed on the Fund by the Investment
Company Act or Subchapter M of the Internal Revenue Code. Consequently, the
performance results for the Sub-Adviser's composites could have been adversely
affected if the institutional private accounts included in the composites had
been regulated as investment companies under the federal securities laws. The
investment results of the Sub-Adviser's composites presented below are unaudited
and are not intended to predict or suggest the returns that might be experienced
by the Orchard Value Fund or an individual investor investing in the Fund.
Investors should also be aware that the use of a methodology different from that
used below to calculate performance could result in different performance data.
Since
1 Year 3 Years 5 Years 10
------ -------- ------- --
Years Inception*
CIC Accounts Composite 33.55% 31.12% 18.99% N/A
16.85%+
S&P 500 Index** 33.36% 31.07% 20.27% 18.05%
N/A
* Commencement of investment operations was May 31, 1990.
+ Through December 31, 1997.
** The S&P 500 Index is an unmanaged index comprised of 500 stocks chosen for
their general
representation of the stock market composition by Standard & Poor's
Corporation.
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
ORCHARD SERIES FUNDSM
8515 East Orchard Road
Englewood, Colorado 80111
(800) 784-4508
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 "Orchard Funds"). The
Orchard 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 Orchard
Funds' investment adviser.
The Orchard Value Fund is divided into Class A and Class B shares. Each Class
incurs different expenses which will affect performance. This prospectus covers
the Class B shares of Orchard Value Fund only (the "Value Fund" or the "Fund").
A brief description of its investment objective follows.
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 Value Fund 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 Orchard Value Fund 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 Orchard Value Fund 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 September , 1998.
To learn more about this Fund and its investments, you may obtain the
Statement of Additional Information which has been filed with the Securities
and Exchange Commission (SEC) along with other related materials
on the SEC's Internet Web site (http://www.sec.gov).
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY OF EXPENSES..........................................................1
INVESTMENT OBJECTIVE AND POLICIES............................................2
INVESTMENT POLICES, PRACTICES AND RISK FACTORS...............................5
MANAGEMENT OF THE FUND.......................................................7
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT..................................8
HOW THE FUND VALUE ITS SHARES...........................................8
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES................................9
HOW THE FUND REPORTS PERFORMANCE........................................9
INVESTING IN THE FUND.......................................................10
HOW TO BUY SHARES......................................................10
HOW TO SELL SHARES.....................................................11
OTHER INFORMATION......................................................13
PERFORMANCE INFORMATION.....................................................13
<PAGE>
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
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Value
Fund
Management Fees 1.00%
12b-1 Fees 0.25%
Other Expenses 0.00%
Total Fund
Operating Expenses 1.25%
"Other Expenses" are based on estimated amounts for the Fund's fiscal year.
Example
To illustrate the various expenses that you will bear by investing in shares of
the Fund, assume that the 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
- -------------------- ------ -------
Value Fund $ 13 $ 43
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>
INVESTMENT OBJECTIVE AND POLICIES
The Orchard Value Fund 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 Fund is commonly known as a mutual fund. By investing in a
mutual fund, you and other shareholders pool money together to be invested
toward a specified investment objective.
The Value Fund has its own investment objective and policies. In addition, the
Value 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 Value Fund's investment objective and
policies. There is no assurance that the Value Fund will meet its investment
objective. Additional investment policies, as well as various investment
practices and techniques in which the Value Fund may engage, are described under
"INVESTMENT POLICIES, PRACTICES AND RISKS FACTORS."
Orchard 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. The Fund seeks above
average returns while attempting to minimize market risk.
CIC Asset Management, Inc. (the "Sub-Adviser) serves as sub-adviser to
the 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 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.
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.
INVESTMENT POLICES, PRACTICES AND RISK FACTORS
The following pages contain more detailed information about certain types of
instruments in which the Value Fund may invest, strategies which may be employed
in pursuit of the Fund's investment objective, and a summary of related risks.
Any investment limitations listed supplement those discussed earlier. A complete
listing of investment limitations and more detailed information about the Value
Fund's 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.
All of these securities may not be bought and/or all of these techniques may not
be used unless it is believed that they are consistent with the Fund's
investment objective and policies and that doing so will help the Fund achieve
its objective.
Money Market Instruments and Temporary Investment Strategies
The Fund 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, or may invest any or all of its assets in money market instruments
as deemed necessary for temporary defensive purposes.
The types of money market instruments in which the Fund 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.
Repurchase Agreements
The 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 Fund may be delayed or
limited.
Equity Securities
The 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
The Fund may invest up to 15% 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 the 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.
The 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.
Adjusting Investment Exposure
The 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.
These practices can be used to adjust the risk and return characteristics of the
Fund's portfolio of investments. If the Sub-Adviser judges market conditions
incorrectly or employs a strategy that does not correlate well with the 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 the
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. The 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
The 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.
The 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.
Lending
The Fund may lend its portfolio securities to brokers or dealers and other
institutions as a means of earning interest income. The Fund 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
The 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 the Fund borrows
money, its share price may be subject to greater fluctuation until the borrowing
is paid off. The 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, the Fund is subject to market risk. The value of the Fund's
shares will fluctuate in response to changes in economic conditions, interest
rates, and the market's perception of the Fund's underlying portfolio
securities.
The Fund should not 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 the Fund.
MANAGEMENT OF THE FUND
The Trust is governed by the Board of Trustees which is responsible for overall
management of the Fund's business affairs. The Trustees meet at least 4 times
during the year to, among other things, oversee all of the Orchard Funds'
activities, review contractual arrangements with companies that provide services
to all the Orchard Funds, and review performance.
Investment Adviser
The Orchard Funds are managed by GW Capital Management, which selects the
Orchard 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 Orchard Funds. As compensation for its services, GW Capital Management
receives monthly compensation at the annual rate of 1.00% for the Orchard Value
Fund.
Sub-Adviser
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 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
objective.
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.
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, the Fund
represents one of several separate series of shares of the Trust. 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 series (such as the 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 the
Fund you own and a proportionate vote for each fractional interest you own.
Shareholder inquiries can be made by telephone at (800) 784-4508, or by mail to
the Trust at 8515 East Orchard Road, Englewood, Colorado 80111.
One Orchard Equities, Inc. distributes and markets the Orchard Funds. Financial
Administrative Services Corporation ("FASCorp" or the "Transfer Agent") performs
transfer agent servicing functions for the Orchard 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 FUND VALUES ITS SHARES
The price of the Fund's shares is based on the net asset value of the Fund. The
Fund's per share net asset value is determined by dividing the value of its net
assets by the number of its outstanding shares. The 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 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.
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
You are entitled to your share of the earnings of the Fund 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 the Fund sells securities for a higher price than it paid for them are
passed along as "capital gains distributions." The Fund distributes
substantially all of its net investment income and capital gains to shareholders
each year.
The Value Fund ordinarily distributes dividends semi-annually. The Fund also
generally distributes capital gains, if any, in the fiscal year in which they
were earned.
Distribution Option
Shareholders of the 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 the 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, the 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 the
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 of shares in the Fund may be subject to
federal income tax. In general, your gain or loss on any redemption or sale will
equal the difference between the cost of the shares you redeem or sell, and the
price you receive when you redeem or sell 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 the 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 Fund on foreign
securities may give rise to withholding and other taxes imposed by foreign
governments. These taxes generally will reduce the amount of 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 Fund may
be required to limit its investment activity in some types of instruments.
HOW THE FUND REPORTS PERFORMANCE
From time to time, the Trust may include the Fund's yield and total return in
advertisements, sales literature, and shareholder reports. These measures of the
Fund's performance are based on past results and are not intended to indicate
future performance.
Yield
The Fund's "yield" refers to the income generated by an investment in the Fund
over a specified 30-day period expressed as an annual percentage rate.
Total Return
The 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 Fund ends on October 31 of each year. Twice a year
shareholders of the Fund will receive a report containing a summary of the
Fund's performance and other information.
INVESTING IN THE FUND
HOW TO BUY SHARES
Shares of the Fund can be purchased at the next share price calculated after
your order is received in good order by the Transfer Agent. Because you pay no
commissions or sales charges when you purchase shares, the 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 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 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 1-800-784-4508 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 Fund and Transfer Agent reserve the right to reject any order to purchase
shares, and the Fund reserves 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 order by the Transfer Agent.
Because you pay no commissions or sales charges when you sell shares of the
Fund, the Fund's share price is equivalent to the Fund's net asset value per
share. You can arrange to sell shares of the 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.
CLASS A AND B SHARES
In addition to Class B shares, the Fund also offers Class A shares of Orchard
Value Fund. Class B shares are available to individual investors. Class A and B
shares generally have similar operating expenses, except for certain
distribution fees. Class B shares cannot be exchanged for shares of other
Orchard funds. Please call 1-800-784-4508 or by mail at 8515 East Orchard Road,
Englewood, Colorado 80111 for additional information on the purchase of Class B
shares.
OTHER INFORMATION
Telephone transaction privileges for purchases may be modified, suspended, or
terminated by the Fund at any time. If an account has more than one owner of
record, the Fund 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 Fund 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.
PERFORMANCE RELATED INFORMATION
The Fund may advertise certain performance related information. The Fund may
include total return in advertisements or other sales materials regarding the
fund.
The following table sets forth the composite performance data relating to the
historical performance of institutional private accounts managed by the
Sub-Adviser that have investment objectives, policies, strategies and risks
substantially similar to those of the Orchard Value Fund. The data is provided
to illustrate the past performance of the Sub-Adviser in managing substantially
similar accounts as measured against specified market indices and does not
represent the performance of the Orchard Value Fund. Investors should not
consider this performance data as an indication of future performance of the
Fund or of the Sub-Adviser.
All returns are calculated on a total return basis and include all dividends and
interest, accrued income and realized and unrealized gains and losses. All
returns reflect the deduction of investment advisory fees, brokerage commissions
and execution costs paid by the Sub-Adviser's institutional private accounts,
without provision for federal or state income taxes. Custodial fees, if any, are
not included in the calculation. The Sub-Adviser's composites include all actual
fee-paying, discretionary institutional private accounts managed by the
Sub-Adviser that have investment objectives, policies and strategies and risks
substantially similar to those of the Orchard Value Fund. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns.
The institutional private accounts that are included in the Sub-Adviser's
composite are not subject to the same types of expenses to which the Orchard
Value Fund is subject nor to the diversification requirements, specific tax
restrictions and investment limitations imposed on the Fund by the Investment
Company Act or Subchapter M of the Internal Revenue Code. Consequently, the
performance results for the Sub-Adviser's composites could have been adversely
affected if the institutional private accounts included in the composites had
been regulated as investment companies under the federal securities laws. The
investment results of the Sub-Adviser's composites presented below are unaudited
and are not intended to predict or suggest the returns that might be experienced
by the Orchard Value Fund or an individual investor investing in the Fund.
Investors should also be aware that the use of a methodology different from that
used below to calculate performance could result in different performance data.
Since
1 Year 3 Years 5 Years 10
------ -------- ------- --
Years Inception*
CIC Accounts Composite 33.22% 30.80% 18.69% N/A
16.56%+
S&P 500 Index** 33.36% 31.07% 20.27%
18.05% N/A
* Commencement of investment operations was May 31, 1990.
+ Through December 31, 1997.
** The S&P 500 Index is an unmanaged index comprised of 500 stocks chosen for
their general
representation of the stock market composition by Standard & Poor's
Corporation.
<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
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
September , 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 ..................... 2
INVESTMENT P2LICIES AND ACTICES .........
INVESTMENT LIMITATIONS .................... 10
MANAGEMENT OF THE FUND .................... 12
DISTRIBUTION FINANCING PLANS ............. 14
PORTFOLIO TRANSACTIONS .................... 15
VALUATION OF PORTFOLIO SECURITIES ......... 16
INVESTMENT PERFORMANCE .................... 17
ADDITIONAL PURCHASE
AND REDEMPTION INFORMATION ............. 19
DIVIDENDS, DISTRIBUTION AND TAXES ......... 19
OTHER INFORMATION ......23.......... .....
APPENDIX .................................. 25
--
FINANCIAL STATEMENTS ...................... 27
- --
<PAGE>
27
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.
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 (73), Trustee; President Emeritus, Denver Metro Chamber of
Commerce.
Richard P. Koeppe (66), Trustee; Retired Superintendent, Denver Public
Schools.
*Douglas L. Wooden (41), Trustee and President; Executive Vice President,
Financial Services (1998 to Present); Senior Vice President, Financial
Services of GWL&A (1996-1998);Senior Vice President, Chief Financial
Officer of GWL&A (1991-1996)
*James D. Motz (48), Trustee; Executive Vice President, Employee Benefits of
GWL&A (1997 to present) Senior Vice President, Employee Benefits of
GWL&A (1991-1997).
Sanford Zisman (58), Trustee; Attorney, Zisman & Ingraham, P.C.
David G. McLeod (35), Treasurer; Assistant Vice President, Investment
Administration of GWL&A (1994 to present); Manager, Securities and
Equities Administration of GWL&A (1992-1994).
*Bruce Hatcher (34), Assistant Treasurer, Manager, Investment Company
Administration (1998 - present); Associate Manager, Separate Account
Administration (1993-1998)
*Beverly A. Byrne (42), Secretary, is Assistant Vice President, Associate
Counsel and Assistant Secretary of GWL&A (1997 - present); Assistant
Counsel and Assistant Secretary of GWL&A (1993-1997).
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.
R.P. Koeppe R. Jennings S. Zisman
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 June 30 , 1998 there were forty-one funds for which the Trustees
serve as Trustees or Directors of which seven 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 June 30, 1998, 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
$27,297; Index 600 $21,804; Index 500 $53,983; Index Pacific $198,749; and,
Index European $219,272.
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.
DISTRIBUTION FINANCING PLANS
The Fund has adopted a separate distribution plan (the "Plan") for Class B
shares pursuant to appropriate resolutions of the Board of Trustees in
accordance with the requirements of Rule 12b-1 under the 1940 Act and the
requirements of the applicable rule of the NASD regarding asset based sales
charges.
Pursuant to the Plan, the Orchard Value Fund may compensate the distributor, One
Orchard Equities, Inc. ("OOE"), for its expenditures in financing any activity
primarily intended to result in the sale of Orchard Value Fund Class B shares
and for maintenance and personal service provided to Class B shareholders. The
expenses of the Orchard Value Fund pursuant to the Plan are accrued on a fiscal
year basis and may not exceed with respect to the Class B shares of the Orchard
Value Fund, the annual rate of 0.25% of the Orchard Value Fund's daily net
assets attributable to Class B shares. All or any portion of this fee may be
remitted to brokers or other persons who provide distribution or shareholder
account services.
GENERAL
In accordance with the terms of the Class B 12b-1 Plan (the "Plan"), OOE
provides to the Fund, for review by Board of Trustees, a quarterly written
report of the amounts expended under the Plan and the purpose for which such
expenditures were made.
The Plan was adopted by a majority vote of the Board of Trustees, including at
least a majority of Trustees who are not, and were not at the time they voted,
interested persons of the Trust as defined in the 1940 Act and do not and did
not have any direct or indirect financial interest in the operation of the Plan,
cast in person at a meeting called for the purpose of voting on the Plan. In
approving the Plan, the Trustees identified and considered a number of potential
benefits which the Plan may provide. The Board of Trustees believes that there
is a reasonable likelihood that the Plan will benefit the Orchard Value Fund and
its current and future shareholders. Under its terms, the Plan remains in effect
from year to year provided such continuance is approved annually by vote of the
Trustees in the manner described above. The Plan may not be amended to increase
materially the amount to be spent for distribution without approval of the
shareholders of the Fund affected thereby, and material amendment to the Plan
must also be approved by the Board of Trustees in the manner described above.
The Plan may be terminated at any time, without payment of any penalty, by vote
of a majority of the Trustees who are not interested persons of the Trust and
have no direct or indirect financial interest in the operations of the Plan, or
by vote of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the Fund affected thereby. The Plan will automatically terminate in
the event of its assignment (as defined in the 1940 Act).
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 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.
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 Trustees have authorized the issuance of two classes of shares of
the Orchard Value Fund designed as Class A and Class B shares and 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 unaudited financial statements as of April 30, 1998
are attached to this Statement of Additional Information. 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 incorporated by
reference to Registrant's Post-Effective Amendment No. 3.
<PAGE>
30
C-32
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 Six Months Ended April 30, 1998 and 1997
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- ------------------------------------------------------------------------------------------------------------------------
ORCHARD ORCHARD ORCHARD ORCHARD
ORCHARD ORCHARD INDEX INDEX MONEY PREFERRED ORCHARD
INDEX 500 INDEX 600 EUROPEAN PACIFIC MARKET STOCK VALUE
FUND FUND FUND FUND FUND FUND FUND
---------- ---------- --------- --------- --------- ---------- ---------
ASSETS:
Investments at value:
Short-term investments 5,368,000 1,699,000 1,257,000 2,751,782
<S> <C> <C> <C> <C> <C>
Common stocks 600,330,286 6,123,952 89,400,691 48,208,742 2,028,024
Preferred stocks 506,684 4,215,636
---------- ----------
---------- --------- --------- --------- ---------
Total investments (cost
$517,805,070; $4,841,231; 605,698,286 6,123,952 91,606,375 49,465,742 2,751,782 4,215,636 2,028,024
$72,584,703;
$65,683,187; $2,751,782;
$4,150,017; $1,995,672)
Cash 12,287 21,582 3,017,823 336,321 160,446 1,273
Dividends and interest receivable 647,864 2,345 310,449 210,114 16,047 18,950 1,477
Subscriptions receivable 647,806 324,214 294,049
Receivables for investments sold 5,903,452 34,880 4,215,302 1,363,160 1,130,000 175,869 47,934
---------- ---------- --------- --------- --------- ---------- ---------
Total assets 612,909,695 6,182,759 99,474,163 51,669,386 4,058,275 4,410,455 2,078,708
---------- ---------- --------- --------- --------- ---------- ---------
LIABILITIES:
Dividends payable 385
Due to GW Capital Management 296,791 3,048 89,917 48,714 1,202 3,238 1,706
Payables for investments purchased 6,295,499 6,971,286 1,746,714 865,745 26,046 9,069
---------- ---------- --------- --------- --------- ---------- ---------
Total liabilities 6,592,290 3,048 7,061,203 1,795,428 867,332 29,284 10,775
---------- ---------- --------- --------- --------- ---------- ---------
NET ASSETS 606,317,405 6,179,711 92,412,960 49,873,958 3,190,943 4,381,171 2,067,933
========== ========== ========= ========= ========= ========== =========
NET ASSETS REPRESENTED BY:
Capital stock, no par value 514,454,949 4,680,503 73,165,034 66,030,311 3,190,943 4,307,173 2,000,000
Net unrealized appreciation 87,893,216 1,282,721 19,739,875 (9,317,239) 65,619 32,352
(depreciation) on investments
Undistributed net investment 1,547,130 2,664 170,909 85,910 24,870 1,451
income (loss)
Accumulated net short-term 2,421,079 95,719 57,474 (24,818) (11,629) 34,130
realized gain (loss) on investments
Accumulated net long-term 1,031 118,104 (2,129) (4,862)
realized gain (loss) on investments
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities (718,203) (6,900,206)
denominated in foreign currencies
---------- ---------- --------- --------- --------- ---------- ---------
NET ASSETS 606,317,405 6,179,711 92,412,960 49,873,958 3,190,943 4,381,171 2,067,933
========== ========== ========= ========= ========= ========== =========
NET ASSET VALUE PER OUTSTANDING 14.2340 13.2699 14.7665 8.4435 1.0000 10.1774 10.3397
SHARE
========== ========== ========= ========= ========= ========== =========
SHARES OF CAPITAL STOCK 42,596,461 465,695 6,258,278 5,906,805 3,190,943 430,479 200,000
OUTSTANDING:
</TABLE>
See notes to financial statements.
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998
- -------------------------------------------------------------------------------------------------------------------------
ORCHARD ORCHARD ORCHARD ORCHARD
ORCHARD ORCHARD INDEX INDEX MONEY PREFERRED ORCHARD
INDEX 500 INDEX 600 EUROPEAN PACIFIC MARKET STOCK VALUE
FUND FUND FUND FUND FUND FUND FUND
---------- ---------- --------- ---------- ---------- ---------- ---------
INVESTMENT INCOME: (A)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest 151,873 1,516 101,889 77,143 87,774 2,178 270
Dividends 4,070,640 20,613 572,133 320,412 148,336 4,682
Less: Foreign withholding tax (4,329) (6) (60,615) (25,649)
---------- ---------- --------- ---------- ---------- ---------- ---------
Total income 4,218,184 22,123 613,407 371,906 87,774 150,514 4,952
---------- ---------- --------- ---------- ---------- ---------- ---------
EXPENSES:
Salaries 4,518 4,518 4,518
Legal and SEC fees 19,913 19,421 987
Directors' fees 379 212 3
Audit fees 7,486 7,481 3,025
Investment administration 77,408 94,544 56,522
Bank and custodial fees 18,843 21,576 1,694
Other expenses 25,055 23,939 114
Management fee 1,600,807 16,930 368,748 238,330 3,118 19,334 3,501
---------- ---------- --------- ---------- ---------- ---------- ---------
Total expenses 1,600,807 16,930 522,350 410,021 69,981 19,334 3,501
Less amount reimbursed by GW Capital 79,852 124,025 62,809
Management
---------- ---------- --------- ---------- ---------- ---------- ---------
Net expenses 1,600,807 16,930 442,498 285,996 7,172 19,334 3,501
---------- ---------- --------- ---------- ---------- ---------- ---------
NET INVESTMENT INCOME (LOSS) 2,617,377 5,193 170,909 85,910 80,602 131,180 1,451
---------- ---------- --------- ---------- ---------- ---------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net short-term realized gain (loss) 2,422,079 95,719 57,474 (24,817) (2,631) 34,130
on investments
Net long-term realized gain (loss) on 1,031 118,104 (2,129) (4,862)
investments
Change in net unrealized appreciation 101,584,644 475,148 19,553,054 (180,274) (602) 32,352
(depreciation) on investments
Change in net unrealized appreciation
(depreciation) on translation of
assets and liabilities denominated (1,861,422)(4,538,651)
in foreign currencies
---------- ---------- --------- ---------- ---------- ---------- ---------
Net change in realized and
unrealized appreciation (depreciation) 104,007,754 688,971 17,746,977 (4,743,742) (8,095) 66,482
on
Investments
---------- ---------- --------- ---------- ---------- ---------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING
FROM OPERATIONS 106,625,131 694,164 17,917,886 (4,657,832) 80,602 123,085 67,933
========== ========== ========= ========== ========== ========== =========
</TABLE>
(A) The portfolio commenced operations on March 2, 1998.
See notes to financial statements.
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, 1998 AND THE PERIOD FEBRUARY 3, 1997 (INCEPTION) TO APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------------
ORCHARD ORCHARD ORCHARD ORCHARD
INDEX 500 FUND INDEX 600 FUND INDEX EUROPEAN INDEX PACIFIC
FUND FUND
------------------- ------------------- ------------------- ------------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
INCREASE IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income 2,617,377 16,199 5,193 5,152 170,909 16,196 85,910 11,038
Net short-term realized gain (loss) 2,422,079 32 95,719 7,567 57,474 (428) (24,817)
on investments
Net long-term realized gain (loss) 1,031 118,104 (2,129)
on investments
Change in net unrealized 101,584,644 85,211 475,148 (285,862) 19,553,054 291,146 (180,274) 167,974
appreciation (depreciation) on
investments
Change in net unrealized
appreciation (depreciation) on (1,861,422)(138,501) (4,538,651)(133,081)
translation
of assets and liabilities
denominated in foreign currencies
--------- -------- --------- --------- --------- -------- --------- --------
Net increase (decrease) in net 106,625,131 101,442 694,164 (273,143) 17,917,886 168,413 (4,657,832)45,931
assets resulting from operations
--------- -------- --------- --------- --------- -------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income and net (1,070,247)(15,329) (149,777) (5,085) (8,353)
short-term realized gain
--------- -------- --------- --------- --------- -------- --------- --------
Total distributions (1,070,247)(15,329) (149,777) (5,085) (8,353)
--------- -------- --------- --------- --------- -------- --------- --------
SHARE TRANSACTIONS:
Net proceeds from sales of shares 45,626,415 4,500,000 15,650 4,500,000 16,501,158 4,500,000 10,979,8464,500,000
Reinvestment of distributions 1,070,247 15,329 149,777 5,085 8,353
Cost of shares redeemed (38,800,473) (22) (4,153,662) (4,892,987)
--------- -------- --------- --------- --------- -------- --------- --------
Net increase (decrease) in net
assets resulting from share 7,896,189 4,515,329 165,405 4,505,085 12,355,849 4,500,000 6,086,859 4,500,000
transactions
--------- -------- --------- --------- --------- -------- --------- --------
Total increase (decrease) in net 113,451,073 4,601,442 709,792 4,226,857 30,265,382 4,668,413 1,429,027 4,545,931
assets
NET ASSETS:
Beginning of period 492,866,332 5,469,919 62,147,578 48,444,931
---------
========= ======== ========= ========= ======== ========= ========
End of period 606,317,405 4,601,442 6,179,711 4,226,857 92,412,960 4,668,413 49,873,958 4,545,931
========= ======== ========= ========= ========= ======== ========= ========
OTHER INFORMATION:
SHARES:
Sold 3,480,233 450,000 1,273 450,000 1,226,881 450,000 1,255,105 450,000
Issued in reinvestment of 86,188 1,519 13,076 547 698
distributions
Redeemed (3,118,255) (2) (320,070) (548,103)
--------- --------- --------- ---------
-------- --------- -------- --------
Net increase (decrease) 448,166 451,519 14,347 450,547 907,509 450,000 707,002 450,000
========= ======== ========= ========= ========= ======== ========= ========
</TABLE>
See notes to financial statements.
THE ORCHARD SERIES FUND
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, 1998 AND THE PERIOD FEBRUARY 3, 1997 (INCEPTION) TO APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------------
ORCHARD ORCHARD ORCHARD
MONEY MARKET FUND PREFERRED STOCK FUND VALUE FUND
---------------------------- -------------------------- -----------
1998 1997 1998 1997 1998
---- ---- ---- ---- ----
INCREASE IN NET ASSETS: (A)
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income 80,602 32,869 131,180 60,377 1,451
Net short-term realized gain (loss) on (2,631) (8,006) 34,130
investments
Net long-term realized gain (loss) on (4,862)
investments
Change in net unrealized appreciation (602) (60,734) 32,352
(depreciation) on investments
Change in net unrealized appreciation
(depreciation) on translation
of assets and liabilities denominated in
foreign currencies
---------- ----------- ----------- ------------ -----------
Net increase (decrease) in net assets 80,602 32,869 123,085 (8,363) 67,933
resulting from operations
---------- ----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income and net (80,602) (32,869) (106,310) (57,095)
short-term realized gain
---------- ----------- ----------- ------------ -----------
Total distributions (80,602) (32,869) (106,310) (57,095)
---------- ----------- ----------- ------------ -----------
SHARE TRANSACTIONS:
Net proceeds from sales of shares 3,000,000 16,000 4,000,000 2,000,000
Reinvestment of distributions 80,216 32,484 106,310 57,095
Cost of shares redeemed
---------- ----------- ----------- ------------ -----------
Net increase (decrease) in net assets 80,216 3,032,484 122,310 4,057,095 2,000,000
resulting from share transactions
Total increase (decrease) in net assets 80,216 3,032,484 139,085 3,991,637 2,067,933
---------- ----------- ----------- ------------ -----------
NET ASSETS:
Beginning of period 3,110,727 4,242,086
-----------
========== =========== ============ ===========
End of period 3,190,943 3,032,484 4,381,171 3,991,637 2,067,933
========== =========== =========== ============ ===========
OTHER INFORMATION:
SHARES:
Sold 3,000,000 1,565 400,000
Issued in reinvestment of distributions 80,216 32,484 10,448 5,808 200,000
Redeemed
---------- ----------- -----------
----------- ------------
Net increase (decrease) 80,216 3,032,484 12,013 405,808 200,000
========== =========== =========== ============ ===========
(A) The portfolio commenced operations on March 2, 1998.
See notes to financial statements. (Concluded)
</TABLE>
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
INDEX 500 FUND
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the periods ended
April 30, 1998 and February 3, 1997 (inception) to October 31, 1997 are as
follows:
Six Months Period Ended
Ended October 31,
April 30, 1997
1998
-------------- -------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 11.6936 $ 10.0000
Income From Investment Operations
Net investment income 0.0622 0.0388
Net short-term realized gain (loss) 0.0569 1.6936
Net long-term realized and unrealized gain (loss) 2.4472
------------ -----------
1.7324
Total Income (Loss) From Investment Operations 2.5663
Less Distributions
From net investment income and net short-term (0.0259) (0.0388)
realized gains
From net long-term realized gains
-----------
------------
Total Distributions (0.0259) (0.0388)
------------ -----------
Net Asset Value, End of Period $ 14.2340 $ 11.6936
============ ===========
Total Return 21.98% 17.38%
Net Assets, End of Period $ 606,317,405 $ 492,866,332
Average Commission Rate Paid Per Share Bought or $ 0.0330 $ 0.0318
Sold
Ratio of Expenses to Average Net Assets 0.60%* 0.60%*
Ratio of Net Investment Income to Average Net 0.98%* 1.67%*
Assets
Portfolio Turnover Rate 9.35% 0.45%
*Annualized
</TABLE>
(A) The portfolio commenced operations February 3, 1997.
(continued)
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
INDEX 600 FUND
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the periods ended
April 30, 1998 and February 3, 1997 (inception) to October 31, 1997 are as
follows:
Six Months Period Ended
Ended ------------
April 30, October 31,
1998 1997
-------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 12.1191 $ 10.0000
Income From Investment Operations
Net investment income 0.0111 0.0238
Net short-term realized gain (loss) 0.2055 0.3262
Net long-term realized and unrealized gain 1.2656 1.7929
(loss)
----------- ----------
Total Income (Loss) From Investment Operations 1.4822 2.1429
Less Distributions
From net investment income and net short-term (0.3314) (0.0238)
realized gains
----------- ----------
-----------
Total Distributions (0.3314) (0.0238)
----------- ----------
Net Asset Value, End of Period $ 13.2699 $ 12.1191
=========== ==========
Total Return 12.67% 21.46%
Net Assets, End of Period $ 6,179,711 $ 5,469,919
Average Commission Rate Paid Per Share Bought $ 0.0329 $ 0.0345
or Sold
Ratio of Expenses to Average Net Assets 0.60%* 0.60%*
Ratio of Net Investment Income to Average Net 0.18%* 0.30%*
Assets
Portfolio Turnover Rate 14.72% 21.58%
</TABLE>
*Annualized
(A) The portfolio commenced operations February 3, 1997.
(continued)
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
INDEX EUROPEAN FUND
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for periods ended April
30, 1998 and February 3, 1997 (inception) to October 31, 1997 are as follows:
Six Months Period Ended
Ended
April 30, 1998 October 31,
1997
--------------- --------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 11.6147 $ 10.0000
Income From Investment Operations
Net investment income 0.0273 0.0343
Net short-term realized gain (loss) 0.0092 0.0016
Net long-term realized and unrealized gain (loss) 3.1168 1.6131
------------ -----------
Total Income (Loss) From Investment Operations 3.1533 1.6490
Less Distributions
From net investment income and net short-term (0.0015) (0.0343)
realized gains
------------ -----------
Total Distributions (0.0015) (0.0343)
------------ -----------
Net Asset Value, End of Period $ 14.7665 $ 11.6147
============ ===========
Total Return 27.15% 16.47%
Net Assets, End of Period $ 92,412,960 $ 62,147,578
Average Commission Rate Paid Per Share Bought or $ 0.0391 $ 0.0639
Sold
Ratio of Expenses to Average Net Assets 1.20%* 1.20%*#
Ratio of Net Investment Income to Average Net 0.46%* 0.83%*
Assets
Portfolio Turnover Rate 9.37% 5.69%
*Annualized
(A) The portfolio commenced operations February 3, 1997.
# Percentages are shown net of expenses reimbursed by GW Capital Management, LLC.
</TABLE>
(continued)
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
INDEX PACIFIC FUND
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the periods ended
April 30, 1998 and February 3, 1997 (inception) to October 31, 1997 are as
follows:
Six Months Period Ended
Ended
April 30, October 31,
1998 1997
------------- -------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.3167 $ 10.0000
Income From Investment Operations
Net investment income 0.0145 0.0163
Net short-term realized gain (loss) (0.0042)
Net long-term realized and unrealized gain (0.8835) (0.6833)
(loss)
----------- ----------
Total Income (Loss) From Investment Operations (0.8732) (0.6670)
Less Distributions
From net investment income and net short-term (0.0163)
realized gains
----------- ----------
Total Distributions (0.0163)
----------- ----------
Net Asset Value, End of Period $ 8.4435 $ 9.3167
=========== ==========
Total Return (9.37)% (6.67%)
Net Assets, End of Period $ 49,873,958 $ 48,444,931
Average Commission Rate Paid Per Share Bought $ 0.0132 $ 0.0093
or Sold
Ratio of Expenses to Average Net Assets 1.20%*# 1.20%*#
Ratio of Net Investment Income to Average Net 0.36%* 0.42%*
Assets
Portfolio Turnover Rate 1.79% 0.04%
*Annualized
(A) The portfolio commenced operation February 3, 1997.
# Percentages are shown net of expenses reimbursed by GW Capital Management, LLC.
</TABLE>
(continued)
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the periods ended
April 30, 1998 and February 3, 1997 (inception) to October 31, 1997 are as
follows:
Six Months Period Ended
Ended April October 31,
30, 1998 1997
-------------- --------------
-------------- --------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 1.0000 $ 1.0000
Income From Investment Operations
Net investment income 0.0255 0.0363
------------ -----------
Total Income (Loss) From Investment Operations 0.0255 0.0363
Less Distributions
From net investment income (0.0255) (0.0363)
------------ -----------
Total Distributions (0.0255) (0.0363)
------------ -----------
Net Asset Value, End of Period $ 1.0000 $ 1.000
============ ===========
Net Assets, End of Period $ 3,190,943 $ 3,110,727
Ratio of Expenses to Average Net Assets 0.46%*# 0.46%*#
Ratio of Net Investment Income to Average Net 5.17%* 4.88%*
Assets
</TABLE>
*Annualized
(A) The portfolio commenced operations February 3, 1997.
#Percentages are shown net of expenses reimbursed by GW Capital Management, LLC.
(continued)
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
PREFERRED STOCK FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the periods ended
April 30, 1998 and February 3, 1997 (inception) to October 31, 1997 are as
follows:
Six Months Period Ended
Ended October 31,
April 30, 1997
1998
------------- -------------
------------- -------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.1372 $ 10.0000
Income From Investment Operations
Net investment income 0.3096 0.4544
Net short-term realized gain (loss) (0.0061) (0.0215)
Net long-term realized and unrealized gain (0.0115) 0.1587
(loss)
----------- ----------
Total Income (Loss) From Investment Operations 0.2920 0.5916
Less Distributions
From net investment income and net short-term (0.2518) (0.4544)
realized gains
----------- ----------
-----------
Total Distributions (0.2518) (0.4544)
----------- ----------
Net Asset Value, End of Period $ 10.1774 $ 10.1372
=========== ==========
Total Return 2.90% 6.04%
Net Assets, End of Period $ 4,381,171 $ 4,242,086
Ratio of Expenses to Average Net Assets 0.90%* 0.90%*
Ratio of Net Investment Income to Average Net 6.11%* 6.07%*
Assets
Portfolio Turnover Rate 17.45% 10.05%
</TABLE>
*Annualized
(A) The portfolio commenced operations February 3, 1997.
(continued)
<PAGE>
THE ORCHARD SERIES FUND
<TABLE>
VALUE FUND
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund from March 2, 1998
(inception) to April 30, 1998, are as follows:
Period Ended
April 30, 1998
------------------
(A)
<S> <C>
Net Asset Value, Beginning of Period $ 10.0000
Income From Investment Operations
Net investment income 0.0073
Net short-term realized gain (loss) 0.1706
Net long-term realized and unrealized gain (loss) 0.1618
------------------
0.3397
Total Income (Loss) From Investment Operations
Less Distributions
From net investment income and net short-term realized gains
From net long-term realized gains
------------------
Total Distributions
------------------
Net Asset Value, End of Period $ 10.3397
==================
Total Return 3.40%
Net Assets, End of Period $ 2,067,933
Average Commission Rate Paid Per Share Bought or Sold $ 0.0591
Ratio of Expenses to Average Net Assets 1.00%*
Ratio of Net Investment Income to Average Net Assets 0.43%*
Portfolio Turnover Rate 23.88%
</TABLE>
*Annualized
(A) The portfolio commenced operations on March 2, 1998.
(Concluded)
<PAGE>
THE ORCHARD SERIES FUND
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED APRIL 30, 1998 AND THE PERIOD FEBRUARY 3, 1997 (INCEPTION) TO
APRIL 30, 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 seven 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, Orchard Preferred Stock Fund and Orchard Value Fund.
Initial capitalization of $100,000 for each Fund, excluding Orchard Value,
was received on January 27, 1997 from Great-West Life & Annuity Insurance
Company (GWL&A). Additional capitalization was received from GWL&A 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 for Orchard
Index 600 Fund. Orchard Value Fund received $2,000,000 of initial
capitalization from GWL&A on February 26, 1998. At April 30, 1998, GWL&A's
investment in the Funds totaled $16,157,576.
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, which are in accordance with generally accepted accounting
principles in the investment company industry:
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 Funds is accrued as of the ex-dividend date and
interest income is accrued daily.
Dividends - Dividends from investment income of the Money Market Fund are
declared daily and reinvested monthly. Dividends from investment income of
the Preferred Stock Fund are declared and reinvested quarterly. Dividends
from investment income of the Index 500, Index 600 Funds and Value Fund
are declared and reinvested semi-annually while dividends from investment
income of the Index Pacific and 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 the securities 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.
<PAGE>
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.
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 quality 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, LLC ("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 Money Market Fund, .90% of the average daily net
assets of the Preferred Stock Fund, .60% of the average daily net assets
of the Index 500 and Index 600 Funds and 1.00% of the average daily net
assets of the Index Pacific, Index European, and Value Funds.
Subject to revision, 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 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, a wholly-owned subsidiary of One Corporation, which
is a wholly-owned subsidiary of GWL&A , distributes and markets the
Trust's Funds. Financial Administrative Services Corporation, 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 April 30, 1998:
<TABLE>
Orchard
Orchard Orchard Orchard Orchard Orchard
Index Index Index Index Preferred Value
500 600 European Pacific
Fund Fund Fund Fund Stock Fund
Fund
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gross 96,062,176 1,603,292 19,480,516 491,625 97,305 80,525
appreciation
Gross (8,168,960)(320,571) (458,844) (16,709,070(31,686) (48,173)
depreciation
--------- --------- ---------- --------- --------- ---------
Net
unrealized
appreciation
(depreciation)
87,893,21 $1,282,721 19,021,672 (16,217,445) 65,619 32,352
========= ========= ========= ========= ========= =========
</TABLE>
The Orchard Series Fund
Orchard Index European Fund
COMMON STOCK
AUSTRIA --- 0.4%
ELECTRIC
192 EVN-Energie Versorgung AG 28,376
254 Oest Elektrizatswirts AG* 30,988
$59,364
FOREIGN BANKS
1,378 Bank Austria AG* 106,463
120 Bank Austria AG Ptg Certs* 7,589
126 Bank Austria AG-Vorzug* 9,803
12 Creditanstalt - Bankverein Ptg Certs* 5,064
2 Creditanstalt AG* 206
$129,125
INDUSTRIAL PRODS & SVCS
252 VA Technologie AG* 36,245
$36,245
MFTG - INDUSTRIAL PRODS
554 Voest-Alpine Stahl AG 22,741
146 Wienerberger Baust* 32,743
$55,484
OIL & GAS
454 Omv AG* 67,422
$67,422
TOTAL AUSTRIA --- 0.4% $347,640
BELGIUM --- 3.1%
CONSUMER SERVICES
100 UCB SA 477,850
$477,850
CREDIT INSTITUTIONS
1,600 Societe Generale de Belgique SA 246,786
$246,786
ELECTRIC
1,250 Electrabel 331,915
2,600 Tractebel Inv International 310,778
$642,693
FINANCIAL SERVICES
954 Fortis AG 269,295
$269,295
FOREIGN BANKS
700 Dexia Belgium* 95,867
400 Generale de Banque 230,956
314 Kredietbank NV Series A 177,060
50 Kredietbank NV VVPR* 27,823
$531,706
HOLDING & INVEST OFFICES
600 Group Bruxelles Lambert SA* 119,773
$119,773
INSURANCE
4 Fortis AG* 1
370 Royale Belge 153,917
$153,918
MFTG - INDUSTRIAL PRODS
1,500 Solvay SA 112,844
$112,844
OIL & GAS
650 Electrafina SA* 85,157
600 Petrofina SA 236,629
$321,786
TOTAL BELGIUM --- 3.1% $2,876,651
DENMARK --- 1.0%
COMMUNICATIONS
1,056 Tele Danmark A/S 88,785
$88,785
CONSUMER SERVICES
1,078 Novo-Nordisk A/S 174,964
15 Sophus Berendsen A/S Series A* 605
335 Sophus Berendsen A/S Series B* 13,569
$189,138
FINANCIAL SERVICES
784 Unidanmark 65,916
$65,916
FOREIGN BANKS
504 BG Bank AS 29,478
900 Den Danske Bank AS 109,226
$138,704
HOLDING & INVEST OFFICES
15 Ratin A/S Series A* 2,837
335 Ratin A/S Series B* 64,414
$67,251
INSURANCE
15 Codan Forsikring 2,369
$2,369
MFTG - CONSUMER PRODS
594 Carlsberg Series A 36,913
198 Carlsberg Series B 12,333
1,009 Danisco A/S 63,441
$112,687
MFTG - INDUSTRIAL PRODS
2 A/S Dampskibsselskabet Svendborg* 127,212
2 D/S 1912* 89,779
$216,991
TOTAL DENMARK --- 1.0% $881,841
FINLAND --- 1.3%
COMMUNICATIONS
9,400 Nokia Oyj Series A* 632,194
3,000 Nokia Oyj Series K* 199,559
$831,753
FOREIGN BANKS
13,000 Merita Ltd Series A* 87,192
100 Merita Ltd Series B* 621
$87,813
MFTG - CONSUMER PRODS
500 Cultor OY 29,585
300 Huhtamaki Group Class I 17,365
700 Orion Yhtyma Oy Series A 21,867
560 Orion Yhtyma Oy Series B 17,391
$86,208
MFTG - INDUSTRIAL PRODS
900 Kemira OY* 9,757
700 Metra OY Class B 17,622
1,400 Outokumpu OY 19,680
13 Rauma OY 244
4,900 UPM-Kymmene Corp 147,216
1,300 Valmet Corp 21,571
$216,090
TOTAL FINLAND --- 1.3% $1,221,864
FRANCE --- 11.8%
AGRICULTURE
50 Eridania Beghin-SA 10,841
$10,841
COMMUNICATIONS
510 Canal Plus 88,612
5,300 France Telecom SA* 288,423
$377,035
CONSUMER SERVICES
650 Accor 177,133
1,100 Havas 99,860
475 Pin-Printemps-Redo 353,660
1,950 Sanofi SA 236,358
$867,011
CREDIT INSTITUTIONS
19 Cie de Suez* 73
$73
ELECTRONICS - HIGH TECH
3,700 Alcatel Alsthom (Cie Gen El) 685,937
$685,937
FOREIGN BANKS
4,800 Banque Nationale de Paris 404,629
2,350 Societe Generale 489,193
$893,822
HOLDING & INVEST OFFICES
3,775 Cie Financiere de Paribas 401,703
$401,703
INSURANCE
7,700 Axa UAP 903,864
$903,864
MFTG - CONSUMER PRODS
700 Christian Dior 94,856
1,800 Groupe Danone 424,980
1,960 LVMH Moet Hennessy 403,445
3,100 Michelin (CGDE) 195,296
320 Promodes 154,137
800 Synthelabo* 120,378
$1,393,092
MFTG - INDUSTRIAL PRODS
1,525 L'Air Liquide 281,450
4,300 Renault (Regie NTL)* 199,471
7,100 Rhone-Poulenc SA 347,185
2,300 Schneider SA 172,087
100 Usinor Sacilor* 1,496
$1,001,689
OIL & GAS
6,100 Elf Aquitaine SA 800,229
5,550 TOTAL SA 659,791
$1,460,020
RETAIL TRADE
945 Carrefour 541,288
200 Cie Generale De Eaux warrants* 291
2,750 Cie Generale des Eaux 511,190
1,950 Cie de Saint Gobain 324,870
1,430 L'oreal 682,379
1,600 Lafarge 151,104
1,050 Peugeot SA 182,263
$2,393,385
UTILITIES
2,541 Lyonnaise Des Eaux 430,936
$430,936
TOTAL FRANCE --- 11.8% $10,819,408
GERMANY --- 12.6%
ELECTRIC
10,700 Veba AG 707,448
$707,448
ELECTRONICS - HIGH TECH
12,250 Siemens AG 717,053
$717,053
FOREIGN BANKS
5,650 Bayer Vereins Bank AG* 429,939
9,150 Commerzbank AG 352,982
10,900 Deutsche Bank AG 845,847
10,650 Dresdner Bank AG 576,494
$2,205,262
INSURANCE
5,150 Allianz AG Holdings* 1,591,970
1,900 Muenchener Rueckver AG* 877,021
$2,468,991
MFTG - INDUSTRIAL PRODS
12,500 BASF AG 556,779
14,150 Bayer Ag 629,485
11,300 Hoechst AG 455,452
865 Mannesmann AG 686,676
450 Viag AG 228,035
530 Volkswagen AG 422,954
$2,979,381
OIL & GAS
7,150 Rwe AG 363,917
$363,917
RETAIL TRADE
3,840 Metro AG* 190,523
$190,523
TELEPHONE
14,000 Deutsche Telekom AG* 357,453
$357,453
TRANSPORTATION EQUIPMENT
420 Bayerische Motoren Werke AG* 463,597
10,700 Daimler-Benz AG 1,045,066
$1,508,663
TOTAL GERMANY --- 12.6% $11,498,691
IRELAND --- 1.4%
FOREIGN BANKS
23,510 Allied Irish Banks PLC 299,270
8,246 Bank of Ireland Series A* 141,128
14,312 Bank of Ireland Series B* 289,883
$730,281
INSURANCE
5,292 Irish Life PLC 49,032
$49,032
MFTG - CONSUMER PRODS
8,755 Kerry Group PLC 138,059
18,536 Smurfit (Jefferson) 68,852
$206,911
MFTG - INDUSTRIAL PRODS
20,209 CRH PLC* 288,085
$288,085
TOTAL IRELAND --- 1.4% $1,274,309
ITALY --- 6.3%
COMMERCIAL/OTHER
9,000 Rolo Banca* 208,404
$208,404
COMMUNICATIONS
20,000 Mediaset SpA* 131,029
$131,029
CREDIT INSTITUTIONS
41,000 Credito Italiano* 215,582
$215,582
FOREIGN BANKS
17,000 Istituto Banc San Paolo di Torino 245,792
13,000 Istituto Mobiliare Italiano SpA 212,922
$458,714
INSURANCE
13,000 Alleanza Assicurazioni 165,565
1,000 Alleanza Assicurazioni non convertible 9,658
19,000 Assic Generali SpA 571,953
85,000 Istituto Nazionale delle Assicurazioni 254,193
1,000 Riunione Adriatica di Sicurta SpA 16,068
$1,017,437
MFTG - CONSUMER PRODS
7,000 Montedison SpA 8,836
1,000 Montedison SpA RNC 913
$9,749
MFTG - INDUSTRIAL PRODS
77,600 Fiat SpA 307,884
13,200 Fiat SpA RNC 32,877
$340,761
OIL & GAS
89,000 ENI SpA 597,907
$597,907
TELEPHONE
161,500 Telecom Italia Mobile SpA 921,241
26,000 Telecom Italia Mobile SpA RNC 94,420
185,111 Telecom Italia SpA* 1,385,248
80,116 Telecom Italia SpA RNC* 422,616
$2,823,525
TOTAL ITALY --- 6.3% $5,803,108
NETHERLANDS --- 9.1%
COMMUNICATIONS
281 Polygram NV 11,602
$11,602
CONSUMER SERVICES
7,923 Philips Electronics 698,165
$698,165
FOREIGN BANKS
34,676 ABN Amro Holding NV 844,583
23,542 ING Groep NV 1,536,680
350 ING Groep NV warrants* 10,854
$2,392,117
INSURANCE
6,705 Aegon NV 869,658
$869,658
MFTG - CONSUMER PRODS
14,684 Unilever NV* 1,045,326
$1,045,326
OIL & GAS
49,178 Royal Dutch Petroleum Co 2,714,528
$2,714,528
TELEPHONE
10,883 Kon Ptt Nederland 562,468
$562,468
TOTAL NETHERLANDS --- 9.1% $8,293,864
NORWAY --- 0.5%
ELECTRIC
300 Hafslund ASA 1,791
$1,791
FOREIGN BANKS
4,600 Christiania Bank og Kreditdasse* 21,173
5,300 Den Norske Bank* 27,880
$49,053
INSURANCE
4,600 Storebrand ASA* 40,741
$40,741
MFTG - CONSUMER PRODS
1,200 Schibsted AS* 22,866
$22,866
MFTG - INDUSTRIAL PRODS
600 Kvaerner AS Series A 26,651
100 Kvaerner AS Series B* 4,079
1,900 Norske Hydro AS* 94,847
700 Orkla ASA Series A 83,038
200 Orkla ASA Series B* 21,417
$230,032
OIL & GAS
1,700 Saga Petroleum Series A 33,763
600 Saga Petroleum Series B* 10,709
200 Transocean 11,004
$55,476
RETAIL TRADE
1,000 Aker Rgi ASA* 17,579
$17,579
TRANSPORTATION EQUIPMENT
900 Bergesen dy ASA Series A* 19,444
400 Bergesen dy ASA Series B* 8,615
$28,059
TOTAL NORWAY --- 0.5% $445,597
SPAIN --- 4.9%
COMMUNICATIONS
19,300 Telefonica de Espana SA* 14,947
$14,947
ELECTRIC
21,400 Endesa SA 519,690
18,515 Iberdrola SA 297,727
$817,417
FOREIGN BANKS
2,125 Argentaria Corp BC 177,130
9,900 BCO ESP de Credito* 119,559
13,840 Banco Bilbao Vizcaya 712,166
9,512 Banco Central Hispanoamericano 316,526
3,800 Banco Popular Espanol SA 311,762
10,368 Banco Santander SA 547,797
$2,184,940
OIL & GAS
5,000 Gas Natural SDG* 320,294
6,150 Repsol SA 337,047
$657,341
TELEPHONE
19,300 Telefonica de Espana 805,644
$805,644
TOTAL SPAIN --- 4.9% $4,480,289
SWEDEN --- 4.5%
COMMUNICATIONS
1,400 Telefonaktiebolaget LM Ericsson Class A* 75,493
18,600 Telefonaktiebolaget LM Ericsson Class B 980,161
$1,055,654
CONSTRUCTION
2,000 Skanska AB Class B* 93,253
$93,253
CONSUMER SERVICES
27,800 Astra AB Series A* 570,908
5,133 Astra AB Series B* 102,098
$673,006
ELECTRIC
13,900 ABB AB Series A 225,311
4,500 ABB AB Series B 69,746
$295,057
FOREIGN BANKS
7,300 ForeningsSparbanken AB* 228,172
23,500 Nordbanken Holding AB* 173,008
11,700 Skand Enskilda BKN 194,940
4,500 Svenska Handelsbanken Series A* 204,007
100 Svenska Handelsbanken Series B* 4,275
$804,402
HOLDING & INVEST OFFICES
1,000 Incentive AB Series A* 96,869
400 Incentive AB Series B* 38,593
1,300 Investor AB Series A 73,039
1,900 Investor AB Series B 107,241
$315,742
MFTG - INDUSTRIAL PRODS
2,600 Atlas Copco AB Class A 76,733
1,300 Atlas Copco AB Class B 38,283
60 Granges AB* 1,093
3,500 Sandvik AB Series A 101,035
1,200 Sandvik AB Series B* 34,563
1,700 Scania AB Series A* 40,072
1,700 Scania AB Series B* 40,401
500 Stora Kopparbergs Series A 8,557
$340,737
RETAIL TRADE
3,800 Hennes & Mauritz AB 197,794
$197,794
TRANSPORTATION
2,400 Volvo Series A* 68,816
5,400 Volvo Series B* 157,626
$226,442
WHOLESALE TRADE -CONSUMER
1,194 Electrolux AB 111,035
$111,035
TOTAL SWEDEN --- 4.5% $4,113,122
SWITZERLAND --- 11.1%
CONSUMER SERVICES
1,430 Novartis AG 2,363,951
140 Novartis AG Bearer 232,182
$2,596,133
FOREIGN BANKS
1,625 Schweizerischer Bankverein 564,341
500 Union Bank of Switzerland 160,479
500 Union Bank of Switzerland Bearer 805,226
$1,530,046
HOLDING & INVEST OFFICES
5,900 CS Holding 1,297,827
890 Nestle SA 1,726,370
$3,024,197
INSURANCE
335 Schweizerische Rueckversicherungs 739,135
$739,135
MFTG - INDUSTRIAL PRODS
161 Roche Holding AG 1,631,786
38 Roche Holdings AG* 636,415
$2,268,201
TOTAL SWITZERLAND --- 11.1% $10,157,712
UNITED KINGDOM --- 29.7%
AIR
18,179 BAA PLC 185,011
4,034 British Airways PLC 42,033
$227,044
COMMUNICATIONS
29,000 British Sky Broadcasting Group PLC 210,986
41,000 Cable and Wireless 469,722
14,142 Granada Group 243,621
24,266 Reuters Group PLC 262,990
54,360 Vodafone Group 595,507
$1,782,826
CONSTRUCTION
1,068 Hanson PLC 6,301
$6,301
CONSUMER SERVICES
8,260 BOC Group 141,050
14,532 EMI Group PLC 147,651
70,000 Glaxo Wellcome PLC 1,979,138
50,859 Marks and Spencer 483,576
650 Nycomed Amersham PLC Series A* 21,545
455 Nycomed Amersham PLC Series B* 14,776
14,000 Rank Group PLC 90,616
108,361 Smithkline Beecham PLC 1,292,197
17,000 Zeneca Group PLC 732,421
$4,902,970
ELECTRIC
855 Energy Group PLC 11,990
46,636 General Electric Co PLC 386,094
2,550 National Grid Group PLC* 16,462
20,000 National Power PLC 194,846
11,126 Powergen 150,355
20,000 Scottish Power PLC 183,891
$943,638
ENVIRONMENTAL SERVICES
48,000 Rentokil Initial PLC 309,279
$309,279
FINANCIAL SERVICES
21,000 Legal & General Group PLC 251,828
$251,828
FOREIGN BANKS
26,000 Abbey National PLC 488,337
20,130 Bank of Scotland 247,456
29,842 Barclays PLC 860,960
15,000 HSBC Holdings ORD 473,401
32,000 HSBC Holdings PLC 941,952
45,000 Halifax PLC* 600,971
96,040 Lloyds TSB Group PLC 1,438,414
31,000 National Westminster Bank PLC 620,615
34,000 Prudential Corp 481,647
13,969 Royal BK Scot Group 215,642
$6,369,395
GAS
71,470 BG PLC* 381,910
81,000 BG PLC Series B* 40,642
$422,552
HOLDING & INVEST OFFICES
67,603 BTR PLC 224,719
17,000 Standard Chartered 260,442
20,000 Tomkins PLC 117,744
$602,905
INDUSTRIAL PRODS & SVCS
5,914 GKN PLC 170,820
8,000 Siebe PLC 178,757
$349,577
INSURANCE
11,000 Commercial Union 205,868
8,090 General Accident PLC 190,239
26,000 Royal & Sun Alliance Insurance Group PLC 290,480
$686,587
MFTG - CONSUMER PRODS
51,000 ASDA Group 170,808
15,000 Associated British Foods 140,741
61,657 BAT Industries PLC 581,604
34,000 British Steel 90,415
16,873 Cadbury Schweppes PLC 246,079
9,590 Pearson PLC 150,288
18,864 Reed International PLC 166,742
6,000 Vendome Luxury Group PLC 49,473
$1,596,150
MFTG - INDUSTRIAL PRODS
39,000 Billiton PLC 111,539
2,000 British Aerospace PLC 66,833
12,000 Imperial Chemical Industry 217,960
5,047 Rolls-Royce PLC 23,551
63,656 Unilever PLC 678,180
$1,098,063
MINING
17,959 RTZ Corp 257,863
$257,863
OIL & GAS
113,130 British Petroleum Company PLC 1,787,088
7,000 Centrica PLC* 12,147
147,000 Shell Transport & Trading Co PLC 1,094,066
$2,893,301
REAL ESTATE
8,665 Land Securities PLC 154,777
$154,777
RETAIL TRADE
17,880 Allied Domecq 183,911
13,256 Bass PLC* 251,637
15,188 Boots Co 235,349
57,645 Diageo PLC 686,448
17,000 Great Universal Stores PLC 259,020
31,103 J Sainsbury PLC 243,713
11,083 Kingfisher PLC 201,304
18,243 Safeway PLC 108,773
10,000 Scot & Newcastle 151,361
36,469 Tesco PLC 341,569
8,065 Whitbread 139,338
$2,802,423
TELEPHONE
126,623 British Telecommunications PLC 1,374,433
$1,374,433
TRANSPORTATION
10,480 Peninsular & Oriental Steam Navigation Co 154,683
$154,683
TOTAL UNITED KINGDOM --- 29.7% $27,186,595
TOTAL COMMON STOCK --- 97.6% $89,400,691
(Cost $70,460,357)
PREFERRED STOCK
GERMANY --- 0.5%
MFTG - INDUSTRIAL PRODS
300 Volkswagen AG* 178,114
$178,114
OIL & GAS
4,750 Rwe AG 199,792
$199,792
RETAIL TRADE
360 Metro AG* 13,426
$13,426
TRANSPORTATION EQUIPMENT
100 Bayerische Motoren Werke AG* 71,914
$71,914
TOTAL GERMANY --- 0.5% $463,246
ITALY --- 0.0%
MFTG - INDUSTRIAL PRODS
17,600 Fiat SpA 43,438
$43,438
TOTAL ITALY --- 0.0% $43,438
TOTAL PREFERRED STOCK --- 0.6% $506,684
(Cost $425,346)
SHORT-TERM INVESTMENTS
UNITED STATES --- 1.9%
SECURITIES & COMMODITIES
1,699,000 Merrill Lynch & Co Inc 1,699,000
$1,699,000
TOTAL UNITED STATES --- 1.9% $1,699,000
TOTAL SHORT-TERM INVESTMENTS --- 1.9% $1,699,000
(Cost $1,699,000)
TOTAL ORCHARD INDEX EUROPEAN FUND --- 100.0% $91,606,375
(Cost $72,584,703)
The Orchard Series Fund
Orchard Index Pacific Fund
COMMON STOCK
AUSTRALIA --- 8.8%
COMMUNICATIONS
44,400 Telstra Corp Installment Receipts 104,264
$104,264
CONSUMER SERVICES
1,800 Publishing & Broadcasting Ltd 8,606
$8,606
FOREIGN BANKS
45,000 Australia & New Zealand Banking Group Ltd 314,171
27,312 Commonwealth Bank of Australia 327,986
1,800 FXF Trust* 235
41,585 National Australia Bank 591,345
56,200 Westpac Banking Corp Ltd 377,590
$1,611,327
INSURANCE
6,750 Lend Lease Corp Ltd 154,986
51,669 National Mutual Holdings Ltd 122,344
$277,330
MFTG - CONSUMER PRODS
25,215 Coca-Cola Amatil Ltd 192,439
41,100 Foster's Brewing Group Ltd 89,544
21,400 News Corp Ltd 143,501
21,400 Pacific Dunlop Ltd 39,644
$465,128
MFTG - INDUSTRIAL PRODS
19,300 Amcor Ltd 87,597
33,533 Boral Ltd 77,432
21,200 CSR Ltd 67,761
6,200 ICI Australia Ltd 45,660
3,459 MIM Holdings Ltd 2,166
18,600 Pioneer International Ltd 53,142
$333,758
MINING
60,200 Broken Hill Proprietary Co Ltd 589,027
11,800 Comalco Ltd 51,425
17,100 Rio Tinto Ltd 237,163
$877,615
OIL & GAS
17,900 Santos Ltd* 64,569
29,700 WMC Ltd 105,778
17,950 Woodside Petroleum Ltd 117,439
$287,786
OTHER TRANS SERVICES
6,500 Brambles Industries Ltd 134,025
$134,025
RETAIL TRADE
31,000 Coles Myer Ltd 150,042
29,500 Woolworths Ltd 101,602
$251,644
TOTAL AUSTRALIA --- 8.8% $4,351,483
HONG KONG --- 8.7%
AIR
73,000 Cathay Pacific Air 64,085
$64,085
COMMUNICATIONS
346,235 Hong Kong Telecommunications Ltd 648,129
$648,129
CONSUMER SERVICES
69,000 Sun Hung Kai Properties Ltd 409,760
20,500 Swire Pacific Ltd Series A 102,421
65,000 Swire Pacific Ltd Series B 55,383
$567,564
ELECTRONICS - HIGH TECH
43,000 HongKong Electric Holdings Ltd 132,120
$132,120
FOREIGN BANKS
28,879 Bank of East Asia 52,009
55,600 Hang Seng Bank Ltd 468,358
$520,367
GAS
76,200 Hong Kong and China Gas Co 103,784
$103,784
HOLDING & INVEST OFFICES
72,500 CLP Holdings Ltd 348,180
45,000 Citic Pacific Ltd 138,265
50,000 Henderson Land Development Co Ltd 223,341
113,000 Hutchison Whampoa Ltd 698,774
16,000 Jardine Matheson Holdings Ltd 67,520
39,767 New World Development Co Ltd 113,202
$1,589,282
REAL ESTATE
67,000 Cheung Kong Holdings Ltd 445,456
57,000 Hong Kong Land Holdings Ltd 80,370
20,283 Tsim Sha Tsui Properties Ltd 37,707
48,000 Wharf Holdings Ltd 76,840
43,000 Wheelock & Company Ltd 38,304
$678,677
TOTAL HONG KONG --- 8.7% $4,304,008
INDONESIA --- 0.2%
CONSTRUCTION
6,500 PT Semen Gresik 4,360
$4,360
CONSUMER SERVICES
23,000 PT Astra International* 4,500
$4,500
FOREIGN BANKS
32,000 PT Bank Internasional Indonesia 2,186
$2,186
MFTG - CONSUMER PRODS
2,295 PT Indofood Sukses Makmur* 969
$969
MFTG - INDUSTRIAL PRODS
9,000 Indocement Tunggal Prakarsa* 3,075
21,500 PT Gudang Garam 25,506
2,500 PT HM Sampoerna 1,623
$30,204
TELEPHONE
10,500 PT Indosat 15,261
48,500 PT Telekomunikasi 18,978
$34,239
TOTAL INDONESIA --- 0.2% $76,458
JAPAN --- 76.0%
AIR
13,000 Japan Airlines* 39,507
$39,507
COMMUNICATIONS
16 DDI Corp 40,520
3 Japan Telecom Co 30,617
300 KDD 10,296
5,000 Matsushita Communication Ltd* 147,793
7 NTT Data Corp* 302,691
1,000 Oki Electric Industry Co 2,079
84,000 Toshiba Corp 389,900
$923,896
CONSTRUCTION
11,000 Daiwa House Industry Co Ltd* 88,978
21,000 Komatsu Ltd 95,252
22,000 Taisei Corp 49,894
$234,124
CONSUMER SERVICES
6,000 Eisai Company Ltd 86,181
13,000 Kao Corp 191,148
2,000 Oriental Land Co Ltd 89,356
10,000 Sankyo Co Ltd 247,959
300 Sony Music Entertainment Inc 11,748
7,000 Taisho Pharmaceutical Co* 148,171
25,000 Takeda Chemical Industry 714,394
9,000 Yamanouchi Pharmaceutical Co Ltd 211,234
$1,700,191
ELECTRIC
21,400 Chubu Electric Power Co Inc 321,129
8,200 Chugoku Electric Power Co Ltd 120,880
500 Hokkaido Electric Power 6,936
25,100 Kansai Electric Power Co Inc 430,730
6,300 Shikoku Electric Power 90,537
11,000 Tohoku Electric Power 161,990
36,700 Tokyo Electric Power 703,315
$1,835,517
ELECTRONICS - HIGH TECH
2,000 Advantest Corp* 134,563
25,000 Canon Inc 591,548
23,000 Denso Corp 395,562
5,300 Fanuc 195,525
94,000 Hitachi Ltd 674,373
4,000 Hoya Corp 132,446
1,000 Keyence Corp* 134,714
10,400 Kyushu Electric Power 155,119
60,000 Matsushita Electric Industrial Co 961,597
4,000 Matsushita Kotobuki Electronics* 110,977
47,000 Mitsubishi Electric Corp 120,804
39,000 NEC Corp 439,295
4,000 Nintendo Corp Ltd 367,100
6,000 Omron Corp 94,119
3,000 Rohm Company 338,827
43,000 Sanyo Electric Co 122,226
4,000 Secom* 235,863
24,000 Sharp Corp 188,691
11,400 Sony Corp 948,851
17,000 Sumitomo Electric Industries 202,669
5,000 Tokyo Electronics 196,553
$6,741,422
FINANCIAL SERVICES
2,000 Nichiei Co Ltd 155,730
3,000 Promise Co Ltd* 152,404
$308,134
FOREIGN BANKS
51,000 Asahi Bank Ltd 196,628
1,000 Bank of Fukuoka Ltd 3,780
132,000 Bank of Tokyo-Mitsubishi 1,635,531
26,000 Bank of Yokohama 66,631
18,000 Chiba Bank Ltd 67,357
87,000 Dai-Ichi Kangyo Bank Ltd 591,269
34,000 Daiwa Bank Ltd 68,884
81,000 Fuji Bank Ltd 456,191
11,000 Gunma Bank 78,999
12,000 Hachijuni Bank 101,875
62,000 Industrial Bank of Japan 421,832
19,000 Joyo Bank 78,855
52,000 Long-Term Credit Bank of Japan 85,304
37,000 Mitsubishi Trust & Banking 352,434
27,000 Mitsui Trust & Banking 58,580
33,000 Nikko Securities Co Ltd* 100,537
37,000 Nippon Credit Bank 36,642
101,000 Sakura Bank Ltd 347,407
81,000 Sanwa Bank Ltd 716,435
17,000 Shizuoka Bank 188,917
89,000 Sumitomo Bank 841,019
28,000 Sumitomo Trust & Banking 146,477
45,000 Tokai Bank 263,985
17,000 Toyo Trust & Banking 98,828
2,000 Yasuda Trust & Banking 2,676
$7,007,073
GAS
55,000 Osaka Gas Co 123,488
61,000 Tokyo Gas Co 137,882
$261,370
INDUSTRIAL SERVICES
24,000 Sumitomo Corp 137,889
$137,889
INSURANCE
2,000 Mitsui Marine & Fire Insurance Co Ltd* 10,266
16,000 Sumitomo Marine & Fire* 95,434
44,000 Tokio Marine & Fire Insurance Co* 478,984
19,000 Yasuda Fire & Marine Insurance Co Ltd* 86,181
$670,865
LEASING
4,000 Acom Company Ltd 211,370
21,000 Mitsubishi Motor Credit 52,389
$263,759
MFTG - CONSUMER PRODS
14,000 Ajinomoto Co 112,504
12,000 Asahi Breweries Ltd 157,212
18,000 Dai Nippon Printing Co Ltd 306,169
20 Japan Tobacco Inc* 143,181
24,000 Kirin Brewery Co Ltd 209,555
8,000 Nikkon Corp 70,940
20,000 Nippon Paper Industries Co 89,658
17,000 Shimuzu Corp 51,406
9,000 Shiseido Co Ltd 118,725
3,000 TDK Corp 237,224
21,000 Toppan Printing Co Ltd 249,720
$1,746,294
MFTG - INDUSTRIAL PRODS
43,000 Asahi Chemical Industry Co Ltd 150,832
25,000 Asahi Glass Company Ltd 135,130
29,000 Ishikawajima-Harima Co Ltd 48,889
32,000 Itochu Corp 74,751
22,000 Kajima Corp 64,031
92,000 Kawasaki Steel Corp 125,189
62,000 Kobe Steel Ltd* 48,745
30,000 Kubota Corp 85,047
5,000 Kyocera Corp 262,322
48,000 Mitsubishi Chemical Corp* 87,088
89,000 Mitsubishi Heavy Industries Ltd 329,679
6,000 Murata Mfg Co Ltd 175,990
78,000 NKK Corp 67,811
22,000 New Oji Paper Co 103,115
151,000 Nippon Steel Co* 243,143
65,000 Nissan Motor Co Ltd 209,820
18,000 Ricoh Corp Ltd 186,559
2,000 SMC Corp 166,314
12,000 Sekisui Chemical Co 65,951
9,000 Shin-Etsu Chemical Co 175,537
36,000 Sumitomo Chemical Co* 95,252
70,000 Sumitomo Metal Industries* 115,891
30,000 Toray Industries Inc 161,476
5,000 Tostem Corp 63,124
5,000 Toyo Seikan Kaisha 64,447
8,000 Toyoda Automatic Loom Works Ltd 141,518
$3,447,651
MINING
33,000 Marubeni Corp 75,340
24,000 Mitsubishi Materials Corp* 46,265
$121,605
OIL & GAS
13,000 Tonen Corp 72,725
$72,725
OTHER TRANS SERVICES
10,000 All Nippon Airways Co Ltd* 42,561
38,000 Kawasaki Heavy Industries 79,286
25,000 Nippon Yesen Kabushiki Kaisha* 82,212
$204,059
RAILROADS
114 East Japan Railway Co 568,793
18,000 Hankyu Corp 79,196
36,000 Kinki Nippon Railway 184,790
2,000 Odakyu Electric Railway 7,182
12,000 Seibu Railway 427,275
18,000 Tobu Railway Co 55,110
25,000 Tokyu Corp 99,599
$1,421,945
REAL ESTATE
36,000 Mitsubishi Estate Co Ltd 348,352
19,000 Mitsui Fudosan 173,511
16,000 Obayashi Corp 71,364
15,000 Sekisui House Ltd 117,251
$710,478
RETAIL TRADE
15,000 Daiei Inc 45,699
12,000 Ito-Yokado Co Ltd 621,409
7,000 Jusco Co* 112,980
8,000 Marui Co 126,399
16,000 Matsushita Electric Works 143,937
26,000 Nippon Oil Co 87,859
12,000 Seven - Eleven Japan 802,842
11,000 Suzuki Motor Company Ltd 94,633
$2,035,758
SECURITIES & COMMODITIES
30,000 Daiwa Securities Co Ltd* 113,396
56,000 Nomura Securities Co Ltd* 683,701
25,000 Yamaichi Securities Co Ltd* 378
$797,475
TELEPHONE
90 Nippon Telegraph & Telephone Corp 789,235
$789,235
TRANSPORTATION EQUIPMENT
28,000 Honda Motor Company Ltd 1,016,027
23,000 Nippon Express Co Ltd 131,275
108,000 Toyota Motor Corp 2,816,752
$3,964,054
WHOLESALE TRADE - INDL
53,000 Fujitsu 619,028
2,000 Hitachi Zosen Corp 3,054
35,000 Mitsubishi Corp 264,590
35,000 Mitsui & Co 216,964
$1,103,636
WHOLESALE TRADE -CONSUMER
23,000 Bridgestone Corp 525,098
15,000 Fuji Photo Film 534,094
$1,059,192
TOTAL JAPAN --- 76.0% $37,597,854
MALAYSIA --- 0.7%
AGRICULTURE
1,000 Kuala Lumpur Kepong Bhd 2,345
$2,345
COMMUNICATIONS
21,500 Telekom Malaysia Bhd 65,284
$65,284
CONSUMER SERVICES
3,000 Renong Bhd* 952
2,000 Resorts World Bhd 3,904
$4,856
CREDIT INSTITUTIONS
1,000 Technology Resources Industries Bhd 1,041
$1,041
ELECTRIC
1,000 Tenaga Nasional Bhd 2,020
$2,020
FOREIGN BANKS
33,700 Malayan Banking Bhd 100,502
2,000 Malayan United Industries Bhd 355
1,200 Public Bank Bhd 579
$101,436
FORESTRY
1,000 Lingui Developments Bhd 393
$393
HIGHWAYS
1,000 UTD Engineers Bhd 811
$811
HOLDING & INVEST OFFICES
800 AMMB Holdings Bhd 820
1,000 Affin Holdings Bhd 420
1,000 Berjaya Sports Toto Bhd 2,399
6,000 Faber Group Bhd* 1,009
3,000 Magnum Corp Bhd 2,033
1,000 Malaysian Helicopter Services Bhd 163
1,000 Multi-Purpose Holdings Bhd 352
7,000 Nestle Malaysia Bhd* 38,146
1,500 YTL Corp Bhd 2,359
$47,701
MFTG - CONSUMER PRODS
8,400 Rothmans of Pall Mall Bhd* 70,028
$70,028
MFTG - INDUSTRIAL PRODS
1,000 Land & General Holdings Bhd 233
16,000 Perusahaan Otomobil Nasional Bhd 20,041
$20,274
OIL & GAS
13,000 Petronas Gas Bhd 31,720
$31,720
REAL ESTATE
1,333 Malaysian Resources Corp Bhd* 575
$575
RETAIL TRADE
4,000 Sime Darby Bhd 3,579
$3,579
TOTAL MALAYSIA --- 0.7% $352,063
NEW ZEALAND --- 1.4%
COMMUNICATIONS
77,200 Telecom Corp of New Zealand Ltd 366,597
$366,597
HOLDING & INVEST OFFICES
115,000 Brierley Investments Ltd 66,426
$66,426
MFTG - CONSUMER PRODS
50,800 Lion Nathan Ltd 134,864
$134,864
MFTG - INDUSTRIAL PRODS
74,000 Carter Holt Harvey Ltd 98,228
56 Fletcher Challenge Ltd 36
27,800 Fletcher Challenge Paper 40,916
$139,180
TOTAL NEW ZEALAND --- 1.4% $707,067
PHILIPPINES --- 0.3%
CONSUMER SERVICES
83,900 SM Prime Holdings Inc 15,102
13,620 San Miguel Corp 22,473
$37,575
ELECTRIC
6,980 Manila Electric Co 19,893
$19,893
FOREIGN BANKS
1,443 Metropolitan Bank & Trust Co 11,273
900 Philippine Commercial International Bank* 4,050
$15,323
REAL ESTATE
56,000 Ayala Corp 24,850
16,925 Ayala Land Inc* 6,664
35,200 C & P Homes Inc* 2,992
$34,506
TELEPHONE
900 Philippine Long Distance 24,188
$24,188
TOTAL PHILIPPINES --- 0.3% $131,485
SINGAPORE --- 1.3%
AIR
10,000 Singapore Airlines Ltd 65,099
$65,099
COMMUNICATIONS
49,000 Singapore Telecommunications Ltd 84,237
$84,237
FOREIGN BANKS
10,000 Development Bank of Singapore Ltd 66,363
14,200 Overseas Chinese Banking Corp Ltd 74,940
10,000 Overseas Union Bank Ltd 37,922
11,000 United Overseas Bank Ltd 52,143
$231,368
MFTG - CONSUMER PRODS
7,828 Singapore Press Holdings Ltd* 86,582
$86,582
MFTG - INDUSTRIAL PRODS
22,250 Keppel Corp Ltd 59,907
$59,907
REAL ESTATE
23,000 City Developments Ltd 99,577
$99,577
TOTAL SINGAPORE --- 1.3% $626,770
THAILAND --- 0.1%
COMMUNICATIONS
2,000 Advanced Info Service PCL 13,437
$13,437
ELECTRONICS - HIGH TECH
1,000 Shinawatra Computer Co 5,995
$5,995
FINANCIAL SERVICES
5,700 Industrial Finance Corp of Thailand* 2,099
$2,099
FOREIGN BANKS
5,300 Bangkok Bank PCL 13,284
2,000 Bank of Ayudhra Ltd 633
7,800 Krung Thai Bank PCL 2,016
2,000 Siam Commercial Bank PCL 2,377
4,200 Thai Farmers Bank PCL 9,605
100 Thai Military Bank PCL 25
$27,940
MFTG - INDUSTRIAL PRODS
700 Siam Cement PCL* 9,876
$9,876
TELEPHONE
6,100 Telecomasia Corp PCL* 2,207
$2,207
TOTAL THAILAND --- 0.1% $61,554
TOTAL COMMON STOCK --- 97.5% $48,208,742
(Cost $64,426,187)
SHORT-TERM INVESTMENTS
UNITED STATES --- 2.5%
SECURITIES & COMMODITIES
1,257,000 Merrill Lynch & Co Inc 1,257,000
$1,257,000
TOTAL UNITED STATES --- 2.5% $1,257,000
TOTAL SHORT-TERM INVESTMENTS --- 2.5% $1,257,000
(Cost $1,257,000)
TOTAL ORCHARD INDEX PACIFIC FUND --- 100.0% $49,465,742
(Cost $65,683,187)
The Orchard Series Fund
Orchard Index 500 Fund
COMMON STOCK
AGENCY --- 0.7%
72,820 Federal National Mortgage Association (nonvtg) 4,360,098
$4,360,098
AIR --- 0.5%
6,270 AMR Corp* 955,391
5,150 Delta Air Lines Inc 598,688
10,084 FDX Corp* 685,712
15,165 Southwest Airlines Co 416,082
6,240 US Air Group Inc* 443,820
$3,099,693
COMMUNICATIONS --- 3.5%
111,420 AT&T Corp 6,692,108
38,680 Airtouch Communications Inc* 2,054,875
48,770 CBS Corp 1,737,431
10,810 Cabletron Systems Inc* 143,233
8,500 Clear Channel Communications Inc* 801,125
23,940 Comcast Corp Class A 857,339
19,500 Gannett Company Inc 1,324,772
10,200 General Instrument Corp* 228,857
18,000 Nextel Communications Inc* 516,366
34,800 Tele-Communications Inc* 1,122,300
41,670 US West Media Group* 1,573,043
24,260 Viacom Inc Class B* 1,407,080
69,560 Worldcom Inc* 2,975,846
$21,434,375
CONSTRUCTION --- 0.0%
4,040 Centex Corp 140,390
2,630 Kaufman & Broad Home Corp 76,433
1,410 Pulte Corp 72,174
$288,997
CONSUMER SERVICES --- 8.2%
4,450 Allergan Inc 184,951
18,100 Amgen Inc* 1,079,213
3,840 Bausch & Lomb Inc 189,838
19,200 Baxter International Inc 1,064,390
8,390 Becton Dickinson & Co 584,154
7,680 Biomet Inc 230,400
68,200 Bristol-Myers Squibb Co 7,220,675
3,940 CR Bard Inc 141,099
13,080 CVS Corp 964,650
55,619 Cendant Corp* 1,390,475
44,410 Columbia/HCA Healthcare Corp 1,462,732
76,120 Eli Lilly & Co 5,295,059
7,170 H&R Block Inc 322,650
6,970 Harrah's Entertainment Inc* 181,652
27,040 Healthsouth Corp* 816,256
17,180 Hilton Hotels Corp 548,678
11,220 Humana Inc* 302,940
92,310 Johnson & Johnson 6,588,626
5,040 King World Productions Inc* 134,502
4,340 Manor Care Inc 152,169
17,550 Marriott International Inc 579,150
32,160 Medtronic Inc 1,692,420
82,210 Merck & Company Inc 9,906,305
12,300 Mirage Resorts Inc* 271,363
17,270 Service Corporation International 712,388
5,875 St Jude Medical Inc* 208,192
21,020 Tenet Healthcare Corp* 786,926
46,310 The Walt Disney Co 5,756,889
12,940 United Healthcare Corp 909,035
5,240 United States Surgical Corp 165,060
$49,842,837
CREDIT INSTITUTIONS --- 10.4%
31,860 American Express Co 3,249,720
23,738 Associates First Capital Corp 1,774,416
9,800 BB&T Corp 659,050
44,302 Banc One Corp 2,605,489
25,890 Bank of New York Company Inc 1,529,115
47,540 BankAmerica Corp 4,040,900
10,010 BankBoston Corp 1,080,449
6,760 Bankers Trust New York Corp 872,885
3,640 Beneficial Corp 474,565
28,930 Chase Manhattan Corp 4,008,599
31,300 Citicorp 4,710,650
10,770 Comerica Inc 720,911
7,400 Countrywide Credit Industries Inc 357,975
16,030 Fifth Third Bancorp 881,650
19,940 First Chicago NBD Corp 1,851,928
66,387 First Union Corp 4,008,115
18,690 Fleet Financial Group Inc 1,614,349
3,940 Golden West Financial Corp 414,929
7,480 HF Ahmanson & Co 570,350
7,370 Household International Inc 968,691
13,100 Huntington Bancshares Inc 465,862
12,240 JP Morgan & Company Inc 1,606,500
30,140 Keycorp 1,196,166
34,375 MBNA Corp 1,164,453
17,480 Mellon Bank Corp 1,258,560
9,000 Mercantile Bancorporation Inc 498,375
22,560 National City Corp 1,562,280
64,547 NationsBank Corp 4,889,435
7,700 Northern Trust Corp 562,100
51,860 Norwest Corp 2,058,168
20,950 PNC Bank Corp 1,266,155
11,000 State Street Boston Corp 786,500
12,100 Summit Bancorp 606,513
14,470 Suntrust Banks Inc 1,178,393
12,000 Synovus Financial Corp 422,244
16,883 U S Bancorp 2,144,141
14,120 Wachovia Corp 1,199,310
17,690 Washington Mutual Inc 1,239,397
5,970 Wells Fargo & Co 2,199,945
$62,699,233
ELECTRIC --- 2.2%
9,370 Ameren Corp 371,286
13,040 American Electric Power Company Inc 622,660
10,110 Baltimore Gas & Electric Co 318,465
10,310 Carolina Power & Light Co 443,969
14,560 Central & South West Corp 379,463
10,820 Cinergy Corp 377,348
16,170 Consolidated Edison Inc 731,693
9,910 DTE Energy Co 388,343
13,230 Dominion Resources Inc 523,405
24,664 Duke Power Co 1,427,429
26,220 Edison International 781,671
16,770 Entergy Corp 417,154
12,530 FPL Group Inc 777,637
15,790 Firstenergy Corp 477,648
8,690 GPU Inc 344,341
19,444 Houston Industries Inc 565,082
9,910 Niagara Mohawk Power Corp* 121,398
5,150 Northern States Power Co 290,331
11,420 PP&L Resources Inc 263,368
20,320 PacifiCorp 472,440
15,260 Peco Energy Co 363,371
15,880 Public Service Enterprise Group Inc 532,965
47,310 Southern Co 1,253,715
16,881 Texas Utilities Co 675,240
14,860 Unicom Corp 516,385
$13,436,807
ELECTRONICS - HIGH TECH --- 13.4%
15,060 AMP Inc 592,039
4,900 Adobe Systems Inc 245,304
9,700 Advanced Micro Devices Inc* 269,175
1,920 Aeroquip-Vickers Inc 122,039
6,160 Andrew Corp* 140,910
9,090 Apple Computer Inc* 248,839
25,160 Applied Materials Inc* 908,905
6,560 Black & Decker Corp 338,660
13,330 Boston Scientific Corp* 963,919
1,720 Briggs & Stratton Corp 77,830
69,835 Cisco Systems Inc* 5,115,414
103,894 Compaq Computer Corp 2,915,473
8,080 DSC Communications Corp* 145,440
3,330 Data General Corp* 50,783
44,820 Dell Computer Corp* 3,619,215
10,110 Digital Equipment Corp* 562,369
22,250 Eastman Kodak Co 1,606,161
30,440 Emerson Electric Co 1,936,745
10,700 Gateway 2000 Inc* 627,951
224,580 General Electric Co 19,117,373
3,430 General Signal Corp 150,920
5,460 Harris Corp 264,128
71,370 Hewlett-Packard Co 5,375,017
8,690 Honeywell Inc 809,256
112,240 Intel Corp 9,070,339
66,680 International Business Machines Corp 7,726,545
5,760 Johnson Controls Inc 342,000
5,800 KLA-Tencor Corp* 233,810
9,690 LSI Logic Corp* 262,841
6,470 Maytag Corp 333,205
14,550 Micron Technology Inc* 451,952
40,950 Motorola Inc 2,277,844
11,300 National Semiconductor Corp* 248,600
35,680 Northern Telecom Ltd 2,172,020
24,060 Novell Inc* 240,600
30,110 PG&E Corp 974,811
3,330 Perkin-Elmer Corp 227,689
3,030 Polaroid Corp 133,320
23,280 Raytheon Co 1,319,673
5,450 Scientific-Atlanta Inc 130,119
16,590 Seagate Technology Inc* 442,737
12,930 Silicon Graphics Inc* 168,892
25,870 Sun Microsystems Inc* 1,065,508
3,430 Tektronix Inc 147,490
12,430 Tellabs Inc* 880,976
26,780 Texas Instruments Inc 1,715,580
10,410 Thermo Electron Corp* 414,443
3,740 Thomas & Betts Corp 218,323
17,130 Unisys Corp* 384,346
3,440 WW Grainger Inc 374,743
5,150 Whirlpool Corp 370,800
22,340 Xerox Corp 2,535,567
$81,068,638
ENVIRONMENTAL SERVICES --- 0.3%
13,360 Browning-Ferris Industries Inc 455,910
22,530 Laidlaw Inc Class B 314,001
31,260 Waste Management Inc 1,047,210
$1,817,121
FINANCIAL SERVICES --- 0.2%
7,000 Franklin Resources Inc 374,500
9,300 Green Tree Financial Corp 378,975
3,740 Republic New York Corp 500,225
$1,253,700
FORESTRY --- 0.4%
3,830 Boise Cascade Corp 143,862
6,370 Georgia-Pacific Corp 491,681
20,720 International Paper Co 1,081,315
7,480 Louisiana-Pacific Corp 163,625
13,750 Weyerhaeuser Co 792,344
$2,672,827
GAS --- 0.7%
3,840 Columbia Gas System Inc 312,000
6,570 Consolidated Natural Gas Co 377,775
1,410 Eastern Enterprises 59,749
21,390 Enron Corp 1,052,110
3,330 Nicor Inc 136,320
2,120 ONEOK Inc 85,860
5,760 Pacific Enterprises 224,277
2,420 Peoples Energy Corp 87,725
7,560 Sonat Inc 335,475
11,730 Tenneco Inc 505,117
28,240 Williams Companies Inc 893,090
$4,069,498
HOLDING & INVEST OFFICES --- 0.2%
11,130 Cognizant Corp 572,494
7,880 MGIC Investment Corp 496,440
$1,068,934
INDUSTRIAL SERVICES --- 5.7%
3,230 Autodesk Inc 151,810
20,520 Automatic Data Processing Inc 1,373,547
5,250 Ceridian Corp* 296,951
37,505 Computer Associates International Inc 2,196,368
10,700 Computer Sciences Corp 564,425
5,560 Deluxe Corp 186,260
11,730 Dun & Bradstreet Corp 416,415
3,130 EG&G Inc 94,291
10,300 Equifax Inc 398,476
29,340 First Data Corp 993,893
5,760 Fluor Corp 272,160
2,830 Foster Wheeler Corp 78,354
14,500 HBO & Co 867,274
8,690 Interpublic Group of Companies Inc 555,074
89,260 Lucent Technologies Inc 6,794,918
167,100 Microsoft Corp* 15,059,888
2,930 National Service Industries Inc 158,586
11,100 Omnicom Group Inc 525,863
67,535 Oracle Systems Corp* 1,747,468
17,600 Parametric Technology Corp* 562,637
19,920 Pitney Bowes Inc 956,160
1,710 Shared Medical Systems Corp 124,722
3,740 Western Atlas Inc 295,460
$34,671,000
INSURANCE --- 4.9%
11,520 AON Corp 743,040
10,210 Aetna Inc 825,091
29,430 Allstate Corp 2,832,638
17,372 American General Corp 1,157,410
48,125 American International Group Inc 6,331,421
11,630 Chubb Capital Corp 918,037
5,050 Cigna Corp 1,045,032
3,800 Cincinnati Financial Corp 484,025
12,900 Conseco Inc 640,163
5,360 General Re Corp 1,198,292
8,090 Hartford Financial Services Group Inc 895,968
7,275 Jefferson-Pilot Corp 426,948
6,980 Lincoln National Corp 619,908
7,880 Loews Corp 788,489
6,760 MBIA Inc 504,465
11,700 Marsh & McLennan Companies Inc 1,066,163
5,000 Progressive Corp 677,185
6,570 Providian Financial Corp 395,429
9,690 SafeCo Corp 483,890
7,954 St Paul Companies Inc 674,102
13,350 SunAmerica Inc 666,659
9,600 Torchmark Corp 427,795
4,350 TransAmerica Corp 502,425
78,709 Travelers Group Inc 4,815,968
9,500 Unum Corp 510,625
$29,631,168
MFTG - CONSUMER PRODS --- 10.1%
2,520 Adolph Coors Co Class B 90,090
3,940 Alberto-Culver Co Class B 115,738
4,950 American Greetings Corp Class A 228,938
33,570 Anheuser-Busch Companies Inc 1,537,909
39,230 Archer-Daniels-Midland Co 843,445
9,100 Avon Products Inc 747,902
19,820 Bestfoods 1,087,623
4,750 Brown-Forman Corp Class B 268,969
6,870 Brunswick Corp 223,275
31,340 Campbell Soup Co 1,608,118
169,680 Coca-Cola Co 12,874,470
20,320 Colgate-Palmolive Co 1,822,440
32,660 ConAgra Inc 953,247
6,570 Dow Jones & Company Inc 319,874
5,050 Fruit of the Loom Inc Class A* 188,744
10,810 General Mills Inc 730,345
38,420 Gillette Co 4,435,090
25,070 HJ Heinz Co 1,366,315
4,850 Harcourt General Inc 253,107
9,190 Hasbro Inc 338,302
9,810 Hershey Foods Corp 718,583
7,480 International Flavors & Fragrances Inc 366,049
2,630 Jostens Inc 62,297
28,220 Kellogg Co 1,164,075
5,470 Knight-Ridder Inc 318,967
4,550 Liz Claiborne Inc 223,801
11,320 Masco Corp 656,560
19,900 Mattel Inc 762,409
6,770 McGraw-Hill Companies Inc 524,248
3,640 Meredith Corp 156,520
6,570 New York Times Co Class A 466,056
10,920 Newell Co 527,567
104,070 Pepsico Inc 4,130,226
166,330 Philip Morris Companies Inc 6,206,105
16,980 Pioneer Hi-Bred International Inc 640,995
9,500 Quaker Oats Co 494,000
10,010 RR Donnelley & Sons Co 441,061
7,380 Ralston-Ralston Purina Group 782,280
10,310 Rubbermaid Inc 295,124
2,530 Russell Corp 68,310
32,460 Sara Lee Corp 1,933,383
24,480 Seagram Company Ltd 1,044,978
1,410 Springs Industries Inc Class A 77,637
6,070 The Times Mirror Co Class A 371,405
39,730 Time Warner Inc 3,118,805
8,390 Tribune Co 553,740
4,140 Tupperware Corp 112,037
12,640 UST Inc 348,384
43,980 Unilever NV ADR 3,282,008
8,380 VF Corp 435,760
7,680 Willamette Industries Inc 298,076
7,980 Wm Wrigley Jr Co 710,220
$61,325,607
MFTG - INDUSTRIAL PRODS --- 11.8%
24,330 3Com Corp* 833,303
52,490 Abbott Laboratories 3,838,331
8,080 Air Products & Chemicals Inc 702,451
15,570 Alcan Aluminium Ltd 506,025
13,430 Allegheny Teledyne Inc 340,786
11,830 Aluminum Company of America 916,825
5,860 Alza Corp* 280,911
44,580 American Home Products Corp 4,151,513
7,380 Armco Inc* 50,738
2,830 Armstrong World Industries Inc 242,673
2,020 Ball Corp 78,023
15,040 Bay Networks Inc* 352,492
3,640 Bemis Company Inc 161,980
7,780 Bethlehem Steel Corp* 121,072
5,150 Case Corp 327,344
25,580 Caterpillar Inc 1,456,448
6,570 Champion International Corp 353,545
2,730 Cincinnati Milacron Inc 84,799
7,080 Clorox Co 593,835
8,280 Cooper Industries Inc 553,725
5,360 Cooper Tire & Rubber Co 127,970
15,870 Corning Inc 634,800
3,130 Crane Co 168,432
8,790 Crown Cork & Seal Company Inc 457,625
17,090 Deere & Co 998,688
15,260 Dover Corp 602,770
15,580 Dow Chemical Co 1,506,383
77,700 EI DuPont De Nemours & Co 5,657,492
34,040 EMC Corp* 1,570,095
5,350 Eastman Chemical Co 367,813
8,880 Ecolab Inc 281,381
9,910 Engelhard Corp 209,349
14,360 Fort James Corp 712,615
10,710 Goodyear Tire & Rubber Co 749,700
4,140 Great Lakes Chemical Corp 208,035
10,400 Guidant Corp 695,500
3,330 Harnischfeger Industries Inc 94,073
6,670 Hercules Inc 318,906
8,090 ITT Industries Inc 294,775
17,080 Illinois Tool Works Inc 1,204,140
11,320 Ingersoll-Rand Co 521,422
3,330 Inland Steel Industries Inc 97,609
38,120 Kimberly-Clark Corp 1,934,590
5,050 Mallinckrodt Inc 162,863
7,180 Mead Corp 248,608
3,030 Millipore Corp 104,535
28,010 Minnesota Mining & Manufacturing Co 2,643,444
40,740 Monsanto Co 2,154,128
6,070 Moore Corporation Ltd 95,220
9,000 Morton International Inc 288,000
530 Nacco Industries Inc Class A 89,139
4,550 Nalco Chemical Co 180,863
6,060 Nucor Corp 363,218
9,600 Owens-Illinois Inc* 379,795
12,240 PPG Industries Inc 865,209
8,680 Pall Corp 170,345
7,575 Parker Hannifin Corp 338,034
88,760 Pfizer Inc 10,101,953
34,780 Pharmacia & Upjohn Inc 1,462,916
2,020 Potlatch Corp 95,698
10,810 Praxair Inc 543,873
5,860 Raychem Corp 235,496
5,040 Reynolds Metals Co 332,640
13,760 Rockwell International Corp 769,693
4,240 Rohm & Haas Co 457,123
50,260 Schering-Plough Corp 4,027,083
8,312 Sealed Air Corp* 521,054
11,820 Sherwin-Williams Co 421,088
6,870 Sigma Aldrich Corp 273,941
4,140 Snap-On Inc 175,172
6,770 Stone Container Corp Series E* 110,859
3,840 Temple-Inland Inc 247,918
4,940 The BF Goodrich Co 265,831
6,160 The Stanley Works 315,312
4,340 The Timken Co 173,327
39,220 Tyco International Ltd 2,137,490
19,810 USX-Marathon Group 709,436
5,960 USX-US Steel Group 233,185
4,750 Union Camp Corp 286,781
8,490 Union Carbide Corp 411,765
5,060 WR Grace & Co 102,779
18,700 Warner-Lambert Co 3,537,797
6,970 Westvaco Corp 211,275
6,660 Worthington Industries Inc 119,667
$71,725,535
MINING --- 0.4%
2,730 Asarco Inc 68,078
25,570 Barrick Gold Corp 573,714
15,770 Battle Mountain Gold Co 113,339
6,370 Cyprus Amax Minerals Co 109,883
13,240 Freeport-McMoran Copper & Gold Inc 249,071
10,110 Homestake Mining Co 117,529
11,420 Inco Ltd 200,558
10,713 Newmont Mining Corp 344,819
4,050 Phelps Dodge Corp 271,856
16,980 Placer Dome Inc 250,455
$2,299,302
OIL & GAS --- 7.7%
6,270 Amerada Hess Corp 360,525
66,740 Amoco Corp 2,953,245
4,100 Anadarko Petroleum Corp 300,325
6,600 Apache Corp 233,475
5,140 Ashland Inc 271,778
22,040 Atlantic Richfield Co 1,719,120
11,610 Baker Hughes Inc 470,205
12,120 Burlington Resources Inc 569,640
45,090 Chevron Corp 3,728,357
7,280 Coastal Corp 520,061
12,030 Dresser Industries Inc 636,086
169,180 Exxon Corp 12,339,482
17,980 Halliburton Co 988,900
3,420 Helmerich & Payne Inc 104,310
3,230 Kerr-McGee Corp 213,180
3,840 McDermott International Inc 158,880
53,780 Mobil Corp 4,248,620
23,250 Occidental Petroleum Corp 684,410
7,280 Oryx Energy Co* 190,190
3,230 Pennzoil Co 206,920
18,100 Phillips Petroleum Co 897,072
5,960 Rowan Companies Inc* 175,445
147,100 Royal Dutch Petroleum Co ADR 8,320,270
34,160 Schlumberger Ltd 2,831,010
4,950 Sun Company Inc 200,163
37,600 Texaco Inc 2,312,400
17,390 Union Pacific Resources Group Inc 415,186
16,890 UnoCal Corp 691,426
$46,740,681
OTHER TRANS SERVICES --- 0.0%
2,520 FMC Corp* 195,456
$195,456
RAILROADS --- 0.6%
10,710 Burlington Northern Santa Fe Corp 1,060,290
14,960 CSX Corp 785,400
25,870 Norfolk Southern Corp 865,015
16,980 Union Pacific Corp 929,655
$3,640,360
RETAIL TRADE --- 5.5%
16,890 Albertson's Inc 844,500
18,720 American Stores Co 449,280
10,410 Autozone Inc* 314,247
6,770 Circuit City Stores Inc 275,031
7,400 Consolidated Stores Corp* 296,000
10,220 Darden Restaurants Inc 163,520
14,960 Dayton Hudson Corp 1,306,188
7,580 Dillards Inc Class A 277,618
14,450 Federated Department Stores Inc* 710,752
11,730 Fortune Brands Inc 432,544
27,165 Gap Inc 1,397,286
12,235 Genuine Parts Co 440,460
4,140 Giant Food Inc Class A 154,215
2,620 Great Atlantic & Pacific Tea Co Inc 81,548
50,240 Home Depot Inc 3,497,960
9,190 Ikon Office Solutions Inc 222,279
17,170 JC Penney & Company Inc 1,220,135
33,460 K Mart Corp* 583,442
17,480 Kroger Co* 731,975
18,700 Limited Inc 627,609
2,630 Longs Drug Stores Corp 76,104
12,030 Lowe's Companies Inc 841,342
15,890 May Department Stores Co 980,206
47,230 McDonald's Corp 2,922,356
2,520 Mercantile Stores Co Inc 184,116
5,260 Nordstrom Inc 344,199
3,640 Owens Corning 151,286
4,340 Pep Boys - Manny Moe & Jack 94,395
17,680 Rite Aid Corp 567,970
26,890 Sears Roebuck & Co 1,594,900
11,100 TJX Companies Inc 491,175
7,080 Tandy Corp 352,230
19,500 Toys R Us Inc* 537,459
10,417 Tricon Global Restaurants* 330,740
154,140 Wal-Mart Stores Inc 7,793,627
33,960 Walgreen Co 1,171,620
9,090 Wendy's International Inc 218,724
10,210 Winn-Dixie Stores Inc 384,151
9,300 Woolworth Corp* 213,900
$33,277,089
SECURITIES & COMMODITIES --- 1.0%
18,250 Charles Schwab & Company Inc 638,750
7,000 Lehman Brothers Holdings Inc 497,434
22,840 Merrill Lynch & Co Inc 2,004,210
40,621 Morgan Stanley Dean Witter & Co 3,203,981
$6,344,375
TELEPHONE --- 4.7%
12,640 Alltel Corp 540,360
75,120 Ameritech Corp 3,197,257
53,283 Bell Atlantic Corp 4,985,264
68,050 Bellsouth Corp 4,367,925
11,220 Frontier Corp 335,893
65,730 GTE Corp 3,841,064
47,820 MCI Communications Corp 2,405,920
125,768 SBC Communications Inc 5,211,449
29,520 Sprint Corp 2,016,570
33,160 US West Communications Group 1,749,190
$28,650,892
TRANSPORTATION EQUIPMENT --- 3.5%
38,720 Allied-Signal Inc 1,696,401
44,450 Chrysler Corp 1,786,312
2,630 Cummins Engine Company Inc 143,006
7,170 Dana Corp 423,926
5,250 Eaton Corp 484,969
4,340 Echlin Inc 205,334
2,520 Fleetwood Enterprises Inc 116,391
82,300 Ford Motor Co 3,770,328
8,580 General Dynamics Corp 362,505
48,570 General Motors Corp Series D 3,272,404
13,340 Lockheed Martin Corp 1,485,743
5,150 Navistar International Corp* 153,856
4,540 Northrop Grumman Corp 479,819
5,360 Paccar Inc 318,250
5,260 Ryder System Inc 183,111
8,490 TRW Inc 448,374
11,320 Textron Inc 885,790
68,548 The Boeing Co 3,431,650
15,980 United Technologies Corp 1,573,023
$21,221,192
U.S. GOVERNMENTS --- 0.4%
47,740 Federal Home Loan Mortgage Corp 2,210,935
$2,210,935
WHOLESALE TRADE -CONSUMER --- 1.9%
7,080 Avery Dennison Corp 370,815
7,500 Cardinal Health Inc 721,875
14,660 Costco Companies Inc* 819,128
19,910 Nike Inc Class B 950,703
92,120 Procter & Gamble Co 7,571,066
3,840 Reebok International Ltd* 112,800
4,150 SuperValu Inc 181,301
23,360 Sysco Corp 556,248
$11,283,936
TOTAL COMMON STOCK --- 99.1% $600,330,286
(Cost $512,437,070)
SHORT-TERM INVESTMENTS
SECURITIES & COMMODITIES --- 0.9%
5,368,000 Merrill Lynch & Co Inc 5,368,000
$5,368,000
TOTAL SHORT-TERM INVESTMENTS --- 0.9% $5,368,000
(Cost $5,368,000)
TOTAL ORCHARD INDEX 500 FUND --- 100.0% $605,698,286
(Cost $517,805,070)
The Orchard Series Fund
Orchard Index 600 Fund
COMMON STOCK
AGRICULTURE --- 1.2%
600 Dekalb Genetics Corp Class B 40,912
666 Delta & Pine Land Co 30,677
$71,589
AIR --- 1.1%
450 Air Express International Corp 11,813
1,050 Comair Holdings Inc 28,678
400 Mesa Air Group Inc* 3,200
300 Offshore Logistics Inc* 7,088
300 Pittston Burlington Group 5,625
200 Skywest Inc 8,100
$64,504
COMMUNICATIONS --- 0.6%
400 Allen Group Inc* 6,425
600 General Communication Inc Class A* 4,237
300 HA-LO Industries Inc* 10,069
300 Metro Networks Inc* 11,925
500 Picturetel Corp* 4,625
300 TCSI Corp* 2,044
$39,325
CONSTRUCTION --- 1.5%
200 Acme Metals Inc* 1,725
400 Apogee Enterprises Inc 5,800
825 DR Horton Inc 15,263
400 Geon Co 9,550
400 Insituform Technologies Inc Class A* 4,650
300 MDC Holdings Inc 5,156
800 Morrison Knudsen Corp* 9,550
200 Southern Energy Homes Inc* 2,212
500 Standard Pacific Corp 8,625
200 The Ryland Group Inc 4,187
500 Toll Brothers Inc* 13,938
200 US Home Corp* 8,300
$88,956
CONSUMER SERVICES --- 8.6%
300 Access Health Inc* 10,125
400 American Oncology Resources* 6,000
100 Angelica Corp 2,200
700 Aztar Corp* 5,468
200 CPI Corp 5,187
400 CapStar Hotel Co* 12,850
200 Carmike Cinemas Inc Class A* 6,062
450 Central Parking Corp 21,094
2,700 Cineplex Odeon Corp* 4,892
200 Cooper Companies Inc* 7,687
900 Coventry Health Care Inc* 15,243
200 Curative Technologies Inc* 6,200
200 Datascope Corp* 5,625
500 DeVry Inc* 18,938
300 Diagnostic Products Corp 8,494
420 Enzo Biochem Inc* 6,143
300 Franklin Covey Co* 7,500
300 G&K Services Inc Class A 12,075
100 GC Companies Inc* 5,263
500 Genesis Health Ventures Inc* 13,219
100 Global Motorsport Group Inc* 2,050
600 Grand Casinos Inc* 10,537
300 Hollywood Park Inc* 3,506
200 Insurance Auto Actions Inc* 2,450
632 Integrated Health Services Inc 24,371
600 Interim Services Inc* 19,575
400 Lincare Holdings Inc* 32,450
400 Magellan Health Services Inc* 11,100
400 Mariner Health Group Inc* 7,250
300 NCS HealthCare Inc Class A* 8,813
300 NFO Worldwide Inc* 6,281
500 North American Vaccine Inc* 8,125
700 Orthodontic Centers of America Inc* 14,963
765 Paragon Health Network Inc* 14,296
200 Pediatrix Medical Group* 8,437
1,000 Phycor Inc* 22,750
400 Players International Inc* 2,125
500 Primadonna Resorts Inc* 8,938
600 Prime Hospitality Corp* 12,412
500 Regal Cinemas Inc* 15,281
300 Regis Corp 8,513
300 Renal Care Group Inc* 11,475
1,050 Rollins Truck Leasing Corp 13,913
400 Sequus Pharmaceuticals Inc* 4,750
200 Showboat Inc 6,062
300 Sierra Health Services Inc* 11,531
450 The Marcus Corp 7,959
500 Universal Health Services Inc Class B* 28,781
500 Westwood One Inc* 15,000
$523,959
CREDIT INSTITUTIONS --- 4.6%
400 Astoria Financial Corp 23,450
300 Commerce Bancorp Inc 17,213
650 Commercial Federal Corp 23,563
300 Cullen/Frost Bankers Inc 17,550
525 First Commercial Corp 38,653
200 FirstBank Puerto Rico 11,350
1,000 FirstMerit Corp 28,375
300 Hubco Inc 11,025
500 Magna Group Inc 29,563
500 Riggs National Corp 14,406
450 St Paul Bancorp Inc 11,250
300 US Trust Corp 21,300
500 UST Corp 14,094
300 Whitney Holding Corp 18,263
$280,055
ELECTRIC --- 1.5%
100 Bangor Hydro Electric Co* 869
300 Central Hudson Gas & Electric Corp 12,094
200 Central Vermont Public Service Corp 2,975
300 Commonwealth Energy System Co 11,475
300 Eastern Utilities Associates 7,875
400 Energen Corp 8,925
100 Green Mountain Power Corp 1,838
200 Orange & Rockland Utilities Inc 8,262
200 Pennsylvania Enterprises Inc 4,687
500 Sierra Pacific Resources 17,500
200 TNP Enterprises Inc 6,450
200 United Illuminating Co 9,825
$92,775
ELECTRONICS - HIGH TECH --- 14.1%
300 ADAC Laboratories* 6,525
200 Alliant Techsystems Inc* 12,787
300 Amtech Corp* 1,088
200 Analogic Corp 9,325
700 Anixter International Inc* 13,956
400 Applied Magnetics Corp* 4,125
700 Aspect Telecommunications Corp* 20,125
400 Auspex Systems Inc* 2,900
533 Baldor Electric Co 13,991
400 Ballard Medical Products Co 10,050
200 Benchmark Electronics Inc* 4,487
200 Broadband Technologies Inc* 1,562
600 Burr Brown Corp* 18,262
100 C COR Electronics Inc* 1,475
600 C-Cube Microsystems Inc* 14,512
300 CTS Corp 11,081
450 Cable Design Technologies Co* 11,981
200 California Microwave Inc* 4,537
100 Centigram Communications Corp* 1,325
600 Checkpoint Systems Inc* 11,212
200 Circon Corp* 3,625
600 Cognex Corp* 14,512
400 Coherent Inc* 9,500
100 Collagen Corp 1,888
625 Comverse Technology Inc* 29,609
400 Dallas Semiconductor Corp 15,425
300 Daniel Industries Inc 5,869
200 Digi International Inc* 5,325
700 Digital Microwave Corp* 7,963
200 Dionex Corp* 10,675
200 Electro Scientific Industries Inc* 7,600
300 Electroglas Inc* 5,063
300 Envoy Corp* 12,638
300 Etec Systems Inc* 17,025
300 Exabyte Corp* 3,431
200 Fluke Corp 6,350
600 General Semiconductor Inc* 8,212
200 Hadco Corp* 7,650
500 Harbinger Corp* 18,188
300 Harman International Industries Inc 12,900
150 Harmon Industries Inc 3,675
200 Hologic Inc* 4,700
700 Input/Output Inc* 17,413
200 Integrated Circuit Systems Inc* 3,025
400 Inter-Tel Inc 9,450
800 International Rectifier Corp* 9,400
200 Intervoice Inc* 2,700
400 Invacare Corp 11,150
300 Juno Lighting Inc 6,488
600 Kemet Corp* 10,800
800 Komag Inc* 12,400
300 Kuhlman Corp 14,700
400 Lattice Semiconductor Corp* 18,250
300 Marshall Industries* 9,731
400 Mentor Corp 10,875
500 Methode Electronics Inc Class A 8,000
400 National Computer Systems Inc 10,000
300 Network Equipment Technologies Inc* 6,169
300 Oak Industries Inc* 10,894
800 P-Com Inc* 15,750
200 Park Electrochemical Corp 5,150
200 Plexus Corp* 4,400
700 Read-Rite Corp* 9,668
300 Resound Corp* 1,894
500 Respironics Inc* 8,344
100 Rival Co 1,606
400 Royal Appliance Manufacturing Co* 2,200
800 Safeskin Corp* 28,500
300 Sanmina Corp* 27,000
200 Spacelabs Inc* 3,575
200 Speedfam International Inc* 5,800
200 Standard Microsystems Corp* 2,200
500 Steris Corp* 29,406
500 Summit Technology Inc 2,844
300 Sunrise Medical Inc* 4,444
200 Symmetricom Inc* 1,475
200 Technitrol Inc 8,175
300 Thomas Industries Inc 7,781
100 Three Five Systems Inc* 1,963
400 Tracor Inc* 15,725
300 Trimble Navigation Ltd* 5,550
400 Unitrode Corp* 6,400
700 VLSI Technology Inc* 14,438
300 Valence Technology Inc* 1,463
700 Vanstar Corp* 9,318
600 Vicor Corp* 12,037
200 Visx Inc* 8,825
200 Vital Signs Inc 3,725
550 Vitesse Semiconductor Corp* 31,728
100 Watkins Johnson Co 2,781
300 X-Rite Inc 3,881
400 Zebra Technologies Corp Class A* 15,500
100 Zoll Medical Corp* 713
$862,833
ENVIRONMENTAL SERVICES --- 0.1%
200 Tetra Technologies Inc* 4,787
$4,787
GAS --- 2.5%
400 Atmos Energy Corp 11,775
200 Cascade Natural Gas Corp 3,212
100 Connecticut Energy Corp 2,900
400 KCS Energy Inc 6,200
700 KN Energy Inc 41,081
300 New Jersey Resources Corp 11,325
400 Northwest Natural Gas Co 10,800
400 Piedmont Natural Gas Company Inc 13,625
600 Pogo Producing Co 19,237
300 Public Service Company of North Carolina Inc 6,150
400 Southwest Gas Corp 9,225
400 Southwestern Energy Co 4,625
300 Wicor Inc 14,381
$154,536
HOLDING & INVEST OFFICES --- 3.2%
400 Centura Banks Inc 28,800
200 Cilcorp Inc 9,562
200 Dain Rauscher Corp 12,037
300 Eaton Vance Corp 14,700
200 JSB Financial Inc 11,062
800 Keystone Financial Inc 31,200
400 Pioneer Group Inc 12,600
600 Provident Financial Group Inc 31,762
1,968 Sovereign Bancorp Inc 37,146
400 WHX Corp* 6,275
$195,144
INDUSTRIAL SERVICES --- 7.7%
300 ABM Industries Inc 8,681
800 Acxiom Corp* 19,400
600 Advanced Tissue Sciences Inc* 5,081
400 Advo Inc* 11,450
600 American Management Systems Inc* 17,362
450 Analysts International Corp 13,050
600 Billing Information Concepts* 16,800
400 Bisys Group Inc* 15,800
450 Boole & Babbage Inc* 10,800
300 Broderbund Software Inc* 5,363
300 CDI Corp* 11,606
500 Cerner Corp* 14,906
800 Ciber Inc* 26,000
300 Computer Task Group Inc* 11,663
300 Dames & Moore Inc 3,844
300 Dialogic Corp* 11,213
200 Fair Isaac & Co Inc 7,950
300 Figgie International Inc Class A* 4,069
200 Filenet Corp* 10,900
300 Hyperion Software Corp* 13,013
200 Itron Inc* 3,062
300 Jack Henry & Associates Inc 10,425
500 National Data Corp 20,406
400 Norrell Corp 8,425
700 PMT Services Inc* 13,650
300 Platinum Software Corp* 6,713
1,100 Platinum Technology Inc* 28,050
400 Primark Corp* 14,875
200 Progress Software Corp* 6,400
700 S3 Inc* 5,118
300 SEI Investments Companies 22,163
200 Stone & Webster Inc 8,925
700 System Software Associates Inc* 6,081
400 Technology Solutions Co* 12,850
700 True North Communications Inc 21,350
300 United States Bioscience Inc* 2,775
500 Vantive Corp* 16,000
200 Volt Information Sciences Inc* 6,650
100 Wall Data Inc* 1,538
700 Xylan Corp* 19,928
$474,335
INSURANCE --- 6.0%
450 Allied Group Inc 13,444
600 American Bankers Insurance Group Inc 36,862
200 Arthur J Gallagher & Co 8,775
300 CMAC Investment Corp 19,369
200 Capital RE Corp 14,762
200 Compdent Corp* 2,625
306 Delphi Financial Group Inc Class A* 17,442
300 Enhance Financial Services Group Inc 20,588
200 Executive Risk Inc 13,337
420 Fidelity National Financial Inc 15,488
300 First American Financial Corp 21,319
500 Fremont General Corp 27,875
500 Frontier Insurance Group Inc 13,250
200 Hilb Rogal & Hamilton Co 3,575
300 Life Re Corp 21,600
600 Mutual Risk Management Ltd 20,325
300 NAC RE Corp 15,000
400 Orion Capital Corp 22,300
1,000 Protective Life Corp 37,125
400 Selective Insurance Group Inc 11,000
150 Trenwick Group Inc 5,775
300 Zenith National Insurance Corp 8,438
$370,274
MFTG - CONSUMER PRODS --- 10.1%
200 Ashworth Inc* 3,350
300 Authentic Fitness Corp 5,438
200 Bassett Furniture Industries Inc 6,250
300 Bowne & Company Inc 12,394
300 Brown Group Inc 4,781
600 Buckeye Technologies Inc* 13,950
300 Canandaigua Wine Co Inc* 15,713
300 Catalina Marketing Corp* 15,600
700 Champion Enterprises Inc* 17,413
1,000 Chiquita Brands International Inc 13,562
100 Coca-Cola Bottling Co 6,113
400 Cone Mills Corp* 3,625
200 Consolidated Graphics Inc* 11,537
500 Corn Products International Inc* 17,813
300 Cyrk Inc* 4,800
400 Delta Woodside Industries Inc 2,425
200 Designs Inc* 425
600 Dimon Inc 8,775
400 Earthgrains Co 18,700
400 Ethan Allen Interiors Inc 20,375
200 Galey & Lord Inc* 5,225
300 Galoob Toys Inc* 3,244
300 Gibson Greetings Inc* 7,847
100 GoodMark Foods Inc 2,288
400 Guilford Mills Inc 11,300
500 Gymboree Corp* 9,188
100 Haggar Corp 1,463
500 Hartmarx Corp* 3,938
200 Innovex Inc 5,112
400 Interface Inc Class A 16,975
100 J&J Snack Foods Corp* 1,950
500 John H Harland Co 8,906
200 Johnston Industries Inc 1,137
500 Just For Feet Inc* 11,000
400 Justin Industries Inc 6,250
100 K-Swiss Inc 2,075
300 K2 Inc 6,806
300 Kellwood Co 9,581
300 La-Z-Boy Inc 15,694
300 Linens 'N Things Inc* 18,075
300 Lydall Inc* 5,569
200 Merrill Corp 4,150
750 Mohawk Industries Inc* 23,156
100 National Presto Industries Inc 3,975
300 Nature's Sunshine Products Inc 7,350
200 New England Business Service Inc 6,637
700 Oakwood Homes Corp 19,731
200 Oshkosh B'Gosh Inc Class A 7,700
100 Oxford Industries Inc 3,563
400 ParExel International Corp* 13,400
200 Pharmaceutical Marketing Services Inc* 2,787
400 Phillips Van-Heusen Corp 4,725
226 Pillowtex Corp 11,342
100 Plenum Publishing Corp 6,600
200 Schweitzer-Mauduit International Inc 6,650
600 Smithfield Foods Inc* 18,225
400 Sola International Inc* 17,000
700 Stride Rite Corp 8,793
100 Swiss Army Brands Inc* 1,200
200 The Dixie Group Inc 2,512
200 The Timberland Co Class A* 17,125
400 Titan International Inc 7,800
400 Tultex Corp* 1,350
200 USA Detergents Inc* 2,762
300 Universal Forest Products Inc 5,363
600 Valassis Communications Inc* 23,550
600 Wolverine World Wide Inc 17,325
600 World Color Press Inc* 19,200
$620,633
MFTG - INDUSTRIAL PRODS --- 14.5%
300 AT Cross Co Class A 3,975
500 Alliance Pharmaceutical Corp* 4,000
350 Alpharma Inc Class A 7,963
100 Amcast Industrial Corp 2,156
400 Applied Power Inc Class A 14,950
300 Aptargroup Inc 18,750
200 Astec Industries Inc* 5,900
400 BMC Industries Inc 7,300
300 Banctec Inc* 6,544
400 Belden Inc 16,575
200 Bell Sports Corp* 1,950
800 Bio-Technology General Corp* 7,125
400 Birmingham Steel Corp 6,400
600 Blount International Inc Class A 18,637
100 Butler Manufacturing Co 3,731
400 COR Therapeutics Inc* 7,550
200 Cambrex Corp 11,100
400 Caraustar Industries Inc 13,700
400 Cephalon Inc* 4,775
100 Chemed Corp 4,006
300 Chemfirst Inc 7,988
300 Clarcor Inc 6,731
200 Commonwealth Industries Inc 3,400
300 Cygnus Inc* 3,300
300 Dynatech Corp* 14,625
600 Fedders Corp 3,225
200 Flow International Corp* 2,137
400 Gerber Scientific Inc 10,200
300 Global Industries Technologies Inc* 5,381
400 Graco Inc 13,775
400 Griffon Corp* 5,350
200 Hauser Inc* 1,550
300 Helix Technology Corp 6,000
600 IDEXX Laboratories Inc* 13,275
300 IMCO Recycling Inc 5,550
300 Immune Response Corp* 3,656
100 Insteel Industries Inc 731
204 Intermagnetics General Corp* 2,053
400 Intermet Corp 8,400
200 Ionics Inc* 8,912
700 JLG Industries Inc 11,418
100 Kronos Inc* 3,600
500 Kulicke & Soffa Industries Inc* 10,750
200 LSB Industries Inc 850
300 Lilly Industries Inc Class A 5,644
150 Lindsay Manufacturing Co 7,031
600 Liposome Company Inc* 3,562
200 Lone Star Industries Inc 16,525
200 Lukens Inc 6,937
600 MacDermid Inc 17,962
300 Marquette Medical Systems Class A* 8,100
200 Material Sciences Corp* 2,050
200 McWhorter Technologies Inc* 5,200
400 Medimmune Inc* 21,100
300 Medusa Corp 18,450
800 Microchip Technology Inc* 22,700
400 Mississippi Chemical Corp 7,250
300 Molecular Biosystems Inc* 2,831
300 Mueller Industries Inc* 20,306
500 Mycogen Corp* 10,250
330 Myers Industries Inc 8,209
900 NBTY Inc* 18,000
100 Nashua Corp* 1,538
400 Northwestern Steel and Wire Co* 1,637
500 Novellus Systems Inc* 23,938
300 Noven Pharmaceuticals Inc* 1,950
200 O'Sullivan Corp 1,962
300 OM Group Inc 13,294
700 Paxar Corp* 10,368
100 Penford Corp 3,500
400 Photronics Inc* 14,750
400 Polaris Industries Inc 14,250
200 Pope & Talbot Inc 3,112
300 Protein Design Labs Inc* 9,600
100 Quaker Chemical Corp 1,981
200 Quanex Corp 5,862
100 RailTex Inc* 1,481
300 Regal-Beloit Corp 9,225
400 Regeneron Pharmaceuticals Inc* 3,925
220 Republic Group Inc 4,180
300 Robbins & Myers Inc 9,938
500 Roberts Pharmaceutical Corp* 8,500
400 Roper Industries Inc 12,400
300 Russ Berrie & Company Inc 8,588
200 SPS Technologies Inc* 12,362
300 Scotts Co Class A* 10,950
300 Shorewood Packaging Corp* 7,781
200 Standex International Corp 6,087
200 Steel Technologies Inc 2,550
400 Sturm Ruger Company Inc 7,875
200 Telxon Corp 6,462
400 Texas Industries Inc 25,775
300 The Manitowoc Company Inc 13,988
300 TheraTech Inc* 2,438
300 Thomas Nelson Inc 3,994
200 Toro Co 7,575
200 Tredegar Industries Inc 15,662
400 Ultratech Stepper Inc* 9,825
400 Valmont Industries Inc 8,900
400 Vertex Pharmaceuticals Inc* 12,450
200 WD-40 Co 5,787
400 WH Brady Co Class A 12,200
100 Walbro Corp 1,256
200 Whittaker Corp* 2,850
200 Wolverine Tube Inc* 7,875
300 Wynn's International Inc 6,750
300 Xircom Inc* 5,119
200 Zero Corp 6,162
$890,703
MINING --- 0.6%
450 AMCOL International Corp 6,159
300 Coeur D'Alene Mines Co* 3,506
200 Dravo Corp* 2,050
400 Getchell Gold Corp* 9,850
500 Glamis Gold Ltd* 2,219
800 Helca Mining Co* 5,100
300 Stillwater Mining Co* 7,931
$36,815
OIL & GAS --- 2.8%
400 Benton Oil & Gas Co* 4,875
300 Cabot Oil & Gas Corp 7,031
750 Cross Timbers Oil Co 14,344
500 Devon Energy Corp 19,938
300 HS Resources Inc* 4,856
500 Newfield Exploration Co* 12,125
400 Oceaneering International Inc* 9,175
300 Plains Resources Inc* 6,300
300 Pool Energy Services Co* 7,913
700 Pride International Inc* 17,018
300 Remington Oil & Gas Corp* 1,800
1,500 Santa Fe Energy Resources Inc* 15,468
400 Seitel Inc* 6,750
500 Snyder Oil Corp 10,656
100 St Mary Land & Exploration Co 3,200
600 Tuboscope Vetco International Corp* 14,212
800 Vintage Petroleum Inc 15,600
100 Wiser Oil Co 1,200
$172,461
OTHER TRANS SERVICES --- 1.9%
500 American Freightways Corp* 6,000
300 Arkansas Best Corp* 3,150
800 Brightpoint Inc* 15,600
400 Expeditors International of Washington Inc 17,000
500 Fritz Companies Inc* 7,313
300 Frozen Food Express Industries Inc 3,056
500 Heartland Express Inc* 12,438
200 Landstar System Inc* 6,550
200 MS Carriers Inc* 6,800
300 Rural/Metro Corp* 9,750
400 USFreightways Corp 14,300
600 Werner Enterprises Inc 14,475
$116,432
REAL ESTATE --- 0.9%
600 Amresco Inc* 21,750
300 CCB Financial Corp 32,625
$54,375
RETAIL TRADE --- 8.4%
300 AnnTaylor Stores Corp* 4,781
500 Applebees International Inc 12,438
200 Au Bon Pain Inc* 1,862
100 Bertuccis Inc* 969
600 Bombay Company Inc* 2,925
300 Books-A-Million Inc* 1,763
200 Builders Material Holding Corp* 2,900
660 CKE Restaurants Inc 22,853
800 Caseys General Stores Inc 13,100
400 Cash America International Inc 6,800
400 Cato Corp Class A 5,700
300 Cheesecake Factory Inc* 7,575
375 Consolidated Products Inc* 7,641
100 Danmark International Inc* 1,063
300 Discount Auto Parts Inc* 7,219
400 Eagle Hardware & Garden Inc* 7,300
300 Express Scripts Inc* 24,000
300 Fabri-Centers of America Inc Class A* 8,831
300 Filenes Basement Corp* 1,669
600 Foodmaker Inc* 11,400
500 Footstar Inc* 19,906
200 Gottschalks Inc* 1,812
500 Hancock Fabrics Inc 7,438
100 IHOP Corp* 4,400
200 J Baker Inc 2,350
400 Jan Bell Marketing Inc* 2,225
500 Landrys Seafood Restaurant Co* 14,250
300 Lechters Corp* 1,959
100 Lillian Vernon Corp 1,725
400 Luby's Cafeterias Inc 7,675
400 Michaels Stores Inc* 12,100
579 Midway Games Inc* 10,712
400 O'Reilly Automotive Inc* 11,000
1,050 Pier 1 Imports Inc 27,694
800 Ross Stores Inc 37,050
300 Ruby Tuesday Inc 10,050
800 Ryan's Family Steak Houses Inc* 8,000
200 SPX Corp* 14,475
700 Shoney's Inc* 3,763
500 Shopko Stores Inc* 17,313
300 Showbiz Pizza Time Inc* 11,588
200 Sonic Corp* 6,400
300 St John Knits Inc 13,388
300 Stein Mart Inc* 10,575
400 TCBY Enterprises Inc 3,525
300 TJ International Inc 9,338
200 Taco Cabana Inc* 1,325
300 The Dress Barn Inc* 8,738
300 The Men's Wearhouse Inc* 12,638
500 The Sports Authority Inc* 8,781
500 Triarc Companies Inc Class A* 12,906
400 Whole Foods Market Inc* 24,750
400 Williams-Sonoma Inc* 21,940
$514,578
SECURITIES & COMMODITIES --- 1.2%
420 Downey Financial Corp 14,569
400 Legg Mason Inc 23,600
300 Piper Jaffray Companies Inc 11,138
675 Raymond James Financial Inc 21,979
$71,286
TELEPHONE --- 0.4%
1,000 Tel-Save Holdings Inc* 22,812
$22,812
TRANSPORTATION EQUIPMENT --- 2.4%
400 AAR Corp 10,475
300 AO Smith Corp 13,538
400 Arctic Cat Inc 4,000
300 BE Aerospace Inc* 9,356
500 Breed Technologies Inc 10,094
500 Gentex Corp* 16,875
200 Huffy Corp 3,275
600 Orbital Sciences Corp* 26,700
300 Simpson Industries Inc 4,163
200 Skyline Corp 6,075
200 Spartan Motors Inc* 1,512
200 Standard Motor Products Inc 4,737
300 Standard Products Co 9,600
150 Thor Industries Inc 3,919
400 Wabash National Corp 12,350
400 Winnebago Industries Inc 4,650
400 Yellow Corp* 7,175
$148,494
WATER --- 0.7%
100 Aquarion Co 3,244
100 Consumers Water Co 2,013
450 Halter Marine Group Inc* 8,156
400 Kirby Corp* 9,800
400 Philadelphia Suburban Corp 8,450
100 Southern California Water Co 2,325
600 United Water Resources Inc 10,387
$44,375
WHOLESALE TRADE - INDL --- 1.3%
200 AM Castle & Co 4,750
300 Applied Industrial Technology Inc 7,613
500 Barrett Resources Corp* 18,563
120 Bell Industries Inc* 1,642
200 Lawson Products Inc 5,050
300 MicroAge Inc* 4,800
600 Nautica Enterprises Inc* 14,925
450 Patterson Dental Co* 13,247
300 Pioneer Standard Electronics Inc 3,769
400 TBC Corp* 3,550
$77,909
WHOLESALE TRADE -CONSUMER --- 2.1%
300 Barnes Group Inc 9,394
200 Commercial Metals Co 6,675
600 Fleming Companies Inc 11,250
300 Hughes Supply Inc 11,625
400 Kaman Corp Class A 7,650
400 Kent Electronics Corp* 8,800
200 Nash Finch Co 3,925
500 Owens & Minor Inc 8,906
700 Richfood Holdings Inc 19,206
100 Syncor International Corp* 1,813
700 Tech Data Corp* 34,913
200 Watsco Inc 5,850
$130,007
TOTAL COMMON STOCK --- 100.0% $6,123,952
(Cost $4,841,231)
TOTAL ORCHARD INDEX 600 FUND --- 100.0% $6,123,952
(Cost $4,841,231)
The Orchard Series Fund
Orchard Money Market Fund
SHORT-TERM INVESTMENTS
CREDIT INSTITUTIONS --- 46.9%
150,000 American Express Co 147,877
150,000 Ford Motor Credit Co 148,408
300,000 JP Morgan & Company Inc 298,128
150,000 Prudential Funding Corp 146,771
400,000 Student Loan Marketing Association 400,072
150,000 Toyota Motor Credit Corp 149,267
$1,290,523
ELECTRIC --- 5.4%
150,000 Duke Power Co 149,129
$149,129
ELECTRONICS - HIGH TECH --- 10.8%
150,000 General Electric Co 146,701
150,000 Sharp Electronics Corp 149,702
$296,403
FINANCIAL SERVICES --- 10.9%
150,000 KFW International Finance 149,769
150,000 Novartis Finance Corp 148,919
$298,688
HOLDING & INVEST OFFICES --- 5.4%
150,000 American General Finance Corp 149,048
$149,048
SECURITIES & COMMODITIES --- 16.3%
150,000 Bear Stearns Companies Inc 150,000
150,000 Daimler-Benz 149,034
150,000 Merrill Lynch & Co Inc 149,196
$448,230
TELEPHONE --- 4.4%
120,000 Ameritech Corp 119,761
$119,761
TOTAL SHORT-TERM INVESTMENTS --- 100.0% $2,751,782
(Cost $2,751,722)
TOTAL ORCHARD MONEY MARKET FUND --- 100.0% $2,751,782
(Cost $2,751,722)
The Orchard Series Fund
Orchard Preferred Stock Fund
PREFERRED STOCK
CREDIT INSTITUTIONS --- 23.0%
7,400 Bankers Trust New York Corp 200,257
6,800 Fleet Financial Group Inc 185,300
7,300 Household International Inc 208,963
3,500 JP Morgan & Company Inc 190,750
6,800 MBNA Corp 183,600
$968,870
ELECTRIC --- 25.3%
1,500 Baltimore Gas & Electric Co 165,000
1,600 Duke Power Co 166,400
1,400 Florida Power & Light Co 147,000
1,800 PP & L Inc 189,900
2,000 South Carolina Electric & Gas 213,000
1,700 Southern California Edison Co 185,725
$1,067,025
ELECTRONICS - HIGH TECH --- 4.4%
6,700 International Business Machines Corp 183,828
$183,828
FINANCIAL SERVICES --- 13.2%
7,000 Comdisco Inc 178,934
7,000 First Maryland Bancorp 179,809
7,500 Republic New York Corp 197,813
$556,556
INSURANCE --- 8.2%
3,100 Travelers Group Inc 161,200
7,300 WR Berkley Corp 186,150
$347,350
SECURITIES & COMMODITIES --- 12.6%
3,500 Donaldson, Lufkin & Jenrette Inc 176,313
5,300 Merrill Lynch & Co Inc 167,941
3,500 Morgan Stanley, Dean Witter & Co* 185,063
$529,317
TRANSPORTATION EQUIPMENT --- 8.8%
6,500 Ford Motor Co 188,500
6,900 General Motors Corp Series D 180,690
$369,190
U.S. GOVERNMENTS --- 4.6%
4,000 Federal Home Loan Mortgage Corp* 193,500
$193,500
TOTAL PREFERRED STOCK --- 100.0% $4,215,636
(Cost $4,150,017)
TOTAL ORCHARD PREFERRED STOCK FUND --- 100.0% $4,215,636
(Cost $4,150,017)
The Orchard Series Fund
Orchard Value Fund
COMMON STOCK
AGRICULTURE --- 1.6%
730 Dole Food Company Inc* 32,804
$32,804
AIR --- 2.0%
1,510 Southwest Airlines Co 41,430
$41,430
CONSUMER SERVICES --- 14.1%
750 Amgen Inc* 44,719
4,750 Food Lion Inc* 48,094
2,100 Humana Inc* 56,700
1,440 Patriot American Hospitality* 36,360
810 Starwood Hotels & Resorts 40,651
850 United Healthcare Corp 59,713
$286,237
CREDIT INSTITUTIONS --- 2.9%
550 Golden West Financial Corp 57,922
$57,922
ELECTRIC --- 10.6%
1,705 Allegheny Energy Inc* 52,216
925 Duke Power Co 53,534
880 FPL Group Inc 54,615
2,325 PacifiCorp 54,056
$214,421
ELECTRONICS - HIGH TECH --- 9.6%
950 AMP Inc 37,346
950 Electronic Data Systems Corp* 40,850
650 Motorola Inc 36,156
940 Thermo Electron Corp* 37,423
720 Thomas & Betts Corp 42,030
$193,805
ENVIRONMENTAL SERVICES --- 1.8%
1,090 Browning-Ferris Industries Inc 37,196
$37,196
HOLDING & INVEST OFFICES --- 6.4%
370 Chase Manhattan Corp 51,268
1,060 Developers Diversified Realty Corp* 42,068
1,395 Liberty Property Trust* 35,659
$128,995
INDUSTRIAL SERVICES --- 4.0%
900 Deluxe Corp 30,150
1,095 Fluor Corp 51,739
$81,889
INSURANCE --- 2.0%
180 General Re Corp 40,241
$40,241
MFTG - CONSUMER PRODS --- 6.3%
1,010 Liz Claiborne Inc 49,679
1,140 Rubbermaid Inc 32,633
730 Tommy Hilfiger Corp* 44,530
$126,842
MFTG - INDUSTRIAL PRODS --- 13.2%
1,470 Cincinnati Milacron Inc 45,661
570 Kimberly-Clark Corp 28,928
840 Lubrizol Corp* 30,975
1,250 Morton International Inc 40,000
600 PPG Industries Inc 42,412
780 Snap-On Inc 33,003
870 The BF Goodrich Co 46,816
$267,795
MINING --- 2.8%
2,565 Barrick Gold Corp 57,551
$57,551
OIL & GAS --- 10.9%
960 Amoco Corp 42,480
540 Chevron Corp 44,651
460 Mobil Corp 36,340
1,170 Occidental Petroleum Corp 34,441
780 Ultramar Diamond Shamrock Corp* 25,203
1,180 Valero Energy Corp* 38,203
$221,318
REAL ESTATE --- 2.0%
1,200 Highwood Properties Inc* 40,800
$40,800
RETAIL TRADE --- 3.6%
730 Sears Roebuck & Co 43,298
1,230 Wendy's International Inc 29,596
$72,894
SECURITIES & COMMODITIES --- 0.9%
255 Lehman Brothers Holdings Inc 18,121
$18,121
TELEPHONE --- 2.9%
990 GTE Corp 57,853
$57,853
TRANSPORTATION EQUIPMENT --- 2.5%
20 Allied-Signal Inc 876
710 Sundstrand Corp 49,034
$49,910
TOTAL COMMON STOCK --- 100.0% $2,028,024
(Cost $1,995,672)
TOTAL ORCHARD VALUE FUND --- 100.0% $2,028,024
(Cost $1,995,672)
PART C
OTHER INFORMATION
<PAGE>
C-6
Item 24. Financial Statements and Exhibits.
(a) Financial Statements are included in Part B and are incorporated by
reference to Registrant's Post-Effective Amendment No. 3 to its
Registration Statement dated February 27, 1998.
(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) is incorporated by reference to Registrant's
Post-Effective Amendment No. 3 to its Registration Statement
dated February 27, 1998.
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 and Item (b)(9), the Plan pursuant
to Rule 18f-3 for Orchard Value Fund, is attached hereto as Exhibit
9.
Item (b)(15), the Rule 12b-1 Distribution Plan for Orchard Value
Fund, is attached hereto as Exhibit 15.
Items (b)(3), (b)(7), (b)(12), (b)(14) and (b)(16)-(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.
Number of Record Holders
Title of Class as of June 30, 1998
-------------- -------------------------
Orchard Money Market Fund 1
Orchard Preferred Stock Fund 13
Orchard Index 600 Fund 12
Orchard Index 500 Fund 28
Orchard Index Pacific Fund 7
Orchard Index European Fund 11
Orchard Value Fund 2
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 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.
<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
95% - Maxim Series Fund, Inc.*
100% - GWL Properties Inc.
100% - Great-West Realty
Investments, Inc.
50% - Westkin Properties Ltd.
100% - Confed Admin Services, Inc.
92%** - Orchard Series Fund
</TABLE>
* 5% New England Life Insurance Company
** 8% New England Life Insurance Company
<PAGE>
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.
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.
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.
Positions and Offices Positions and Officers
Name with Registrant with Underwriter
- ------ ---------------------
- --------------------
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
(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) Not applicable.
(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.
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 5 to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Englewood in the State of
Colorado on the 17th day of July , 1998.
ORCHARD SERIES FUND
/s/ D.L. Wooden
D.L. Wooden
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 5 to the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
/s/ D.L. Wooden President 7/17/98
D.L. Wooden and Trustee
/s/ D.G. McLeod Treasurer 7/17/98
D.G. McLeod
/s/ R.P. Koeppe* Trustee 7/17/98
R.P. Koeppe
/s/ R. Jennings* Trustee 7/17/98
R. Jennings
<PAGE>
Signature Title Date
/s/ J.D. Motz Trustee 7/17/98
J.D. Motz
/s/ S. Zisman* Trustee 7/17/98
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
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)(9) Form of Rule 18f-3 Plan for Orchard Value Fund++
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.**
99.24(b)(15) Form of Rule 12b-1 Plan for Orchard Value Fund++
* Filed with Post-Effective Amendment No. 1.
+ Filed with Post-Effective Amendment. No. 3.
++ Filed with Post-Effective Amendment No. 5.
** Filed with Pre-Effective Amendment No. 2.
Exhibit (b)(9)
<PAGE>
ORCHARD SERIES FUND
PLAN PURSUANT TO RULE 18f-3 UNDER
THE INVESTMENT COMPANY ACT OF 1940
To the extent Orchard Series Fund (the "Fund") intends to create different
classes of shares representing interests in the same investment portfolio, Rule
18f-3 under the Investment Company Act of 1940 ("1940 Act") requires the Fund to
create a written plan specifying all of the differences among the Fund's
classes, including shareholder services, distribution arrangements, expense
allocations, and any related conversion features or exchange options. The Board
has created the Plan to meet this requirement. The Board, including a majority
of the Independent Trustees (defined herein), must periodically review the Plan
for its continued appropriateness, and must approve any material amendment of
the Plan as it relates to any class of any Series covered by the Plan. This Plan
must be amended to properly describe each additional class of shares approved by
the Fund's Board of Trustees after the date hereof. Before any material
amendment of the Plan, the Fund is required to obtain a finding by a majority of
the Board, and a majority of the Independent Trustees, that the Plan as proposed
to be amended, including the expense allocations, is in the best interests of
each class individually and the Fund as a whole.
CLASS DESIGNATIONS
The Fund may from time to time issue different classes of shares representing
interests in the same investment portfolio. Each of such classes of shares will,
except as described herein, have the same rights and obligations as each other
class. Each class shall be subject to such investment minimums and other
conditions of eligibility as are set forth in the Fund's prospectus or statement
of additional information as from time to time in effect (the "Prospectus").
CLASS CHARACTERISTICS
The Fund presently proposes to issue two classes of shares of the Orchard Value
Fund, Class A and Class B shares. Class A shares are offered at a public
offering price that is equal to their net asset value ("NAV") without an initial
sales charge or a contingent deferred sales charge ("CDSC").
Class B shares are offered at their NAV, without an initial sales charge or a
CDSC, but will be subject to a fee imposed in accordance with Rule 12b-1 under
the Act ("Rule 12b-1 fees"), a portion of which may include a service fee, as
described in the Prospectus.
ALLOCATIONS TO EACH CLASS
Expense Allocations
The following expenses shall be allocated, to the extent practicable, on a
class-by-class basis: (i) Rule 12b-1 fees payable by the Orchard Value Fund to
the distributor of the Orchard Value Fund's Class B shares1. Subject to the
approval of a majority of the Fund's Board of Directors, including a majority of
the Independent Directors (as defined in the Distribution Plan), the following
"Class Expenses" may, to the extent not required to be borne by GW Capital
Management, LLC (the "Manager") or an affiliate, pursuant to the Fund's
Investment Advisory Agreement, be allocated on a class-by-class basis: (a)
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, Prospectuses and proxy statements to current
shareholders of a specific class; (b) SEC registration fees incurred with
respect to a specific class; (c) state blue sky and foreign registration fees
and expenses incurred with respect to a specific class; (d) the expenses of
administrative personnel and services required to support shareholders of a
specific class; (e) litigation and other legal expenses relating to a specific
class; (f) expenses relating to shareholder meetings, including Trustees' fees
or expenses incurred as a result of issues relating to a specific class of
shares; (g) accounting and consulting expenses relating to a specific class; (h)
any fees imposed pursuant to a non-Rule 12b-1 shareholder services plan that
relate to a specific class; (i) transfer fees identified as being attributable
to a specific class of shares; and (j) any additional expenses, not including
management fees, investment advisory fees, custodial fees or other expenses
relating to the management of the Orchard Value Fund's assets, if such expenses
are actually incurred in a different amount with respect to a class that are of
a different kind or to a different degree than with respect to one or more other
classes.
All expenses not hereafter designated as Class Expenses will be allocated to
each class on the basis of the net asset value of that class in relation to the
net asset value of the Orchard Value Fund ("Fund Expenses").
Income, Gains And Losses
Income and realized and unrealized capital gains and losses shall be allocated
to each class on the basis of the net asset value of that class in relation to
the net asset value of the Orchard Value Fund.
Exchange Features
Class A and Class B shares shall have no conversion features and may not be
exchanged for one another.
DIVIDENDS
Dividends paid by the Orchard Value Fund with respect to its Class A shares and
Class B shares, to the extent any dividends are paid, will be calculated in the
same manner, at the same time and will be in the same amount, except that any
Rule 12b-1 fee payments relating to a class of shares will be borne exclusively
by that class and any incremental transfer agency costs or, if applicable, Class
Expenses relating to a class shall be borne exclusively by that class.
VOTING RIGHTS
Each share of the Fund entitles the shareholder of record to one vote. Each
class of shares of the Orchard Value Fund shall have exclusive voting rights on
any matter submitted to shareholders that relates solely to the rights and
privileges of its class and shall have separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of the other class. Class B shareholders will vote separately as a
class to approve any material increase in payments authorized under the
Distribution Plan applicable to Class B shares.
RESPONSIBILITIES OF THE DIRECTORS
On an ongoing basis, the Trustees will monitor the Orchard Value Fund for the
existence of any material conflicts among the interests of the two classes of
shares. The Trustees, including a majority of the Independent Trustees, shall
take such action as is reasonably necessary to eliminate any such conflict that
may develop. If a conflict arises, the Manager and Distributor (which also
distributes the Class A shares), will take appropriate measures to remedy such
conflict.
REPORTS TO THE DIRECTORS
The Manager and the Distributor will be responsible for reporting any potential
or existing conflicts among the two classes of shares of Orchard Value Fund to
the Trustees. In addition, the Trustees will receive quarterly and annual
statements concerning expenditures complying with paragraph (b)(3)(ii) of Rule
12b-1. In the statements, only expenditures properly attributable to the direct
or indirect sale or servicing of a particular class of shares shall be used to
justify any distribution fee charged to that class. The statements, including
the allocations upon which they are based, will be subject to the review of the
Independent Trustees in the exercise of their fiduciary duties.
Adopted this 4th day of July , 1998.
Exhibit 11
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 5 to Registration Statement No. 333-9217 of Orchard Series Fund on Form N-1A
of our report dated December 5, 1997, appearing in the Annual Report of Orchard
Series Fund for the year ended October 31, 1997, which is incorporated by
reference to Orchard Series Fund's Post-Effective Amendment No. 3, and to the
reference to us under the heading "Independent Public Accountant" and "Financial
Statements" in the Statement of Additional Information, which is part of such
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
July 17, 1998
Exhibit (b) (15)
<PAGE>
ORCHARD SERIES FUND
RULE 12b-1 DISTRIBUTION PLAN
Distribution Plan
Class B Shares of Orchard Value Fund
June 4, 1998
Article I. The Plan
This Distribution Plan (the "Plan") sets forth the terms and conditions on
which Orchard Series Fund (the "Company") on behalf of the Orchard Value Fund
(the "Fund") will, after the effective date hereof, pay certain amounts to One
Orchard Equities, Inc. (the "Distributor") in connection with the provision by
the Distributor, of certain services to the Fund and its Class B shareholders,
as set forth herein. Certain of such payments by the Fund may, under Rule 12b-1
(the "Rule") under the Investment Company Act of 1940, as amended (the "Act"),
be deemed to constitute the financing of distribution by the Fund of its Class B
shares. This Plan describes all material aspects of such financing as
contemplated by the Rule and shall be administered and interpreted, and
implemented and continued, in a manner consistent with the Rule.
Article II. Distribution and Service Expenses
The Fund shall pay to the Distributor a fee in the amount specified in
Article III hereof. Such fee may be spent by the Distributor on any activities
or expenses primarily intended to result in the sale of Class B shares of the
Fund, including, but not limited to:
(a) compensation to and expenses, including overhead and telephone
expenses, of employees of Distributor engaged in the distribution of
the Class B shares;
(b) printing and mailing of prospectuses, statements of additional
information, and reports for prospective purchases of the Fund
investing directly in Class B shares;
(c) compensation to financial intermediaries and broker/dealers to pay
or reimburse them for their services or expenses in connection with
the distribution of the Fund investing directly in Class B shares;
(d) expenses relating to the development, preparation, printing, and
mailing of Fund advertisements, sales literature, and other
promotional materials describing and/or relating to the Fund;
(e) expenses of holding seminars and sales meetings designed to promote
the distribution of the Class B shares;
(f) expenses of obtaining information and providing explanations to Fund
shareholders regarding Fund investment objectives and policies and
other information about the Fund, including performance;
(g) expenses of training sales personnel regarding the Fund;
(h) expenses of compensating sales personnel in connection with the sale
of shares to the Fund; and
(i) expenses of personal services and/or maintenance of shareholder
accounts with respect to Class B shares attributable to such
accounts.
Article III. Maximum Expenditures
The expenditures to be made by the Fund pursuant to this Plan, and the
basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed 0.25% of the average daily
net asset value of the Class B shares of the Fund (determined in accordance with
the Fund's prospectus as from time to time in effect) on an annual basis to
cover distribution expenses. All such expenditures shall be calculated and
accrued daily and paid monthly or at such intervals as the Board of Trustees
shall determine.
Article IV. Expenses Borne by the Fund
Notwithstanding any other provision of this Plan, the Fund may bear the
respective expenses under any administrative services agreement, as from time to
time in effect under the Fund's current prospectus. Except as otherwise
contemplated by this Plan, the Fund shall not, directly or indirectly, engage in
financing any activity which is primarily intended to or should reasonably
result in the sale of shares of the Fund.
To the extent that any investment management and administration fees paid
by the Fund might be considered as indirectly financing any activity which is
primarily intended to result in the sale of the Fund's shares, the payment by
that Fund of such fees hereby is authorized under this Plan.
<PAGE>
Article V. Approval by Board of Directors, Shareholders
This Plan shall not take effect until it has been approved, together with
any related agreements, by votes cast in person at a meeting called for the
purpose of voting on this Plan and any such related agreements, of a majority of
both (i) the Trustees of the Fund and (ii) those Trustees who are not
"interested persons" of the Fund and have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it (the
"Independent Trustees").
Article VI. Continuance
This Plan and any related agreement shall continue in effect for a period
of more than one year after it takes effect only for as long as such continuance
is specifically approved at least annually in the manner provided for in Article
V.
Article VII. Information
The Distributor shall provide the Board of Trustees, and the Board, and,
in particular, the Independent Trustees, shall review, in the exercise of their
fiduciary duties, at least quarterly, a written report of the amounts expended
with respect to the Class B shares of the Fund by the Distributor under this
Plan and the Principal Underwriting Agreement and the purposes for which such
expenditures were made.
Article VIII. Termination
This Plan may be terminated (a) at any time by vote of a majority of the
Independent Directors, or a majority of the Fund's outstanding voting Class B
shares, or (b) automatically in the event of its assignment.
Article IX. Agreements
Each agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Independent Trustees or
by vote of a majority of the Fund's then outstanding voting Class B
shares.
(b) That such agreement shall terminate automatically in the event of
its assignment.
<PAGE>
Article X. Amendments
This Plan may not be amended to increase materially the maximum amount of
the fees payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class B shares of the Fund. No material amendment to the Plan
shall, in any event, be effective unless it is approved by the Board of Trustees
in the same manner as is provided for in Article V.
Article XI. Preservation of Documents
The Fund shall preserve copies of this Plan (including any amendments
thereto) and any related agreements and all reports made to the Board for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
Article XII. Selection of Trustees
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons of the Fund shall be committed to the discretion of
the Board of Trustees who are not interested persons of the Fund.
Article XIII. Defined Terms
As used in this Plan, the terms "majority of the outstanding voting Class
B shares" shall have the same meaning as the phrase "Majority of the outstanding
voting securities" has in the Act, and the phrase "interested person" and
"assignment" shall have the same meaning as that phrase has in the Act.
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan effective
as of the _________day of _______________1998.
Orchard Series Fund, on behalf of
Orchard Value Fund
By: /s/ David G. McLeod
Print Name: David G. McLeod
Title: Treasurer
One Orchard Equities, Inc.
By: /s/ Beverly A. Byrne
Print Name: Beverly A. Byrne
Title: Secretary and Compliance
1 As of the date of this Plan, the Fund has adopted a Distribution Plan pursuant
to Rule 12b-1 under the Act only for the Class B shares (the "Distribution
Plan") of the Orchard Value Fund. One Orchard Equities, Inc. serves as
distributor for both the Class A shares and Class B shares (the "Distributor").
