As filed with the Securities and Exchange Commission on December 30, 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. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [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>
ORCHARD SERIES FUND
The Orchard Money Market
Fund
The Orchard Preferred
Stock Fund
The Orchard Index 500 Fund
The Orchard Index 600 Fund
The Orchard Index
European Fund
The Orchard Index Pacific
Fund
8515 East Orchard Road
Englewood, CO 80111
(800) 338 - 4015
This Prospectus describes five mutual funds that emphasize long-term growth of
capital, and one (a money market fund) that emphasizes preservation of invested
capital. GW Capital Management, LLC ("GW Capital Management"), a wholly owned
subsidiary of Great-West Life & Annuity Insurance Company, serves as investment
adviser to each of the Funds.
Each Fund is a series of the Orchard Series Fund (the "Trust"). The Trust is
registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company. This Prospectus contains important information
about each Fund that you should consider before investing. Please read it
carefully and save it for future reference.
This Prospectus does not constitute an offer to sell securities in any state or
other jurisdiction to any person to whom it is unlawful to make such an offer
in such state or other jurisdiction.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this
Prospectus is March 1,
1999.
<PAGE>
CONTENTS
The Funds at a Glance
Brief description of each
Fund........................................................................
2
Fees and Expenses
Each Fund's annual
operating
expenses...................................................................
3
The Funds in Detail
Investment objectives and
policies......................................................................
12
General Portfolio
Policies..........................................................14.
Management of the
Funds............................................................
16
Important Information
About Your
Investment..........................17....
How the Funds Report
Performance.............................................
18
Investing in the
Funds.............................................................19
Financial Highlights
A summary of financial
data for each
Fund....................................
Understanding the
Financial
Highlights............................................
<PAGE>
THE FUNDS AT A GLANCE
The following pages provide key information about each of the Funds discussed
in this Prospectus.
ORCHARD MONEY MARKET FUND.
The investment objective for this Fund is to:
o Seek as high a level of current income as is consistent with the
preservation of capital and liquidity.
The principal investment strategies for this Fund include:
o Investing in high-quality, short-term securities.
o Investing in securities that, when purchased, have the highest rating for
short-term debt by at least one nationally recognized statistical rating
organization such as Moody's Investor Services, Inc. ("Moody's) and
Standard & Poor's Corporation ("S&P").
o Investing in securities which are only denominated in U.S. dollars.
o Maintaining a dollar weighted average portfolio maturity of 90 days or less.
The principal investment
risks for this Fund
include:
o An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
<PAGE>
ORCHARD PREFERRED STOCK
FUND.
The investment objective for this Fund is to:
o Seek as high a level of dividend income qualifying for the corporate
dividends received deduction under applicable federal tax law.
The principal investment strategies for this Fund include:
o Investing at least 65% of total assets in cumulative preferred stocks issued
by U.S.
corporations.
o Investing in preferred stocks that, when purchased, have the highest rating
for short-term debt by at least one nationally recognized statistical
rating organization such as Moody's and S&P.
o Investing in preferred stock which can be converted into common stocks.
The principal investment risks for this Fund include:
o Equity securities are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Different parts of the market can react differently to these developments.
o This Fund may invest in foreign securities. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to
increased risks of adverse issuer, political, regulatory, market, currency
valuation or economic developments and can perform differently than the
U.S. market
o This Fund may invest up to 15% of its net assets in illiquid securities
(securities which cannot be sold in the ordinary course of business within
7 days) of its assets. The Fund could be unable to sell an illiquid
security when it wishes to or could be forced to sell it at a price which
is less than its value which will result in a decrease in the value of the
Fund.
o Cumulative preferred stocks are subject to interest rate risk and credit
risk. This means the value of these stocks will tend to fall in response to
a general increase in interest rates and risk in value in response to a
general decline in interest rates. In addition, the value of these stocks
will vary in response to changes in the credit rating of the issuing
corporation.
o When you sell your shares of the Fund, they could be worth more or less than
what you paid for them.
<PAGE>
ORCHARD STOCK INDEX
FUNDS.
The investment objective for each of the Index Funds is to:
o Seek long-term growth of capital.
The principal investment strategies for each Index Fund is to:
o Invest at least 80% in common stocks that comprise a specific benchmark
index. Following is a list of the applicable indexes:
FUND BENCHMARK INDEX
Orchard Index 600 Fund Standard & Poor's (S&P) SmallCap 600 Stock Index
Orchard Index 500 Fund S&P 500 Composite Stock Price Index
Orchard Index Pacific Fund Financial Times (FT)/S&P Actuaries Large-Cap Pacific
Index
Orchard Index European Fund FT/S&P Actuaries Large-Cap European Index
o Invest without limitation in preferred stocks and investment grade debt
instruments for temporary, defensive purposes.
The principal investment risks for the Index Funds include:
o Equity securities are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Different parts of the market can react differently to these developments.
o The Orchard Index European and Orchard Index Pacific Funds will invest in
foreign securities. Foreign markets, particularly emerging markets, can be
more volatile than the U.S. market due to increased risks of adverse
issuer, political, regulatory, market, currency valuation or economic
developments and can perform differently than the U.S. market.
o The Orchard Index 600 Fund invests in the stocks of small companies. The
stocks of small companies often involve more risk and volatility than those
of larger companies.
o Each Index Fund may use futures contracts on market indexes and options on
the futures contracts. When using this investment technique, there is a
risk that the change in value of the securities included on the index and
the price of a futures contract will not match. There is also a risk that
the Fund could be unable to sell the futures contract when it wishes to or
could be forced to sell it at a price which is less than its value which
will result in a decrease in the value of the Fund.
o When you sell your shares of any of the Index Funds, they could be worth
more or less than what you paid for them.
<PAGE>
PERFORMANCE
Yield
Yield and effective yield will fluctuate and may not provide a basis for
comparison with bank deposits, other mutual funds or other investments which
are insured or pay a fixed yield for a stated period of time. Yields are based
on past results and are not an indication of future performance.
As of December 31, 1998, the Orchard Money Market Fund's 7-day yield was x.xx%
and its effective yield was x.xx%.
Total Return
The following information illustrates the changes in the Funds' performance
from year-to-year and compares the Funds' performance to the performance of a
market index over various periods of time. Returns are based on past results
and are not an indication of future performance.
YEAR-BY-YEAR ANNUAL
RETURNS
Orchard Preferred Stock
1998
During the periods shown in the chart for the Orchard Preferred Stock Fund, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The year-to-date return as of January 31, 1999 for the Orchard Preferred Stock
Fund was %.
The return for the period February 3, 1997 (inception of the Orchard Preferred
Stock Fund) to December 31, 1997 was %.
Orchard Index 500
1998
During the periods shown in the chart for the Orchard Index 500 Fund, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The year-to-date return as of January 31, 1999 for the Orchard Index 500 Fund
was %.
The return for the period February 3, 1997 (inception of the Orchard Index 500
Fund) to December 31, 1997 was %.
Orchard Index 600
1998
During the periods shown in the chart for the Orchard Index 600 Fund, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The year-to-date return as of January 31, 1999 for the Orchard Index 600 Fund
was %.
The return for the period February 3, 1997 (inception of the Orchard Index 600
Fund) to December 31, 1997 was %.
Orchard Index European
1998
During the periods shown in the chart for the Orchard Index European Fund, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The year-to-date return as of January 31, 1999 for the Orchard Index European
Fund was %.
The return for the period February 3, 1997 (inception of the Orchard Index
European Fund) to December 31, 1997 was %.
Orchard Index Pacific
1998
During the periods shown in the chart for the Orchard Index Pacific Fund, the
highest return for a quarter was % (quarter ending , 199 ) and the lowest return
for a quarter was % (quarter ending , 199 ).
The year-to-date return as of January 31, 1999 for the Orchard Index Pacific
Fund was %.
The return for the period February 3, 1997 (inception of the Orchard Index
Pacific Fund) to December 31, 1997 was %.
AVERAGE ANNUAL RETURNS
For the periods ended December 31, 1998, the past 1 year and inception to date:
1998 February 3, 1997
(inception)
to December 31, 1997
Orchard Preferred Stock
Merrill Lynch DRD-Eligible Preferred
Stock Index
Orchard Index 500
S&P 500 Index
Orchard Index 600
S&P 600 Index
Orchard Index European
Financial Times/S&P-Actuaries
Large-Cap European Index
Orchard Index Pacific
Financial Times/S&P-Actuaries
Large-Cap Pacific Index
The Merrill Lynch DRD-Eligible Preferred Stock Index is comprised of 43 domestic
preferred stock issues paying dividends that are eligible for the corporate
dividends received deduction. The index tracks the total return (dividend income
plus capital appreciation) of its constituent preferred stocks.
The Merrill Lynch DRD Preferred Stock Index is sponsored by Merrill Lynch, which
is responsible for determining which stocks are represented on the index. Total
returns for the Merrill Lynch DRD Preferred Stock Index assume reinvestment of
dividends, but do not include the effect of taxes, brokerage commissions or
other costs you would pay if you actually invested in those stocks.
The S&P 500 Composite Stock Price Index (the "S&P 500") is a widely recognized,
unmanaged, market-value weighted index of 500 stock prices. The stocks which
make up the S&P 500 trade on the New York Stock Exchange, the American Stock
Exchange, or the NASDAQ National Market System. It is generally acknowledged
that the S&P 500 broadly represents the performance of publicly traded common
stocks in the United States.
The S&P Small Cap 600 Stock Index (the "S&P 600") is a widely recognized,
unmanaged index of 600 stock prices. The index is market-value weighted, meaning
that each stock's influence on the index's performance is directly proportional
to that stock's "market value" (stock price multiplied by the number of
outstanding shares). The stocks which make up the S&P 600 trade on the New York
Stock Exchange, American Stock Exchange, or NASDAQ quotation system. The S&P 600
is designed to monitor the performance of publicly traded common stocks of the
small company sector of the United States equities market.
Both the S&P 600 and the S&P 500 are sponsored by the Standard & Poor's, which
is responsible for determining which stocks are represented on the indexes.
Total returns for the S&P 600 and the S&P 500 assume reinvestment of dividends,
but do not include the effect of taxes, brokerage commissions or other costs you
would pay if you actually invested in those stocks.
The Financial Times/S&P-Actuaries Large-Cap Pacific Index (the "Pacific Index")
and the Financial Times/S&P-Actuaries Large-Cap European Index (the "European
Index") are unmanaged, market-value weighted indexes of equity securities traded
on the stock exchanges of the countries represented in the respective indexes.
They are designed to represent the performance of stocks in the large-cap sector
of the markets from the countries included in the European and Pacific Rim
regions of the world.
The Pacific Index and European Index are sponsored by the Financial Times-Stock
Exchange International; Standard & Poor's; Goldman, Sachs and Company; and Nat
West Securities, Ltd. Each of these entities has voting rights on a committee
that is responsible for determining the composition of the stocks comprising the
indexes.
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
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 (expenses that are deducted from Fund assets)
Money Preferred Index Index Index Index
Market Stock 600 500 Pacific European
Fund Fund Fund Fund Fund Fund
Management Fees 0.20% 0.90% 0.60% 0.60% 1.00% 1.00%
12b-1 Fees NONE NONE NONE NONE NONE NONE
Other Expenses 3.37% 0.00% 0.00% 0.00% 0.52% 0.35%
Total Fund
Operating Expenses 3.37% 0.90% 0.60% 0.60% 1.52% 1.35%
(after reimbursement)
.
Subject to revision, GW Capital Management has voluntarily agreed to reimburse
"Other Expenses" for the Index Pacific Fund, the Index European Fund, and the
Money Market Fund to the extent that total operating expenses exceed 1.20%,
1.20%, and 0.46%, respectively, of average assets. Because of this agreement,
the total operating expenses which were charged for the Index Pacific and the
Index European Funds was 1.20% of net assets, and the total operating expenses
which were charged for the Money Market Fund was 0.46% of net assets. Interest,
taxes, brokerage commissions, and extraordinary expenses are not eligible for
reimbursement.
<PAGE>
Fund Expense Examples
These examples are intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Examples also assume that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
high or lower, based on these assumptions your costs would be:
Fund 1 Year 3 Years 5 Years 10 Years
Money Market Fund $ 52 $ 172 $ 314 $ 792
Preferred Stock Fund $ 94 $ 307 $ 559 $1,396
Index 600 Fund $ 63 $ 206 $ 376 $ 946
Index 500 Fund $ 63 $ 206 $ 376 $ 946
Index Pacific Fund $ 124 $ 407 $ 739 $1,831
Index European Fund $ 124 $ 407 $ 739 $1,831
<PAGE>
THE FUNDS IN DETAIL
The following questions are designed to help you better understand an investment
in one of the Orchard Funds.
Q: What types of securities does the Orchard Money Market Fund purchase?
A: The Fund may invest in a variety of high-quality, short-term debt
securities, including but not limited to: 1) securities issued or guaranteed
as to principal and interest by the United States or its agencies or
instrumentalities ("U.S. government securities"); 2) certificates of deposit,
time deposits and bankers' acceptances; 3) commercial paper and other
short-term corporate debt securities; 4) repurchase agreements; and 5) from
time to time, floating rate notes and Eurodollar certificates of deposit.
Q: How do you know the investments purchased by the Orchard Money Market
Fund are "high-quality?"
A: The Fund generally invests in securities that at the time of their
purchase are: 1) rated in the highest category by at least one nationally
recognized statistical rating organizations ("NRSRO"), such as Moody's and
S&P; or 2) deemed by GW Capital Management under the guidelines of the Funds'
Board of Trustees (the "Board of Trustees") to be of comparable quality to
such rated securities.
Q: What do you consider to be "short-term" securities?
A: The Fund invests in securities with remaining maturities not exceeding
thirteen months, and maintains a dollar-weighted average portfolio maturity of
ninety days or less.
Q: Please explain what is meant by a cumulative preferred stock, and if the
Orchard Preferred Stock Fund invests only in this type of preferred stock.
A: The term cumulative refers to the security's preference as to payment of
dividends. If for any reason an issuer is forced to suspend dividend payments,
it must first do so on any outstanding common stock. If cumulative preferred
dividends are suspended, the amount of any stated dividend not paid is placed in
arrears and must be paid in total prior to the issuer resuming payment of any
common stock dividends. There are other types of preferred stocks.
The Orchard Preferred Stock Fund may invest in both cumulative and
non-cumulative preferred stocks. Non-cumulative preferred stocks have no right
to receive any suspended dividend payments. A thorough credit check and business
analysis is performed on any company issuing non-cumulative preferred stock in
order to minimize the risk that a dividend payment may be suspended. Although
the Preferred Stock Fund may invest in non-cumulative preferred stocks, none
have been purchased to date.
Q: What is the difference between a preferred stock, such as those purchased
for the Orchard Preferred Stock Fund, and a common stock?
A. As a company grows, common stock holders benefit as earnings begin to be paid
out in the form of common stock dividends. If the company continues to be
successful, dividend payments on its common stock are expected to grow over
time. As well, many smaller, high-growth companies issue common stock which pays
no dividends. In contrast, once a dividend is set on a preferred stock issue, it
remains fixed over the life of the security. In addition, the price of common
stock may increase to reflect the higher value of the company and the
expectation of greater future dividends.
Q: Since the dividend paid on preferred stocks is fixed, what is the difference
between a cumulative preferred stock, such as those purchased for the Orchard
Preferred Stock Fund and a corporate bond?
A: Most cumulative preferred stocks are issued with a fixed dividend and do not
participate in any growth in dividends paid to owners of a company's common
stock. In this manner, preferred stocks are more like traditional fixed income
investments (bonds) than common stocks. The main difference between a corporate
bond and a preferred stock is that a company may suspend a dividend payment on a
preferred stock issue without the risk of default, which would occur if a
scheduled interest payment is suspended on a bond issue. The primary reason the
Orchard Preferred Stock Fund concentrates on investment grade preferred
securities as fund holdings is to minimize the risk of loss of income that may
result from holding non-investment grade preferred stock issues.
Q: What indexes are the Orchard Index Funds trying to copy?
A: The Orchard Index Funds are managed to achieve returns similar to their
Benchmark Indexes. The Funds attempt to reproduce the returns of their
respective Benchmark Index by owning the securities contained in each index in
as close as possible a proportion of the portfolio as each stock's weight in the
Benchmark Index. The Funds may acquire this exposure by ownership of all the
stocks in the Benchmark Index and by owning futures contracts on the relevant
index.
Q: If there is a decline in any of the markets represented by the underlying
indexes will my investment decline in value?
A: The Orchard Index Funds are subject to the same market risks inherent in
investing in any stock fund. Therefore, the change in value of each of the index
funds will be similar to the change in value of the Fund's respective index,
adjusting for Fund fees and expenses.
For all of the Orchard Funds, you should carefully consider your own investment
goals, time horizon (the amount of time you plan to hold your shares of a Fund)
and risk tolerance before investing in a Fund. There is no guarantee that any
Fund will meet its investment objective.
GENERAL PORTFOLIO POLICIES AND OTHER RISKS
The following pages contain more detailed information about the types of
securities in which the Funds may invest, strategies GW Capital Management may
use to achieve the Funds' investment objectives, and a summary of related risks.
A complete listing of the Funds' investment limitations and more detailed
information about their investment practices are contained in the Statement of
Additional Information.
1. Money Market Instruments and Temporary Investment Strategies
In addition to the Orchard Money Market Fund, the other Funds each may hold cash
or cash equivalents and may invest in short-term, high-quality debt (money
market) instruments as deemed appropriate by GW Capital Management. Also, the
Orchard Preferred Stock Fund may invest up to 100% of its assets in money market
instruments as deemed necessary by GW Capital Management for temporary defensive
purposes to respond to adverse market, economic or political conditions. Should
the Orchard Preferred Stock Fund take this action, it may not achieve its
investment objective.
2. Equity Securities
Each Fund, except the Orchard Money Market Fund, invests directly or indirectly
in equity securities, such as common and preferred stocks, convertible stocks,
and warrants. Equity prices fluctuate based on changes in a company's financial
condition and overall market and economic conditions. Equity securities of
smaller companies are especially sensitive to these factors.
3. Illiquid Securities
Each Fund may invest up to 15% of its net assets in illiquid securities, except
the Orchard Money Market Fund, which may invest only up to 10% of its net assets
in illiquid securities. "Illiquid securities" are 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.
A Fund may be unable to sell illiquid securities when it wants to or may be
forced to sell them at a price that is lower than the price at which they are
valued. Sales of illiquid securities may require more time and may result in
higher selling expenses than do sales of securities that are not illiquid.
Illiquid securities may also be more difficult to value due to the lack of
availability of reliable market quotations for these types of securities.
4. Adjusting Investment Exposure
Each Fund, other than the Orchard Money Market Fund, can use various techniques
to increase or decrease its exposure to changing security prices, currency
exchange rates, or other factors that affect security values. These techniques
may involve transactions such as buying and selling options and futures
contracts. These techniques are also referred to as "derivative" transactions.
GW Capital Management may use these types of transactions to adjust the risk and
return characteristics of a Fund's investments. These techniques could result in
a loss if market conditions are judged incorrectly or the strategy does not
correlate well with a Fund's investments. These techniques may increase a Fund's
volatility and may involve a small investment relative to the magnitude of the
risk assumed. The Fund may also incur a loss if the other party to the
derivative transaction does not perform as promised. A Fund will not enter into
futures contracts or options if the aggregate initial margin and premium
required would exceed 5% of the Fund's total assets.
5. Foreign Investments
Each Fund, except the Orchard Money Market Fund, may, in a manner consistent
with its investment objective and policies, invest in foreign securities.
Foreign investments involve additional risks and considerations such as,
political and economic conditions; fluctuations in foreign currencies; different
tax and other regulatory measures; and, less stringent investor protection
measures. Foreign securities and markets may also be less liquid and at times
more volatile than their U.S. counterparts.
The Index Pacific Fund and the Index European Fund have substantial exposure to
foreign markets since these Funds invest primarily in securities of foreign
issuers. The other Funds may have some exposure to foreign markets. This
exposure is minimized since these Funds invest primarily in securities of U.S.
issuers.
6. Other Risk Factors
As a mutual fund, each Fund is subject to market risk. The value of a Fund's
shares will fluctuate in response to changes in economic conditions, interest
rates, and the market's perception of the securities held by the Fund,
No Fund should be considered to be a complete investment program by itself. You
should consider your own investment objectives and tolerance for risk, as well
as your other investments when deciding whether to purchase shares of any Fund.
MANAGEMENT OF THE FUNDS
The Funds are managed by GW Capital Management, which selects the Funds'
portfolio investments and handles their business affairs. GW Capital
Management's address is 8515 East Orchard Road, Englewood, CO 80111. GW Capital
Management provides investment management services for mutual funds and other
investment portfolios representing assets of over $xx billion. GW Capital
Management has been providing investment management services directly (and
indirectly through its predecessor company, The Great-West Life Assurance
Company) since 1969.
The aggregate fee paid to GW Capital Management for the fiscal year ending
October 31, 1998 is as follows:
Fund Percentage of Average Net Assets
Orchard Money Market .20%
Orchard Preferred Stock .90%
Orchard Index 500 .60%
Orchard Index 600 .60%
Orchard Index European 1.00%
Orchard Index Pacific 1.00%
Jim Desmond, Vice President, GW Capital Management, is responsible for the
day-to-day management of the Orchard Preferred Stock Fund. He is also an
Assistant Vice President at Great-West Life & Annuity Insurance Company, where
he has managed GWL&A's separate account assets since 1991. From September 1987
to December 1991, he was an equity portfolio manager for the Colorado Public
Employees Retirement Association. Jim is a Chartered Financial Analyst ("CFA"),
and has approximately sixteen years equity analysis and portfolio management
experience.
Year 2000 Issues
The services provided to the Fund by GW Capital Management depend on the smooth
functioning of its computer systems. Many computer software systems in use today
cannot distinguish the year 2000 from the year 1900 because of the way dates are
encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. GW Capital
Management has been actively working on necessary changes to its computer
systems to deal with the year 2000 and to obtain assurances from our service
providers that they are taking similar steps.
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT
Share Price
The transaction price for buying, selling, or exchanging a Fund's shares is the
net asset value of that Fund. Each Fund's net asset value is generally
calculated as of the close of trading on the New York Stock Exchange every day
the NYSE is open. If the NYSE closes at any other time, or if an emergency
exists, the time at which the NAV is calculated may differ. To the extent that a
Fund's assets are traded in other markets on days when the NYSE is closed, the
value of the Fund's assets may be affected on days when the Fund is not open for
business. In addition, trading in some of a Fund's assets may not occur on days
when the Fund is open for business. Your share price will be next net asset
value calculated after we accept your order.
Net asset value is based on the market value of the securities in the Fund.
Certain short-term securities are valued on the basis of amortized cost. If
market prices are not available of if a security's value has been materially
affected by events occurring after the close of the exchange or market on which
the security is principally traded (for example, a foreign exchange or market) ,
that security may be valued by another method that the Board of Trustees of
Orchard Series Fund believes accurately reflects fair value.
We determine net asset value by dividing net assets of the Fund (the value of
its investments, cash, and other assets minus its liabilities) by the number of
the Fund's outstanding shares.
INVESTING IN THE FUNDS
How to buy shares
To open an account, mail a completed account application to:
Orchard Series Fund
8515 East. Orchard Road
Englewood, CO 80111.
With the application form, you must either:
(1)include a check or money order made payable to the appropriate Fund in the
amount that you wish to invest, or
(2)wire (electronically transfer) such amount to an account designated by the
Transfer Agent, Financial Administrative Services Corporation.
If you wish to make an initial purchase of shares by wiring your investment, you
must first call 1-800-338-4015 between the hours of 8:00 a.m. and 4:00 p.m.
(Eastern Time) on any day that the NYSE is open for trading to receive an
account number. You will be asked to provide the following information:
o the name in which the account will be established,
o the account holder's address,
o tax identification number, and
o dividend distribution election.
If requested, you will be given the instructions that your bank will need to
complete the wire transfer. Your bank may charge a fee for its wire transfer
services. Presently, there is no charge by the Fund for its wire transfer
services, but the Funds reserve the right to charge for these services.
Once you have established an account, you can purchase shares by mailing a check
or money order made payable to the appropriate Fund. Be sure to include
instructions telling us the name and number of your account. You can also
purchase shares by wiring the amount that you wish to invest to your account.
The price to buy one share of a Fund is the Fund's net asset value next
calculated after your order is received in proper form. Because you pay no
commissions or sales charges when you purchase shares, a Fund's share price is
equal to the Fund's net asset value per share.
Short-term or excessive trading into and out of a Fund may harm performance by
disrupting portfolio management strategies and by increasing expenses.
Accordingly, a Fund may reject any purchase orders, including exchanges,
particularly from market timers or investors who, in GW Capital Management's
opinion, have a pattern of short-term or excessive trading or whose trading has
been or may be disruptive to that Fund.
Each Fund may stop offering shares completely or may offer shares only on a
limited basis, for a period of time or permanently.
How to Sell Shares
The price to sell one share of each Fund is the Fund's net asset value next
calculated after your order is received in proper form.
You can sell some or all your shares out of your account at any time. You can
sell your shares only by mail. No sales may be made by telephone.
You can sell shares by sending a "letter of instruction" by regular or express
mail to:
8515 East Orchard Road
Englewood, CO 80111.
The letter should include:
(1) the name of the account
(2) the account number
(3) the name of the Fund
(4) the dollar amount or number of shares to be sold (5) any special payment
instructions; and
(6) the signature(s) of the person(s) authorized to sell shares held in the
account.
When you place an order to sell shares, please not the following:
o Normally, your request to sell shares will be processed the next business
day, but the Fund may take up to seven days to process redemptions if making
immediate payment would adversely affect a Fund.
o Redemption proceeds (other than exchanges) may be delayed until investments
credited to your account have been received and collected, which can take up
to seven business days
o You will not receive interest on amounts represented by uncashed redemption
checks.
How to Exchange Shares
An exchange involves selling all or a portion of the shares of one Fund and
purchasing shares of another Fund. There are no sales charges or distribution
fees for an exchange. The exchange will occur at the next net asset value
calculated for the two Funds after the exchange request is received in proper
form. Before exchanging into a Fund, read its prospectus.
Please note the following policies governing exchanges:
o The minimum amount to be exchanged is the lesser of $500 or the remaining
value in the Fund to be exchanged.
You can request an exchange in writing or by telephone.
o Written requests should be submitted to:
8515 East Orchard Road
Englewood, CO 80111.
o The form should be signed by the account owner(s) and include the following
information:
(1) the name of the account
(2) the account number
(3) the name of the Fund from which the shares of which are to be sold (4) the
dollar amount or number of shares to be exchanged (5) the name of the Fund(s) in
which new shares will be purchased; and (6) the signature(s) of the person(s)
authorized to effect exchanges in the
account.
You can request an exchange by telephoning 1-800-338-4015.
Each Fund may refuse exchange purchases by any person or group if, in 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 otherwise potentially be adversely affected.
Other Information
o The policies and procedures to request purchases or exchanges of shares of
the Funds by telephone may be modified, suspended, or terminated by a Fund at
any time.
o If an account has more than one owner of record, the Funds may rely on the
instructions of any one owner.
o Each account owner has telephone transaction privileges unless the Fund
receives cancellation instructions from an account owner.
TheTransfer Agent will record telephone calls and has adopted other procedures
to confirm that telephone instructions are genuine.
o The Funds will not be responsible for losses or expenses arising from
unauthorized telephone transactions, as long as they use reasonable
procedures to verify the identity of the investor.
o 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.
Dividends and Capital Gains Distributions
Each Fund earns dividends, interest and other income from its investments, and
distributes this income (less expenses) to shareholders as dividends. Each Fund
also realizes capital gains from its investments, and distributes these gains
(less any losses) to shareholders as capital gains distributions.
The Orchard Money Market Fund ordinarily declares dividends from net investment
income daily and distributes dividends monthly. The Orchard Preferred Stock Fund
ordinarily distributes dividends from net investment income quarterly. The
Orchard Index 500 and Orchard Index 600 Funds ordinarily distribute dividends
semi-annually, while the Orchard Index Pacific and Orchard Index European
ordinarily distribute dividends annually. All of the Funds generally distribute
capital gains, if any, in December.
Distribution Options
You 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, to receive your distributions in
cash, they will be automatically reinvested. You can change the manner in which
you receive distributions at any time by writing to:
8515 East Orchard Road
Englewood, Colorado 80111
Tax Consequences
As with any investment, your investment in a Fund could have tax consequences
for you. If you are not investing through a tax-advantaged retirement account,
you should consider these tax consequences.
Taxes on distributions. Distributions you receive from each Fund are subject to
federal income tax, and may also be subject to state and local taxes. If you
live outside the United States, the country where you reside could also tax your
distributions. Your distributions are taxable when they are paid, whether you
take them in cash or reinvest them in additional shares of the Fund.
Distributions declared in December and paid in January are taxable as if they
were paid on December 31.
For federal income tax purposes, each Fund's dividends and short-term capital
gain distributions are taxable to you as ordinary income. Each Fund's long-term
capital gains distributions are taxable to you generally as capital gains at a
rate based on how long the securities were held.
If you buy shares when a fund has realized but not yet distributed income or
capital gains, you will be "buying a dividend" by paying the full price for the
shares and then receiving a portion of the price back in the form of a taxable
distribution.
In January of each year, the Trust will send you and the IRS a statement showing
the taxable distributions paid to you in the previous year.
Taxes on transactions. Your redemptions, including exchanges, may result in a
capital gain or loss for federal tax purposes. A capital gain or loss on your
investment in a Fund is the difference between the cost of your shares and the
price you receive when you 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. It is your and your tax preparer's responsibility to determine
whether a transaction will result in a taxable gain or loss and the amount of
the tax to be paid, if any.
Effect of Foreign Taxes. Dividends and interest received by the Funds on foreign
securities may be subject to withholding and other taxes imposed by foreign
governments. These taxes will generally reduce the amount of distributions on
foreign securities.
Annual and Semi-Annual Shareholder Reports
The fiscal year of the Funds ends on October 31 of each year. Twice a year
shareholders of each Fund will receive a report containing a summary of the
Fund's performance and other information.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each Fund's
financial history for the period of the Funds' operations. Certain information
reflects financial results for a single Fund share. Total returns for each
period include the reinvestment of all dividends and distributions. The
information has been audited by Deloitte & Touche LLP, independent auditors,
whose report, along with the Funds' financial statements, are included in the
Funds' Annual Report. A free copy of the Annual Report is available upon
request.
<PAGE>
ORCHARD MONEY MARKET FUND
Selected data for a share of capital stock of the Fund for the year ended
October 31, 1998 and the period ended October 31, 1997 are as follows:
<TABLE>
Period Ended October 31,
-------------------------------------
1998 1997
--------------- --------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 1.0000 $ 1.0000
Income From Investment Operations
Net investment income 0.0513 0.0363
------------ ------------
Total Income From Investment Operations 0.0513 0.0363
Less Distributions
From net investment income (0.0513) (0.0363)
------------ ------------
Total Distributions (0.0513) (0.0363)
------------ ------------
Net Asset Value, End of Period $ 1.0000 $ 1.0000
============ ============
Total Return/Yield 5.26% 3.69%
Net Assets, End of Period $ 3,274,248 $ 3,110,727
Ratio of Expenses to Average - Before 3.57% 1.54%*
Net Assets Reimbursement
- After 0.46% 0.46%*
Reimbursement #
Ratio of Net Investment Income to Average Net 5.13% 4.88%*
Assets
</TABLE>
*Annualized
#Percentages are shown net of expenses reimbursed by GW Capital Management, LLC.
(A) The portfolio commenced operations February 3, 1997.
<PAGE>
ORCHARD PREFERRED STOCK FUND
Selected data for a share of capital stock of the Fund for the year ended
October 31, 1998 and period ended October 31, 1997 are as follows:
<TABLE>
Period Ended October 31,
-------------------------------------
1998 1997
-------------- --------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.1372 $ 10.0000
Income From Investment Operations
Net investment income 0.5793 0.4544
Net realized and unrealized gain (loss) (0.1256) 0.1372
----------- ------------
Total Income From Investment Operations 0.4537 0.5916
Less Distributions
From net investment income (0.5340) (0.4544)
From realized gains
----------- ------------
Total Distributions (0.5340) (0.4544)
----------- ------------
Net Asset Value, End of Period $ 10.0569 $ 10.1372
=========== ============
Total Return 4.52% 6.04%
Net Assets, End of Period $ 4,533,133 $ 4,242,086
Ratio of Expenses to Average Net Assets 0.90% 0.90%*
Ratio of Net Investment Income to Average Net 5.67% 6.07%*
Assets
Portfolio Turnover Rate 48.89% 10.05%
</TABLE>
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended October 31, 1998 were $2,080,581 and $2,121,926, respectively.
*Annualized
(A) The portfolio commenced operations February 3, 1997.
<PAGE>
ORCHARD INDEX 500 FUND
Selected data for a share of capital stock of the Fund for the year ended
October 31, 1998 and the period ended October 31, 1997 are as follows:
<TABLE>
Period Ended October 31,
------------------------------------
1998 1997
------------- --------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 11.6936 $ 10.0000
Income From Investment Operations
Net investment income 0.1282 0.0388
Net realized and unrealized gain 2.3471 1.6936
----------- ------------
Total Income From Investment Operations 2.4753 1.7324
Less Distributions
From net investment income (0.0881) (0.0388)
From net realized gains
----------- ------------
-----------
Total Distributions (0.0881) (0.0388)
----------- ------------
Net Asset Value, End of Period $ 14.0808 $ 11.6936
=========== ============
Total Return 21.18% 17.38%
Net Assets, End of Period $ 605,087,390 $ 492,866,332
Ratio of Expenses to Average Net Assets 0.60% 0.60%*
Ratio of Net Investment Income to Average Net 0.96% 1.67%*
Assets
Portfolio Turnover Rate 20.20% 0.45%
</TABLE>
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended October 31, 1998 were $130,682,569 and $112,487,902, respectively.
* Annualized
(A) The portfolio commenced operations February 3, 1997.
<PAGE>
ORCHARD INDEX 600 FUND
Selected data for a share of capital stock of the Fund for the year ended
October 31, 1998 and the period ended October 31, 1997 are as follows:
<TABLE>
Period Ended 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 0.0255 0.0238
Net realized and unrealized gain (loss) (1.3719) 2.1191
----------- -----------
Total Income (Loss) From Investment Operations (1.3464) 2.1429
Less Distributions
From net investment income (0.0167) (0.0238)
From net realized gains (0.3260)
----------- -----------
Total Distributions (0.3427) (0.0238)
----------- -----------
Net Asset Value, End of Period $ 10.4300 $ 12.1191
=========== ===========
Total Return (11.37%) 21.46%
Net Assets, End of Period $ 4,883,597 $ 5,469,919
Ratio of Expenses to Average Net Assets 0.60% 0.60%*
Ratio of Net Investment Income to Average Net 0.22% 0.30%*
Assets
Portfolio Turnover Rate 31.25% 21.58%
</TABLE>
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended October 31, 1998 were $1,768,091 and $1,697,890, respectively.
*Annualized
(A) The portfolio commenced operations February 3, 1997.
<PAGE>
ORCHARD INDEX EUROPEAN FUND
Selected data for a share of capital stock of the Fund for the year ended
October 31, 1998 and the period ended October 31, 1997 are as follows:
<TABLE>
Period Ended October 31,
--------------------------------
1998 1997
-------------- -------------
(A)
<S> <C> <C>
Net Asset Value, Beginning of Period $ 11.6147 $ 10.0000
Income From Investment Operations
Net investment income 0.1285 0.0343
Net realized and unrealized gain 2.3809 1.6147
------------ ----------
Total Income From Investment Operations 2.5094 1.6490
Less Distributions
From net investment income (0.0152) (0.0343)
From net realized gains (0.0015)
------------ ----------
Total Distributions (0.0167) (0.0343)
------------ ----------
Net Asset Value, End of Period $ 14.1074 $ 11.6147
============ ==========
Total Return 21.60% 16.47%
Net Assets, End of Period $ 105,247,691 $ 62,147,578
Ratio of Expenses to Average - Before Reimbursement 1.35% 1.74%*
Net Assets
- After Reimbursement 1.20% 1.20%*
#
Ratio of Net Investment Income to Average Net Assets 1.08% 0.83%*
Portfolio Turnover Rate 32.58% 5.69%
</TABLE>
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended October 31, 1998 were $45,999,464 and $26,886,845, respectively.
*Annualized
# Percentages are shown net of expenses reimbursed by GW Capital Management,
LLC.
(A) The portfolio commenced operations February 3, 1997.
<PAGE>
ORCHARD INDEX PACIFIC FUND
Selected data for a share of capital stock of the Fund for the year ended
October 31, 1998 and the period ended October 31, 1997 are as follows:
<TABLE>
Period Ended 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 0.0255 0.0163
Net realized and unrealized loss (1.4214) (0.6833)
------------ -----------
Total Loss From Investment Operations (1.3959) (0.6670)
Less Distributions
From net investment income (0.0163)
From net realized gains
------------ -----------
Total Distributions 0.0000 (0.0163)
------------ -----------
Net Asset Value, End of Period $ 7.9208 $ 9.3167
============ ===========
Total Return (14.98%) (6.67%)
Net Assets, End of Period $ 86,230,231 $ 48,444,931
Ratio of Expenses to Average - Before Reimbursement 1.52% 1.80%*
Net Assets
- After Reimbursement 1.20% 1.20%*
#
Ratio of Net Investment Income to Average Net Assets 0.47% 0.42%*
Portfolio Turnover Rate 8.94% 0.04%
</TABLE>
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended October 31, 1998 were $52,556,565 and $5,183,265, respectively.
*Annualized
# Percentages are shown net of expenses reimbursed by GW Capital Management,
LLC.
(A) The portfolio commenced operations February 3, 1997.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more details about the investment policies and techniques of
the Funds. A current SAI is on file with the SEC and is incorporated into this
Prospectus by reference. This means that the SAI is legally considered a part of
this Prospectus even though it is not physically contained within this
Prospectus.
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during its last fiscal year.
For a free copy of the SAI or annual or semi-annual reports or to request other
information or ask questions about a Fund, call 1-800-338-4015.
The SAI and the annual and semi-annual reports are available on the SEC's
Internet Web site (http://www.sec.gov). You can also obtain copies of this
information, upon paying a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the Funds, including the SAI, at the SEC's Public Reference
Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of
the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-7735.
<PAGE>
ORCHARD VALUE FUND
8515 East Orchard Road
Englewood, Colorado 80111
(800) 784-4508
PROSPECTUS
The Orchard Value Fund is divided into Class A and Class B shares. Each
Class has different expenses which will affect performance. This Prospectus
covers the Class A shares of Orchard Value Fund only.
Orchard Value Fund. This Fund seeks long-term capital appreciation by
investing primarily in common stocks issued by U.S. companies when it is
believed that such stocks are undervalued.
GW Capital Management, LLC ("GW Capital Management"), a wholly owned subsidiary
of Great-West Life & Annuity Insurance Company, is the investment adviser to the
Fund. CIC Asset Management, Inc. ("CIC"), as sub-adviser, manages the Value Fund
on a day-to-day basis and makes all the investment decisions on behalf of the
Value Fund, subject to the supervision of GW Capital Management.
The Value Fund is a series of the Orchard Series Fund (the "Trust"). The Trust
is registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company. This Prospectus contains important information
about the Value Fund Class A shares that you should consider before investing.
Please read it carefully and save it for future reference.
This Prospectus does not constitute an offer to sell securities in any state or
other jurisdiction to any person to whom it is unlawful to make such an offer in
such state or other jurisdiction.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 1, 1999.
<PAGE>
TABLE OF CONTENTS
Page
The Value Fund at a Glance
Brief description of the
Fund..........................................................................
2
Fees and Expenses
The Value Fund's annual operating
expenses...................................................................
3
The Fund in Detail
Investment objectives and
policies......................................................................
12
General Portfolio
Policies..........................................................14.
Management of the
Fund............................................................ 16
Important Information About Your Investment................................
17
How the Fund Reports Performance.............................................
18
Investing in the
Fund..............................................................19
Financial Highlights
A summary of financial data for the Fund....................................
----
<PAGE>
THE VALUE FUND AT A GLANCE
The following pages provide key information about the Class A shares of the
Value Fund.
ORCHARD VALUE FUND.
The investment objective for this Fund is to:
o Seek long-term capital appreciation by investing primarily in common stocks
issued by U.S. companies when it is believed that such stocks are
undervalued.
The principal investment strategies for this Fund include:
o Investing primarily in common stocks issued by U.S. companies traded on
the various U.S. stock exchanges and in the over-the-counter markets.
o Investing primarily in stocks which CIC believes are undervalued at the time
of acquisition.
o Selling stocks when CIC believes that they are fairly valued.
o Investing a limited portion of the Fund's assets in debt securities (both
domestic (U.S.) and foreign debt securities) including mortgage- and
asset-backed securities, zero coupon and high yield/high risk bonds (commonly
referred to as "junk bonds").
o Investing in money market securities as a cash reserve and as warranted by
market conditions.
The principal investment risks for this Fund include:
o Equity securities are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market, or economic developments.
Different parts of the market can react differently to these developments.
o This Fund may invest in foreign securities. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to increased
risks of adverse issuer, political, regulatory, market, currency valuation or
economic developments and can perform differently than the U.S. market.
o The Fund may use futures contracts on market indexes and options on the
futures contracts. When using this investment technique, there is a risk
that the change in value of the securities included on the index and the
price of the futures contract will not match. There is also a risk when
using this investment technique that the Fund could be unable to sell the
futures contract when it wishes to or could be forced to sell it at a
price which is less than its value which will result in a decrease in the
value of the Fund.
o This Fund may invest in "junk bonds." Below investment grade debt
securities generally provide higher yields, but are subject to greater
credit and market risk than higher quality debt securities. Below
investment grade debt securities are considered to be speculative
regarding the ability of the issuer to meet principal and interest
payments. In addition, the market for selling these types of securities
may be less liquid which may make the valuation and sale of the securities
more difficult.
o This Fund may invest up to 15% of its total assets in illiquid securities
(securities which cannot be sold in the ordinary course of business within 7
days). The Fund could be unable to sell an illiquid security when it wishes
to or could be forced to sell it at a price which is less than its value
which will result in a decrease in the value of the Fund.
o When you sell your shares of the Fund, they could be worth more or less than
what you paid for them.
<PAGE>
PERFORMANCE
Because the Fund has only been operating for a short period of time (less than
one year), the following table shows consolidated performance information ("CIC
Accounts Composite") of the historical performance of institutional private
accounts managed by CIC that have investment objectives, policies, strategies
and risks substantially similar to those of the Orchard Value Fund. The data is
provided to explain by example the past performance of CIC in managing
substantially similar accounts and does not represent the performance of the
Orchard Value Fund. You should not consider this performance data as an
indication of future performance of the Fund or of the Sub-Adviser.
The CIC Accounts Composite returns 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 CIC's institutional private accounts. The institutional private account
return data includes all actual fee-paying, discretionary institutional private
accounts managed by CIC that have investment objectives, policies and strategies
and risks substantially similar to those of the Orchard Value Fund.
The institutional private accounts that are included in the CIC Accounts
Composite are not subject to the same types of expenses which apply to the
Orchard Value Fund. In addition, the diversification requirements, specific tax
restrictions and investment limitations imposed on the Orchard Value Fund by the
Investment Company Act of 1940 and Subchapter M of the Internal Revenue Code do
not apply to the institutional private accounts. As a result, the performance
results for the institutional private accounts could have been negatively
affected if those institutional private accounts were regulated as investment
companies under the federal securities laws. The investment results for the
institutional private accounts 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. You should
also be aware that the use of a different method from that used below to
calculate performance could result in different performance data.
Year-by-Year Annual Returns
CIC Accounts Composite
1990* 1991 1992 1993 1994 1995 1996 1997 1998+
* Commencement of investment operations was May 31, 1990.
+ Through Decenber 31, 1998.
During the periods shown for the CIC Accounts Composite, the highest return for
a quarter was 14.52% (quarter ending June 30, 1997), and the lowest return for a
quarter was -16.77% (quarter ending September 30, 1998).
<PAGE>
Average Annual Returns
Since
1 Year 3 Years 5 Years 10
------ -------- ------- ---
Years Inception*
CIC Accounts Composite xx.xx% xx.xx% xx.xx% N/A
xx.xx%+
S&P 500 Index** xx.xx% xx.xx% xx.xx% xx.xx%
N/A
* Commencement of investment operations was May 31, 1990.
+ Through December 31, 1998.
** 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. The stocks
which make up the S&P 500 trade on the New York Stock Exchange, the
American Stock
Exchange, or the NASDAQ National Market System. It is generally
acknowledged that the
S&P 500 broadly represents the performance of publicly traded common stocks
in the United States.
The S&P 500 is sponsored by the Standard & Poor's, which is responsible
for determining which
stocks are represented on the indexes. Total returns for the S&P 500
assume reinvestment of
dividends, but do not include the effect of taxes, brokerage commissions
or other costs you
would pay if you actually invested in those stocks.
For the xx months that the Orchard Value Fund has been in existence, the
following is performance data. Again, please remember that the returns are based
on past results and are not an indication of future performance.
Since
1 Year 3 Years 5 Years 10
------ -------- ------- ---
Years Inception*
Orchard Value Fund N/A N/A N/A N/A
xx.xx%+
S&P 500 Index** xx.xx% xx.xx% xx.xx% xx.xx%
N/A
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
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 (expenses that are deducted from Fund assets)
Value
Fund
Management Fees 1.00%
12b-1 Fees NONE
Other Expenses 0.00%
Total Fund
Operating Expenses 1.00%
Fund Expense Examples
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Examples also assume that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
high or lower, based on these assumptions your costs would be:
Fund 1 Year 3 Years 5 Years 10 Years
Orchard Value Fund $104.46 $342.09 $622.38 $1,549.92
<PAGE>
THE VALUE FUND IN DETAIL
The following questions are designed to help you better understand an investment
in the Orchard Value Fund.
Q: What types of securities does the Fund purchase for investment?
A: The Fund invests primarily in common stocks issued by U.S. companies
which are believed by CIC to be undervalued at the time of acquisition.
Q: How does CIC determine that a stock is undervalued at the time of
acquisition?
A: In advance of actually purchasing a stock, CIC researches the company issuing
the stock to identify stocks which are both inexpensive and factors which CIC
believes will drive the price back to fair value. In making this determination,
CIC 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.
Q: Will a security be sold due to short-term earnings disappointment?
A: No. CIC maintains a long-term approach. If CIC continues to believe the
stock has the potential to grow to fair value, the stock will be not be sold
due solely to short-term earnings disappointment.
You should carefully consider your own investment goals, time horizon (the
amount of time you plan to hold your shares of the Fund) and risk tolerance
before investing in the Fund. There is no guarantee that the Fund will meet its
investment objective.
GENERAL PORTFOLIO POLICIES
The following pages contain more detailed information about the types of
securities in which the Fund may invest, strategies CIC may use to achieve the
Fund's investment objectives, and a summary of related risks. A complete listing
of the Fund's investment limitations and more detailed information about their
investment practices are contained in the Statement of Additional Information.
Please keep in mind that securities which met applicable investment policies and
limitations when first purchased do not need to be sold in the event of a later
change in circumstances.
1. Equity Securities
The Fund invests directly or indirectly in equity securities, such as common and
preferred stocks, convertible stocks, and warrants. Equity prices fluctuate
based on changes in a company's financial condition and overall market and
economic conditions. Equity securities of smaller companies are especially
sensitive to these factors.
2. Illiquid Securities
The Value Fund may invest up to 15% of its net assets in illiquid securities.
"Illiquid securities" are 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.
The Fund may be unable to sell illiquid securities when it wants to or may be
forced to sell them at a price that is lower than the price at which they are
valued. Sales of illiquid securities may require more time and may result in
higher selling expenses than do sales of securities that are not illiquid.
Illiquid securities may also be more difficult to value due to the lack of
availability of reliable market quotations for these types of securities.
3. Adjusting Investment Exposure
The Value 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 transactions such as buying
and selling options and futures contracts. These techniques are also referred to
as "derivative" transactions.
CIC uses these types of transactions to adjust the risk and return
characteristics of the Fund's investments. These techniques could result in a
loss if market conditions are judged incorrectly or the strategy does not
correlate well with the Fund's investments. These techniques may increase the
Fund's volatility and may involve a small investment relative to the magnitude
of the risk assumed. The Fund may also incur a loss if the other party to the
derivative transaction does not perform as promised. The Fund will not enter
into futures contracts or options if the aggregate initial margin and premium
required would exceed 5% of the Fund's total assets.
4. Foreign Investments
The Fund may invest in foreign securities in a manner consistent with its
investment objective and policies. Foreign investments include additional risks
and considerations such as, political and economic conditions; fluctuations in
foreign currencies; different tax and other regulatory measures; and, less
stringent investor protection measures. Foreign securities and markets may also
be less liquid and at times more volatile than their U.S. counterparts.
5. 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 securities held by the Fund.
The Value Fund should not be considered to be a complete investment program by
itself. You should consider your own investment objectives and tolerance for
risk, as well as your other investments when deciding whether to purchase shares
of the Fund.
MANAGEMENT OF THE FUND
The Fund is managed by GW Capital Management; however, GW Capital Management has
entered into an agreement with CIC Asset Management, Inc. to act as a
sub-adviser to the Value Fund. Under this agreement, CIC is responsible for the
daily management of the Value Fund and for making decisions to buy, sell or hold
any particular security. CIC's management activities are subject to review and
supervision by GW Capital Management and the Board of Trustees of Orchard Series
Fund.
GW Capital Management's address is 8515 East Orchard Road, Englewood, CO 80111.
GW Capital Management provides investment management services for mutual funds
and other investment portfolios representing assets of over $xx billion. GW
Capital Management has been providing investment management services directly
(and indirectly through its predecessor company, The Great-West Life Assurance
Company) since 1969.
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 633 West Fifth Street, Suite 1180, 11th Floor, Los Angeles, California 90017.
CIC provides investment management services for the Orchard Value Fund and other
investment portfolios representing assets of $xxx. CIC has been providing
investment management services since 1990.
The fee paid to GW Capital Management for the fiscal year ending October 31,
1998 for the Orchard Value Fund was .50% of the average daily net asset value of
the Orchard Value Fund. GW Capital Management is responsible for compensating
CIC for its management services.
CIC utilizes a team 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.
Year 2000 Issues
The services provided to the Fund by GW Capital Management and CIC depend on the
smooth functioning of its computer systems. Many computer software systems in
use today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could have a negative impact on
the handling of securities trades, pricing and account services. GW Capital
Management has been actively working on necessary changes to its computer
systems to deal with the year 2000 and to obtain assurances from our service
providers that they are taking similar steps.
CIC has been actively working on necessary changes to its computer systems to
deal with the year 2000 and to work with CIC's service providers to assure that
they are taking similar steps.
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT
Share Price
The transaction price for buying or selling the Fund's shares is the net asset
value of that Fund. The Fund's net asset value is generally calculated as of the
close of trading on the New York Stock Exchange every day the NYSE is open. If
the NYSE closes at any other time, or if an emergency exists, the time at which
the NAV is calculated may differ. To the extent that the Fund's assets are
traded in other markets on days when the NYSE is closed, the value of the Fund's
assets may be affected on days when the Fund is not open for business. In
addition, trading in some of the Fund's assets may not occur on days when the
Fund is open for business. Your share price will be next net asset value
calculated after we accept your order.
Net asset value is based on the market value of the securities in the Fund.
Certain short-term securities are valued on the basis of amortized cost. If
market prices are not available or if a security's value has been materially
affected by events occurring after the close of the exchange or market on which
the security is principally traded (for example, a foreign exchange or market),
that security may be valued by another method that the Board of Trustees of
Orchard Series Fund believes accurately reflects fair value.
We determine net asset value by dividing net assets of the Fund (the value of
its investments, cash, and other assets minus its liabilities) by the number of
the Fund's outstanding shares.
INVESTING IN THE FUND
How to buy shares
To open an account, mail a completed account application to:
Orchard Series Fund
8515 East. Orchard Road
Englewood, CO 80111.
With the application form, you must either:
(1)include a check or money order made payable to the Fund in the amount that
you wish to invest, or
(2)wire (electronically transfer) such amount to an account designated by the
Transfer Agent, Financial Administrative Services Corporation.
If you wish to make an initial purchase of shares by wiring your investment, you
must first call 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. You will be asked to provide the following information:
o the name in which the account will be established,
o the account holder's address,
o tax identification number, and
o dividend distribution election.
If requested, you will be given the instructions that your bank will need to
complete the wire transfer. Your bank may charge a fee for its wire transfer
services. Presently, there is no charge by the Fund for its wire transfer
services, but the Fund reserves the right to charge for these services.
Once you have established an account, you can purchase shares by mailing a check
or money order made payable to the appropriate Fund. Be sure to include
instructions telling us the name and number of your account. You can also
purchase shares by wiring the amount that you wish to invest to your account.
The price to buy one share of the Fund is the Fund's net asset value next
calculated after your order is received in proper form. Because you pay no
commissions or sales charges when you purchase shares, the Fund's share price is
equal to the Fund's net asset value per share.
Short-term or excessive trading into and out of the Fund may harm performance by
disrupting portfolio management strategies and by increasing expenses.
Accordingly, the Fund may reject any purchase orders, including exchanges,
particularly from market timers or investors who, in GW Capital Management's
opinion, have a pattern of short-term or excessive trading or whose trading has
been or may be disruptive to that Fund.
The Fund may stop offering shares completely or may offer shares only on a
limited basis, for a period of time or permanently.
How to Sell Shares
The price to sell one share of the Fund is the Fund's net asset value next
calculated after your order is received in proper form.
You can sell some or all your shares out of your account at any time. You can
sell your shares only by mail. No sales may be made by telephone.
You can sell shares by sending a "letter of instruction" by regular or express
mail to:
8515 East Orchard Road
Englewood, CO 80111.
The letter should include:
(1) the name of the account
(2) the account number
(3) the name of the Fund
(4) the dollar amount or number of shares to be sold (5) any special payment
instructions; and
(6) the signature(s) of the person(s) authorized to sell shares held in the
account.
When you place an order to sell shares, please note the following:
o Normally, your request to sell shares will be processed the next business
day, but the Fund may take up to seven days if making immediate payment would
adversely affect the Fund.
o Redemption proceeds may be delayed until investments credited to your account
have been received and collected, which can take up to seven business days.
o You will not receive interest on amounts represented by uncashed redemption
checks.
Class A and Class B Shares
In addition to the Class A shares described in this prospectus, the Fund also
offers Class B shares of Orchard Value Fund. Class A and Class B shares
generally have similar operating expenses, except for certain distribution fees.
Class A shares do not have any distribution fees. For additional information on
Class B shares:
o Call 1-800-784-4508; or
o Contact us by mail at:
8515 East Orchard Road
Englewood, CO 80111
Other Information
o The policies and procedures to request purchases of Fund shares by telephone
may be modified, suspended, or terminated by the Fund at any time.
o If an account has more than one owner of record, the Fund may rely on the
instructions of any one owner.
o Each account owner has telephone transaction privileges unless the Fund
receives cancellation instructions from an account owner.
TheTransfer Agent will record telephone calls and has adopted other procedures
to confirm that telephone instructions are genuine.
o The Fund will not be responsible for losses or expenses arising from
unauthorized telephone transactions, as long as they use reasonable
procedures to verify the identity of the investor.
o 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.
Dividends and Capital Gains Distributions
The Fund earns dividends, interest and other income from its investments, and
distributes this income (less expenses) to shareholders as dividends. The Fund
also realizes capital gains from its investments, and distributes these gains
(less any losses) to shareholders as capital gains distributions.
The Orchard Value Fund ordinarily distributes dividends semi-annually and
generally distributes capital gains, if any, in December.
Distribution Options
You 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, to receive your distributions in
cash, they will be automatically reinvested. You can change the manner in which
you receive distributions at any time by writing to:
8515 East Orchard Road
Englewood, Colorado 80111
Tax Consequences
As with any investment, your investment in the Fund could have tax consequences
for you. If you are not investing through a tax-advantaged retirement account,
you should consider these tax consequences.
Taxes on distributions. Distributions you receive from the Fund are subject to
federal income tax, and may also be subject to state and local taxes. If you
live outside the United States, the country where you reside could also tax your
distributions. Your distributions are taxable when they are paid, whether you
take them in cash or reinvest them in additional shares of the Fund.
Distributions declared in December and paid in January are taxable as if they
were paid on December 31.
For federal income tax purposes, the Fund's dividends and short-term capital
gain distributions are taxable to you as ordinary income. The Fund's long-term
capital gains distributions are taxable to you generally as capital gains at a
rate based on how long the securities were held.
If you buy shares when the Fund has realized but not yet distributed income or
capital gains, you will be "buying a dividend" by paying the full price for the
shares and then receiving a portion of the price back in the form of a taxable
distribution.
In January of each year, the Trust will send you and the IRS a statement showing
the taxable distributions paid to you in the previous year.
Taxes on transactions. Your redemptions, including exchanges, may result in a
capital gain or loss for federal tax purposes. A capital gain or loss on your
investment in the Fund is the difference between the cost of your shares and the
price you receive when you 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. It is your and your tax preparer's responsibility to determine
whether a transaction will result in a taxable gain or loss and the amount of
the tax to be paid, if any.
Effect of Foreign Taxes. Dividends and interest received by the Fund on foreign
securities may be subject to withholding and other taxes imposed by foreign
governments. These taxes will generally reduce the amount of distributions on
foreign securities.
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.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Fund's
financial history for the period of the Fund's operations. Certain information
reflects financial results for a single Fund share. Total returns for each
period include the reinvestment of all dividends and distributions. The
information has been audited by Deloitte & Touche LLP, independent auditors,
whose report, along with the Fund's financial statements, are included in the
Fund's Annual Report. A free copy of the Annual Report is available upon
request.
<PAGE>
ORCHARD VALUE FUND
Selected data for a share of capital stock of the Fund for the period March 2,
1998 (inception) to October 31, 1998, are as follows:
<TABLE>
Period Ended
October 31,
1998
-------------
(B)
<S> <C>
Net Asset Value, Beginning of Period $ 10.0000
Income From Investment Operations
Net investment income 0.0730
Net realized and unrealized gain (loss) (1.0275)
-------------
Total Loss From Investment Operations (0.9545)
Less Distributions
From net investment income (0.0358)
From net realized gains
-------------
Total Distributions (0.0358)
-------------
Net Asset Value, End of Period $ 9.0097
=============
Total Return (9.58%)
Net Assets, End of Period $ 1,836,921
Ratio of Expenses to Average Net Assets 1.00%*
Ratio of Net Investment Income to Average Net Assets 1.15%*
Portfolio Turnover Rate 79.58%
</TABLE>
Portfolio turnover is calculated using the lesser of long-term purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of the securities (excluding short-term securities) owned
during the period. Purchases and sales of investment securities for the year
ended October 31, 1998 were $3,544,272 and $1,509,921, respectively.
*Annualized
(B) The portfolio commenced operations March 2, 1998.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more details about the investment policies and techniques of
the Fund. A current SAI is on file with the SEC and is incorporated into this
Prospectus by reference. This means that the SAI is legally considered a part of
this Prospectus even though it is not physically contained within this
Prospectus.
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
For a free copy of the SAI or annual or semi-annual reports or to request other
information or ask questions about the Fund, call 1-800-784-4508.
The SAI and the annual and semi-annual reports are available on the SEC's
Internet Web site (http://www.sec.gov). You can also obtain copies of this
information, upon paying a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the Fund, including the SAI, at the SEC's Public Reference
Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of
the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-7735.
<PAGE>
ORCHARD VALUE FUND
8515 East Orchard Road
Englewood, Colorado 80111
(800) 784-4508
PROSPECTUS
The Orchard Value Fund is divided into Class A and Class B shares. Each
Class has different expenses which will affect performance. This Prospectus
covers the Class B shares of Orchard Value Fund only.
Orchard Value Fund. This Fund seeks long-term capital appreciation by
investing primarily in common stocks issued by U.S. companies when it is
believed that such stocks are undervalued.
GW Capital Management, LLC ("GW Capital Management"), a wholly owned subsidiary
of Great-West Life & Annuity Insurance Company, is the investment adviser to the
Fund. CIC Asset Management, Inc. ("CIC"), as sub-adviser, manages the Value Fund
on a day-to-day basis and makes all the investment decisions on behalf of the
Value Fund, subject to the supervision of GW Capital Management.
The Value Fund is a series of the Orchard Series Fund (the "Trust"). The Trust
is registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company. This Prospectus contains important information
about the Value Fund Class B shares that you should consider before investing.
Please read it carefully and save it for future reference.
This Prospectus does not constitute an offer to sell securities in any state or
other jurisdiction to any person to whom it is unlawful to make such an offer in
such state or other jurisdiction.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 1, 1999.
<PAGE>
TABLE OF CONTENTS
Page
The Value Fund at a Glance
Brief description of the
Fund........................................................................
2
Fees and Expenses
The Value Fund's annual operating
expenses...................................................................
3
The Fund in Detail
Investment objectives and
policies......................................................................
12
General Portfolio
Policies..........................................................14.
Management of the
Fund............................................................ 16
Important Information About Your Investment................................
17
How the Fund Reports Performance.............................................
18
Investing in the
Fund..............................................................19
Financial Highlights
A summary of financial data for the Fund....................................
----
<PAGE>
VALUE FUND AT A GLANCE
The following pages provide key information about Class B shares the Value Fund.
ORCHARD VALUE FUND.
The investment objective for this Fund is to:
o Seek long-term capital appreciation by investing primarily in common stocks
issued by U.S. companies when it is believed that such stocks are
undervalued.
The principal investment strategies for this Fund include:
o Investing primarily in common stocks issued by U.S. companies traded on
the various U.S. stock exchanges and in the over-the-counter markets.
o Investing primarily in stocks which CIC believes are undervalued at the time
of acquisition.
o Selling stocks when CIC believes that they are fairly valued.
o Investing a limited portion of the Fund's assets in debt securities (both
domestic (U.S.) and foreign debt securities) including mortgage- and
asset-backed securities, zero coupon and high yield/high risk bonds (commonly
referred to as "junk bonds").
o Investing in money market securities as a cash reserve and as warranted by
market conditions.
The principal investment risks for this Fund include:
o Equity securities are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Different parts of the market can react differently to these developments.
o This Fund may invest in foreign securities. Foreign markets, particularly
emerging markets, can be more volatile than the U.S. market due to increased
risks of adverse issuer, political, regulatory, market, currency valuation or
economic developments and can perform differently than the U.S. market
o The Fund may use futures contracts on market indexes and options on the
futures contracts. When using this investment technique, there is a risk
that the change in value of the securities included on the index and the
price of the futures contract will not match. There is also a risk when
using this investment technique that the Fund could be unable to sell the
futures contract when it wishes to or could be forced to sell it at a
price which is less than its value which will result in a decrease in the
value of the Fund.
o This Fund may invest in "junk bonds." Below investment grade debt
securities generally provide higher yields, but are subject to greater
credit and market risk than higher quality debt securities. Below
investment grade debt securities are considered to be speculative
regarding the ability of the issuer to meet principal and interest
payments. In addition, the market for selling these types of securities
may be less liquid which may make the valuation and sale of the securities
more difficult.
o This Fund may invest up to 15% of its total assets in illiquid securities
(securities which cannot be sold in the ordinary course of business within 7
days). The Fund could be unable to sell an illiquid security when it wishes
to or could be forced to sell it at a price which is less than its value
which will result in a decrease in the value of the Fund.
o When you sell your shares of the Fund, they could be worth more or less than
what you paid for them.
PERFORMANCE
Because the Fund has only been operating for a short period of time (less than
one year), the following table shows consolidated performance information ("CIC
Accounts Composite") of the historical performance of institutional private
accounts managed by CIC that have investment objectives, policies, strategies
and risks substantially similar to those of the Orchard Value Fund. The data is
provided to explain by example the past performance of CIC in managing
substantially similar accounts and does not represent the performance of the
Orchard Value Fund. You should not consider this performance data as an
indication of future performance of the Fund or of the Sub-Adviser.
The CIC Accounts Composite returns 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 CIC's institutional private accounts. The institutional private account
return data includes all actual fee-paying, discretionary institutional private
accounts managed by CIC that have investment objectives, policies and strategies
and risks substantially similar to those of the Orchard Value Fund.
The institutional private accounts that are included in the CIC Accounts
Composite are not subject to the same types of expenses which apply to the
Orchard Value Fund. In addition, the diversification requirements, specific tax
restrictions and investment limitations imposed on the Orchard Value Fund by the
Investment Company Act of 1940 and Subchapter M of the Internal Revenue Code do
not apply to the institutional private accounts. As a result, the performance
results for the institutional private accounts could have been negatively
affected if those institutional private accounts were regulated as investment
companies under the federal securities laws. The investment results for the
institutional private accounts 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. You should
also be aware that the use of a different method from that used below to
calculate performance could result in different performance data.
Year-by-Year Annual Returns
CIC Accounts Composite
1990* 1991 1992 1993 1994 1995 1996 1997 1998+
* Commencement of investment operations was May 31, 1990.
+ Through December 31, 1998.
During the periods shown for the CIC Accounts Composite, the highest return for
a quarter was 14.52% (quarter ending June 30, 1997), and the lowest return for a
quarter was -16.77% (quarter ending September 30, 1998).
<PAGE>
Average Annual Returns
Since
1 Year 3 Years 5 Years 10
------ -------- ------- ---
Years Inception*
CIC Accounts Composite xx.xx% xx.xx% xx.xx% N/A
xx.xx%+
S&P 500 Index** xx.xx% xx.xx% xx.xx% xx.xx%
N/A
* Commencement of investment operations was May 31, 1990.
+ Through December 31, 1998.
** 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. The stocks
which make up the S&P 500 trade on the New York Stock Exchange, the
American Stock
Exchange, or the NASDAQ National Market System. It is generally
acknowledged that the
S&P 500 broadly represents the performance of publicly traded common stocks
in the United States.
The S&P 500 is sponsored by the Standard & Poor's, which is responsible
for determining which
stocks are represented on the indexes. Total returns for the S&P 500
assume reinvestment of
dividends, but do not include the effect of taxes, brokerage commissions
or other costs you
would pay if you actually invested in those stocks.
For the xx months that the Orchard Value Fund has been in existence, the
following is performance data. Again, please remember that the returns are based
on past results and are not an indication of future performance.
Since
1 Year 3 Years 5 Years 10
------ -------- ------- ---
Years Inception*
Orchard Value Fund N/A N/A N/A
N/A xx.xx%+
S&P 500 Index** xx.xx% xx.xx% xx.xx% xx.xx%
N/A
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
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 (expenses that are deducted from Fund assets)
Value
Fund
Management Fees 1.00%
12b-1 Fees 0.25%**
Other Expenses 0.00%
Total Fund
Operating Expenses 1.25%
** 12b-1 distribution fees are asset-based sales charges. Class B shareholders
may indirectly pay more in sales charges than the equivalent of the maxim
permitted front-end sales charge.
Fund Expense Examples
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Examples also assume that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
high or lower, based on these assumptions your costs would be:
Fund 1 Year 3 Years 5 Years 10 Years
Orchard Value Fund $
130.42 $426.02 $773.17 $1,913.79
<PAGE>
THE VALUE FUND IN DETAIL
The following questions are designed to help you better understand an investment
in the Orchard Value Fund.
Q: What types of securities does the Fund purchase for investment?
A: The Fund invests primarily in common stocks issued by U.S. companies
which are believed by CIC to be undervalued at the time of acquisition.
Q: How does CIC determine that a stock is undervalued at the time of
acquisition?
A: In advance of actually purchasing a stock, CIC researches the company issuing
the stock to identify stocks which are both inexpensive and factors which CIC
believes will drive the price back to fair value. In making this determination,
CIC 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.
Q: Will a security be sold due to short-term earnings disappointment?
A: No. CIC maintains a long-term approach. If CIC continues to believe the
stock has the potential to grow to fair value, the stock will be not be sold
due solely to short-term earnings disappointment.
You should carefully consider your own investment goals, time horizon (the
amount of time you plan to hold your shares of the Fund) and risk tolerance
before investing in the Fund. There is no guarantee that the Fund will meet its
investment objective.
GENERAL PORTFOLIO POLICIES
The following pages contain more detailed information about the types of
securities in which the Fund may invest, strategies CIC may use to achieve the
Fund's investment objectives, and a summary of related risks. A complete listing
of the Fund's investment limitations and more detailed information about their
investment practices are contained in the Statement of Additional Information.
Please keep in mind that securities which met applicable investment policies and
limitations when first purchased do not need to be sold in the event of a later
change in circumstances.
1. Equity Securities
The Fund invests directly or indirectly in equity securities, such as common and
preferred stocks, convertible stocks, and warrants. Equity prices fluctuate
based on changes in a company's financial condition and overall market and
economic conditions. Equity securities of smaller companies are especially
sensitive to these factors.
2. Illiquid Securities
The Value Fund may invest up to 15% of its net assets in illiquid securities.
"Illiquid securities" are 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.
The Fund may be unable to sell illiquid securities when it wants to or may be
forced to sell them at a price that is lower than the price at which they are
valued. Sales of illiquid securities may require more time and may result in
higher selling expenses than do sales of securities that are not illiquid.
Illiquid securities may also be more difficult to value due to the lack of
availability of reliable market quotations for these types of securities.
3. Adjusting Investment Exposure
The Value 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 transactions such as buying
and selling options and futures contracts. These techniques are also referred to
as "derivative" transactions.
CIC uses these types of transactions to adjust the risk and return
characteristics of the Fund's investments. These techniques could result in a
loss if market conditions are judged incorrectly or the strategy does not
correlate well with the Fund's investments. These techniques may increase the
Fund's volatility and may involve a small investment relative to the magnitude
of the risk assumed. The Fund may also incur a loss if the other party to the
derivative transaction does not perform as promised. The Fund will not enter
into futures contracts or options if the aggregate initial margin and premium
required would exceed 5% of the Fund's total assets.
4. Foreign Investments
The Fund may invest in foreign securities in a manner consistent with its
investment objective and policies. Foreign investments include additional risks
and considerations such as, political and economic conditions; fluctuations in
foreign currencies; different tax and other regulatory measures; and, less
stringent investor protection measures. Foreign securities and markets may also
be less liquid and at times more volatile than their U.S. counterparts.
5. 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 securities held by the Fund.
The Value Fund should not be considered to be a complete investment program by
itself. You should consider your own investment objectives and tolerance for
risk, as well as your other investments when deciding whether to purchase shares
of the Fund.
MANAGEMENT OF THE FUND
The Fund is managed by GW Capital Management; however, GW Capital Management has
entered into an agreement with CIC Asset Management, Inc. to act as a
sub-adviser to the Value Fund. Under this agreement, CIC is responsible for the
daily management of the Value Fund and for making decisions to buy, sell or hold
any particular security. CIC's management activities are subject to review and
supervision by GW Capital Management and the Board of Trustees of Orchard Series
Fund.
GW Capital Management's address is 8515 East Orchard Road, Englewood, CO 80111.
GW Capital Management provides investment management services for mutual funds
and other investment portfolios representing assets of over $xx billion. GW
Capital Management has been providing investment management services directly
(and indirectly through its predecessor company, The Great-West Life Assurance
Company) since 1969.
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 633 West Fifth Street, Suite 1180, 11th Floor, Los Angeles, California 90017.
CIC provides investment management services for the Orchard Value Fund and other
investment portfolios representing assets of $xxx. CIC has been providing
investment management services since 1990.
The fee paid to GW Capital Management for the fiscal year ending October 31,
1998 for the Orchard Value Fund was .50% of the average daily net asset value of
the Orchard Value Fund. GW Capital Management is responsible for compensating
CIC for its management services.
CIC utilizes a team 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.
Year 2000 Issues
The services provided to the Fund by GW Capital Management and CIC depend on the
smooth functioning of its computer systems. Many computer software systems in
use today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could have a negative impact on
the handling of securities trades, pricing and account services. GW Capital
Management has been actively working on necessary changes to its computer
systems to deal with the year 2000 and to obtain assurances from our service
providers that they are taking similar steps.
CIC has been actively working on necessary changes to its computer systems to
deal with the year 2000 and to work with CIC's service providers to assure that
they are taking similar steps.
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT
Share Price
The transaction price for buying or selling the Fund's shares is the net asset
value of that Fund. The Fund's net asset value is generally calculated as of the
close of trading on the New York Stock Exchange every day the NYSE is open. If
the NYSE closes at any other time, or if an emergency exists, the time at which
the NAV is calculated may differ. To the extent that the Fund's assets are
traded in other markets on days when the NYSE is closed, the value of the Fund's
assets may be affected on days when the Fund is not open for business. In
addition, trading in some of the Fund's assets may not occur on days when the
Fund is open for business. Your share price will be next net asset value
calculated after we accept your order.
Net asset value is based on the market value of the securities in the Fund.
Certain short-term securities are valued on the basis of amortized cost. If
market prices are not available or if a security's value has been materially
affected by events occurring after the close of the exchange or market on which
the security is principally traded (for example, a foreign exchange or market),
that security may be valued by another method that the Board of Trustees of
Orchard Series Fund believes accurately reflects fair value.
We determine net asset value by dividing net assets of the Fund (the value of
its investments, cash, and other assets minus its liabilities) by the number of
the Fund's outstanding shares.
INVESTING IN THE FUND
How to buy shares
To open an account, mail a completed account application to:
Orchard Series Fund
8515 East. Orchard Road
Englewood, CO 80111.
With the application form, you must either:
(1)include a check or money order made payable to the Fund in the amount that
you wish to invest, or
(2)wire (electronically transfer) such amount to an account designated by the
Transfer Agent, Financial Administrative Services Corporation.
If you wish to make an initial purchase of shares by wiring your investment, you
must first call 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. You will be asked to provide the following information:
o the name in which the account will be established,
o the account holder's address,
o tax identification number, and
o dividend distribution election.
If requested, you will be given the instructions that your bank will need to
complete the wire transfer. Your bank may charge a fee for its wire transfer
services. Presently, there is no charge by the Fund for its wire transfer
services, but the Fund reserves the right to charge for these services.
Once you have established an account, you can purchase shares by mailing a check
or money order made payable to the appropriate Fund. Be sure to include
instructions telling us the name and number of your account. You can also
purchase shares by wiring the amount that you wish to invest to your account.
The price to buy one share of the Fund is the Fund's net asset value next
calculated after your order is received in proper form. Because you pay no
commissions or sales charges when you purchase shares, the Fund's share price is
equal to the Fund's net asset value per share.
Short-term or excessive trading into and out of the Fund may harm performance by
disrupting portfolio management strategies and by increasing expenses.
Accordingly, the Fund may reject any purchase orders, including exchanges,
particularly from market timers or investors who, in GW Capital Management's
opinion, have a pattern of short-term or excessive trading or whose trading has
been or may be disruptive to that Fund.
The Fund may stop offering shares completely or may offer shares only on a
limited basis, for a period of time or permanently.
How to Sell Shares
The price to sell one share of the Fund is the Fund's net asset value. Your
shares will be sold at the next net asset value calculated after your order is
received in proper form.
You can sell some or all your shares out of your account at any time. You can
sell your shares only by mail. No sales may be made by telephone.
You can sell shares by sending a "letter of instruction" by regular or express
mail to:
8515 East Orchard Road
Englewood, CO 80111.
The letter should include:
(1) the name of the account
(2) the account number
(3) the name of the Fund
(4) the dollar amount or number of shares to be sold (5) any special payment
instructions; and
(6) the signature(s) of the person(s) authorized to sell shares held in the
account.
When you place an order to sell shares, please note the following:
o Normally, your request to sell shares will be processed the next business
day, but the Fund may take up to seven days if making immediate payment would
adversely affect the Fund.
o Redemption proceeds may be delayed until investments credited to your account
have been received and collected, which can take up to seven business days.
o You will not receive interest on amounts represented by uncashed redemption
checks.
Class A and Class B Shares
In addition to the Class B shares described in this prospectus, the Fund also
offers Class A shares of Orchard Value Fund. Class A and Class B shares
generally have similar operating expenses, except for certain distribution fees.
Class A shares do not have any distribution fees. For additional information on
Class A shares:
o Call 1-800-784-4508; or
o Contact us by mail at:
8515 East Orchard Road
Englewood, CO 80111
Other Information
o The policies and procedures to request purchases of Fund shares by telephone
may be modified, suspended, or terminated by the Fund at any time.
o If an account has more than one owner of record, the Fund may rely on the
instructions of any one owner.
o Each account owner has telephone transaction privileges unless the Fund
receives cancellation instructions from an account owner.
TheTransfer Agent will record telephone calls and has adopted other procedures
to confirm that telephone instructions are genuine.
o The Fund will not be responsible for losses or expenses arising from
unauthorized telephone transactions, as long as they use reasonable
procedures to verify the identity of the investor.
o If you are unable to reach the Fund 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.
Dividends and Capital Gains Distributions
The Fund earns dividends, interest and other income from its investments, and
distributes this income (less expenses) to shareholders as dividends. The Fund
also realizes capital gains from its investments, and distributes these gains
(less any losses) to shareholders as capital gains distributions.
The Orchard Value Fund ordinarily distributes dividends semi-annually and
generally distributes capital gains, if any, in December.
Distribution Options
You 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, to receive your distributions in
cash, they will be automatically reinvested. You can change the manner in which
you receive distributions at any time by writing to:
8515 East Orchard Road
Englewood, Colorado 80111
Tax Consequences
As with any investment, your investment in the Fund could have tax consequences
for you. If you are not investing through a tax-advantaged retirement account,
you should consider these tax consequences.
Taxes on distributions. Distributions you receive from the Fund are subject to
federal income tax, and may also be subject to state and local taxes. If you
live outside the United States, the country where you reside could also tax your
distributions. Your distributions are taxable when they are paid, whether you
take them in cash or reinvest them in additional shares of the Fund.
Distributions declared in December and paid in January are taxable as if they
were paid on December 31.
For federal income tax purposes, the Fund's dividends and short-term capital
gain distributions are taxable to you as ordinary income. The Fund's long-term
capital gains distributions are taxable to you generally as capital gains at a
rate based on how long the securities were held.
If you buy shares when the Fund has realized but not yet distributed income or
capital gains, you will be "buying a dividend" by paying the full price for the
shares and then receiving a portion of the price back in the form of a taxable
distribution.
In January of each year, the Trust will send you and the IRS a statement showing
the taxable distributions paid to you in the previous year.
Taxes on transactions. Your redemptions, including exchanges, may result in a
capital gain or loss for federal tax purposes. A capital gain or loss on your
investment in the Fund is the difference between the cost of your shares and the
price you receive when you 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. It is your and your tax preparer's responsibility to determine
whether a transaction will result in a taxable gain or loss and the amount of
the tax to be paid, if any.
Effect of Foreign Taxes. Dividends and interest received by the Fund on foreign
securities may be subject to withholding and other taxes imposed by foreign
governments. These taxes will generally reduce the amount of distributions on
foreign securities.
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.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Fund's
financial history for the period of the Fund's operation. Certain information
reflects financial results for a single Fund share. Total returns for each
period include the reinvestment of all dividends and distributions. The
information has been audited by Deloitte & Touche LLP, independent auditors,
whose report, along with the Fund's financial statements, are included in the
Fund's Annual Report. A free copy of the Annual Report is available upon
request. There are no financial highlights for Class B shares as none were sold
in 1998.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more details about the investment policies and techniques of
the Fund. A current SAI is on file with the SEC and is incorporated into this
Prospectus by reference. This means that the SAI is legally considered a part of
this Prospectus even though it is not physically contained within this
Prospectus.
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
For a free copy of the SAI or annual or semi-annual reports or to request other
information or ask questions about the Fund, call 1-800-784-4508.
The SAI and the annual and semi-annual reports are available on the SEC's
Internet Web site (http://www.sec.gov). You can also obtain copies of this
information, upon paying a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009. You can also review and copy
information about the Fund, including the SAI, at the SEC's Public Reference
Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of
the SEC's Public Reference Room.
INVESTMENT COMPANY ACT OF 1940, FILE NUMBER, 811-7735.
<PAGE>
ORCHARD SERIES FUND
(the "Trust")
Orchard Money Market Fund
Orchard Preferred Stock Fund
Orchard Index 600 Fund
Orchard Index 500 Fund
Orchard Index Pacific Fund
Orchard Index European Fund
Orchard Value Fund
(the "Funds")
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Throughout this SAI, "the Fund" is intended to refer to each Fund listed
above, unless otherwise indicated. This SAI is not a Prospectus and should
be read together with the Prospectus for the Fund dated March 1, 1999.
Requests for copies of the Prospectus should be made by writing to:
Secretary, Orchard Series Fund, at 8515 East Orchard Road, Englewood,
Colorado 80111, or by calling (303) 689-3000. The financial statements
appearing in the Annual Report, which accompanies this SAI, are
incorporated into this SAI by reference.
March 1, 1999
<PAGE>
ii
TABLE OF CONTENTS
Page
INFORMATION ABOUT THE FUNDS 2
INVESTMENT LIMITATIONS 2
INVESTMENT POLICIES AND PRACTICES 3
MANAGEMENT OF THE FUND 12
INVESTMENT ADVISORY SERVICES 13
DISTRIBUTION SERVICES 15
PORTFOLIO TRANSACTIONS. 15
PURCHASE, REEMPTION AND PRICING OF SHARES 17
INVESTMENT PERFORMANCE 18
DIVIDENDS, DISTRIBUTION AND TAXES 20
OTHER INFORMATION
23
APPENDIX 26
FINANCIAL STATEMENTS 28
<PAGE>
37
INFORMATION ABOUT THE FUNDS
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 diversified investment portfolios, commonly known as mutual funds (the
Funds). The Trust commenced business as an investment company on February 3,
1997. The Funds are "no-load," meaning you pay no sales charges or distribution
fees (other than with respect to Class B shares of the Orchard Value Fund). 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.
Diversified Portfolio of Securities
Each Fund will operate as a diversified investment portfolio of the Trust. This
means 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.
INVESTMENT LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise indicated, whenever an investment policy or
limitation states a maximum percentage of a Fund's assets that may be invested
in any security or other asset, or sets forth a policy regarding quality
standards, the indicated percentage or quality standard limitation will be
determined immediately after and as a result of a Fund's acquisition of the
security or other asset. Accordingly, any subsequent change in values, net
assets, or other circumstances will not be considered when determining whether
the investment complies with a Fund's investment policies and limitations. A
Fund's fundamental investment policies and limitations cannot be changed without
approval by vote of a "majority of the outstanding voting shares" (as defined in
the Investment Company Act of 1940 ("the 1940 Act")) of the Fund.
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.
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.
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 or any sub-adviser may employ in pursuit of the Funds'
investment objectives, and a discussion of related risks. GW Capital Management
and/or its sub-advisers 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 indicated, each
Fund may invest in all these securities or use all of these techniques.
Asset-Backed Securities. Asset-backed securities represent interests in pools of
mortgages, loans, receivables or other assets. Payment of interest and repayment
of principal may be largely dependent upon the cash flows generated by the
assets backing the securities and, in certain cases, supported by letters of
credit, surety bonds, or other credit enhancements. Asset-backed security values
may also be affected by other factors including changes in interest rates, the
availability of information concerning the pool and its structure, the
creditworthiness of the servicing agent for the pool, the originator of the
loans or receivables, or the entities providing the credit enhancement. In
addition, these securities may be subject to prepayment risk.
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.
Borrowing. The Funds may borrow from banks or through reverse repurchase
agreements. If the fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If the fund makes additional
investments while borrowings are outstanding, this may be considered a form of
leverage.
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.
Common Stock. Common stock represents an equity or ownership interest in an
issuer. In the event an issuer is liquidated or declares bankruptcy, owners of
bonds and preferred stock take precedence over the claims of those who own
common stock.
Convertible Securities. Convertible securities are bonds, debentures, notes,
preferred stocks or other securities that may be converted or exchanged (by the
holder or by the issuer) into shares of the underlying common stock (or cash or
securities of equivalent value) at a stated exchange ratio. A convertible
security may also be called for redemption or conversion by the issuer after a
particular date and under certain circumstances (including a specified price)
established upon issue. If a convertible security held by a fund is called for
redemption or conversion, the fund could be required to tender it for
redemption, convert it into the underlying common stock, or sell it to a third
party. Convertible securities generally have less potential for gain or loss
than common stocks. Convertible securities generally provide yields higher than
the underlying common stocks, but generally lower than comparable
non-convertible securities. Because of this higher yield, convertible securities
generally sell at prices above their "conversion value," which is the current
market value of the stock to be received upon conversion. The difference between
this conversion value and the price of convertible securities will vary over
time depending on changes in the value of the underlying common stocks and
interest rates. When the underlying common stocks decline in value, convertible
securities will tend not to decline to the same extent because of the interest
or dividend payments and the repayment of principal at maturity for certain
types of convertible securities. However, securities that are convertible other
than at the option of the holder generally do not limit the potential for loss
to the same extent as securities convertible at the option of the holder. When
the underlying common stocks rise in value, the value of convertible securities
may also be expected to increase. At the same time, however, the difference
between the market value of convertible securities and their conversion value
will narrow, which means that the value of convertible securities will generally
not increase to the same extent as the value of the underlying common stocks.
Because convertible securities may also be interest-rate sensitive, their value
may increase as interest rates fall and decrease as interest rates rise.
Convertible securities are also subject to credit risk, and are often
lower-quality securities.
Debt Securities. Debt securities are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must repay the
amount borrowed at the maturity of the security. Some debt securities, such as
zero coupon bonds, do not pay interest but are sold at a deep discount from
their face values. Debt securities include corporate bonds, government
securities, and mortgage and other asset-backed securities.
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. Securities
lending allows a fund to retain ownership of the securities loaned and, at the
same time, to earn additional income.
Because there may be delays in the recovery of loaned securities, or even a loss
of rights in collateral supplied should the borrower fail financially, loans
will be made only to parties deemed by GW Capital Management to be of good
standing. Furthermore, they will only be made if, in GW Capital Management's
judgment, the consideration to be earned from such loans would justify the risk.
GW Capital Management understands that it is the current view of the SEC Staff
that a Fund may engage in loan transactions only under the following conditions:
(1) the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, the fund must be able to terminate the loan
at any time; (4) the fund must receive reasonable interest on the loan or a flat
fee from the borrower, as well as amounts equivalent to any dividends, interest,
or other distributions on the securities loaned and to any increase in market
value; (5) the fund may pay only reasonable custodian fees in connection with
the loan; and (6) the Board of Trustees must be able to vote proxies on the
securities loaned, either by terminating the loan or by entering into an
alternative arrangement with the borrower.
Cash received through loan transactions may be invested in other eligible
securities. Investing this cash subjects that investment, as well as the
security loaned, to market forces (i.e., capital appreciation or depreciation).
Lower Quality Debt Securities. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of principal,
or may be in default. These securities are often considered to be speculative
and involve greater risk of loss or price changes due to changes in the issuer's
capacity to pay. The market prices of lower-quality debt securities may
fluctuate more than those of higher-quality debt securities and may decline
significantly in periods of general economic difficulty, which may follow
periods of rising interest rates.
The market for lower-quality debt securities may be thinner and less active than
that for higher-quality debt securities, which can adversely affect the prices
at which the former are sold. Adverse publicity and changing investor
perceptions may affect the liquidity of lower-quality debt securities and the
ability of outside pricing services to value lower-quality debt securities.
Because the risk of default is higher for lower-quality debt securities,
research and credit analysis are an especially important part of managing
securities of this type. GW Capital Management and its sub-advisers will attempt
to identify those issuers of high-yielding securities whose financial condition
is adequate to meet future obligations, has improved, or is expected to improve
in the future. Analysis will focus on relative values based on such factors as
interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer.
A Fund may choose, at its expense or in conjunction with others, to pursue
litigation or otherwise to exercise its rights as a security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of the Fund's shareholders.
Money Market Instruments and Temporary Investment Strategies. In addition to the
Money Market Fund, the other Funds each may hold cash or cash equivalents and
may invest in short-term, high-quality debt instruments (that is in "money
market instruments") as deemed appropriate by GW Capital Management, or may
invest any or all of their assets in money market instruments as deemed
necessary by GW Capital Management for temporary defensive purposes.
The types of money market instruments in which the Funds may invest include,
but are not limited to: (1) 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.
Preferred Stock. Preferred stock is a class of equity or ownership in an issuer
that pays dividends at a specified rate and that has precedence over common
stock in the payment of dividends. In the event an issuer is liquidated or
declares bankruptcy, owners of bonds take precedence over the claims of those
who own preferred and common stock.
Repurchase Agreements. Repurchase agreements involve an agreement to purchase a
security and to sell that security back to the original seller at an agreed-upon
price. The resale price reflects the purchase price plus an agreed-upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. As protection against the risk that the original seller will
not fulfill its obligation, the securities are held in a separate account at a
bank, marked-to-market daily, and maintained at a value at least equal to the
sale price plus the accrued incremental amount. The value of the security
purchased may be more or less than the price at which the counterparty has
agreed to purchase the security. In addition, delays or losses could result if
the other party to the agreement defaults or becomes insolvent. A Fund will
engage in repurchase agreement transactions with parties whose creditworthiness
has been reviewed and found satisfactory by GW Capital Management.
Reverse Repurchase Agreements. In a reverse repurchase agreement, a Fund sells a
security to another party, such as a bank or broker-dealer, in return for cash
and agrees to repurchase that security at an agreed-upon price and time. A Fund
will enter into reverse repurchase agreements with parties whose
creditworthiness has been reviewed and found satisfactory by GW Capital
Management. Such transactions may increase fluctuations in the market value of
fund assets and may be viewed as a form of leverage.
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." Short sales "against the box" are short sales of
securities that a Fund owns or has the right to obtain (equivalent in kind or
amount to the securities sold short). 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 if 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.
MANAGEMENT OF THE FUND
The Fund is governed by the Board of Trustees. The Board is responsible for
overall management of the Funds' business affairs. The Trustees meet at least 4
times during the year to, among other things, oversee the Funds' activities,
review contractual arrangements with companies that provide services to the
Funds, and review performance.
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 (74), Trustee; President Emeritus, Denver Metro Chamber of
Commerce.
Richard P. Koeppe (67), Trustee; Retired Superintendent, Denver Public
Schools.
*Douglas L. Wooden (42), 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 (49), Trustee; Executive Vice President, Employee Benefits of
GWL&A (1997 to present) Senior Vice President, Employee Benefits of
GWL&A (1991-1997).
Sanford Zisman (59), Trustee; Attorney, Zisman & Ingraham, P.C.
*David G. McLeod (36), Treasurer; Vice President, Investment Operations,
(1998 to Present) Assistant Vice President, Investment Administration
of GWL&A (1994 to 1998); Manager, Securities and Equities
Administration of GWL&A (1992-1994).
*Bruce Hatcher (35), Assistant Treasurer, Manager, Investment Company
Administration (1998 - present); Associate Manager, Separate Account
Administration (1993-1998)
*Beverly A. Byrne (43), 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
Compensation Received
from the Trust $ 10,000 $10,000 $10,000
Pension or Retirement
Benefits Accrued as
Fund Expense* $0 $0 $0
Estimated Annual Benefits
Upon Retirement $0 $0 $0
Total Compensation
Received from the Trust and
All Affiliated Funds* $1 9,000 $21,000
$21,000
* As of October 31, 1998 there were thirty-six funds for which the Trustees
serve as Trustees or Directors of which seven are Funds of the Trust.
As of January 31, 1999, 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 xx% 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 SERVICES
Investment Adviser
GW Capital Management, LLC is a Colorado limited liability company, located at
8515 East Orchard Road, Englewood, Colorado 80111, and 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.
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 April 1, 1999, 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.
Under the terms of investment advisory agreement with the Trust, GW Capital
Management acts as investment adviser and, subject to the supervision of the
Board of Trustees, directs the investments of the Funds in accordance with its
investment objective, policies and limitations. GW Capital Management also
provides the Funds with all necessary office facilities and personnel for
servicing the Funds' investments, compensates all officers of the Funds and all
Trustees who are "interested persons" of the Trust or of GW Capital Management,
and all personnel of the Funds or GW Capital Management performing services
relating to research, statistical and investment activities.
In addition, GW Capital Management, subject to the supervision of the Board of
Trustees, provides the management and administrative services necessary for the
operation of the Funds. These services include providing facilities for
maintaining the Trust's organization; supervising relations with custodians,
transfer and pricing agents, accountants, underwriters and other persons dealing
with the Funds; preparing all general shareholder communications and conducting
shareholder relations; maintaining the Funds' records and the registration of
the Funds' shares under federal securities laws and making necessary filings
under state securities laws; developing management and shareholder services for
the Funds; and furnishing reports, evaluations and analyses on a variety of
subjects to the Trustees.
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 November 1, 1997 to October 31, 1998, GW Capital Management was
paid a fee for its services as follows: Money Market $6,353; Preferred Stock
$39,747; Index 600 $32,959; Index 500 $3,382,480; Index Pacific
$594,906; Index European $860,075; and Value $12,940.
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
GW Capital Management 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.
For the period March 2, 1998 (inception) to October 31, 1998, CIC was paid
$xxxxx for its services.
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 Funds 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 SERVICES
The Trust has entered into a distribution agreement with One Orchard Equities,
Inc. ("OOE"), an affiliate of the Trust. OOE is a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. ("NASD"). The distribution agreement calls for OOE to
use all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the Funds, which are continuously offered at net asset
value.
The Fund has adopted a separate distribution plan (the "Plan") for Class B
shares of the Orchard Value Fund 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.
Under 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).
For the period March 2, 1998 (inception) to October 31, 1998, only Class A
shares of the Value Fund were sold.
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) for the period November 1, 1997 to October 31, 1998 is as follows:
Fund
Preferred Stock Fund 48.89%
Index 600 Fund 31.25%
Index 500 Fund 20.20%
Index Pacific Fund 8.94%
Index European Fund 32.58%
Value Fund 79.58%
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.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchase and Redemption of Shares. The Prospectus fully describes how shares of
the Funds may be purchased and redeemed. That disclosure is incorporated by
reference into this SAI. Please read the Prospectus carefully.
Pricing of Shares. 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.
Calculation of Total Return. Total return is a measure of the change in value of
an investment in a Fund over the time period covered . In calculating total
return, any dividends or capital gains distributions are assumed to have been
reinvested in the Fund immediately rather than paid to the investor in cash. The
formula for total return includes four steps (1) adding to the total number of
shares purchased by a hypothetical $1,000 investment in the Fund all additional
shares which would have been purchased if all dividends and distributions paid
or distributed during the period had been immediately reinvested; (2)
calculating the value of they hypothetical initial investment of $1,000 as of
the end of the period by multiplying the total number of shares owned at the end
of the period by the net asset value per share on the last trading day of the
period; (3) assuming redemption at the end of the period and deducting any
applicable contingent deferred sales charge; and (4) dividing this account value
for the hypothetical investor by the initial $1,000 investment. Total return
will be calculated for one year, five years and ten years or some other relevant
periods if a Fund has not been in existence for at least ten years.
FORMULA: P(1+T) to the power of N = ERV
WHERE: T = Average annual total return
N = The number of years including portions of years where
applicable for which the performance is being measured
ERV = Ending redeemable value of a hypothetical $1.00 payment made
a the inception of the portfolio
P = Opening redeemable value of a hypothetical $1.00 payment made at
the inception of the portfolio
The above formula can be restated to solve for T as follows:
T = [(ERV/P) to the power of 1/N]-1
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.
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 of 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 of 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 years
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.
Transfer and Dividend Paying Agent
Financial Administrative Services Corporation ("FASCorp"), 8515 East Orchard
Road, Englewood, Colorado 80111 serves as the Funds' transfer agent and dividend
paying agent.
Independent Auditors
Deloitte & Touche LLP, 555 17th Street, Suite 3600, Denver, Colorado 80202,
serves as the Funds' independent auditors. Deloitte & Touche LLP examines
financial statements for the Funds and provides other audit, tax, and related
services.
FINANCIAL STATEMENTS
The Trust's and each Fund's audited financial statements as of October 31, 1998
together with the notes thereto and the report of Deloitte & Touche LLP are
incorporated into this Statement of Additional Information by reference to the
Fund's N-30D (annual report) filed with the Securities and Exchange Commission
via EDGAR on December 30, 1998.
<PAGE>
APPENDIX
Corporate Bond Ratings by Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class. B - Bonds where are rated B generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Corporate Bond Ratings by Standard & Poor's Corporation
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity for bonds rated BBB than for bonds in the A category.
BB, B, CCC, and CC - Standard & Poor's describes the BB, B, CCC and CC rated
issues together with issues rated CCC and CC. Debt in these categories is
regarded on balance as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C - The rating C is reserved for income bonds on which no interest is being
paid.
D - Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Commercial Paper Ratings by Moody's Investors Service, Inc.
Prime-1 - Commercial Paper issuers rated Prime-1 are judged to be of the best
quality. Their short-term debt obligations carry the smallest degree of
investment risk. Margins of support for current indebtedness are large or stable
with cash flow and asset protection well assured. Current liquidity provides
ample coverage of near-term liabilities and unused alternative financing
arrangements are generally available. While protective elements may change over
the intermediate or longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Prime-2 - Issuers in the Commercial Paper market rated Prime-2 are high quality.
Protection for short-term holders is assured with liquidity and value of current
assets as well as cash generation in sound relationship to current indebtedness.
They are rated lower than the best commercial paper issuers because margins of
protection may not be as large or because fluctuations of protective elements
over the near or immediate term may be of greater amplitude. Temporary increases
in relative short and overall debt load may occur. Alternative means of
financing remain assured.
Prime-3 - Issuers in the Commercial Paper market rated Prime-3 have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earning and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Commercial Paper Ratings by Standard & Poor's Corporation
A - Issuers assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issuers in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2 - Capacity for timely payment for issuers with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1".
A-3 - Issuers carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designation.
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
Item 22. Financial Statements
The financial statements are incorporated by reference to
Registrant's N-30D filed via EDGAR on December 30, 1998.
Item 23. Exhibits
Items (a)-(c) are incorporated by reference to Registrant's
Registration Statement dated July 30, 1996.
Item (d) is incorporated by reference to Registrant's
Post-Effective Amendment No 3 to its Registration Statement dated
February 27, 1998.
Items (e) and (g) are incorporated by reference to Registrant's
Pre-Effective Amendment No. 2 to its Registration Statement dated
January 28, 1997.
Item (f) is not applicable.
Item (h) - the Transfer Agency Agreement - is incorporated by
reference to Registrant's Pre-Effective Amendment No. 2 to its
Registration Statement dated January 28, 1997.
Item (i) is incorporated by reference to Registrant's
Pre-Effective Amendment No. 2 to its Registration Statement dated
January 28, 1997.
Item (j), written consent of Deloitte & Touche LLP, Independent
Auditors for the Trust to be filed by amendment.
Item (k) is not applicable.
Item (l) is incorporated by reference to Registrant's
Pre-Effective Amendment No. 2 to its Registration Statement dated
January 28, 1997.
Items (m) and (o) are incorporated by reference to Registrant's
Post-Effective Amendment No. 5 to its Registration Statement
dated July 17, 1998.
Item (n) is incorporated by reference to Registrant's N-30D filed
via EDGAR on December 30, 1998.
Item 24. Persons Controlled by or under Common Control with Registrant.
See page C-2.
Item 25. 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>
Power Corporation of Canada
100% - 2795957 Canada Inc.
100% - 171263 Canada Inc.
67.7% - Power Financial Corporation
81.2% - Great-West Lifeco Inc.
99.5% - The Great-West Life Assurance Company
<S> <C>
100% - Great-West Life & Annuity Insurance Company
100% - Anthem Health & Life Insurance Company
100% - First Great-West Life & Annuity Insurance Company
100% - GW Capital Management, LLC
100% - Orchard Capital
Management,
LLC
100% - Greenwood Investments, Inc.
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 Health Plan, Inc.
100% - One Health Plan of Alaska, Inc.
100% - One Health Plan of Arizona, Inc.
100% - One of Arizona, Inc.
100% - One Health Plan of Maine, Inc.
100% - One Health Plan of Nevada, Inc.
100% - One Health Plan of New Hampshire, Inc.
100% - One Health Plan of New Jersey, Inc.
100% - One Health Plan of South Carolina, Inc.
100% - One Health Plan of Wisconsin, Inc.
100% - One Health Plan of Wyoming, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
12% - 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
100% - Orchard Trust Company
</TABLE>
* 5% New England Life Insurance Company
** 8% New England Life Insurance Company
<PAGE>
Item 26. 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 27. 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 Underwriter with Registrant
- ------ ---------------------
- --------------------
Steve Miller Director and President None
Stan Kenyon Director None
Steve Quenville Director None
Glen R. Derback Treasurer Treasurer
Beverly A. Byrne Secretary Secretary
(c) Not applicable.
Item 28.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 29. Management Services.
Not applicable.
Item 30. 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 6 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 29th day of December, 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. 6 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 12/29/98
D.L. Wooden and Trustee
/s/ D.G. McLeod Treasurer 12/29/98
D.G. McLeod
/s/ R.P. Koeppe* Trustee 12/29/98
R.P. Koeppe
/s/ R. Jennings* Trustee 12/29/98
R. Jennings
<PAGE>
Signature Title Date
/s/ J.D. Motz Trustee 12/29/98
J.D. Motz
/s/ S. Zisman* Trustee 12/29/98
S. Zisman
*By: /s/ B.A. Byrne
B.A. Byrne
Attorney-in-fact pursuant to Powers of Attorney filed under
Post-Effective Amendment No. 1 to the Registration Statement
<PAGE>
EXHIBIT INDEX
Exhibit Description
23 Powers of Attorney*
23(1) Declaration of Trust**
23(2) Bylaws**
23(c) Instruments Defining Rights of Security Holders**
23(d) Form of Investment Advisory Agreement +
23(e) Form of Principal Underwriting Agreement**
23(g) Form of Custodian Agreement**
23(h) Form of Transfer Agency Agreement**
23(i) Opinion of R.B. Lurie**
23(j) Consent of Deloitte & Touche LLP +*
23(l) Form of Subscription Agreement.**
23(m)) Form of Rule 12b-1 Plan for Orchard Value Fund ++
23(n) Financial Data Schedule++
23(o) Rule 18f-3 Plan for Orchard Value Fund ++
* Filed with Post-Effective Amendment No. 1.
** Filed with Pre-Effective Amendment No. 2.
+ Filed with Post-Effective Amendment. No. 3.
+* To be filed by amendment.
++ Filed with Post-Effective Amendment No. 5.
++ Filed with Registrant's N-30D via EDGAR on December 29, 1998 and
incorporated herein by reference.
