As filed with the Securities and Exchange Commission on February 17, 2000
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. [ ]
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Post-Effective Amendment No. 8 [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [X]
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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) 737-3000
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 [X]
on February 29, 2000 pursuant to paragraph (b) of Rule 485 [ ] 60 days
after filing pursuant to paragraph (a)(1) of Rule 485 [ ] on pursuant
to paragraph (a)(1) of Rule 485 [ ] 75 days after filing pursuant to
paragraph (a)(2) of Rule 485 [ ] on pursuant to paragraph (a)(2) of
Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of 1940,
Registrant has elected to register an indefinite number of shares.
1
ORCHARD SERIES FUND
The Orchard Money Market Fund
The Orchard Index 500 Fund
The Orchard Index 600 Fund
8515 East Orchard Road
Englewood, CO 80111
(800) 338 - 4015
This Prospectus describes two 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 separate mutual fund of the Orchard Series Fund (the "Trust").
This Prospectus contains important information about each Fund, which 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 February 29, 2000.
<PAGE>
CONTENTS
The Funds at a Glance
Brief description of each Fund...................................
3
Performance.................................................... 5
Fees and Expenses
Each Fund's annual operating expenses......................
7
The Funds in Detail
Investment objectives and policies.............................
8
More Information about the Funds....................... 8
Management of the Funds.................................. 10
Important Information About Your Investment............10
Investing in the Funds....................................... 11
Financial Highlights
A summary of financial data for each Fund.............. 14
<PAGE>
THE FUNDS AT A GLANCE
The following information about each Fund is only a summary of important
information you should know. More detailed information about the Funds'
investment strategies and risks is included elsewhere in this Prospectus. Please
read this Prospectus carefully before investing in any of the Funds.
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 debt 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) or Standard
& Poor's Corporation ("S&P") (or unrated securities of comparable quality).
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.
o The market value of a money market instrument is affected by changes in
interest rates. When interest rates rise, the market value of money market
instruments declines and when interest rates decline, market value rises.
When interest rates rise, money market instruments which were previously
purchased and held by the Fund will have lower yields.
ORCHARD STOCK INDEX FUNDS.
The investment objective for each of the Index Funds is to:
Seek investment results that track as closely as possible the total return of
the common stocks that comprise its benchmark index.
The principal investment strategies for each Index Fund is to:
o Invest at least 80% of its assets in common stocks that comprise its
specific benchmark index. Following is a list of the applicable indexes:
FUND BENCHMARK INDEX
Orchard Index 600 Fund S&P SmallCap 600 Stock Index*
Orchard Index 500 Fund S&P 500 Composite Stock Price Index*
o Each Index Fund may use futures contracts on market indexes and options on
the futures contracts as a means of tracking the benchmark index.
The principal investment risks shared by all the Index Funds include:
o Stocks are volatile and can decline in value significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy, or
the market as a whole.
o It is possible the benchmark index may perform unfavorably and/or
underperform the market as a whole. Therefore, it is possible that an Index
Fund could have poor investment results even if it is successful in
tracking the return of the benchmark index.
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
o Several factors will affect an Index Fund's ability to track precisely the
performance of its benchmark index. For example, unlike benchmark indexes,
which are merely unmanaged groups of securities, each Index Fund has
operating expenses and those expenses will reduce the Index Fund's total
return. In addition, an Index Fund may own less than all the securities of
a benchmark index, which also may cause a variance between the performance
of the Index Fund and its benchmark index.
o When using futures contracts on market indexes and options on the futures
contracts, there is a risk that the change in value of the securities
included in 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 due to possible illiquidity of those
instruments. Also, there is the risk that the use of these types of
derivative techniques could cause the Fund to lose more money than if the
Fund had actually purchased the underlying securities. This is because
derivatives magnify gains and losses.
o When you sell your shares of any of the Index Funds, they could be worth
less than what you paid for them.
The Orchard Index 600 has the following additional risk:
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. Small companies are often dependent on a small number of
products and have limited financial resources. They may be severely affected by
economic changes, business cycles and adverse market conditions. In addition,
there is generally less publicly available information concerning small
companies upon which to base an investment decision.
PERFORMANCE
Total Return
The bar charts and table below provide an indication of the risk of investment
in the Funds. The bar charts show the Funds' performance for each calendar year
since inception. The table that follows the bar charts shows how the Funds'
average annual total returns for the one-year period ending December 31, 1999,
and for the period since inception compare to a broad based stock market index.
The returns shown below are historical and are not an indication of future
performance.
YEAR-BY-YEAR ANNUAL RETURNS
Orchard Index 500
[OBJECT OMITTED]
During the periods shown in the chart for the Orchard Index 500 Fund, the
highest return for a quarter was 21.16% (quarter ending December 1998) and the
lowest return for a quarter was -10.08% (quarter ending September 1998).
Orchard Index 600
[OBJECT OMITTED]
1998 1999
During the periods shown in the chart for the Orchard Index 600 Fund, the
highest return for a quarter was 18.07% (quarter ending June 1998) and the
lowest return for a quarter was -20.76% (quarter ending September 1998).
AVERAGE ANNUAL RETURNS
For the periods ended December 31, 1999, the past 1 year and inception to date:
Feb. 3, 1997 (inception)
1999 to Dec. 31, 1999
Orchard Index 500 20.32% 25.01%
S&P 500 Index 21.04% 25.82%
Orchard Index 600 11.92% 10.87%
S&P 600 Index 12.40% 11.41%
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 that 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 that 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 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.
Money Market Fund 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. The table below
compares the Orchard Money Market Fund 7-day yield to a broad measure of money
fund performance.
As of December 31, 1999, the yield for the Orchard Money Market Fund, and the
average yield as reported in the Donoghue Money Fund Report, was as follows:
7-Day Yield Effective Yield
Orchard Money Market Fund 5.52% 5.67%
Donoghue Money Fund Report 4.91% N/A
The Donoghue Money Fund Report represents the universe of money funds, and is
broken down into three categories: Government, All Taxable and All Tax-Free. The
funds are broken down even further within the categories into first tier, second
tier, government institutional, first tier institutional, and second tier
institutional. Information is collected by a statistical team on a daily and
weekly basis. The Donoghue Money Fund Report is released on a monthly basis and
is used as a comparative tool for the Orchard Money Market Fund.
<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 Index Index
Market 500 600
Fund Fund Fund
Management Fees 0.20% 0.60% 0.60%
Distribution
(12b-1) Fees NONE NONE NONE
Other Expenses 1.98% 0.00% 0.00
Total Annual Fund
Operating Expenses++++ 2.18% 0.60% 0.60%
++++ GW Capital Management has voluntarily agreed to reimburse "Other Expenses"
for the Money Market Fund for an indefinite period of time. Because of this
agreement, the total annual fund operating expenses which were charged for the
Money Market Fund were 0.46% of net assets.
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 (before any reimbursement) remain the same. Although
your actual costs may be higher or lower, based on these assumptions, your costs
would be:
<TABLE>
<S> <C> <C> <C> <C>
Fund 1 Year 3 Years 5 Years 10 Years
Money Market Fund 1 $ 223 $ 704 $1,235 $ 2,811
Index 500 Fund $ 62 $ 194 $ 340 $ 774
Index 600 Fund $ 62 $ 194 $ 340 $ 774
</TABLE>
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 Trust's 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: How does each of the Orchard Index Funds match the performance of its
Benchmark Index?
A: The Orchard Index Funds are managed to achieve returns similar to their
Benchmark Indices. 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, and options on
such futures contracts, on the relevant index.
Q: If there is a decline in any of the markets represented by the Benchmark
Indices 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.
MORE INFORMATION ABOUT THE FUNDS
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. All percentage limitations relating to the Funds'
investment strategies are applied at the time a Fund acquires a security.
1. Money Market Instruments and Temporary Investment Strategies
The Money Market Fund invests exclusively in money market instruments as its
investment strategy. Therefore, the value of your investment in the Money Market
Portfolio will be determined exclusively by the risks and rewards relating to
money market instruments.
In addition, the non-money market 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.
2. Equity Securities
For each Fund, except the Orchard Money Market Fund, the principal investment
strategy is to invest directly or indirectly in equity securities, such as
common and preferred stocks, convertible stocks, and warrants. Therefore, as an
investor in these Funds, the return on your investment will be based primarily
on the risks and rewards of equity securities.
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. The value of a company's stock may
fall as a result of factors that directly relate to that company, such as lower
demand for the company's products or services or poor management decisions. A
stock's value may also fall because of economic conditions that affect many
companies, such as increases in production costs. The value of a company's stock
may also be affected by changes in financial market conditions that are not
directly related to the company or its industry, such as changes in interest
rates or other economic fundamentals.
Small and Medium Size Companies
Companies that are small or unseasoned (less than 3 years of operating history)
are more likely not to survive or accomplish their goals with the result that
the value of their stock could decline significantly. These companies are less
likely to survive since they are often dependent upon a small number of products
and may have limited financial resources.
Small or unseasoned companies often have a greater degree of change in earnings
and business prospects than larger companies resulting in more volatility in the
price of their securities. As well, the securities of small or unseasoned
companies may not have wide marketability. This fact could cause a Fund to lose
money if it needs to sell the securities when there are few interested buyers.
Small or unseasoned companies also normally have fewer outstanding shares than
larger companies. As a result, it may be more difficult to buy or sell large
amounts of these shares without unfavorably impacting the price of the security.
Finally, there may be less publicly available information about small or
unseasoned companies. As a result, GW Capital Management, when making a decision
to purchase a security for a Fund, may not be aware of some problems associated
with the company issuing the security.
3. Derivatives
Each Fund, other than the Orchard Money Market Fund, can use various techniques
to increase or decrease its exposure to changing security prices or other
factors that affect security values. These techniques are also referred to as
"derivative" transactions. In addition, each Index Fund may use futures
contracts on market indexes and options on the futures contracts as part of its
principal investment strategy of seeking to track the performance of its
Benchmark Index. Therefore, the risks associated with derivatives transactions
are of particular interest to investors considering the Index Funds.
Derivatives are financial instruments designed to achieve a certain economic
result when an underlying security, index, interest rate, commodity, or other
financial instrument moves in price. Derivatives can, however, subject a Fund to
various levels of risk. There are four basic derivative products: forward
contracts, futures contracts, options and swaps.
Forward contracts commit the parties to a transaction at a time in the future at
a price determined when the transaction is initiated. They are the predominant
means of hedging currency or commodity exposures. Futures contracts are similar
to forwards but differ in that (1) they are traded through regulated exchanges,
and (2) are "marked to market" daily.
Options differ from forwards and futures in that the buyer has no obligation to
perform under the contract. The buyer pays a fee, called a premium, to the
seller, who is called a writer. The writer gets to keep the premium in any event
but must deliver (in the context of the type of option) at the buyer's demand.
Caps and floors are specialized options which enable floating-rate borrowers and
lenders to reduce their exposure to interest rate swings for a fee.
A swap is an agreement between two parties to exchange certain financial
instruments or components of financial instruments. Parties may exchange streams
of interest rate payments, principal denominated in two different currencies, or
virtually any payment stream as defined by the parties.
Derivatives involve special risks. If GW Capital Management judges market
conditions incorrectly or employs a strategy that does not correlate well with a
Fund's investments, these techniques could result in a loss. These techniques
may increase the volatility of a Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. In addition, these techniques
could result in a loss if the counterparty to the transaction does not perform
as promised.
Derivative transactions may not always be available and/or may be infeasible to
use due to the associated costs.
4. 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
GW Capital Management provides investment advisory, accounting and
administrative services to the Funds. GW Capital Management's address is 8515
East Orchard Road, Englewood, Colorado 80111. GW Capital Management provides
investment management services for mutual funds and other investment portfolios
representing assets of over $6.5 billion. GW Capital Management and its
affiliates have been providing investment management services since 1969.
The aggregate fee paid to GW Capital Management for the fiscal year ending
October 31, 1999 is as follows:
Fund Percentage of Average Net Assets
---- --------------------------------
Orchard Money Market 0.20%
Orchard Index 500 0.60%
Orchard Index 600 0.60%
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 (generally 4:00 p.m. Eastern Time). 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 the net asset value next calculated after we receive your
order in good form.
The net asset value of the Money Market Fund is determined by using the
amortized cost method of valuation. The net asset value of each of the non-money
market funds is based on the market value of the securities in the Fund.
Short-term securities with a maturity of 60 days or less are valued on the basis
of amortized cost. If market prices are not available for a security, 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 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) (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 Fund's 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 your bank will need to complete
the wire transfer. Your bank may charge a fee for its wire transfer services.
Presently, none of the Funds charge for 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:
Orchard Series Fund
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 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 (or longer as permitted by the SEC).
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 net asset value next
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. o You can request an exchange in writing or by telephone. o
Written requests should be submitted to:
Orchard Series Fund
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.
o You can request an exchange by telephoning 1-800-338-4015.
o 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.
o The Transfer Agent may 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 Index 500 and
Orchard Index 600 Funds ordinarily distribute dividends semi-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:
Orchard Series Fund
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, whether
received in cash or reinvested in additional shares of 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, 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 by the Fund.
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 performance for the period of the Funds' operations. Certain
information reflects financial results for a single Fund share. Total returns in
the table represent the rate that an investor would have earned on an investment
in the Fund (assuming 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
FINANCIAL HIGHLIGHTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the years ended
October 31, 1999 and 1998, and the period ended October 31, 1997 are as follows:
Period Ended October 31,
--------------------------------------------------------
1999 1998 1997
-------------- ---------------
-------------------
(A)
Net Asset Value, Beginning of Period $ 1.0000 $ 1.0000 $ 1.0000
Income From Investment Operations
Net investment income 0.0458 0.0513 0.0363
---------------- -------------- ---------------
Total Income From Investment Operations 0.0458 0.0513 0.0363
Less Distributions
From net investment income (0.0458) (0.0513) (0.0363)
---------------- -------------- ---------------
Total Distributions (0.0458) (0.0513) (0.0363)
---------------- -------------- ---------------
Net Asset Value, End of Period $ 1.0000 $ 1.0000 $ 1.0000
================ ============== ===============
Total Return/Yield 4.68% 5.26% 3.69%
Net Assets, End of Period $ 3,746,859 $ 3,274,248 $ 3,110,727
Ratio of Expenses to Average Net Assets
- Before Reimbursement 2.18% 3.57% 1.54%*
- After Reimbursement # 0.46% 0.46% 0.46% *
Ratio of Net Investment Income to Average Net Assets
- Before Reimbursement 2.88% 2.03% 3.79%*
- After Reimbursement # 4.60% 5.13% 4.88%*
</TABLE>
*Annualized
# Percentages are shown net of expenses reimbursed by GW Capital Management,
LLC.
(A) The Fund commenced operations February 3, 1997.
<PAGE>
ORCHARD INDEX 500 FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the years ended
October 31, 1999 and 1998, and the period ended October 31, 1997 are as follows:
Period Ended October 31,
--------------------------------------------------------------------
1999 1998 1997
--------------------- -------------------- ------------------
(A)
Net Asset Value, Beginning of Period $ 14.0808 $ 11.6936 $ 10.0000
Income From Investment Operations
Net investment income 0.1221 0.1282 0.0388
Net realized and unrealized gain 3.3536 2.3471 1.6936
----------------- --------------- ------------------
Total Income From Investment Operations 3.4757 2.4753 1.7324
Less Distributions
From net investment income (0.1243) (0.0881) (0.0388)
From net realized gains (0.1670)
----------------- --------------- ------------------
Total Distributions (0.2913) (0.0881) (0.0388)
----------------- --------------- ------------------
Net Asset Value, End of Period $ 17.2652 $ 14.0808 $ 11.6936
================= =============== ==================
Total Return 24.92% 21.18% 17.38%
Net Assets, End of Period $ 763,050,362 $ 605,087,390 $ 492,866,332
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% *
Ratio of Net Investment Income to Average Net Assets 0.75% 0.96% 1.67% *
Portfolio Turnover Rate 17.09% 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, 1999 were
$120,119,351 and $124,082,232, respectively.
*Annualized
(A) The Fund commenced operations February 3, 1997.
<PAGE>
ORCHARD INDEX 600 FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the years ended
October 31, 1999 and 1998, and the period ended October 31, 1997 are as follows:
Period Ended October 31,
--------------------------------------------------------------------
1999 1998 1997
--------------------- -------------------- ------------------
(A)
Net Asset Value, Beginning of Period $ 10.4300 $ 12.1191 $ 10.0000
Income From Investment Operations
Net investment income 0.0235 0.0255 0.0238
Net realized and unrealized gain (loss) 1.1728 (1.3719) 2.1191
----------------- --------------- ------------------
Total Income (Loss) From Investment Operations 1.1963 (1.3464) 2.1429
Less Distributions
From net investment income (0.0239) (0.0167) (0.0238)
From net realized gains (0.0335) (0.3260)
----------------- --------------- ------------------
Total Distributions (0.0574) (0.3427) (0.0238)
----------------- --------------- ------------------
Net Asset Value, End of Period $ 11.5689 $ 10.4300 $ 12.1191
================= =============== ==================
Total Return 11.48% (11.37%) 21.46%
Net Assets, End of Period $ 136,771,933 $ 4,883,597 $ 5,469,919
Ratio of Expenses to Average Net Assets 0.60% 0.60% 0.60% *
Ratio of Net Investment Income to Average Net Assets 0.30% 0.22% 0.30% *
Portfolio Turnover Rate 40.90% 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, 1999 were $160,487,237 and $44,668,032, respectively.
*Annualized
(A) The Fund commenced operations February 3, 1997.
<PAGE>
20
ADDITIONAL INFORMATION
The Statement of Additional Information ("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, or by electronic request at the
following e-mail address: public [email protected]. 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
Class A Shares
8515 East Orchard Road
Englewood, Colorado 80111
(800) 784-4508
Class A Shares
PROSPECTUS
The Orchard Value Fund (the "Fund") is divided into Class A and Class B shares.
Each Class has different expenses that will affect performance. This Prospectus
covers the Class A shares of the 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. (the "Sub-Adviser" or "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 and the Board of Trustees of the Fund.
The Value Fund is a separate mutual fund of the Orchard Series Fund (the
"Trust"). 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 February 29, 2000.
<PAGE>
CONTENTS
Page
The Value Fund at a Glance
Brief description of the Fund..................................................
3
Performance.............................................. 4
Fees and Expenses
The Value Fund's annual operating expenses.............................
5
The Fund in Detail
Investment objectives and policies..........................................
6
More Information About the Fund....................... 6
Management of the Fund................................................. 9
Important Information About Your Investment.............. 10
Investing in the Fund.................................................... 11
Financial Highlights
A summary of financial data for the Fund.......................... 15
<PAGE>
THE VALUE FUND AT A GLANCE
The following information about Orchard Value Fund Class A shares is only a
summary of important information you should know. More detailed information
about the Fund's investment strategies and risks is included elsewhere in this
Prospectus. Please read this Prospectus carefully before investing in the 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 that the Sub-Adviser believes are undervalued.
o Selling stocks when the Sub-Adviser believes that they are fairly valued.
The principal investment risks for this Fund include:
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
o When you sell your shares of the Fund, they could be worth less than what you
paid for them.
<PAGE>
PERFORMANCE
The bar chart and table below provide an indication of the risk of investment in
the Fund. The bar chart shows the Fund's performance for each calendar year
since inception. The table shows how the Fund's average annual total return for
the one year and since inception compare to a broad based stock market index.
The returns shown are historical and are not an indication of future
performance.
Orchard Value Fund, Class A
Year-By-Year Annual Returns
[OBJECT OMITTED]
1999
During the periods shown in the chart for the Orchard Value Fund, the highest
return for a quarter was 11.24% (quarter ending June 1999) and the lowest return
for a quarter was -12.85% (quarter ending September 1999).
Average Annual Returns
For the periods ended December 31, 1999, the past one year and inception to
date:
Since
1 Year Inception*
------ ---------
Orchard Value Fund 6.49% -2.90% +
Russell 1000 Value Index 7.35% 16.17%
S&P 500 Index 21.04% 18.58%
* The inception date for the Orchard Value Fund was March 2, 1998. + Through
December 31, 1999.
Given the fundamental objectives of the Orchard Value Fund, the investment
adviser and sub-adviser have determined that the Russell 1000 Value Index is the
appropriate index to use as a benchmark for the Fund's performance. The adviser
and sub-adviser decided to use the Russell 1000 Value Index as the Fund's
benchmark index because it more accurately represents the manager's investment
style for the Fund.
Because the Fund has been in existence for a short period of time (less than two
years), very little performance data is available. Historical performance data
of institutional private accounts managed by the Sub-Adviser (the manager of the
Fund) that have investment objectives, policies, strategies and risks
substantially similar to those of the Fund can be found on page 9 of this
prospectus.
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.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "S&P 600(R)," "Standard & Poor's
500", "Standard & Poor's SmallCap 600 Index" and "S&P SmallCap 600 Index" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by
Great-West Life & Annuity Insurance Company and its majority-owned subsidiaries
and affiliates. Orchard Series Fund is not sponsored, endorsed, sold or promoted
by Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in Orchard Series Fund.
The Russell 1000 Value Index is a subset of the Russell 1000 Index, which in
turn is a subset of the Russell 3000 Index. The Russell 3000 Index represents
approximately 98% of the total market capitalization of all U.S. stocks that
trade on the New York and American Stock Exchanges and in the NASDAQ (National
Association of Securities Dealers Automated Quotations) National Market System
over-the-counter market. The Russell 1000 consists of the 1000 largest stocks
within the Russell 3000 Index, representing approximately 94% of the Russell
3000 Index total market capitalization. The Russell 1000 Value Index is
comprised of stocks from the Russell 1000 Index with greater-than-average value
orientation. A stock is determined to have a greater-than-average value
orientation if it falls in the bottom 50% of the Russell 1000 Index based on
cumulative market capitalization, ranked by descending price-to-book ratio.
Thus, securities in the Russell 1000 Value Index typically have low
price-to-book and price-earnings ratios, higher divided yields and lower
forecasted growth rates than growth-oriented securities.
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)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases....................................................................NONE
Sales Load Imposed on Reinvested Dividends.................................................NONE
Deferred Sales
Load..........................................................................................NONE
Redemption
Fees...............................................................................................NONE
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Management Fees.....................................................................1.00%
Distribution and Service (12b-1) Fees...............................................NONE
Other Expenses.........................................................................0.00%
Total Annual Fund Operating Expenses.............................................1.00%
</TABLE>
Fund Expense Example
The following Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The Example assumes 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
Example also assumes 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
higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
$103 $323 $566 $1,289
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 the Sub-Adviser to be undervalued at the time of
acquisition.
Q: How does the Sub-Adviser determine that a stock is undervalued at the time
of acquisition?
A: In advance of actually purchasing a stock, the Sub-Adviser researches to
identify companies whose stock the Sub-Adviser believes to be undervalued. The
Sub-Adviser uses the S&P 500 index to represent the overall market and the
Russell 1000 Value Index as a benchmark of its investment style. The Sub-Adviser
then uses characteristics of the S&P 500 index for determination of relative
valuation.
Q: Will a security be sold due to short-term earnings disappointment?
A: No. The Sub-Adviser maintains a long-term approach. If the Sub-Adviser
continues to believe the stock is undervalued, 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.
MORE INFORMATION ABOUT THE FUND
The following pages contain more detailed information about the types of
securities in which the Fund may invest, strategies the Sub-Adviser may use to
achieve the Fund's investment objective, and a summary of related risks. A
complete listing of the Fund's investment limitations and more detailed
information about its investment practices are contained in the Statement of
Additional Information. All percentage limitations relating to the Fund's
investment strategies are applied at the time a Fund acquires a security.
1. Money Market Instruments and Temporary Investment Strategies
While it is not a principal investment strategy, the Value Fund 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 or the Sub-Adviser.
The Value Fund may also invest up to 100% of its assets in money market
instruments as deemed necessary by GW Capital Management or CIC for temporary
defensive purposes to respond to adverse market, economic or political
conditions. Should the Value Fund take this action, it may not achieve its
investment objective.
2. Equity Securities
The Fund pursues investment in equity securities, such as common and preferred
stocks, convertible stocks, and warrants as a principal investment strategy.
Therefore, as an investor in the Fund, the return on your investment will be
based primarily on the risks and rewards of equity securities. 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. The value of a company's stock may fall as a result
of factors that directly relate to that company, such as lower demand for the
company's products or services or poor management decisions. A stock's value may
also fall because of economic conditions that affect many companies, such as
increases in production costs. The value of a company's stock may also be
affected by changes in financial market conditions that are not directly related
to the company or its industry, such as changes in interest rates or currency
exchange rates.
3. Derivatives
While it is not a principal investment strategy, the Fund can use various
techniques to increase or decrease its exposure to changing security prices,
currency exchange rates, or other factors that affect security values. These
techniques are also referred to as "derivative" transactions.
Derivatives are financial instruments designed to achieve a certain economic
result when an underlying security, index, interest rate, commodity, or other
financial instrument moves in price. Derivatives can, however, subject the Fund
to various levels of risk. There are four basic derivative products: forward
contracts, futures contracts, options and swaps.
Forward contracts commit the parties to a transaction at a time in the future at
a price determined when the transaction is initiated. They are the predominant
means of hedging currency or commodity exposures. Futures contracts are similar
to forwards but differ in that (1) they are traded through regulated exchanges,
and (2) are "marked to market" daily.
Options differ from forwards and futures in that the buyer has no obligation to
perform under the contract. The buyer pays a fee, called a premium, to the
seller, who is called a writer. The writer gets to keep the premium in any event
but must deliver (in the context of the type of option) at the buyer's demand.
Caps and floors are specialized options which enable floating-rate borrowers and
lenders to reduce their exposure to interest rate swings for a fee.
A swap is an agreement between two parties to exchange certain financial
instruments or components of financial instruments. Parties may exchange streams
of interest rate payments, principal denominated in two different currencies, or
virtually any payment stream as defined by the parties.
Derivatives involve special risks. If the Sub-Adviser judges market conditions
incorrectly or employs a strategy that does not correlate well with the Fund's
investments, these techniques could result in a loss. These techniques may
increase the volatility of the Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. In addition, these techniques
could result in a loss if the counterparty to the transaction does not perform
as promised.
Derivative transactions may not always be available and/or may be infeasible to
use due to the associated costs.
4. Foreign Investments
While it is not a principal investment strategy, the Fund may, in a manner
consistent with its investment objective and policies, invest in foreign
securities. Securities of foreign companies generally have the same risk
characteristics as those issued by U.S. companies. In addition, foreign
investments present other risks and considerations not presented by U.S.
investments. Investments in foreign securities may cause the Fund to lose money
when converting investments from foreign currencies into U.S. dollars due to
unfavorable currency exchange rates.
Investments in foreign securities also subject the Fund to the adverse political
or economic conditions of the foreign country. Foreign countries may prevent or
delay the Fund from selling its investments and taking money out of the country.
In addition, foreign securities may not be as liquid as U.S. securities which
could result in the Fund being unable to sell its investments in a timely
manner. Foreign countries also have less stringent investor protection,
disclosure and accounting standards than the U.S. As a result, there is
generally less publicly-available information about foreign companies than U.S.
companies. The exposure to foreign securities risk is minimized since this Fund
invests primarily in securities of U.S. issuers.
5. Portfolio Turnover Risk
The portfolio turnover rate for this Fund in 1999 was in excess of 100%. In
order to meet the Fund's investment objectives, the Fund may engage in
short-term trading. Short-term trading may result in a high portfolio turnover
rate, which could produce higher brokerage costs and taxable distributions.
6. 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 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. GW Capital Management provides
investment advisory, accounting and administrative services to the Fund. GW
Capital Management's address is 8515 East Orchard Road, Englewood, Colorado
80111. GW Capital Management provides investment management services for mutual
funds and other investment portfolios representing assets of over $6.5 billion.
GW Capital Management and its affiliates have been providing investment
management services since 1969.
The fee paid to GW Capital Management for the fiscal year ending October 31,
1999 is as follows:
Orchard Value Fund Class A 1.00%
GW Capital Management has entered into an agreement with CIC Asset Management,
Inc. to act as a sub-adviser to the Fund. Under this agreement, CIC is
responsible for the daily management of the Fund and for making decisions to
buy, sell or hold portfolio securities. 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 is responsible for compensating CIC
for its management services.
The Sub-Adviser 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, Los Angeles, California 90017. The
Sub-Adviser provides investment management services for the Fund and other
investment portfolios representing assets of $343 million. The Sub-Adviser has
been providing investment management services since 1990.
CIC utilizes a team of portfolio managers and analysts acting together to manage
the assets of the Fund. The team meets regularly to review portfolio holdings
and to discuss purchase and sale activity. The team adjusts holdings in the
Fund's portfolio as it deems appropriate in pursuit of the Fund's investment
objective.
The Fund has only been operating for a short period of time (less than two
years). For that reason the table below has been provided. The table shows
consolidated performance information ("Sub-Adviser Accounts Composite") of the
historical performance of institutional private accounts managed by the
Sub-Adviser that have investment objectives, policies, strategies and risks
substantially similar to those of the Orchard Value Fund. The data is provided
to explain by example the past performance of the Sub-Adviser 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 Sub-Adviser 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 the Sub-Adviser's institutional private accounts. The
institutional private account return data includes all actual fee-paying,
discretionary institutional private accounts managed by the Sub-Adviser that
have investment objectives, policies and strategies and risks substantially
similar to those of the Orchard Value Fund.
The institutional private accounts that are included in the Sub-Adviser Accounts
Composite are not subject to the same types of expenses that apply to the
Orchard Value Fund. As a result, in the performance results for the
institutional private accounts listed below, we assumed a total annual operating
expense of 1.00%, which is the same as the Orchard Value Fund Class A Shares. 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. 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.
The return data provided below is calculated based on the SEC's formula for
"standardized average annual total return" (described in the Statement of
Additional Information), assuming a total annual operating expense of 1.00%,
which is the same as the Orchard Value Fund Class A Shares.
Average Annual Returns
Since
1 Year 5 Years Inception*
------ ------- ---------
Sub-Adviser Accounts Composite 0.66% 18.6% 13.59% +
Russell 1000 Value Index 7.35% 23.07% 16.17%
S&P 500 Index 21.04% 28.56% 18.58%
* Commencement of Sub-Adviser's investment operations was May 31, 1990. +
Through December 31, 1999.
Although the Sub-Adviser Accounts Composite is compared to both the S&P 500
Index and the Russell 1000 Value Index, the investment adviser and sub-adviser
have determined that the Russell 1000 Value Index is the appropriate index to
use as a benchmark for the Orchard Value Fund's performance. Total returns for
the S&P 500 Index and the Russell 1000 Value 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.
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
(generally 4:00 p.m. Eastern Time). 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
the net asset value next calculated after we receive your order in good form.
Net asset value is based on the market value of the securities in the Fund.
Short-term securities with a maturity of 60 days or less 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 Class A Shares 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:
Orchard Series Fund Class A Shares
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 (or longer as permitted by the SEC).
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:
Orchard Series Fund
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.
o The Transfer 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 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:
Orchard Series Fund Class A Shares
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, whether
received in cash or reinvested in additional shares of 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 by the Fund.
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 (Class A)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock of the fund for the year ended
October 31, 1999 and the period ended October 31, 1998, are as follows:
<TABLE>
<S> <C>
Period Ended October 31,
------------------------------------------------------
1999 1998
---------------------- ---------------------
(A)
Net Asset Value, Beginning of Period $ 9.0097 $ 10.0000
Income From Investment Operations
Net investment income 0.1186 0.0730
Net realized and unrealized gain (loss) 0.4667 (1.0275)
------------------- ------------------
Total Income (Loss) From Investment Operations 0.5853 (0.9545)
Less Distributions
From net investment income (0.1213) (0.0358)
From net realized gains (0.0651)
------------------- ------------------
Total Distributions (0.1864) (0.0358)
------------------- ------------------
Net Asset Value, End of Period $ 9.4086 $ 9.0097
=================== ==================
Total Return 6.49% (9.58%)
Net Assets, End of Period $ 2,581,149 $ 1,836,921
Ratio of Expenses to Average Net Assets 1.00% 1.00%*
Ratio of Net Investment Income to Average Net Assets 1.34% 1.15%*
Portfolio Turnover Rate 153.77% 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, 1999 were $4,184,002 and $3,512,270, respectively.
*Annualized
(A) The Fund commenced operations March 2, 1998.
<PAGE>
ADDITIONAL INFORMATION
The Statement of Additional Information ("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, or by electronic request at the
following e-mail address: public [email protected]. 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
Class B Shares
PMB 611
303 16th Street, Suite #016
Denver, CO 80202-5657
(877) 440-2709
PROSPECTUS
The Orchard Value Fund is divided into Class A and Class B shares. Each Class
has different expenses that 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. (the "Sub-Adviser" or "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 and the Board of Trustees of the Fund.
The Value Fund is a separate mutual fund of the Orchard Series Fund (the
"Trust"). 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 February 29, 2000.
<PAGE>
CONTENTS
Page
The Value Fund at a Glance
Brief description of the Fund ................................. 3
Performance.................................................... 3
Fees and Expenses
The Value Fund's annual operating expenses................... 4
The Fund in Detail
Investment objectives and policies........................... 4
More Information About the Fund.............................. 5
Management of the Fund .................................... 7
Important Information About Your Investment.................. 9
Investing in the Fund .................................... 10
Financial Highlights
A summary of financial data for the Fund ................... 13
<PAGE>
VALUE FUND AT A GLANCE
The following information about Orchard Value Fund Class B shares is only a
summary of important information you should know. More detailed information
about the Fund's investment strategies and risks is included elsewhere in this
Prospectus. Please read this Prospectus carefully before investing in the 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 that the Sub-Adviser believes are undervalued at
the time of acquisition.
o Selling stocks when the Sub-Adviser believes that they are fairly valued.
The principal investment risks for this Fund include:
o Stock markets are volatile and can decline significantly in response to
adverse issuer, political, regulatory, market or economic developments.
Market risk may affect a single company, industry sector of the economy or
the market as a whole.
o The value of an individual security or particular type of security can be
more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
o When you sell your shares of the Fund, they could be worth less than what
you paid for them.o
PERFORMANCE
Because no Class B shares of the Orchard Value Fund have been sold, there is no
performance data for the Class B shares. Historical performance data of
institutional private accounts managed by the Sub-Adviser (the manager of the
Fund) that have investment objectives, policies, strategies and risks
substantially similar to those of the Fund can be found on page 7 of this
Prospectus.
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
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Management Fees ...................................... 1.00%
Distribution and Service (12b-1) Fees ........... 0.25%
Other Expenses ................................... 0.00%
Total Annual Fund Operating Expenses .......... 1.25%
Fund Expense Examples
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes 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
Example also assumes 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
higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
$128 $404 $708 $1,612
THE VALUE FUND IN DETAIL
The following questions are designed to help you better understand an investment
in the 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 the Sub-Adviser to be undervalued at the time of
acquisition.
Q: How does the Sub-Adviser determine that a stock is undervalued at the time
of acquisition?
A: In advance of actually purchasing a stock, the Sub-Adviser researches to
identify companies whose stock the Sub-Adviser believes to be undervalued. The
Sub-Adviser uses the S&P 500 index to represent the overall market and the
Russell 1000 Value Index as a benchmark of its investment style. The Sub-Adviser
then uses characteristics of the S&P 500 index for determination of relative
valuation.
Q: Will a security be sold due to short-term earnings disappointment?
A: No. The Sub-Adviser maintains a long-term approach. If the Sub-Adviser
continues to believe the stock is undervalued, the stock will 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.
MORE INFORMATION ABOUT THE FUND
The following pages contain more detailed information about the types of
securities in which the Fund may invest, strategies the Sub-Adviser 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. All percentage limitations relating to the Fund's
investment strategies are applied at the time a Fund acquires a security.
1. Money Market Instruments and Temporary Investment Strategies
While it is not a principal investment strategy, the Fund 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 or the Sub-Adviser.
The Fund may also invest up to 100% of its assets in money market instruments as
deemed necessary by GW Capital Management or CIC for temporary defensive
purposes to respond to adverse market, economic or political conditions. Should
the Fund take this action, it may not achieve its investment objective.
2. Equity Securities
The Fund pursues investment in equity securities, such as common and preferred
stocks, convertible stocks, and warrants as a principal investment strategy.
Therefore, as an investor in these Funds, the return on your investment will be
based primarily on the risks and rewards of equity securities. 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. The value of a company's stock may fall as a result
of factors that directly relate to that company, such as lower demand for the
company's products or services or poor management decisions. A stock's value may
also fall because of economic conditions that affect many companies, such as
increases in production costs. The value of a company's stock may also be
affected by changes in financial market conditions that are not directly related
to the company or its industry, such as changes in interest rates or currency
exchange rates.
3. Derivatives
While it is not a principal investment strategy, the Fund can use various
techniques to increase or decrease its exposure to changing security prices,
currency exchange rates, or other factors that affect security values. These
techniques are also referred to as "derivative" transactions.
Derivatives are financial instruments designed to achieve a certain economic
result when an underlying security, index, interest rate, commodity, or other
financial instrument moves in price. Derivatives can, however, subject the Fund
to various levels of risk. There are four basic derivative products: forward
contracts, futures contracts, options and swaps.
Forward contracts commit the parties to a transaction at a time in the future at
a price determined when the transaction is initiated. They are the predominant
means of hedging currency or commodity exposures. Futures contracts are similar
to forwards but differ in that (1) they are traded through regulated exchanges,
and (2) are "marked to market" daily.
Options differ from forwards and futures in that they buyer has no obligation to
perform under the contract. The buyer pays a fee, called a premium, to the
seller, who is called a writer. The writer gets to keep the premium in any event
but must deliver (in the context of the type of option) at the buyer's demand.
Caps and floors are specialized options which enable floating-rate borrowers and
lenders to reduce their exposure to interest rate swings for a fee.
A swap is an agreement between two parties to exchange certain financial
instruments or components of financial instruments. Parties may exchange streams
of interest rate payments, principal denominated in two different currencies, or
virtually any payment stream as defined by the parties.
Derivatives involve special risks. If the Sub-Adviser judges market conditions
incorrectly or employs a strategy that does not correlate well with the Fund's
investments, these techniques could result in a loss. These techniques may
increase the volatility of the Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. In addition, these techniques
could result in a loss if the counterparty to the transaction does not perform
as promised.
Derivative transactions may not always be available and/or may be infeasible to
use due to the associated costs.
4. Foreign Investments
While it is not a principal investment strategy, the Fund may, in a manner
consistent with its investment objective and policies, invest in foreign
securities. Securities of foreign companies generally have the same risk
characteristics as those issued by U.S. companies. In addition, foreign
investments present other risks and considerations not presented by U.S.
investments. Investments in foreign securities may cause the Fund to lose money
when converting investments from foreign currencies into U.S. dollars due to
unfavorable currency exchange rates.
Investments in foreign securities also subject the Fund to the adverse political
or economic conditions of the foreign country. Foreign countries may prevent or
delay the Fund from selling its investments and taking money out of the country.
In addition, foreign securities may not be as liquid as U.S. securities which
could result in the Fund being unable to sell its investments in a timely
manner. Foreign countries also have less stringent investor protection,
disclosure and accounting standards than the U.S. As a result, there is
generally less publicly-available information about foreign companies than U.S.
companies. The exposure to foreign securities risk is minimized since this Fund
invests primarily in securities of U.S. issuers.
5. Portfolio Turnover Risk
Although no Class B Shares of the Fund were sold in 1999, the portfolio turnover
rate for the Class A shares was in excess of 100% in 1999. In order to meet the
Fund's investment objectives, the Fund may engage in short-term trading.
Short-term trading may result in a high portfolio turnover rate, which could
produce higher brokerage costs and taxable distributions.
6. 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 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. GW Capital Management provides
investment advisory, accounting and administrative services to the Fund. GW
Capital Management's address is 8515 East Orchard Road, Englewood, Colorado
80111. GW Capital Management provides investment management services for mutual
funds and other investment portfolios representing assets of over $6.5 billion.
GW Capital Management and its affiliates have been providing investment
management services since 1969.
The fee the Fund agreed to pay GW Capital Management for the fiscal year ending
October 31, 1999 is as follows:
Orchard Value Fund Class B 1.00%
GW Capital Management has entered into an agreement with CIC Asset Management,
Inc. to act as sub-adviser to the Fund. Under this agreement, CIC is responsible
for the daily management of the Fund and for making decisions to buy, sell or
hold portfolio securities. 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 is responsible for compensating CIC for its
management services.
The Sub-Adviser 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, Los Angeles, California 90017. The
Sub-Adviser provides investment management services for the Fund and other
investment portfolios representing assets of $343 million. The Sub-Adviser has
been providing investment management services since 1990.
CIC utilizes a team of portfolio managers and analysts acting together to manage
the assets of the Fund. The team meets regularly to review portfolio holdings
and to discuss purchase and sale activity. The team adjusts holdings in the
Fund's portfolio as it deems appropriate in pursuit of the Fund's investment
objective.
The table below shows consolidated performance information ("Sub-Adviser
Accounts Composite") of the historical performance of institutional private
accounts managed by the Sub-Adviser that have investment objectives, policies,
strategies and risks substantially similar to those of the Fund. The data is
provided to explain by example the past performance of the Sub-Adviser in
managing substantially similar accounts and does not represent the performance
of the Fund. You should not consider this performance data as an indication of
future performance of the Fund or of the Sub-Adviser.
The Sub-Adviser 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 the Sub-Adviser's institutional private accounts. The
institutional private account return data includes all actual fee-paying,
discretionary institutional private accounts managed by the Sub-Adviser that
have investment objectives, policies and strategies and risks substantially
similar to those of the Fund.
The institutional private accounts that are included in the Sub-Adviser Accounts
Composite are not subject to the same types of expenses that apply to the Fund.
As a result, in the performance results for the institutional private accounts
listed below, we assumed a total annual operating expense of 1.25%, which is the
same as the 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. 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 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.
The return data provided below for the Sub-Adviser Accounts Composite is
calculated based on the formula for "standardized average annual total return"
(described in the Statement of Additional Information), assuming a total annual
operating expense of 1.25%, which is the same as the Fund.
Average Annual Returns Since
1 Year 5 Years Inception*
------ ------- ---------
Sub-Adviser Accounts Composite 0.66% 18.61% 13.59%+
Russell 1000 Value Index 7.35% 23.07% 16.17%
S&P 500 Index 21.04% 28.56% 18.58%
* Commencement of Sub-Adviser's investment operations was May 31, 1990. +
Through December 31, 1999.
Although the Sub-Adviser Accounts Composite is compared to both the S&P 500
Index and the Russell 1000 Value Index, the investment adviser and sub-adviser
have determined that the Russell 1000 Value Index is the appropriate index to
use as a benchmark for the Orchard Value Fund's performance. Total returns for
the S&P 500 Index and the Russell 1000 Value 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 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.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "S&P 600(R)," "Standard & Poor's
500", "Standard & Poor's SmallCap 600 Index" and "S&P SmallCap 600 Index" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by
Great-West Life & Annuity Insurance Company and its majority-owned subsidiaries
and affiliates. Orchard Series Fund is not sponsored, endorsed, sold or promoted
by Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in Orchard Series Fund.
The Russell 1000 Value Index is a subset of the Russell 1000 Index, which in
turn is a subset of the Russell 3000 Index. The Russell 3000 Index represents
approximately 98% of the total market capitalization of all U.S. stocks that
trade on the New York and American Stock Exchanges and in the NASDAQ (National
Association of Securities Dealers Automated Quotations) National Market System
over-the-counter market. The Russell 1000 Index consists of the 1000 largest
stocks within the Russell 3000 Index, representing approximately 94% of the
Russell 3000 Index total market capitalization. The Russell 1000 Value Index is
comprised of stocks from the Russell 1000 Index with greater-than-average value
orientation. A stock is determined to have a greater-than-average value
orientation if it falls in the bottom 50% of the Russell 1000 Index based on
cumulative market capitalization, ranked by descending price-to-book ratio.
Thus, securities in the Russell 1000 Value Index typically have low
price-to-book and price-earnings ratios, higher divided yields and lower
forecasted growth rates than growth-oriented securities.
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
(generally 4:00 p.m. Eastern Time). 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
the net asset value next calculated after we receive your order in good form.
Net asset value is based on the market value of the securities in the Fund.
Short-term securities with a maturity of 60 days or less 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:
- -----------------
The Fund imposes a $5000 minimum initial investment and a $1000 minimum for
subsequent investments. These minimum investment amounts do not apply to
individuals investing in the Fund as an investment option under an employer
sponsored group retirement or deferred compensation plan.
To open an account, mail a completed account application to:
Orchard Value Fund - Class B PMB 611 303 16th Street, Suite #016
Denver, Colorado 80202-5657
With the application form, you must either:
(1) (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
Sub-Transfer Agent, ALPS Mutual Fund Services.
If you wish to make an initial purchase of shares by wiring your investment, you
must first call 1-877-440-2709 between the hours of 9:00 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:
Orchard Value Fund - Class B PMB 611 303 16th Street, Suite #016
Denver, Colorado 80202-5657
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 (or longer as permitted by the SEC).
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 B shares have a 0.25% distribution and service (12b-1) fee. Because these
fees are paid out of the Fund's Class B assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
Class A shares do not have any distribution or service fees. For additional
information on Class A shares:
o Call 1-800-784-4508; or
o Contact us by mail at:
Orchard Value Fund Class A Shares
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.
o The Transfer 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:
Orchard Value Fund - Class B PMB 611 303 16th Street, Suite #016
Denver, Colorado 80202-5657
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, whether in cash
or reinvested in additional shares of 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 by the Fund.
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
There are no financial highlights for Class B shares as none were sold in 1999.
ADDITIONAL INFORMATION
The Statement of Additional Information ("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 1-877-440-2709.
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, or by an electronic request at
the following e-mail address: public [email protected]. 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 Index 500 Fund
Orchard Index 600 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 Prospectuses for the Funds dated
February 29, 2000. Requests for copies of the Prospectuses should be
made by writing to: Secretary, Orchard Series Fund, at 8515 East
Orchard Road, Englewood, Colorado 80111, or by calling (303) 737-3000.
The financial statements appearing in the Annual Report, which
accompanies this SAI, are incorporated into this SAI by reference.
February 29, 2000
<PAGE>
2
TABLE OF CONTENTS
Page
INFORMATION ABOUT THE FUNDS 2
INVESTMENT LIMITATIONS 2
INVESTMENT POLICIES AND PRACTICES 3
MANAGEMENT OF THE FUND 13
CODE OF ETHICS 14
INVESTMENT ADVISORY SERVICES 14
DISTRIBUTION SERVICES 16
PORTFOLIO TRANSACTIONS & BROKERAGE 17
PURCHASE, REDEMPTION AND PRICING OF SHARES 19
INVESTMENT PERFORMANCE 20
DIVIDENDS, DISTRIBUTION AND TAXES 22
OTHER INFORMATION 26
FINANCIAL STATEMENTS 27
APPENDIX 28
<PAGE>
30
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
four 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 may from time-to-time 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 the 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 "Trustees"). The Trustees are
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, their principal occupations during the past 5 years (or as otherwise
indicated) and their positions with affiliates of Orchard Series Fund or its
principal underwriter 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 (75), Trustee; President Emeritus, Denver Metro Chamber of
Commerce; Director, Maxim Series Fund.
Richard P. Koeppe (68), Trustee; Retired Superintendent, Denver Public Schools,
Director, Maxim Series Fund.
*Douglas L. Wooden (43), 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); Director and President, Maxim Series
Fund; Manager, GW Capital Management.
*James D. Motz (50), Trustee; Executive Vice President, Employee Benefits of
GWL&A (1997 to present) Senior Vice President, Employee Benefits of
GWL&A (1991-1997); Director, Maxim Series Fund; Manager, GW Capital
Management.
Sanford Zisman (60), Trustee; Attorney, Zisman & Ingraham, P.C.; Director, Maxim
Series Fund.
*David G. McLeod (37), 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); Treasurer, Maxim Series Fund; Manager, GW Capital
Management.
*Bruce Hatcher (36), Assistant Treasurer; Manager, Investment Company
Administration (1998 - present); Associate Manager, Separate Account
Administration of GWL&A (1993-1998); Assistant Treasurer, Maxim Series
Fund.
*Beverly A. Byrne (44), Secretary; Vice President, Counsel and Assistant
Secretary of GWL&A (2000 - present); Assistant Vice President,
Assistant Counsel and Assistant Secretary of GWL&A (1997-2000);
Assistant Counsel and Assistant Secretary of GWL&A (1993-1997); Chief
Legal & Compliance Counsel of One Orchard Equities, Inc., the principal
underwriter of the Orchard Series Fund; Secretary, Maxim Series Fund,
an affiliated fund; Manager, GW Capital Management.
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, as well as certain other information.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
R.P. Koeppe R. Jennings S. Zisman
---------------------------------------
Trustee Trustee Trustee
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* $16,000 $16,000 $16,000
</TABLE>
*As of October 31, 1999 there were 42 funds for which the Trustees served as
Trustees or Directors of which four are Funds of the Trust.
As of January 31, 2000, no person owned 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 89.72% 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.
CODE OF ETHICS
The Orchard Series Fund, GW Capital Management and One Orchard Equities have
adopted a code of ethics addressing investing by their personnel. The code
permits personnel to invest in securities, including securities held by the
Orchard Series Fund under certain circumstances. The code places appropriate
restrictions on all such investments.
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 100% owned subsidiary
of Great-West Lifeco Inc., which in turn is an 80.9% 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 April 1, 1999. As approved, the Agreement will remain in
effect until April 1, 2000, 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%
Index 600 Fund 0.60%
Index 500 Fund 0.60%
Value Fund 1.00%
For the period November 1, 1998 to October 31, 1999, GW Capital Management was
paid a fee for its services as follows: Money Market $6,903; Index 500
$4,285,520; Index 600 $718,382; and Value (Class A shares) $22,880. 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; Index 500 $3,382,480;
Index 600 $32,959; and Value (Class A shares since inception date of March 2,
1998) $12,940. For the period February 3, 1997 (inception) to October 31, 1997,
GW Capital Management was paid a fee for its services as follows: Money Market
$4,526; Index 500 $53,983; Index 600 $21,804.
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 633 West Fifth Street, Suite
1180, 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 November 1, 1998 to October 31, 1999, CIC was paid $11,489 for
its services. For the period March 2, 1998 (inception) to October 31, 1998, CIC
was paid $8,024 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 Money Market Fund to the extent that total operating expenses, but excluding
interest, taxes, brokerage commissions, and extraordinary expenses, exceed 0.46%
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 and service 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 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 that the Plan may provide. The Trustees believe 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 November 1, 1998 to October 31, 1999, only Class A shares of the
Value Fund were sold.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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.
No brokerage commissions have been paid by the Orchard Money Market Fund for the
years ended December 31, 1997, December 31, 1998 and December 31, 1999. For the
years 1997, 1998 and 1999, respectively, the Funds paid commissions as follows:
Index 500 Fund - $4,691, $39,686 and $53,198; Index 600 Fund - $1,662, $8,060
and $ 69,115; Value Fund (Class A shares since inception, March 2, 1998, only) -
$7,357 and $8,263.
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 market 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, 1998 to October 31, 1999 is as follows:
Fund
Index 600 Fund 40.90%
Index 500 Fund 17.09%
Value Fund 153.77%
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.
Each Fund intends to pay all redemptions of its shares in cash. However, each
Fund may make full or partial payment of any redemption request by the payment
to shareholders of portfolio securities of the applicable Fund (i.e., by
redemption in-kind) at the value of such securities used in determining the
redemption price. Nevertheless, pursuant to Rule 18f-1 under the 1940 Act, each
Fund is committed to pay in cash to any shareholder of record, all such
shareholder's requests for redemption made during any 90-day period, up to the
lesser of $250,000 or 1% of the application Fund's net asset value at the
beginning of such period. The securities to be paid in-kind to any shareholders
will be readily marketable securities selected in such manner as the Trustees of
the Trust deem fair and equitable. If shareholders were to receive redemptions
in-kind, they would incur brokerage costs should they wish to liquidate the
portfolio securities received in such payment of their redemption request. The
Funds do not anticipate making redemptions in-kind.
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 measure 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:
FORMULA: P(1+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:
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 on the last day of the period
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 the 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)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 $1,000 payment made at
the beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-,
or 10-year periods (or fractional portion)
P = Opening redeemable value of a hypothetical $1,000 payment made at
the inception of the
portfolio
The above formula can be restated to solve for T as follows: T =[(ERV/P)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 Morningstar, 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 to 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 12 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
12 months) are currently taxed at rates of 8-20%. 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. ALPS Mutual Fund Services, 303 16th Street, Suite 3100, Denver,
Colorado 80202 serves as the Fund's sub-transfer agent and dividend paying agent
for the Orchard Value Fund Class B Shares.
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, 1999
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 29, 1999.
<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.
- --------
* Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "S&P 600(R)," "Standard &
Poor's 500", "Standard & Poor's SmallCap 600 Index" and "S&P SmallCap 600 Index"
are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by Great-West Life & Annuity Insurance Company and its majority-owned
subsidiaries and affiliates. Orchard Series Fund is not sponsored, endorsed,
sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in Orchard Series Fund.
1 Fees After Reimbursement
Fund 1 Year 3 Years 5 Years 10 Years
Money Market Fund $ 47 $ 149 $ 261 $ 593
-C-1 -
PART C
OTHER INFORMATION
Item 22. Financial Statements
The financial statements are incorporated by reference to
Registrant's Annual Report to Stockholders required under CFR
ss. 270.30b-1 and filed pursuant to CFR ss. 270.30b2-1 filed
via EDGAR on December 29, 1999.
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. Sub-Transfer
Agency Agreement for Orchard Value Fund Class B is filed
herewith.
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 is filed herewith.
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.
Item (m) is 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 (p), code of ethics adopted under Rule 17j-1 of the
Investment Company Act, are attached herewith.
Item 24. Persons Controlled by or under Common Control with Registrant.
-------------------------------------------------------------
See the organizational chart on page C-3.
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
Power Corporation of Canada
100% - 2795957 Canada Inc.
100% - 171263 Canada Inc.
67.5% - Power Financial Corporation
81.1% - Great-West Lifeco Inc.
<TABLE>
<S> <C>
99.5% - The Great-West Life Assurance Company
100% - GWL&A Financial (Nova Scotia) Co.
100% GWL&A Financial, Inc.
100% - Great-West Life & Annuity Insurance Capital I
100% - Great-West Life & Annuity Insurance Company
100% - Alta Health & Life Insurance Company
100% - AH&L Agency, Inc.
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.
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.
92%**- Orchard Series Fund
100% - Orchard Trust Company
100% - National Plan Coordinators of Delaware, Inc.
100% - NPC Securities, Inc.
100% - NPC Administrative Services Corporation
100% - Deferred Comp of Michigan, Inc.
100% - National Plan Coordinators of Washington,
Inc.
100% - National Plan Coordinators of Ohio, Inc.
100% - Renco, Inc.
100% - P.C. Enrollment Services & Insurance
Brokerage, Inc.
</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/managers and officers of GW
Capital Management have held, during the past two fiscal years, the following
positions of a substantial nature.
<TABLE>
Name Position(s)
- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
John T. Hughes Manager, Chairman of the Board and President, GW Capital Management; Senior
Vice President and Chief Investment Officer, Great-West GWL&A; Chairman and
Director, GWL Properties Inc.; Director, Great-West Realty Investment, Inc.
and Orchard Capital Management, LLC.
Wayne Hoffmann Manager, GW Capital Management;
Vice President, Investments, Great-West and
GWL&A; Director, Orchard Capital Management,
LLC.
S. Mark Corbett Manager, GW Capital Management; Vice President, Investments, Great-West and
GWL&A; Director, Orchard Capital Management, LLC.
J.D. Motz Manager, GW Capital Management; Executive Vice President, Employee Benefits,
Great-West, GWL&A and First Great-West Life & Annuity Insurance Company; Vice
Chairman and Chief Executive Officer, Alta Health & Life Insurance Company;
Director, President and Chairman, Orchard Series Fund, Maxim Series Fund, Inc.
and Great-West Variable Annuity Account A; Chairman and President, One
Corporation and Great-West Benefit Services, Inc.; Director and Executive Vice
President, Orchard Trust Company; Director, Financial Administrative Services
Corporation, Orchard Capital Management, LLC, One Health Plan of Illinois,
Inc., One Health Plan of Texas, Inc., One Health Plan of California, Inc., One
Health Plan of Colorado, Inc., One Health Plan of North Carolina, Inc., One
Health Plan of Washington, Inc., One Health Plan of Ohio, Inc., One Health
Plan of Tennessee, Inc., One Health Plan of Florida, Inc., One Health Plan of
Indiana, Inc., One Health Plan of Massachusetts, Inc., One Health Plan, Inc.,
One Health Plan of Alaska, Inc., One Health Plan of Arizona, Inc., One Health
Plan of Maine, Inc., One Health Plan of Nevada, Inc., One Health Plan of New
Hampshire, Inc., One Health Plan of New Jersey, Inc., One Health Plan of South
Carolina, Inc., One Health Plan of Wisconsin, Inc., One Health Plan of
Wyoming, Inc.
D.L. Wooden Manager, GW Capital Management; Executive Vice President, Financial Services,
Great-West, GWL&A and First Great-West Life & Annuity Insurance Company;
Director, Chairman, President and Chief Executive Officer, Orchard Trust
Company; Director, Orchard Series Fund, Maxim Series Fund, Inc., Great-West
Variable Annuity Account A, Financial Administrative Services Corporation,
Orchard Capital Management, LLC and Orchard Trust Company.
James M. Desmond Vice President, GW Capital Management; Assistant Vice President, Investments,
Great-West and GWL&A.
David G. McLeod Treasurer, GW Capital Management; Vice President, Investment Operations,
Great-West, GWL&A, First Great-West Life & Annuity Insurance Company, Orchard
Trust Company, National Plan Coordinators of Delaware, Inc., Renco, Inc., P.C.
Enrollment Services & Insurance & Brokerage, Inc., National Plan Coordinators
of Washington, Inc., National Plan Coordinators of Ohio, Inc. Deferred Comp of
Michigan, Inc., and Financial Administrative Services Corporation; Treasurer,
Maxim Series Fund, Inc., Orchard Series Fund, Great-West Variable Annuity
Account A and Orchard Capital Management, LLC; Director, BenefitsCorp
Equities, Inc., NPC Securities, Inc. and Greenwood Investments, Inc.
Beverly A. Byrne Secretary, GW Capital Management; Vice President and Counsel, Great-West;
Assistant Vice President, Associate Counsel and Assistant Secretary, GWL&A,
GWL&A Financial Inc., First Great-West Life & Annuity Insurance Company and
Alta Health & Life Insurance Company; Assistant Vice President, Associate
Counsel and Secretary, Financial Administrative Services Corporation;
Secretary, One Orchard Equities, Inc., Greenwood Investments, Inc.,
BenefitsCorp Equities, Inc., Benefits Communication Corporation, Orchard
Capital Management, LLC, National Plan Coordinators of Delaware, Inc., NPC
Securities, Inc., NPC Administrative Services Corporation, Renco, Inc.,
Deferred Comp of Michigan, Inc., National Plan Coordinators of Washington,
Inc., National Plan Coordinators of Ohio, Inc., P.C. Enrollment Services &
Insurance Brokerage, Inc., Great-West Benefit Services, Inc., Great-West
Variable Annuity Account A, and Maxim Series Fund, 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
Mark Hackl Director None
Patricia Neal Jensen Director None
Glen R. Derback Treasurer Treasurer
Beverly A. Byrne Secretary Secretary
(c) Not applicable.
</TABLE>
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.
------------
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.
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 Orchard Series Fund certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 8 to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Englewood in the State of
Colorado on the 17th day of February, 2000.
ORCHARD SERIES FUND
J.D. Motz
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 8 to the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
President 2/17/00
- -----------------------------------------------------
J.D. Motz and Trustee
Treasurer 2/17/00
D.G. McLeod
Trustee 2/17/00
- -----------------------------------------------------
R.P. Koeppe*
Trustee 2/17/00
- -----------------------------------------------------
R. Jennings*
Trustee 2/17/00
D.L. Wooden
Trustee 2/17/00
- -----------------------------------------------------
S. Zisman*
*By: 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**, Sub-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) Rule 18f-3 Plan for Orchard Value Fund ++
23(p) Rule 17j-1 Code of Ethics +*
* Filed with Post-Effective Amendment No. 1.
** Filed with Pre-Effective Amendment No. 2.
+ Filed with Post-Effective Amendment. No. 3.
+* Filed with this Post-Effective Amendment. No. 8.
++ Filed with Post-Effective Amendment No. 5.
<PAGE>
Exhibit 23(h)
Other Material Contracts
(i) Transfer Agency Agreement - incorporated by reference to Registrant's
Pre-Effective Amendment No. 2 to its Registration Statement dated January
28, 1997.
(ii) Sub-Transfer Agency Agreement attached hereto.
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
between
ALPS MUTUAL FUNDS SERVICES, INC.
and
FINANCIAL ADMINISTRATIVE SERVICES CORPORATION
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
Between
ALPS MUTUAL FUNDS SERVICES, INC.
And
FINANCIAL ADMINISTRATIVE SERVICES CORPORATION
_____________________________________________________________________________
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Section Page
1. Terms of Appointment and Duties ................................................................1
2. Third Party Administrators for Defined Contribution Plans ......................................3
3. Fees and Expenses ..............................................................................4
4. Representations and Warranties of ALPS .........................................................4
5. Representations and Warranties of the Transfer Agent ...........................................5
6. Wire Transfer Operating Guidelines .............................................................5
7. Indemnification ................................................................................6
8. Standard of Care ...............................................................................7
9. Confidentiality ...............................................................................8
10. Covenants of the Transfer Agent and ALPS ......................................................8
11. Termination of Agreement ......................................................................8
12. Assignment and Third Party Beneficiaries ......................................................9
13. Subcontractors ................................................................................9
14. Miscellaneous .................................................................................9
</TABLE>
- 16 -
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 2nd day of November, 1998, by and between Financial
Administrative Services Corporation a Colorado corporation, having its principal
office and place of business at 8515 E. Orchard Road, Englewood, Colorado,
80111(the "Transfer Agent"), and ALPS MUTUAL FUNDS SERVICES, INC., a Colorado
corporation, having its principal office and place of business at 370 17th
Street, Suite 3100, Denver, Colorado 80202 ("ALPS").
WHEREAS, the Transfer Agent has been appointed by the investment company
(including each series thereof) listed on Schedule A (the "Trust"), an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended, as transfer agent, dividend disbursing agent
and shareholder servicing agent in connection with certain activities, and the
Transfer Agent has accepted each such appointment;
WHEREAS, the Transfer Agent has entered into a Transfer Agency and Service
Agreement with the Trust listed on Schedule A pursuant to which the Transfer
Agent is responsible for certain transfer agency and dividend disbursing
functions and the Transfer Agent is authorized to subcontract for the
performance of its obligations and duties thereunder in whole or in part with
ALPS;
WHEREAS, the Transfer Agent is desirous of having ALPS perform certain
shareholder accounting, administrative and servicing function (collectively
"Shareholder and Record-Keeping Services");
WHEREAS, the Transfer Agent desires to appoint ALPS as its sub-transfer agent
and servicing agent , and ALPS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Terms of Appointment; Duties
1.1 Sub-Transfer Agency Services. Subject to the terms and conditions set forth
in this Agreement, the Transfer Agent hereby employs and appoints ALPS to
act as, and ALPS agrees to act as, the sub-transfer agent for the Trust's
authorized and issued shares of beneficial interest, and the dividend
disbursing agent. As used herein, the term "Shares" means the authorized
and issued shares of common stock, or shares of beneficial interest, as the
case may be, for the Trust (including each series thereof) enumerated in
Schedule A. ALPS agrees that it will perform the following Shareholder and
Record-Keeping services:
(a) In accordance with procedures established from time to time by agreement
between the Transfer Agent and ALPS, ALPS shall:
(i) Receive for acceptance, orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation thereof to the Custodian of
the Trust authorized by the Board of Trustees of the Trust (the
"Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of Shares and
hold such Shares in the appropriate Shareholder account;
(iii)Receive for acceptance redemption requests and redemption directions and
deliver the appropriate documentation thereof to the Custodian;
(iv) In respect to the transactions in items (i) (ii) and (iii) above, ALPS
shall execute transactions directly with broker-dealers authorized by the
Funds who shall thereby be deemed to be acting on behalf of the Trust;
(v) When it receives monies paid to it by the Custodian with respect to any
redemption, pay or cause to be paid in the appropriate manner such monies
as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof upon receipt of
appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Trust;
(viii) Maintain records of account for and advise the Trust and its Shareholders
as to the foregoing; and
(ix) (Record the issuance of Shares of the Trust and maintain pursuant to SEC
Rule 17Ad-10(e) a record of the total number of Shares of the Trust which
are authorized, based upon data provided to it by the Trust, and issued and
outstanding. ALPS shall also provide the Trust on a regular basis with the
total number of Shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to monitor
the issuance of such Shares or to take cognizance of any laws relating to
the issue or sale of such Shares, which functions shall be the sole
responsibility of the Trust.
1.2 Additional Services. In addition to, and neither in lieu nor in
contravention of, the services set forth in the above paragraph, ALPS shall
perform the following services:
(a) Other Customary Services. Perform the customary services of a transfer
agent, dividend disbursing agent, and, as relevant, agent in connection
with accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal program),
including but not limited to: maintaining all Shareholder accounts,
preparing Shareholder meeting lists, mailing Shareholder proxies,
Shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and
filing U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal authorities
for all taxable Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for Shareholders, and providing
Shareholder account information.
(b) Control Book (also known as "Super Sheet"). Maintain a daily record and
produce a daily report for the Trust of all transactions and receipts and
disbursements of money and securities and deliver a copy of such report for
the Trust for each business day to the Trust no later than 9:00 AM Mountain
Time, or such earlier time as the Trust may reasonably require, on the next
business day;
(c) "Blue Sky" Reporting. The Trust or Transfer Agent shall (i) identify to
ALPS in writing those transactions and assets to be treated as exempt from
blue sky reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The responsibility of
ALPS for the Trust's blue sky State registration status is solely limited
to the initial establishment of transactions subject to blue sky compliance
by the Trust and providing a system which will enable the Trust to monitor
the total number of Shares sold in each State;
(d) National Securities Clearing Corporation (the "NSCC"). If the transactions
are to be made via NSCC ALPS shall: (i) accept and effectuate the
registration and maintenance of accounts through Networking and the
purchase, redemption, transfer and exchange of shares in such accounts
through Fund/SERV (networking and Fund/SERV being programs operated by the
NSCC on behalf of NSCC's participants, including the Fund), in accordance
with, instructions transmitted to and received by ALPS by transmission from
NSCC on behalf of broker-dealers and banks which have been established by,
or in accordance with the instructions of authorized persons, as
hereinafter defined on the dealer file maintained by ALPS; (ii) issue
instructions to Trust's banks for the settlement of transactions between
the Trust and NSCC (acting on behalf of its broker-dealer and bank
participants); (iii) provide account and transaction information from the
affected Trust's records in accordance with NSCC's Networking and Fund/DERV
rules for those broker-dealers; and (iv) maintain Shareholder accounts
through Networking.
(e) New Procedures. New procedures as to who shall provide certain of these
services in Section I may be established from time to time by agreement
between the Transfer Agent and ALPS. ALPS may at times perform only a
portion of these services and the Transfer Agent, the Trust or their agent
may perform these services on the Trust's behalf.
2. Third Party Administrators for Defined Contribution Plans
2.1 The Trust may decide to make these shares available to certain of its
customers' ("Employers") deferred compensation plans ("Plan or Plans") for
the benefit of the individual Plan participant (the "Plan Participant"),
such Plan(s) being established under Sections 401(a), 403(b) or 457 of the
Internal Revenue Code of 1986, as amended ("Code"). These Plans may be
administered by third party administrators which may or may not be plan
administrators as defined in the Employee Retirement Income Security Act of
1974, as amended)(the "TPA(s)")
2.2 ALPS shall:
(a) Treat Shareholder accounts established by the Plans in the name of the
Trustees, Plans or TPAs as the case may be as omnibus accounts;
(b) Maintain omnibus accounts on its records in the name of the Trustee of such
Plans, or its designee for the benefit of the Plan; and
(c) Perform all services under Section 1 on behalf of the Trust and not as a
record-keeper for the Plans.
2.3 Transactions identified under Section 2 of this Agreement shall be deemed
exception services ("Exception Services") when such transactions:
(a) Require ALPS to use methods and procedures other than those usually
employed by ALPS to perform services under Section 1 of this Agreement;
(b) Involve the provision of information to ALPS after the commencement of its
nightly processing cycle; or
(c) Require more manual intervention by ALPS, either in the entry of data or in
the modification or amendment of reports generated by ALPS than is usually
required by non-retirement plan and pre-nightly transactions.
3. Fees and Expenses
3.1 Fee Schedule. For the performance by ALPS pursuant to this Agreement, the
Transfer Agent agrees to pay ALPS fees as set out in the fee schedule
attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 3.2 below may be changed from time to time subject
to mutual written agreement between the Transfer Agent and ALPS.
3.2 Out-of-Pocket Expenses. In addition to the fee paid under Section 3.1
above, the Transfer Agent agrees to reimburse ALPS for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, mailing and tabulating proxies, records storage, or
advances incurred by ALPS for the items set out in the fee schedule
attached hereto. In addition, any other expenses incurred by ALPS at the
request or with the consent of the Transfer Agent, will be reimbursed by
the Fund.
3.3 Postage. Postage for mailing of dividends, proxies, reports and other
mailings to all shareholder accounts shall be advanced to ALPS by the
Transfer Agent at least seven (7) days prior to the mailing date of such
materials.
3.4 Invoices. The Transfer Agent agrees to pay all fees and reimbursable
expenses within thirty days following the receipt of the respective billing
notice.
4. Representations and Warranties of ALPS
ALPS represents and warrants to the Transfer Agent that:
4.1 It is a duly registered transfer agent under the Securities Exchange Act of
1934
4.2 It is duly organized and existing and in good standing under the laws of
the State of Colorado.
4.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
4.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4.6 It will provide Transfer Agent with all information necessary to complete
its annual filing requirements in a timely fashion.
5. Representations and Warranties of the Transfer Agent
The Transfer Agent represents and warrants to ALPS that:
5.1 It is a corporation duly organized and existing and in good standing under
the laws of Colorado.
5.2 It is empowered under applicable laws and by its Articles of Incorporation
and By-Laws to enter into and perform this Agreement.
5.3 The Board of Directors has duly authorized it to enter into and perform
this Agreement.
6. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial Code
6.1 ALPS is authorized to promptly debit the appropriate account(s) upon the
receipt of a payment order in compliance with the agreed upon security
procedures (the "Security Procedures") chosen for funds transfer and in the
amount of money that ALPS has been instructed to transfer. ALPS shall
execute payment orders in compliance with the Security Procedures and with
the Transfer Agent instructions on the execution date provided that such
payment order is received by the customary deadline for processing such a
request, unless the payment order specifies a later time. All payment
orders and communications received after this the customary deadline will
be deemed to have been received the next business day.
6.2 The Transfer Agent shall restrict access to confidential information
relating to the Security Procedures to authorized persons as communicated
to ALPS in writing. The Transfer Agent must notify ALPS immediately if it
has reason to believe unauthorized persons may have obtained access to such
information or of any change in the Transfer Agent's authorized personnel.
ALPS shall verify the authenticity of all Transfer Agent instructions
according to the Security Procedure.
6.3 ALPS shall process all payment orders on the basis of the account number
contained in the payment order. In the event of a discrepancy between any
name indicated on the payment order and the account number, the account
number shall take precedence and govern.
6.4 ALPS reserves the right to decline to process or delay the processing of a
payment order which (a) is in excess of the collected balance in the
account to be charged at the time of ALPS's receipt of such payment order;
or (b) if ALPS, in good faith, is unable to satisfy itself that the
transaction has been properly authorized.
6.5 ALPS shall use reasonable efforts to act on all authorized requests to
cancel or amend payment orders received in compliance with the Security
Procedures provided that such requests are received in a timely manner
affording ALPS reasonable opportunity to act. However, ALPS assumes no
liability if the request for amendment or cancellation cannot be satisfied.
6.6 ALPS shall assume no responsibility for failure to detect any erroneous
payment order provided that ALPS complies with the payment order
instructions as received and ALPS complies with the Security Procedures.
The Security Procedures are established for the purpose of authenticating
payment orders only and not for the detection of errors in payment orders.
6.7 When the Transfer Agent initiates or receives Automated Clearing House
credit and debit entries pursuant to these guidelines and the rules of the
National Automated Clearing House Association and the New England Clearing
House Association, ALPS or its bank will act as an Originating Depository
Financial Institution and/or receiving depository Financial Institution, as
the case may be, with respect to such entries. Credits given by ALPS with
respect to an ACH credit entry are provisional until ALPS receives final
settlement for such entry from the Federal Reserve Bank. If ALPS does not
receive such final settlement, the Transfer Agent agrees that ALPS shall
receive a refund of the amount credited to the Transfer Agent in connection
with such entry, and the party making payment to the Transfer Agent via
such entry shall not be deemed to have paid the amount of the entry.
6.8 Confirmation of ALPS's execution of payment orders shall ordinarily be
provided within twenty four (24) hours notice of which may be delivered
through ALPS's proprietary information systems, or by facsimile or
call-back. Call-back confirmations will be followed with a written
confirmation. Transfer Agent must report any objections to the execution of
an order within thirty (30) days.
7. Indemnification
7.1 ALPS shall not be responsible for, and the Transfer Agent shall indemnify
and hold ALPS, harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out
of or attributable to:
(a) All actions of ALPS or its agent or subcontractors required to be taken
pursuant to this Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct;
(b) The Transfer Agent's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the
Transfer Agent hereunder;
(c) The reliance upon, and any subsequent use of or action taken or omitted, by
ALPS, or its agents or subcontractors on: (i) any information, records,
documents, data, stock certificates or services, which are received by ALPS
or its agents or subcontractors by machine readable input, facsimile, CRT
data entry, electronic instructions or other similar means authorized by
the Transfer Agent, and which have been prepared, maintained or performed
by the Transfer Agent or the Trust or any other person or firm on behalf of
the Transfer Agent or the Trust including but not limited to any previous
transfer agent or registrar; (ii) any written instructions or requests of
the Transfer Agent or the Trust or any of its officers; (iii) any written
instructions or opinions of Transfer Agent's legal counsel with respect to
any matter arising in connection with the services to be performed by ALPS
under this Agreement which are provided to ALPS after consultation with
such legal counsel; or (iv) any paper or document reasonably believed to be
genuine, authentic, or signed by the proper person or persons;
(d) The offer or sale of Shares in violation of federal or state securities
laws or regulations requiring that such Shares be registered or in
violation of any stop order or other determination or ruling by any federal
or any state agency with respect to the offer or sale of such Shares;
(e) Upon the Trust's request entering into any agreements required by the
National Securities Clearing Corporation (the "NSCC") required by the NSCC
for the transmission of Trust or Shareholder data through the NSCC clearing
systems.
7.2 Transfer Agent shall not be responsible for, and ALPS shall indemnify and
hold Transfer Agent harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out
of or attributable to:
(a) All actions of Transfer Agent or its agent or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct;
(b) ALPS' lack of good faith, negligence or willful misconduct which arise out
of the breach of any representation or warranty of the Transfer Agent
hereunder;
(c) The reliance upon, and any subsequent use of or action taken or omitted, by
Transfer Agent, or its agents or subcontractors on: (i) any information,
records, documents, data, stock certificates or services, which are
received by the Transfer Agent or its agents or subcontractors by machine
readable input, facsimile, CRT data entry, electronic instructions or other
similar means authorized by ALPS, and which have been prepared, maintained
or performed by ALPS or any other person or firm on behalf of ALPS; (i) any
written instructions or requests of the ALPS or any of its officers; (ii)
any written instructions or opinions of ALPS legal counsel with respect to
any matter arising in connection with the services to be performed by
Transfer Agent under this Agreement which are provided to Transfer Agent
after consultation with such legal counsel; or (iv) any paper or document
reasonably believed to be genuine, authentic, or signed by the proper
person or persons;
(d) The offer or sale of Shares in violation of federal or state securities
laws or regulations requiring that such Shares be registered or in
violation of any stop order or other determination or ruling by any federal
or any state agency with respect to the offer or sale of such Shares;
7.3 In order that the indemnification provisions contained in this Section 7
shall apply, upon the assertion of a claim for which one party may be
required to indemnify the other party, the party seeking indemnification
shall promptly notify the party providing indemnification of such
assertion, and shall keep the that party advised with respect to all
developments concerning such claim. The party providing indemnification
shall have the option to participate with the other party in the defense of
such claim with its own counsel or to defend against said claim in its own
name or in the name of party seeking indemnification at its own expense.
Neither party shall confess any claim or make any compromise in any case in
which the other party may be required to provide indemnification except
with the other party's prior written consent.
8. Standard of Care
ALPS shall at all times act in good faith and agrees to use its best efforts to
ensure the accuracy of all services performed under this agreement. At all
times, ALPS shall be held to a reasonableness standard of actions by other
similar transfer agents in the mutual fund industry and shall be liable for
any errors caused by the negligence, willful misconduct or bad faith of its
employees.
9. Confidentiality
9.1 ALPS and the Transfer Agent agree that they will not, at any time during
the term of this Agreement or after its termination, reveal, divulge, or
make known to any person, firm, corporations or other business
organization, any customers' lists, trade secrets, cost figures and
projections, profit figures and projections, or any other secret or
confidential information whatsoever, whether of ALPS or of the Transfer
Agent, used or gained by ALPS or the Transfer Agent during performance
under this Agreement. ALPS and the Transfer Agent further covenant and
agree to retain all such knowledge and information acquired during and
after the term of this Agreement respecting such lists, trade secrets, or
any secret or confidential information whatsoever in trust for the sole
benefit of ALPS or the Transfer Agent and their successors and assigns. The
above prohibition of disclosure shall not apply to the extent that ALPS
must disclose such data to a Trust agent for purposes of providing services
under this Agreement.
9.2 In the event that any requests or demands are made for the inspection of
the Shareholder records of the Fund, other than request for records of
Shareholders pursuant to subpoenas from state or federal government
authorities, ALPS will notify the Transfer Agent and secure instructions
from an authorized officer of the Transfer Agent as to such inspection.
ALPS expressly reserves the right, however, to exhibit the Shareholder
records as required by law or court order, upon notification of Transfer
Agent, provided that Transfer Agent has an opportunity to seek proper
action to maintain the records' confidentiality.
10. Covenants of the Transfer Agent and ALPS
10.1 ALPS hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Transfer Agent for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
10.2 ALPS shall keep records relating to the services to be performed hereunder,
in the form and manner as it may deem advisable. To the extent required by
Section 31 of the Investment Company Act of 1940, as amended, and the Rules
thereunder, ALPS agrees that all such records prepared or maintained by
ALPS relating to the services to be performed by ALPS hereunder are the
property of the Trust and will be preserved, maintained and made available
in accordance with such Section and Rules, and will be surrendered promptly
to the Trust on and in accordance with its request.
11. Termination of Agreement
11.1 This Agreement may be terminated by either party upon one-hundred twenty
(120) days written notice to the other.
11.2 Should the Transfer Agent exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material
will be borne by the Transfer Agent. Additionally, ALPS reserves the right
to charge for any other reasonable expenses associated with such
termination. Payment of such expenses or costs shall be in accordance with
Section 3.4 of this Agreement.
11.3 Upon termination of this Agreement, each party shall return to the other
party all copies of confidential or proprietary materials or information
received from such other party hereunder, other than materials or
information required to be retained by such party under applicable laws or
regulations.
12. Assignment and Third Party Beneficiaries
12.1 Except as provided in Section 13.1 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party. Any attempt to do so in violation of
this Section shall be void. Unless specifically stated to the contrary in
any written consent to an assignment, no assignment will release or
discharge the assignor from any duty or responsibility under this
Agreement.
12.2 Except as explicitly stated elsewhere in this Agreement, nothing under this
Agreement shall be construed to give any rights or benefits in this
Agreement to anyone other than ALPS and the Transfer Agent, and the duties
and responsibilities undertaken pursuant to this Agreement shall be for the
sole and exclusive benefit of ALPS and the Transfer Agent. This Agreement
shall inure to the benefit of and be binding upon the parties and their
respective permitted successors and assigns.
12.3 This Agreement does not constitute an agreement for a partnership or joint
venture between ALPS and the Transfer Agent. Neither party shall make any
commitments with third parties that are binding on the other party without
the other party's prior written consent.
13. Subcontractors
13.1 Nothing herein shall impose any duty upon ALPS in connection with or make
ALPS liable for the actions or omissions to act of unaffiliated third
parties such as by way of example and not limitation, Airborne Services,
Federal Express, United Parcel Service, the U.S. mail, the NSCC and
telecommunication companies, provided, if the Transfer Agent selected such
company, ALPS shall have exercised due care in selecting the same.
14. Miscellaneous
14.1 Amendment. This Agreement may be amended or modified by a written agreement
executed by both parties.
14.2 Colorado Law to Apply. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of
Colorado.
14.3 Force Majeure. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall
not be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes. However, equipment or
transmission problems associated with computer year 2000 problems do not
constitute a valid force majeure.
14.4 Survival. All provisions regarding indemnification, warranty, liability,
and limits thereon, and confidentiality and/or protections of proprietary
rights and trade secrets shall survive the termination of this Agreement.
14.5 Severability. If any provision or provisions of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired.
14.6 Priorities Clause. In the event of any conflict, discrepancy or ambiguity
between the terms and conditions contained in this Agreement and any
Schedules hereto, the terms of the Agreement shall take precedence.
However, any written amendment to the Agreement shall incorporate the
Agreement and shall take precedence over any existing term in the
Agreement, to the extent applicable.
14.7 Audit of Records. ALPS will permit FASCorp or its authorized agents to
visit, inspect, duplicate, examine, audit and verify (collectively "audit")
the Records belonging to or in the possession or control of ALPS. Such
audit will be completed at ALPS's office or elsewhere during regular
business hours, and with at least seventy-two (72) hours prior notice to
ALPS. The Records to which FASCorp will have access are those which are
required by law to be maintained pursuant to the provision of the Services
which ALPS provides to the shareholders. FASCorp may make copies and make
extracts from such records, provided that such audit shall not unreasonably
interfere with ALPS's normal course of business.
14.8 Waiver. No waiver by either party or any breach or default of any of the
covenants or conditions herein contained and performed by the other party
shall be construed as a waiver of any succeeding breach of the same or of
any other covenant or condition.
14.9 Merger of Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect
to the subject matter hereof whether oral or written.
14.10Counterparts. This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
14.11Reproduction of Documents. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process. The parties hereto each agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the regular course
of business, and that any enlargement, facsimile or further reproduction
shall likewise be admissible in evidence.
14.12Notices. All notices and other communications as required or permitted
hereunder shall be in writing and sent by first class mail, postage
prepaid, addressed as follows or to such other address or addresses of
which the respective party shall have notified the other.
(a) If to Financial Administrative Services Corporation, to:
<TABLE>
<S> <C>
8515 E. Orchard Road
Englewood, CO 80111
Attention: David McLeod
Vice President, Investments
cc: Beverly Byrne, Secretary
Facsimile: _____________________
(b) If to the ALPS, to:
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, CO 80202-5631
Attention: General Counsel
Facsimile: (303) 623-7850
</TABLE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
ALPS MUTUAL FUNDS SERVICES, INC.
BY: ________________________________
Executive Vice President
ATTEST: ___________________________
FINANCIAL ADMINISTRATIVE SERVICES CORP.
BY: ________________________________
TITLE:______________________________
ATTEST: ____________________________
ALPS MUTUAL FUNDS SERVICES, INC.
TRANSFER AGENT SERVICE RESPONSIBILITIES*
Service Performed Responsibility ALPS Transfer Agent
1. Receives orders for the purchase X
of Shares.
2. Issue Shares and hold Shares in X
Shareholders accounts.
3. Receive redemption requests. X
4. Effect transactions 1-3 above X
directly with broker-dealers.
5. Pay monies to redeeming X
Shareholders.
6. Effect transfers of Shares. X
7. Prepare and transmit dividends X
and distributions.
8. Reporting of abandoned property. X
9. Maintain records of account. X
10.Maintain and keep a current and X
accurate control book for each
issue of securities.
11. Mail proxies.
X
12. Mail Shareholder reports. X
13. Mail prospectuses to current X
Shareholders.
14. Withhold taxes on U.S. resident X
and non-resident alien accounts.
Service Performed Responsibility ALPS Transfer Agent
15. Prepare and file U.S. Treasury X
Department forms.
16. Prepare and mail account and X
confirmation statements for
Shareholders.
17. Provide Shareholder account X
information.
18. Blue sky reporting.
X
*Such services are more fully described in Section 1.1 (a), (b) and (c) of the
Agreement.
ALPS MUTUAL FUNDS SERVICES, INC.
BY: ____________________________
Executive Vice President
ATTEST: _______________________
FINANCIAL ADMINISTRATIVE SERVICES CORPORATION
BY: _____________________________
TITLE:___________________________
ATTEST: _________________________
SCHEDULE A
Orchard Value Fund, Class B
FEE SCHEDULE
ONE TIME CONVERSION FEE $0
GREATER OF:
MINIMUM BASE ANNUAL FEE OR $24,000
MAINTENANCE FEE PER ACCOUNT $13
OUT OF POCKET EXPENSES
NEW ACCOUNT SET UP $4.00 per account
MANUAL FIN. TRANSACTIONS $5.00 each
MANUAL MAINT. TRANSACTIONS $2.00 each
TELEPHONE CALLS $2.00 each
CORRESPONDENCE SENT $4.00 each
CLOSED ACCOUNT FEE $3.00 per account
Dated:_____________ , 1999
ALPS MUTUAL FUNDS SERVICES, INC.
BY: _______________________________
Executive Vice President
ATTEST: ___________________________
FINANCIAL ADMINISTRATIVE SERVICES CORPORATION
BY: _________________________________
ATTEST: ____________________________
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 8 to Registration Statement No. 333-9217 on Form N-1A of Orchard Series Fund
of our report dated December 3, 1999, appearing in the October 31, 1999 Annual
Report of Orchard Series Fund and to the references to us under the headings
"Financial Highlights" appearing in the Prospectuses and "Independent Auditors"
and "Financial Statements" appearing in the Statement of Additional Information,
which are also a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 15, 2000
Exhibit 23(p)
Code of Ethics for Orchard Series Fund, One Orchard Equities, Inc. and GW
Capital Management, LLC
Orchard Series Fund,
GW Capital Management, LLC and One Orchard Equities, LLC
CODE OF ETHICS
(Rule 17j-1), Investment Company Act of 1940)
I. Applicability
A. Purpose
This Code of Ethics ("Code") establishes rules of conduct for Covered Persons
(as hereinafter defined) of GW Capital Management, LLC ("Capital Management"),
in its capacity as an investment adviser to the Orchard Series Fund ("Orchard"),
for Cover Persons of One Orchard Equities, Inc. ("One Orchard Equities") in its
capacity as principal underwriter for Orchard, and for Covered Persons of
Orchard itself (Capital Management, Orchard and One Orchard Equities being
hereinafter collectively referred to as "Covered Companies").
In promulgating this Code, the Covered Companies have considered how the Code's
restrictions and procedures may be applied in light of the Covered Companies'
ethical obligations, the overall nature of the Covered Companies' operations,
and the issues potentially raised by transactions in different kinds of
securities and by the personal investment activities of different categories of
personnel, including, without limitation, portfolio managers, other investment
personnel such as analysts and traders who assist with portfolio management, and
Covered Persons in general.
B. Statement of General Principles
1. Each Covered Person is required, at all times, to place the interests of
Orchard's shareholders above his or her own interests.
2. All personal securities transactions by a Covered Person must be conducted
consistent with this Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of such person's position of
trust and responsibility.
3. No Covered Person shall take inappropriate advantage of his or her
position.
4. Covered Persons are specifically reminded that it is unlawful for any of
them, in connection with the purchase or sale, directly or indirectly, of a
security held or to be acquired by the Covered Companies:
a. To employ any device, scheme or artifice to defraud the Covered Companies:
b. To make any untrue statement of a material fact to the Covered Companies or
omit to state to the Covered Companies a material fact necessary to make
the statements made, in light of the circumstances under which they are
made, not misleading;
c. To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Covered Companies: or
d. To engage in any manipulative practice with respect to the Covered
Companies.
C. Definitions
1. For purposes of this Code:
a. "Covered Persons" shall mean any director, officer or Advisory Person of
Orchard, Capital Management of One Orchard Equities.
b. "Advisory Person" shall mean any employee of Capital Management, Orchard,
or One Orchard Equities (or of any company in a control relationship with
Capital Management, Orchard or One Orchard Equities), who in connection
with his or her regular functions or duties, makes, participates in or
obtains information regarding the purchase or sale of securities for
Orchard or whose functions relate to the making of any recommendation to
Orchard regarding the purchase or sale of securities; and
Any natural person or any company in a control relationship to Orchard, Capital
Management or One Orchard Equities who obtains information concerning
recommendations made to Orchard with regard to the purchase or sale or a
security.
For purposes of this Article I, a person who normally assists in the
preparation of public reports or who receives public reports but who
receives no information about current recommendations or trading shall not
be deemed to be either an Advisory Person or a Covered Person unless he or
she is a director or officer of Orchard.
2. "Security" shall have the meaning set forth in Section 2(a)(36) of the
Investment Company Act, except that it shall not include shares of
registered open-end investment companies, securities issued by the
Government of the United States, short-term debt securities which are
"government securities" within the meaning of Section 2(a)(16) of the
Investment Company Act, bankers' deposit, and commercial paper.
3. A security is "being considered for purchase or sale" when a recommendation
to purchase or sell a security has been made and communicated and, with
respect to the person making the recommendation, when such person seriously
considers making such recommendation.
4. A security is "being purchased or sold" from the time when a purchase or
sale decision has been communicated to the person who places the by and
sell orders until the time when such transaction has been fully completed
or terminated.
5. "Beneficial Ownership" is defined in Attachment A hereto.
6. "Control" shall have the same meaning as that set forth in Section 2 (a)(9)
of the Investment Company Act.
7. "Purchase or sale of a security" includes inter alia, the writing of an
option to purchase or sell security.
8. "Designated Supervisory Person" shall mean a supervisory person designated
by the Covered Companies who has the authority and responsibility to grant
or deny pre-clearance approval of transactions in securities by Covered
Persons, and to otherwise monitor the activities of Covered Persons as
indicated herein.
II. Pre-Clearance
EveryCovered Person shall adhere to the following described pre-clearance and
reporting procedures with respect to each transaction by which he or she
acquires any direct or indirect Beneficial Ownership of a security:
A. Each Covered Person must obtain pre-clearance from the Designated
Supervisory Person for all personal securities investments. Such
pre-clearance shall identify any prohibition or limitation applicable to
the proposed personal securities investments.
In seeking pre-clearance, a Covered Person will be required to complete and
sign a pre-clearance form containing certain questions designed to ensure
that there is not actual or potential conflict of interest between a
Covered Person's proposed trade and transactions effected or to be effected
on behalf of Orchard (or which may be contemplated). Among other things,
the pre-clearance form will require a Covered Person to represent whether
he or she is aware of any transactions in the same or equivalent securities
being effected or contemplated on behalf of Orchard. Advisory Persons must
also represent (among other things) whether any transaction in the same or
equivalent securities has been effected on behalf of Orchard within the
preceding fifteen days.
B. Covered Persons may seek pre-clearance only where they have a present
intention to transact in the security for which pre-clearance is sought. It
is the Covered Companies' view that it is not appropriate for a Covered
Person to obtain a general or open-ended pre-clearance to cover the
eventuality that he or she may buy or sell a security at some point on a
particular day depending upon market developments. This requirement would
not proscribe a price limit order, provided the Covered Person shall have a
present intention to effect a transaction at such price. Consistent with
the foregoing, a Covered Person may not simultaneously request
pre-clearance to buy and sell the same security.
C. Pre-clearance of a trade shall be valid and in effect only for the business
day on which pre-clearance is obtained; provided, however, that a
pre-clearance expires upon a Covered Person becoming aware of facts or
circumstances that could prevent a proposed trade from being pre-cleared
were such facts or circumstances made known to the Designated Supervisory
Person. Accordingly, if a Covered Person becomes aware of new or changed
facts or circumstances which give rise to a question as to whether
pre-clearance could be obtained if the Designated Supervisory Person was
made aware of such facts or circumstances, the Covered Person shall be
required to advise the Designated Supervisory Person before proceeding with
such transaction.
D. On each business day, compliance personnel shall furnish all pre-clearance
forms to the Covered Persons who completed each such form on the prior
business day along with a memorandum stating that the attached
pre-clearance forms were prepared on the basis of representations made by
the employee. The Covered Person shall be required to review such form,
inform the Designated Supervisory Person as to whether each pre-cleared
securities transaction (or any part of it) was actually effected and
whether any of the information thereon is inaccurate or otherwise
inconsistent with what the employee believes he or she represented to the
Designated Supervisory Person. The Covered Person shall promptly return the
pre-clearance form to the Designated Supervisory Person. The Designated
Supervisory Person shall maintain appropriate files of all pre-clearance
forms and each pre-clearance form shall be accompanied by a record
reflecting the representations made by Covered Persons as to whether each
pre-cleared personal trade (or any part of it) was actually effected.
E. The restrictions and procedures applicable to transactions in securities by
Covered Persons shall similarly apply to securities whose value or return
is related, in whole or in part, to the value or return of a security
purchased or sold during the relevant period by Orchard or to the value or
return of a security which at the time is presently being held by Orchard.
For example, options or warrants to purchase common stock, and convertible
debt and convertible preferred stock would be considered related to the
underlying common stock for purposes of this policy. In sum, the related
security would be treated as if it were the underlying security for
purposes of pre-clearance. Accordingly, Covered Persons should be aware of
the fact that if an option transaction cannot be pre-cleared for a
particular period of time (in accordance with the pre-clearance
procedures), it is possible that a Covered Person could be required to hold
an option until the expiration date at which point the Covered Person may
automatically receive whatever option value (if any) remains.
III. Prohibitions and Substantive Restrictions on Personal Investment Activities
A. No Covered Person shall recommend to Orchard any securities transaction
without having disclosed his or her Beneficial Ownership interest, if any,
in such securities or any other security of the issuer thereof, including
without limitation:
1. his or her direct or indirect Beneficial Ownership of any securities of
such issuer;
2. any contemplated transaction by such person in securities of such issuer;
3. any position with such issuer or its affiliates; and
4. any present or proposed business relationship between such issuer or its
affiliates and such person or any party in which such person has a
significant interest.
B. No Covered Person shall acquire a Beneficial Ownership in any securities in
an initial public offering.
C. No Covered Person shall acquire a Beneficial Ownership in any securities
through a private placement without express prior approval from the
Designated Supervisory Person. This prior approval shall take into account
among other factors, whether the investment opportunity should be reserved
for Orchard and its Shareholders, and whether the opportunity is being
offered to a Covered Person by virtue of his or her position with a Covered
Company.
Covered Persons who have been authorized to acquire a Beneficial Ownership in
securities in private placements must disclose such investment when they
are made aware of the Covered Companies subsequent consideration of
investments in the issuer of such private placements.
When such transactions have been approved and the required disclosure is made,
the decision of whether to purchase securities of the issuer in such
private placements shall be based on an independent review by investment
personnel with no personal interest in said issuer, Covered Persons having
interests in the subject issuer may not participate in any discussions or
deliberations relative to the subject securities.
D. No Covered Person shall execute a securities transaction if such Person is
aware that a transaction in that same security is being contemplated on
behalf of Orchard.
Covered Persons shall not execute a securities transaction on a day during which
Orchard has a pending "buy" or "sell" order in that same security until
that order is executed or withdrawn by Orchard investment personnel having
no personal interest in the subject securities and who are acting solely in
the best interest of Orchard. If this prohibition is violated, any profits
realized by such Covered Person must be disgorged and other appropriate
sanctions will be imposed.
E. No Covered Person who is also an Advisory Person shall buy or sell a
security within seven (7) calendar days before or after Orchard trades in a
security of the same issuer. If this prohibition is violated, any profits
realized by such Covered Person must be disgorged and other appropriate
sanctions will be imposed.
F. No Covered Person shall profit in the purchase and sale, or sale and
purchase, of the same (or equivalent) securities within sixty (60) calendar
days of a trade by Orchard in the same security. If this prohibition is
violated, any profits realized by such Covered Person must be disgorged.
G. No Covered Person, who is an Advisory Person, may purchase a put option or
write a call option where Orchard holds a long position in the underlying
security.
H. No Covered Person, who is an Advisory Person, may establish a long
position, in a security, for his or her personal account, if Orchard: holds
a put option on such security (aside from a put purchased for hedging
purposes where Orchard holds the underlying security), has written a call
option on such security, or otherwise maintains a position that would
benefit from a decrease in the value of the underlying security.
I. No Covered Person who is an Advisory Person may short sell any security
where Orchard holds a long position in the same security or where Orchard
otherwise maintains a position in respect of which it would benefit from an
increase in the value of the security.
Notwithstanding the foregoing, exceptions to this Section III. A. through I. may
be made on a case-by-case basis as determined by the Designated Supervisory
Person where there is no evidence of abuse and the equities of the
situation strongly support an exemption. As a general matter, exceptions
would only be granted upon a showing of "hardship" and would not be granted
for Covered Persons who are also Advisory Persons.
J. No Covered Person shall receive, accept or give any gift or any other thing
of more than de minimus value from or to any person or entity that does or
proposes to do business with or on behalf of the Covered Companies,
including issuers whose securities may reasonably be purchased by Orchard.
K. No Covered Person may engage in any outside business activities which may
give rise to conflict of interest or jeopardize the integrity or reputation
of the Covered Companies.
No Covered Person shall serve on the boards of, or hold any other official
position with, any private companies or any publicly traded companies
without express prior authorization by the Designated Supervisory Person
based upon a determination that such board service would be consistent with
the interests of Orchard and its shareholders.
If such authorization is obtained, any Covered Person serving on the board of,
or holding an official position with, a private company or a publicly
traded company shall be isolated, by means of a "Chinese Wall" or other
similar procedure, from those investment personnel making investment
decisions.
IV. Exempt Transactions
The prohibitions described in Article III shall not apply to:
A. Purchases or sales effected in any account over which the Covered Person
has no direct or indirect influence or control;
B. Purchases or sales that are non-volitional on the part of the Covered
Person;
C. Purchases that are part of an automatic dividend reinvestment plan;
D. Purchases effected upon the exercise of rights issued by an issuer pro rata
to all holders of a class of its securities, to the extent such rights were
acquired from the issuer, and sales of such rights so acquired; or
E. Any securities transaction, or series of related transactions, involving
five hundred (500) shares or less in the aggregate, if the issuer has a
market capitalization (outstanding shares multiplied by the current price
per share) greater than $1 billion.
F. Purchases and sales of securities which are not eligible for purchase or
sale by Orchard.
V. Reporting Procedures
EveryCovered Person shall adhere to the following reporting procedures with
respect to each transaction by which he or she acquired any direct or
indirect Beneficial Ownership of a security:
A. Each Covered Person shall direct his or her broker to supply, to the
Designated Supervisory Person, on a timely basis, duplicate copies of
confirmations of all his or her personal securities transactions and copies
of periodic statements for all his or her personal securities accounts.
With respect to any non-brokered transaction, the Covered Person shall
provide an information statement containing the same type of information
that would be required in a broker's confirmation. In any event, the
information will be supplied to the Designated Supervisory Person no later
than 10 days after the end of the calendar quarter in which a transaction
was effected.
B. Any person who is a Covered Person with respect to Orchard solely by virtue
of being a director of Orchard, but who is not an "interested person" (as
defined in the Investment Company Act of 1940) with respect to Orchard,
shall be subject to the restrictions set forth herein only if such person,
at the time of that transaction, knew, or in the ordinary course of
fulfilling his official duties as a director of Orchard should have known,
that during the 15-day period immediately preceding or after the date of
the transactions by such person, the security such person purchased or sold
is or was purchased or sold by Orchard or was being considered for purchase
or sale by Orchard.
C. Each Covered Person shall permit the Covered Companies to monitor his or
her personal investment activity (including requiring Covered Persons to
effect all personal trades through a particular broker) after prior
approval has been granted and the Covered Companies shall implement
appropriate procedures to monitor such personal investment activity.
D. Each Covered Person shall disclose all his or her personal securities
holdings upon commencement of employment with a Covered Company and
thereafter on an annual basis.
E. The management of the Covered Companies shall each prepare an annual report
to the Orchard Board of Directors that, at a minimum:
1. summarizes existing procedures concerning personal investing and any
changes in the procedures made during the past year;
2. identifies any violations requiring significant remedial action during the
last year; and
3. identifies any recommended changes in existing restrictions or procedures
based upon their respective experiences under this Code, evolving industry
practices, or developments in applicable laws or regulations.
VI. Annual Certification by Covered Persons
A. Each Covered Person shall annually certify that he or she has read and
understands this Code and recognizes that he or she is subject thereto.
B. Each Covered Person shall annually certify that he or she has read and
understands and will adhere to, the Covered Companies Statement of Policy
on Insider Trading, which should be read in conjunction to this Code. Each
Covered Person also recognizes that he or she is subject to said policy.
C. Each Covered Person shall annually certify that he or she has complied with
the requirements of this Code and that he or she has disclosed or reported
all personal securities transactions required to be disclosed or reported
pursuant to the requirements of this Code.
VII. Sanctions
Upon discovering that a Covered Person has not complied with the requirements of
this Code, the Board of Directors of a Covered Company, whichever is most
appropriate under the circumstances, may impose on that person whatever
sanctions the Board deems appropriate, including, among other things,
censure, suspension or termination of employment.
VIII. Dissemination, Record Retention and Confidentiality
A. The Covered Companies will provide a copy of this Code of Ethics to all
Covered Persons.
B. The Covered Companies shall maintain, for a period of six years in an
easily accessible place, the following records:
1. A copy of this Code and any subsequent Codes which have been or are
currently in effect during the covered time frame;
2. A record of any violations of the Code and any actions taken as a result of
such violations;
3. A copy of each report made by a Covered Person pursuant to the Code; and
4. A list of all persons who are, or within the past six years have been
required to make reports pursuant to the Code.
C. All information obtained from any Covered Person hereunder shall be kept in
strict confidence, except that reports of securities transactions hereunder
shall be made available to the Securities and Exchange Commission or any
other regulatory of self-regulatory organization to the extent required by
law or regulation.
IX. Other Laws, Rules, and Statements of Policy
Nothing contained in this Code shall be interpreted as relieving any Covered
Person from acting in accordance with the provision of any applicable law,
rule, or regulation or any other statement of policy or procedure governing
the conduct of such person adopted by a Covered Company, their affiliates
or subsidiaries.
X. Further Information
If any person has any question with regard to the applicability of the
provisions of this Code generally or with regard to any securities or
transactions, he or she should consult the Designated Supervisory Person.
Attachment A
For purposes of the attached Code of Ethics, the term "Beneficial Ownership"
shall be interpreted in the same manner as it would be in determining
whether a person is subject to the provisions of Section 16 of the
Securities Exchange Act of 1934 and the rules and regulations thereunder,
except that the determination of direct or indirect beneficial ownership
shall apply to all securities that a Covered Person has or acquires.
Beneficial Ownership of securities would include not only ownership of
securities held by a Covered Person for his own benefit, whether in bearer
form or registered in his name or otherwise, but also ownership of
securities held for his benefit by others (regardless of whether or how
they are registered) such as custodians, brokers, executors,
administrators, or trustees (including trusts in which he has only a
remainder interest), and securities held for his account by pledges,
securities owned by a partnership in which he is a member if he may
exercise a controlling influence over the purchase, sale or voting of such
securities, and securities owned by any corporation that he should regard
as a personal holding corporation. Correspondingly, this term would exclude
securities held by a Covered Person for the benefit of someone else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which a Covered Person is a legatee or
beneficiary unless there is a specific legacy to such person of such
securities or such person is the sole legatee or beneficiary and there are
other assets in the estate sufficient to pay debts ranking ahead of such
legacy, or the securities are held in the estate more than a year after the
decedent's death.
Securities held in the name of another should be considered as "beneficially"
owned by a Covered Person where such person enjoys "benefits substantially
equivalent to ownership". The Securities and Exchange Commission has said
that although the final determination of beneficial ownership is a question
to be determined in the light of the facts of the particular case,
generally a person is regarded as the beneficial owner of securities held
in the name of his or her spouse and their minor children. Absent special
circumstances such relationship ordinarily results in such person obtaining
benefits substantially equivalent to ownership, e.g., application of the
income derived from such securities to maintain a common home, to meet
expenses that such person otherwise would meet from other sources, or the
ability to exercise a controlling influence over the purchase, sale or
voting of such securities.
A Covered Person also may be regarded as the beneficial owner of securities
held in the name of another person, if by reason of any contract,
understanding, relationship, agreement, or other arrangement, he obtains
therefrom benefits substantially equivalent to those of ownership.
Moreover, the fact that the holder is a relative or relative of a spouse
and sharing the same home as a Covered Person may in itself indicate that
the Covered Person would obtain benefits substantially equivalent to those
of ownership from securities held in the name of such relative. Thus,
absent countervailing facts, it is expected that securities held by
relatives who share the same home as a Covered Person will be treated as
being beneficially owned by the Covered Person.
A Covered Person also is regarded as the beneficial owner of securities held
in the name of a spouse, minor children or other person, even though he
does not obtain therefrom the aforementioned benefits of ownership, if he
can vest or revest title in himself at once or at some future time.
Certification
I acknowledge that I have received, read and understood this Code of Ethics.
I hereby agree to comply with these rules and procedures in all respects. I
acknowledge that I am also subject to the Covered Companies policy on
Insider Trading and that I have/will read that policy in conjunction with
this Code. I further certify, that since the last time I received a copy of
the Code of Ethics, that I have not effected any personal securities
transactions which are prohibited by this Code and that any/all personal
securities transactions were effected and/or reported in compliance with
the rules stated herein.
________________________________
Signature
________________________________
Name (Printed)
________________________________
Date
