As filed with the Securities and Exchange Commission on November 29, 2000
File Nos. 333-25803
811-08189
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 6
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7
FLEMING MUTUAL FUND GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
320 Park Avenue
New York, New York 10022
(Address of Principal Executive Office)
(212) 508-3900
(Registrant's Telephone Number, Including Area Code)
Steven J. Paggioli
Investment Company Administration, LLC
915 Broadway, Suite 1605
New York, New York 10011
(Name and Address of Agent for Service)
Please Send Copy of Communications to:
Leslie Sperling Cruz, Esq.
Morgan, Lewis & Bockius LLP
1800 M Street, NW
Washington, DC 20036
(202) 467-7515
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On __(date)__, pursuant to paragraph (b) of Rule 485
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] On __(date)__, pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On __(date)__, 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 file post-effective amendment.
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As filed with the Securities and Exchange Commission on November 29, 2000
Registration No: 333-25803
File No: 811-08189
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PART A
COMBINED PROSPECTUS
Fleming Mutual Fund Group, Inc.
Fleming Mid Cap Value Fund
Fleming Small Cap Growth Fund
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FLEMING MUTUAL FUND GROUP, INC.
FLEMING MID CAP VALUE FUND
FLEMING SMALL CAP GROWTH FUND
PROSPECTUS
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THESE SHARES OR DETERMINED WHETHER THE INFORMATION IN
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS A CRIMINAL OFFENSE FOR ANYONE TO
INFORM YOU OTHERWISE.
The date of this Prospectus is January 28, 2001
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TABLE OF CONTENTS
AN OVERVIEW OF THE FUNDS.......................................................3
PERFORMANCE....................................................................4
FEES AND EXPENSES..............................................................6
PRINCIPAL RISKS OF INVESTING IN THE FUNDS......................................8
THE ADVISER....................................................................9
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES...................................10
DIVIDENDS AND DISTRIBUTIONS...................................................15
TAXES.........................................................................15
FINANCIAL HIGHLIGHTS..........................................................16
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AN OVERVIEW OF THE FUNDS
WHAT IS EACH FUND'S INVESTMENT OBJECTIVE?
Each Fund seeks growth from capital appreciation.
WHAT ARE EACH FUND'S PRINCIPAL INVESTMENT STRATEGIES?
Robert Fleming Inc. (the "Adviser") is a 'bottom-up' manager and stock selection
across the Funds is based on company fundamentals and combines quantitative
screening with proprietary fundamental analysis to construct portfolios.
FLEMING MID CAP VALUE FUND ("MID CAP VALUE FUND" AND FORMERLY THE FLEMING FUND).
The Fund primarily invests in common stocks and preferred stocks with market
capitalizations from $1 billion to $20 billion, at the time of initial purchase,
that the Adviser believes to be undervalued.
FLEMING SMALL CAP GROWTH FUND ("SMALL CAP GROWTH FUND" AND FORMERLY THE FLEMING
FLEDGLING FUND). The Fund primarily invests in common stock and preferred stocks
with market capitalizations of less than $1.5 billion, at the time of initial
purchase. Under normal market conditions, the Fund will only purchase stocks
that are quoted on a stock exchange or traded on an over-the-counter market
("OTC") that the Adviser believes offer strong profit growth potential.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING THE FUNDS?
There is the risk that you could lose money on your investment in the Funds. The
following risks could affect the value of your investment:
* The stock market declines
* Growth or value stocks fall out of favor with investors
* Stocks in the Funds' portfolios may not increase their earnings or value at
the rate anticipated
* Securities of smaller and newer companies in which the Small Cap Growth
Fund primarily invest involve greater risk than investing in larger more
established companies
* Investments in mid-sized companies in which the Mid Cap Value Fund
primarily invest may involve greater risk than investing in larger more
established companies.
* The Funds may be unable to achieve their objectives
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WHO MAY WANT TO INVEST IN THE FUNDS?
The Funds may be appropriate for long-term investors who seek capital
appreciation and who can accept higher short-term risk. Further, investors in
the Small Cap Growth Fund should be able to accept the potential volatility and
other risks of investing in small companies.
The Funds may not be appropriate for investors who:
* Need regular income or stability of principal
* Are pursuing a short-term goal
PERFORMANCE
The following performance information indicates some of the risks of investing
in the Funds. The bar chart shows changes in each Funds' performance from year
to year. The table shows each Fund's average return compared with broad-based
market indices. The Funds' past performance will not necessarily continue in the
future.
As of 12/31(%)
1998 19.77
1999 13.87
MID CAP VALUE FUND
Bar chart
2000 - _____%
1999 - 13.87%
1998 - 19.77%
end Bar chart
During the period shown in the bar chart, the Fund's highest quarterly return
was ____% for the quarter ended ______________and the lowest quarterly return
was _______% for the quarter ended __________________.
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AVERAGE ANNUAL TOTAL RETURNS
As of December 31, 2000
Since Inception
1 Year (11/13/97)
------ ----------
MID CAP VALUE FUND ____% ____%
S&P/BARRA MID CAP 400 VALUE INDEX* ____% ____%
RUSSELL MID CAP VALUE INDEX** ____% ____%
----------
* The S&P/BARRA Mid Cap 400 Value Index is an unmanaged
capitalization-weighted index.
** The Russell Mid Cap Value Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000 Index, which
represent approximately 35% of the total market capitalization of the
Russell 1000 Index.
As of 12/31 (%)
1998 14.86
1999 46.54
SMALL CAP GROWTH FUND
Bar chart
2000 - _____%
1999 - 46.54%
1998 - 14.86%
end Bar chart
During the period shown in the bar chart, the Fund's highest quarterly return
was _____% for the quarter ended _____________ and the lowest quarterly return
was _____% for the quarter ended ________________.
AVERAGE ANNUAL TOTAL RETURNS
As of December 31, 2000
Since Inception
1 Year (11/14/97)
------ ----------
SMALL CAP GROWTH FUND ____% ____%
RUSSELL 2000 INDEX* ____% ____%
RUSSELL 2000 GROWTH INDEX** ____% ____%
----------
* The Russell 2000 Index is an unmanaged, capitalization weighted price only
index which is comprised of 2000 of the smallest stocks (on the basis of
capitalization) in the Russell 3000 Index.
** The Russell 2000 Growth Index measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted
growth rates.
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FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of a Fund.
Mid Cap Small Cap
Value Fund Growth Fund
---------- -----------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) imposed on purchases None None
Maximum deferred sales charge (load) None None
ANNUAL FUND OPERATING EXPENSES*
(EXPENSES DEDUCTED FROM FUND ASSETS)
Management Fees 0.70% 0.80%
Other Fees X.XX% X.XX%
----- -----
Total Annual Fund Operating Expenses X.XX% X.XX%
Fee Reduction and/or Expense Reimbursement (X.XX)% (X.XX)%
----- -----
Net Expenses 0.75% 0.85%
===== =====
----------
* The Adviser has contractually agreed to reduce its fees and/or pay expenses
of the Funds to ensure that Total Fund Operating Expenses will not exceed
Net Expenses shown above. This contract has a one year term ending March
2002. The Adviser reserves the right to be reimbursed for any fees waived
or expenses paid on behalf of a Fund if the Fund's expenses are less than
Net Expenses above. The Directors may terminate this expense reimbursement
arrangement at any time.
EXAMPLE
This Example is intended to help you compare the costs of investing in a Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time period
indicated and then redeem all your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year. The Example
is based on Net Expenses for the first year and Total Annual Fund Operating
Expenses for the remaining years. Although your actual costs may be higher or
lower, under these assumptions, your cost would be:
Fleming Mid Cap Fleming Small Cap
Value Fund Growth Fund
---------- -----------
One Year......................... $77 $87
Three Years...................... $XX $XX
Five Years....................... $XX $XX
Ten Years........................ $XX $XX
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INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
MID CAP VALUE FUND
The Mid Cap Value Fund seeks growth from capital appreciation. The Fund invests
primarily (and, under normal conditions, at least 65% of its total assets) in a
diversified portfolio of common stock of issuers with market capitalization from
$1 billion to $20 billion, at the time of initial purchase, that the Adviser
believes to be undervalued.
The Adviser is a 'bottom-up' manager and stock selection is based on company
fundamentals. The Adviser combines quantitative screening with proprietary
fundamental analysis to construct the Fund's portfolio. The Adviser uses a wide
variety of sources and research companies. These sources include electronic
screens, the Adviser's relationship with over 70 national and regional brokerage
firms and attendance at trade shows and conferences. The thrust of the research
can be characterised by three component analyses: financial, business and
management. Essentially, historical financial data is used to build up a
potential investment universe of companies that have met what the Adviser
considers to be the key criteria for financial success. Then, the Adviser uses
an overlay of more subjective current business and management analysis form a
view on future stock potential.
The Adviser may sell a security due to a change in the company's fundamentals. A
change in the original reason for purchase of the original investment may cause
the security to be eliminated from the portfolio. The Adviser may sell a
security due to opportunity cost. Typically, the Adviser attempts to maintain a
portfolio of 30 - 50 securities. As a result, a new company may displace a
current holding. Finally, the Adviser may sell a security due to extreme
valuation. While the Adviser will not automatically sell when a security reaches
a certain price, the attainment of an intermediary price target will trigger a
re-evaluation of the company's fundamentals and future potential.
SMALL CAP GROWTH FUND
The Small Cap Growth Fund seeks growth from capital appreciation. The Fund
invests primarily (and, under normal conditions, at least 65% of its total
assets) in a diversified portfolio of common stocks of issuers with market
capitalizations of not more than $1.5 billion, at initial time of purchase, that
the Adviser believes have strong earnings growth potential.
The Adviser is a 'bottom-up' manager and stock selection is based on company
fundamentals. The Adviser and combines qualitative screening with proprietary
fundamental analysis to construct portfolios. The Adviser's selection process
for the portfolio is a multi-faceted activity and involves a wide range of
sources. The Adviser uses mechanical screening techniques based on the its
required quantitative criteria to help narrow the search. The Adviser has
developed a number of screens for the whole market and, in some cases, for a
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specific industry. The Adviser believes that interaction with company management
is essential in understanding each business properly and assessing the risks of
investing. To this end, the Adviser visits over 250 companies each year, along
with another 250 in-office meetings and conference contacts.
During the research phase, the Adviser looks for companies that it believes can
generate consistent, above average rates of growth over a sustained period of
time. Therefore, in addition to quantitative factors, the Adviser considers
qualitative factors, such as the Adviser's level of confidence in the management
and the competitive position of a company; the predictability and durability of
the business relative to its valuation; the level of business risk in the
company's end markets and our evaluation of any short term categories of change,
both positive and negative.
The Adviser may sell a security for the following reasons: a new investment may
displace a current holding; a change in a company's fundamentals may lead to a
re-evaluation of a stock's potential; a security may become overvalued; the
market capitalization of a security may exceed the Fund's guidelines.
BOTH FUNDS
Under normal market conditions, the Funds will only purchase securities that are
traded on registered exchanges or the over-the-counter market in the United
States. Each Fund may, for temporary defensive purposes, invest up to 100% of
its total assets in money market instruments (including certain U.S. Government
and U.S. Treasury securities, bank obligations, commercial paper and other
short-term debt securities rated at the time of purchase in the top two
categories by a nationally recognized statistical rating organization, and
repurchase agreements involving the foregoing securities), shares of money
market funds and cash. When a Fund is investing for temporary defensive
purposes, it is not pursuing its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
The principal risks of investing in the Funds that may adversely affect the
Funds' net asset value or total return are previously summarized in "An Overview
of the Funds." These risks are discussed in more detail below.
MARKET RISK. The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for its, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry, sector of
the economy or the market as a whole.
EQUITY SECURITIES - Investments in equity securities in general are subject to
market risks that may cause their prices to fluctuate over time. Fluctuations in
the value of equity securities in which a Fund invests will cause the net asset
value of the Fund to fluctuate.
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SMALLER AND MID-SIZED COMPANIES - The Mid Cap Value Fund invests to a
significant degree in equity securities of mid-sized companies and the Small Cap
Growth Fund invests to a significant degree in equity securities of smaller
companies. An investment in smaller or medium capitalization companies involves
greater risk than that customarily associated with investments in larger, more
established companies. This increased risk may be due to the greater business
risks of smaller size, limited markets and financial resources, narrow product
lines and lack of depth of management. The securities of smaller companies are
often traded in the over-the-counter market and, if listed on a national
securities exchange, may not be traded in volumes typical for that exchange.
Thus, the securities of smaller-or mid-sized companies are likely to be less
liquid, and subject to more abrupt or erratic market movements than securities
of larger, more established growth companies.
THE ADVISER
The Adviser is a New York-based SEC-registered investment management firm. The
Adviser is a wholly-owned subsidiary of The Chase Manhattan Corporation. The
Chase Manhattan Corporation is a global financial services firm headquartered in
New York with assets in excess of $44 billion. The Adviser has, since 1984,
managed U.S. equities for institutions, major corporations, foundations,
endowments, public funds and religious organizations. As of September 30, 2000,
the Adviser had discretionary management authority over assets in excess of $6
billion. The Adviser's principal business address is 320 Park Avenue, New York,
New York 10022.
The Adviser serves as the investment adviser for each Fund under an investment
advisory agreement (the "Advisory Agreement"). Under the Advisory Agreement, the
Adviser makes the investment decisions for the assets of each Fund and
continuously reviews, supervises and administers each Fund's investment program,
subject to the supervision of, and policies established by, the Board of
Directors (the "Board") of the Fleming Mutual Fund Group, Inc. ("Corporation").
For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of 0.70% of the average daily net assets of
the Mid Cap Value Fund and 0.80% of those of the Small Cap Growth Fund. The
Adviser has contractually agreed through March 2002 to waive all or a portion of
its fee and to reimburse expenses of the Mid Cap Value and Small Cap Growth
Funds in order to limit their annual operating expenses (as a percentage of
average daily net assets on an annualized basis) to not more than 0.75% and
0.85%, respectively.
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JONATHAN KENDREW LLEWELYN SIMON, serves as portfolio manager to the Mid Cap
Value Fund. Mr. Simon has worked as a portfolio manager with various affiliates
of the Adviser since 1980 and is currently the Chief Investment Officer and a
Director of Robert Fleming Inc. Mr. Simon is President of Fleming Asset
Management USA, which is a division of the Adviser.
CHRISTOPHER MARK VYVYAN JONES, serves as portfolio manager to the Small Cap
Growth Fund. Mr. Jones has worked as a portfolio manager with various affiliates
of the Adviser since 1982 and is currently a Director of Robert Fleming Inc. Mr.
Jones is head of the Adviser's Small Company Investment Team.
FUND EXPENSES
The Adviser has contractually agreed to reduce its fees and/or pay expenses of
the Funds to ensure that the Fund's aggregate annual operating expenses
(excluding interest and tax expenses) will not exceed 0.75% of the Mid Cap Value
Fund's average daily net assets and 0.85% of the Small Cap Growth Fund's average
daily net assets. The contract has a one year term ending March 2002. In
addition, the Adviser may voluntarily reduce its fees and/or pay expenses of
either Fund in order to reduce the Fund's aggregate annual operating expenses.
Any reduction in advisory fees or payment of expenses made by the Adviser are
subject to reimbursement by the Fund if requested by the Adviser in the three
subsequent fiscal years. This reimbursement may be requested by the Adviser if
the aggregate amount actually paid by the Fund toward operating expenses for
such fiscal year (taking into account the reimbursement) does not exceed the
applicable limitation on Fund expenses. Any such reimbursement will be reviewed
by the Directors. Each Fund must pay its current ordinary operating expenses
before the Adviser is entitled to any reimbursement of fees and/or expenses.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Transfer Agent on each day
that the New York Stock Exchange (the "NYSE") is open for normal trading
("Business Day"). Generally, the NYSE is closed on major national holidays.
Investors may purchase and redeem shares of each Fund directly through the
Transfer Agent at: Countrywide Fund Services, Inc., 312 Walnut Street, 21st
Floor, Cincinnati, Ohio, 45202, by mail or wire transfer. Purchases and
redemptions of shares of the Fund may be made on any Business Day. All
shareholders may place orders by telephone; when market conditions are extremely
busy, it is possible that investors may experience difficulties placing orders
by telephone and may wish to place orders by mail.
The minimum initial investment in each Fund is $1,000,000, and subsequent
purchases must be at least $10,000. The Corporation or Adviser may waive these
minimums at its discretion. No minimum applies to subsequent purchases effected
by dividend reinvestment. Employees of the Adviser and certain of its affiliates
may invest in the Funds subject to certain conditions, including a lower minimum
investment, established by the Adviser.
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Certain brokers assist their clients in the purchase or redemption of shares and
charge a fee for this service.
PURCHASES BY MAIL
An account may be opened by mailing a check or other negotiable bank draft for
$1,000,000 or more, together with a completed Account Application to: Fleming
Mutual Fund Group, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. When
purchases are made by check (including certified or cashier's checks),
redemption proceeds will not be forwarded until the investment being redeemed
has been in the account up to 15 days. Subsequent investments may also be mailed
directly to the Transfer Agent.
PURCHASES BY WIRE TRANSFER
Shareholders having an account with a commercial bank that is a member of the
Federal Reserve System may purchase shares of the Fund by requesting their bank
to transmit funds by wire to:
Fleming Mutual Fund Group, Inc.
Firstar Bank
ABA #042000013
Credit Fleming 4864-84413
FFC: Shareholder's Name:___________________________
Shareholder's Account No.:____________________
The shareholder's name and account number must be specified in the wire.
INITIAL PURCHASES: Before making an initial investment by wire, an investor must
first telephone 1-800-264-0592 to be assigned an account number. The investor's
name, account number, taxpayer identification number or Social Security number,
and address must be specified in the wire. In addition, an Account Application
should be promptly forwarded to: Fleming Mutual Fund Group, Inc., P.O. Box 5354,
Cincinnati, Ohio 45201-5354.
SUBSEQUENT PURCHASES: Additional investments may be made at any time through the
wire procedures described above, which must include a shareholder's name and
account number. The investor's bank may impose a fee for investments by wire.
PURCHASES THROUGH BROKERS: You may buy and sell shares of each Fund through
certain brokers (and their agents) that have made arrangements with the Funds to
sell such shares. When you place your order with such a broker or its authorized
agent, your order is treated as if you had placed it directly with the Fund's
Transfer Agent, and you will pay or receive the next price calculated by the
Fund. The broker (or agent) holds your shares in an omnibus account in the
broker's (or agent's) name, and the broker (or agent) maintains your individual
ownership records. The Advisor may pay the broker (or its agent) for maintaining
these records as well as providing other shareholder services. The broker (or
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its agent) may charge you a fee for handling your order. The broker (or agent)
is responsible for processing your order correctly and promptly, keeping you
advised regarding the status of your individual account, confirming your
transactions and ensuring that you receive copies of the Fund's prospectus.
PURCHASING WITH SECURITIES
Shares may be purchased by tendering payment in kind in the form of marketable
securities, including, but not limited to, shares of common stock and debt
securities, provided the acquisition of such securities is consistent with the
Funds' investment objective and otherwise acceptable to the Adviser.
PURCHASING BY RETIREMENT PLAN AND INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
Shares of the Funds are available for purchase by any retirement plan, including
401(k) plans, profit sharing plans, and IRAs. The minimum initial investment in
each Fund is $1,000,000, and subsequent purchases must be at least $10,000. The
Adviser may waive the minimums at its discretion.
AUTOMATIC INVESTMENT PLAN ("AIP")
A shareholder or prospective shareholder may arrange for periodic investments in
a Fund through automatic deductions by ACH from a checking account by completing
the appropriate section on the application. The minimum initial investment
amount for AIPs is $1,000,000, and the minimum pre-authorized investment amount
is $1,000 per month per account. To participate in the AIP, complete the
appropriate section on the account application form.
GENERAL INFORMATION REGARDING PURCHASES
A purchase request will be invested at the net asset value as of the day
received by the Transfer Agent if the Transfer Agent (or its authorized agent)
receives the purchase request in good order and payment before the close of the
NYSE. A purchase request is in good order if it is complete and accompanied by
the appropriate documentation, including an Account Application and any
additional documentation required. Purchase requests in good order received
after the close of the NYSE, will be invested at the net asset value of the next
Business Day. Payment may be made by check or readily available funds. The
purchase price of shares of any Fund is that Fund's net asset value per share
next determined after a purchase order is effective. Purchases will be made in
full and fractional shares of each Fund calculated to three decimal places.
If a check received for the purchase of shares does not clear, the purchase will
be canceled, and the investor could be liable for any losses or fees incurred.
Fleming Mutual Fund Group, Inc. (the "Corporation") reserves the right to reject
a purchase order when the Corporation determines that it is not in the best
interest of the Corporation or its shareholders to accept such order.
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EXCHANGES
Shareholders of each Fund may exchange their shares for shares of the other Fund
if it is then offering its shares to the public. Exchanges are made at net asset
value. An exchange is considered a sale of shares and may result in capital gain
or loss for federal income tax purposes. The shareholder must have received a
current prospectus for the new Fund before any exchange will be effected. If the
Transfer Agent (or its authorized agent) receives exchange instructions in
writing or by telephone (an "Exchange Request") in good order by the close of
the NYSE, on any Business Day, the exchange will be effected that day. The
liability of the Fund or the Transfer Agent for fraudulent or unauthorized
telephone instructions may be limited as described below. The Corporation
reserves the right to modify or terminate this exchange offer on 60 days'
notice.
REDEMPTIONS
Shareholders may request redemptions from a Fund either by mail, by writing to
Fleming Mutual Fund Group, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354, or
by calling 1-800-264-0592.
The Transfer Agent may require that the signatures on the written request be
guaranteed. You should be able to obtain a signature guarantee from a bank,
broker, dealer, certain credit unions, securities exchange or association,
clearing agency or savings association. Notaries public cannot guarantee
signatures. The signature guarantee requirement will be waived if all of the
following conditions apply: (1) the redemption is for not more than $25,000
worth of shares, (2) the redemption check is payable to the shareholder(s) of
record, and (3) the redemption check is mailed to the shareholder(s) at his or
her address of record. The Corporation and the Transfer Agent reserve the right
to amend these requirements without notice. Provided the telephone redemption
option has been authorized by the shareholder on the account registration form,
a redemption of shares may be requested by calling 1-800-264-0592 and requesting
that the proceeds be mailed to the primary registration address or wired per the
authorized instructions designated on the shareholder's account registration
form. Shareholders may not close their accounts by telephone.
Redemption requests in good order received by the Transfer Agent (or its
authorized agent) prior to the close of the NYSE on any Business Day will be
effective that day. To redeem shares of the Fund, shareholders must place their
redemption orders with the Transfer Agent (or its authorized agent) prior to the
close of the NYSE, on any Business Day. The redemption price of shares of any
Fund is the net asset value per share of that Fund next determined after the
redemption order is effective. Payment of redemption proceeds will be made as
promptly as possible and, in any event, within seven days after the redemption
order is received, provided, however, that redemption proceeds for shares
purchased by check (including certified or cashier's checks) will be forwarded
only upon collection of payment for such shares; collection of payment may take
up to 15 days.
Shareholders may receive redemption payments in the form of a check or by
Federal Reserve wire transfer. There is no charge for having a check for
redemption proceeds mailed. Shareholders cannot redeem shares of a Fund by
Federal Reserve wire on Federal holidays restricting wire transfers.
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If the Board determines that it would be detrimental to the best interests of
the remaining shareholders of a Fund to make a redemption payment wholly or
partly in cash, the Fund may pay the redemption proceeds in whole or in part by
a distribution in-kind of readily marketable securities held by the Fund in lieu
of cash in conformity with the applicable rules of the Securities and Exchange
Commission. Investors may incur brokerage charges on the sale of portfolio
securities received in such payments of redemptions.
Neither the Corporation nor the Transfer Agent will be responsible for the
authenticity of instructions received by telephone if they reasonably believe
those instructions to be genuine. The Corporation and the Transfer Agent will
each employ reasonable procedures to confirm that telephone instructions are
genuine. Such procedures may include the taping of telephone conversations.
The Corporation reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Corporation also
reserves the right to suspend sales of shares of any Fund for any period during
which the New York Stock Exchange, the Adviser, the Administrator, the Transfer
Agent and/or the Custodian are not open for business.
SYSTEMATIC WITHDRAWAL PLAN
The Corporation offers a Systematic Withdrawal Plan ("SWP") which may be
utilized by shareholders who wish to receive regular distributions from their
account. Upon commencement of the SWP, the account must have a current value of
$1,000,000 or more. Shareholders may elect to receive automatic payments via
check or ACH of $100 or more on a monthly, quarterly, semi-annual, or annual
basis. Automatic withdrawals are normally processed on the last day of the
applicable month or, if such day is not a business day, on the previous business
day, and are paid promptly thereafter. To arrange a SWP, complete the
appropriate section on the account application form. Shareholders should realize
that if withdrawals exceed income dividends, their invested principal in the
account will be depleted. Thus, depending upon the frequency and amounts of the
withdrawal payments and/or any fluctuations in the net asset value per share,
their original investment could be exhausted entirely. To participate in the
SWP, shareholders must have their dividends automatically reinvested.
Shareholders may change or cancel the SWP at any time, upon written notice to
the Transfer Agent.
SHARE PRICE
Shares of a Fund are purchased at the net asset value after an order in proper
form is received by the Transfer Agent. An order in proper form must include all
correct and complete information, documents and signatures required to process
your purchase, as well as a check or bank wire payment properly drawn and
collectable. Payment should be made by check drawn on a U.S. bank, savings and
loan, or credit union. The net asset value per share is determined as of the
close of trading of the New York Stock Exchange on each Business Day. Orders
received before 4:00 p.m., Eastern time on a Business Day will be processed as
of the close of trading on that day. Otherwise, processing will occur on the
next Business Day. The Distributor reserves the right to reject any purchase
order.
14
<PAGE>
NET ASSET VALUE
The net asset value per share of each Fund is the value of the Fund's assets,
less its liabilities, divided by the number of outstanding shares of the Fund.
Each Fund values its investments on the basis of the market value of its
securities. Securities and other assets for which market prices are not readily
available are valued at fair value as determined in good faith in accordance
with procedures approved by the Board.
SHARE CERTIFICATES
Shares are credited to your account and certificates are not issued. This
eliminates the costly problem of lost or destroyed certificates.
DIVIDENDS AND DISTRIBUTIONS
The Mid Cap Value Fund and Small Cap Growth Fund intend to pay dividends
annually. Each Fund makes distributions of its net capital gains, if any, at
least annually. The Board may determine to declare dividends and make
distributions more frequently. Shareholders automatically receive all income
dividends and capital gain distributions in additional shares, unless the
shareholder has elected to take such payment in cash. Shareholders may change
their election by providing written notice to the Transfer Agent at least 15
days prior to the distribution. Shareholders may receive payments for cash
distributions in the form of a check or by Federal Reserve or ACH wire transfer.
Dividends and other distributions of each Fund are paid on a per share basis.
The value of each share will be reduced by the amount of the payment. If shares
are purchased shortly before the record date for a distribution of ordinary
income or capital gains, a shareholder will pay the full price for the shares
and receive some portion of the price back as a taxable distribution or
dividend.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its shareholders.
Shareholders are urged to consult their tax advisors regarding specific
questions as to federal, state and local income taxes. Further information
concerning taxes is set forth in the Statement of Additional Information.
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Dividends from net investment income will be taxable to shareholders as ordinary
income whether received in cash or in additional shares. Any net capital gains
will be distributed annually and will be taxed to shareholders as long-term
capital gains, regardless of how long the shareholder has held shares. Each Fund
will mail annual notices to shareholders of the federal income tax status of all
distributions, including the amount of dividends eligible for the
dividends-received deduction.
Each sale, exchange or redemption of a Fund's shares is a taxable event to the
shareholder.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each Fund's
financial performance since the Fund's inception of November 13, 1997 for the
Mid Cap Value Fund and November 14, 1997 for the Small Cap Growth Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by _____________________,
independent auditors, whose report, along with the Fund's financial statements,
are incorporated by reference in the Statement of Additional Information, which
is available upon request.
FLEMING MID CAP VALUE FUND
<TABLE>
<CAPTION>
November 13, 1997*
Year Ended Year Ended to
September 30, 2000 September 30, 1999 September 30, 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.62 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.11
Net realized and unrealized gain
on investments 3.20 0.54
------ ------
Total from Investment Operations 3.22 0.65
------ ------
LESS DISTRIBUTIONS:
From net investment income (0.10) (0.03)
From net realized gain (0.18) --
------ --
Total Distributions (0.28) (0.03)
------ ------
NET ASSET VALUE, END OF PERIOD $13.56 $10.62
====== ======
Total Return 30.41% 6.50%+
Net Assets at End of Period ('000) $3,552 $2,873
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before Expense Reimbursement 5.11% 7.72%++
After Expense Reimbursement 1.25% 1.25%++
Ratio of Net Investment Income to Average
Net Assets (After Expense Reimbursement) 0.06% 0.73%++
Portfolio Turnover Rate 108.74% 73.34%+
</TABLE>
* Commencement of operations.
+ Not annualized.
++ Annualized.
16
<PAGE>
(Financial Highlights Continued)
FLEMING SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
November 13, 1997*
Year Ended Year Ended to
September 30, 2000 September 30, 1999 September 30, 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.47 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.08 0.08
Net realized and unrealized gain
on investments 4.28 (0.59)
------ ------
Total from Investment Operations 4.36 (0.51)
------ ------
LESS DISTRIBUTIONS:
From net investment income (0.09) (0.02)
From net realized gain (0.29) --
------ ------
Total Distributions (0.38) (0.02)
------ ------
NET ASSET VALUE, END OF PERIOD $13.45 $ 9.47
====== ======
Total Return 46.61% (5.15%)+
Net Assets at End of Period ('000) $1,813 $1,107
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before Expense Reimbursement 10.19% 13.84%++
After Expense Reimbursement 1.35% 1.35%++
Ratio of Net Investment Income to Average
Net Assets (After Expense Reimbursement) (0.68%) (0.30%)++
Portfolio Turnover Rate 70.75% 35.47%+
</TABLE>
* Commencement of operations.
+ Not annualized.
++ Annualized.
17
<PAGE>
Corporation:
FLEMING MUTUAL FUND GROUP, INC.
Funds:
FLEMING MID CAP VALUE FUND
FLEMING SMALL CAP GROWTH FUND
Adviser:
ROBERT FLEMING INC.
Distributor:
FIRST FUND DISTRIBUTORS, INC.
Administrator
INVESTMENT COMPANY ADMINISTRATION, LLC
Legal Counsel:
MORGAN, LEWIS & BOCKIUS LLP
Independent Auditors:
---------------------------
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
FLEMING MID CAP VALUE FUND
FLEMING SMALL CAP GROWTH FUND
For investors who want more information about the Funds, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: 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 reports, you will find a discussion of market conditions and
investment strategies that significantly affected each Fund's performance during
its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is incorporated by reference into this
Prospectus.
You can get free copies of reports and the SAI, request other information and
discuss your questions about the Funds by contacting the Funds at:
Fleming Mutual Fund Group, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Telephone: 1-800-264-0592
You can review and copy information including the Fund's reports and SAI at the
Public Reference Room of the Securities and Exchange Commission in Washington,
D.C. You can obtain information on the operation of the Public Reference Room by
calling (202) 942-8090. You can get text-only copies:
* For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-6009, or
* For a fee, by calling (202) 942-8090, or
* Free of charge from the Commission's Internet website at http://www.sec.gov
or by sending an e-mail request to [email protected].
The Funds' SEC Investment Company Act
file number is 811-08189
<PAGE>
As filed with the Securities and Exchange Commission on November 29, 2000
Registration No: 333-25803
File No: 811-08189
================================================================================
--------------------------------------------------------------------------------
PART B
COMBINED STATEMENT OF ADDITIONAL INFORMATION
Fleming Mutual Fund Group, Inc.
Fleming Mid Cap Value Fund
Fleming Small Cap Growth Fund
--------------------------------------------------------------------------------
================================================================================
<PAGE>
CORPORATION:
FLEMING MUTUAL FUND GROUP, INC.
FUNDS:
FLEMING MID CAP VALUE FUND
FLEMING SMALL CAP GROWTH FUND
INVESTMENT ADVISER:
ROBERT FLEMING INC.
This Statement of Additional Information is not a prospectus and relates only to
the Fleming Mid Cap Value Fund (the "Mid Cap Value Fund" and formerly the
Fleming Fund) and Fleming Small Cap Growth Fund (the "Small Cap Growth Fund" and
formerly the Fleming Fledgling Fund), each a separate series of the Fleming
Mutual Fund Group, Inc. (the "Corporation" and formerly the Fleming Capital
Mutual Fund Group, Inc.). It is intended to provide additional information
regarding the activities and operations of the Fleming Mutual Fund Group, Inc.
(the "Corporation") and should be read in conjunction with the Funds' Prospectus
dated January 28, 2001. The Prospectus may be obtained without charge by calling
1-800-264-0592.
TABLE OF CONTENTS
THE CORPORATION.............................................................B-2
DESCRIPTION OF PERMITTED INVESTMENTS........................................B-2
INVESTMENT LIMITATIONS......................................................B-6
THE ADVISER.................................................................B-8
THE ADMINISTRATOR...........................................................B-9
THE DISTRIBUTOR.............................................................B-9
DIRECTORS AND OFFICERS OF THE CORPORATION...................................B-10
COMPUTATION OF YIELD AND TOTAL RETURN.......................................B-11
PURCHASE AND REDEMPTION OF SHARES...........................................B-12
DETERMINATION OF NET ASSET VALUE............................................B-13
TAXES.......................................................................B-13
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................B-14
LIMITATION OF DIRECTORS' LIABILITY..........................................B-16
FINANCIAL INFORMATION.......................................................B-16
January 29, 2001
B-1
<PAGE>
THE CORPORATION
The Corporation (formerly named Fleming Capital Mutual Fund Group, Inc.), an
open-end management investment company, was organized as a Maryland corporation
on August 19, 1997. The Articles of Incorporation permits the Corporation to
offer 100 million shares of common stock, with $.001 par value per share.
Pursuant to the Corporation's Articles of Incorporation, the Board may increase
the number of shares that the Corporation is authorized to issue without the
approval of the Corporation's shareholders. The Board has the power to designate
and redesignate any authorized but unissued shares of capital stock into one or
more classes of shares and separate series within each such class, to fix the
number of shares in any such class or series, and to classify or reclassify any
unissued shares with respect to such class or series. The shares of common stock
are currently classified into two series: the Mid Cap Value Fund and the Small
Cap Growth Fund (formerly Fleming Fund and Fleming Fledgling Fund,
respectively).
The shares of the Funds, when issued, will be fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. The shares have no
preference as to conversion, exchange, dividends, retirement or other features
and have no pre-emptive rights. The shares of the Funds have non-cumulative
rights, which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the Directors if they choose to do
so. Persons or organizations owning 25% or more of the outstanding shares of
either of the Funds may be presumed to "control" (as that term is defined in the
Investment Company Act of 1940, as amended ("1940 Act")) that Fund. Under
Maryland law, the Corporation is not required to hold an annual meeting of its
shareholders unless required to do so under the 1940 Act.
The Corporation bears the costs of its operating expenses, including fees of its
service providers, audit and legal expenses, expenses of preparing prospectuses,
certain proxy solicitation materials and reports to shareholders, costs of
custodial services and registering the shares under federal and state securities
laws, pricing and insurance expenses, and pays additional expenses including
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
DESCRIPTION OF PERMITTED INVESTMENTS
AMERICAN DEPOSITARY RECEIPTS ("ADRS")
ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
may be available through "sponsored" or "unsponsored" facilities. A sponsored
facility is established jointly by the issuer of the security underlying the
receipt and a depositary, whereas an unsponsored facility may be established by
a depositary without participation by the issuer of the underlying security.
Holders of unsponsored depositary receipts generally bear all the costs of the
unsponsored facility. The depositary of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through, to the holders of the
receipts, voting rights with respect to the deposited securities.
CONVERTIBLE SECURITIES
Convertible securities are corporate securities that are exchangeable for a set
number of another security at a prestated price. Convertible securities
typically have characteristics similar to both fixed-income and equity
securities. Because of the conversion feature, the market value of a convertible
security tends to move with the market value of the underlying stock. The value
of a convertible security is also affected by prevailing interest rates, the
credit quality of the issuer, and any call provisions.
B-2
<PAGE>
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option. A
Fund may use futures contracts and related options for BONA FIDE hedging
purposes, to offset changes in the value of securities held or expected to be
acquired or be disposed of, to minimize fluctuations in foreign currencies, or
to gain exposure to a particular market or instrument. A Fund will minimize the
risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges. In
addition, a Fund will only sell covered futures contracts and options on futures
contracts.
Stock and bond index futures are futures contracts for various stock and bond
indices that are traded on registered securities exchanges. Stock and bond index
futures contracts obligate 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 stock or bond index at the close of the last trading day
of the contract and the price at which the agreement is made.
Stock and bond index futures contracts are bilateral agreements pursuant to
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock or bond index
value at the close of trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the stocks or bonds
comprising the index is made; generally contracts are closed out prior to the
expiration date of the contracts.
No price is paid upon entering into futures contracts. Instead, a Fund would be
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, would be made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures; (3) there may not be a liquid secondary market
for a futures contract or option; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may restrict trading in
futures contracts and futures options.
A Fund may enter into futures contracts and options on futures contracts traded
on an exchange regulated by the Commodities Futures Trading Commission ("CFTC"),
as long as, to the extent that such transactions are not for "bona fide hedging
purposes," the aggregate initial margin and premiums on such positions
(excluding the amount by which such options are in the money) do not exceed 5%
of a Fund's net assets. A Fund may buy and sell futures contracts and related
options to manage its exposure to changing interest rates and securities prices.
Some strategies reduce a Fund's exposure to price fluctuations, while others
tend to increase its market exposure. Futures and options on futures can be
volatile instruments and involve certain risks that could negatively impact a
Fund's return.
In order to avoid leveraging and related risks, when a Fund purchases futures
contracts, it will collateralize its position by depositing an amount of cash or
liquid securities, equal to the market value of the futures positions held, less
margin deposits, in a segregated account with its custodian. Collateral equal to
the current market value of the futures position will be marked to market on a
daily basis.
B-3
<PAGE>
INVESTMENT COMPANY SHARES
Each Fund may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees that are separate from those fees
incurred directly by the Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Fund
expenses. Under applicable regulations, a Fund generally is prohibited from
acquiring the securities of another investment company if, as a result of such
acquisition: (1) the Fund owns more than 3% of the total voting stock of the
other company; (2) securities issued by any one investment company represent
more than 5% of the Fund's total assets; or (3) securities (other than treasury
stock) issued by all investment companies represent more than 10% of the total
assets of the Fund. See also "Investment Limitations."
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be disposed of within seven days
at approximately the price at which they are being carried on the Fund's books.
Illiquid securities include demand instruments with demand notice periods
exceeding seven days, securities for which there is no active secondary market,
and repurchase agreements with durations or maturities over seven days in
length.
MONEY MARKET INSTRUMENTS
Money market instruments are high-quality, dollar-denominated, short-term debt
securities. They consist of: (i) bankers' acceptances, certificates of deposits,
notes and time deposits of highly-rated U.S. banks and U.S. branches of foreign
banks; (ii) U.S. Treasury obligations and obligations issued or guaranteed by
the agencies and instrumentalities of the U.S. Government; (iii) high-quality
commercial paper issued by U.S. and foreign corporations; (iv) debt obligations
with a maturity of one year or less issued by corporations with outstanding
high-quality commercial paper ratings; and (v) repurchase agreements involving
any of the foregoing obligations entered into with highly-rated banks and
broker-dealers.
OPTIONS
A put option gives the purchaser of the option the right to sell, and the writer
of the option the obligation to buy, the underlying security at any time during
the option period. A call option gives the purchaser of the option the right to
buy, and the writer of the option the obligation to sell, the underlying
security at any time during the option period. The premium paid to the writer is
the consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction." In
order to close out an option position, a Fund may enter into a "closing
transaction," which is simply the sale (purchase) of an option contract on the
same security with the same exercise price and expiration date as the option
contract originally opened. If a Fund is unable to effect a closing purchase
transaction with respect to an option it has written, it will not be able to
sell the underlying security until the option expires or the Fund delivers the
security upon exercise.
A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to anticipate an increase in
the market value of securities that the Fund may seek to purchase in the future.
A Fund purchasing put and call options pays a premium therefor. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for the Fund, loss of the premium paid may be offset by
an increase in the value of the Fund's securities or by a decrease in the cost
of acquisition of securities by the Fund.
B-4
<PAGE>
A Fund may write covered call options as a means of increasing the yield on its
fund and as a means of providing limited protection against decreases in its
market value. When a fund sells an option, if the underlying securities do not
increase or decrease to a price level that would make the exercise of the option
profitable to the holder thereof, the option generally will expire without being
exercised and the Fund will realize as profit the premium received for such
option. When a call option written by a Fund is exercised, the Fund will be
required to sell the underlying securities to the option holder at the strike
price, and will not participate in any increase in the price of such securities
above the strike price. When a put option written by a Fund is exercised, the
Fund will be required to purchase the underlying securities at the strike price,
which may be in excess of the market value of such securities.
A Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are generally illiquid.
A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
Custodian consisting of cash or liquid securities in an amount equal to the
amount the Fund would be required to pay upon exercise of the put.
A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. A Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of a Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.
All options written on indices must be covered. When a Fund writes an option on
an index, it will establish a segregated account containing cash or liquid
securities with its custodian in an amount at least equal to the market value of
the option and will maintain the account while the option is open or will
otherwise cover the transaction.
Risks associated with options transactions include: (1) the success of a hedging
strategy may depend on an ability to predict movements in the prices of
individual securities, fluctuations in markets and movements in interest rates;
(2) there may be an imperfect correlation between the movement in prices of
options and the securities underlying them; (3) there may not be a liquid
secondary market for options; and (4) while a Fund will receive a premium when
it writes covered call options, it may not participate fully in a rise in the
market value of the underlying security.
REITS
A Fund may invest in common stocks or other securities issued by Real Estate
Investment Trusts ("REITs"). REITs invest their capital primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to its shareholders or unitholders if it complies
with regulatory requirements relating to its organization, ownership, assets and
B-5
<PAGE>
income, and with a regulatory requirement that it distribute to its shareholders
or unitholders at least 95% of its taxable income for each taxable year.
Generally, REITs can be classified as Equity REITs, Mortgage REITs or Hybrid
REITs. Equity REITs invest the majority of their assets directly in real
property and derive their income primarily from rents and capital gains from
appreciation realized through property sales. Equity REITs are further
categorized according to the types of real estate securities they own, e.g.,
apartment properties, retail shopping centers, office and industrial properties,
hotels, health-care facilities, manufactured housing and mixed-property types.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive their income primarily from interest payments. Hybrid REITs combine the
characteristics of both Equity and Mortgage REITs.
A shareholder in a Fund that invests in REITs will bear not only his
proportionate share of the expenses of the Fund , but also, indirectly, the
management expenses of underlying REITs. REITs may be affected by changes in the
value of their underlying properties and by defaults by borrowers or tenants.
Mortgage REITs may be affected by the quality of the credit extended.
Furthermore, REITs are dependent on specialized management skills. Some REITs
may have limited diversification and may be subject to risks inherent in
investments in a limited number of properties, in a narrow geographic area, or
in a single property type, REITs depend generally on their ability to generate
cash flow to make distributions to shareholders or unitholders, and may be
subject to defaults by borrowers and to self-liquidations. In addition, the
performance of a REIT may be affected by its failure to qualify for tax-free
pass-through of income, or its failure to maintain exemption from registration
under the 1940 Act.
REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a Fund obtains a security and
simultaneously commits to return the security to the seller (a member bank of
the Federal Reserve System or primary securities dealer as recognized by the
Federal Reserve Bank of New York) at an agreed upon price (including principal
and interest) on an agreed upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
The repurchase agreements entered into by a Fund will provide that the
underlying security at all times shall have a value at least equal to 102% of
the resale price stated in the agreement (the Adviser monitors compliance with
this requirement). Under all repurchase agreements entered into by a Fund, the
Corporation's Custodian or its agent must take possession of the underlying
collateral. However, if the seller defaults, the Fund could realize a loss on
the sale of the underlying security to the extent that the proceeds of sale,
including accrued interest, are less than the resale price provided in the
agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Fund is treated as an unsecured creditor and is required to
return the underlying security to the seller's estate.
U.S. GOVERNMENT AGENCY OBLIGATIONS
Certain Federal agencies, such as the Government National Mortgage Association
("GNMA"), have been established as instrumentalities of the U.S. Government to
supervise and finance certain types of activities. Issues of these agencies,
while not direct obligations of the U.S. Government, are either backed by the
full faith and credit of the United States (e.g., GNMA securities) or supported
by the issuing agencies' right to borrow from the Treasury. The issues of other
agencies are supported by the credit of the instrumentality (e.g., Fannie Mae
securities).
B-6
<PAGE>
U.S. GOVERNMENT SECURITIES
Bills, notes and bonds issued by the U.S. Government and backed by the full
faith and credit of the United States.
U.S. TREASURY OBLIGATIONS
Bills, notes and bonds issued by the U.S. Treasury, and separately traded
interest and principal component parts of such obligations that are transferable
through the Federal book-entry system known as Separately Traded Registered
Interested and Principal Securities ("STRIPS") and Coupon Under Book Entry
Safekeeping ("CUBES").
WARRANTS
Warrants are instruments giving holders the right, but not the obligation, to
buy equity or fixed income securities of a company at a given price during a
specified period.
SECURITIES LENDING
In order to generate additional income, a Fund may lend its securities to
qualified broker-dealers or institutional investors, in an amount up to 33 1/3%
of the total assets taken at market value, pursuant to agreements that require
that the loan be continuously secured by collateral consisting of cash or
securities of the U.S. Government or its agencies equal to at least 100% of the
market value of the loaned securities. A Fund continues to receive interest on
the loaned securities while simultaneously earning interest on the investment of
cash collateral. Collateral is marked to market daily. There may be risks of
delay in recovery of the securities or even loss of rights in the collateral
should the borrower of the securities fail financially or become insolvent.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
When-issued or delayed delivery securities are subject to market fluctuations
due to changes in market interest rates and it is possible that the market value
at the time of settlement could be higher or lower than the purchase price if
the general level of interest rates has changed. Although a Fund generally
purchases securities on a when-issued or forward commitment basis with the
intention of actually acquiring securities for its investment portfolio, a Fund
may dispose of a when-issued security or forward commitment prior to settlement
if it deems appropriate.
ZERO COUPON SECURITIES
Zero coupon obligations are debt securities that do not bear any interest, but
instead are issued at a deep discount from par. The value of a zero coupon
obligation increases over time to reflect the interest accreted. Such
obligations will not result in the payment of interest until maturity, and will
have greater price volatility than similar securities that are issued at par and
pay interest periodically.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
The following investment limitations (and those set forth in the Prospectus) are
fundamental policies of each Fund which cannot be changed with respect to a Fund
without the consent of the holders of a majority of that Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of a Fund's shares present at a meeting, if more than 50% of the
outstanding shares of a Fund are present or represented by proxy, or (ii) more
than 50% of a Fund's outstanding shares, whichever is less.
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No Fund may:
1. Purchase securities of any issuer (except securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and repurchase
agreements involving such securities) if, as a result, more than 5% of the
total assets of the Fund would be invested in the securities of such
issuer; or acquire more than 10% of the outstanding voting securities of
any one issuer. This restriction applies to 75% of each Fund's total
assets.
2. Purchase any securities which would cause 25% or more of the total assets
of the Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements involving such securities.
3. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate a Fund to purchase securities or require a
Fund to segregate assets are not considered to be borrowings. Asset
coverage of a least 300% is required for all borrowings, except where a
Fund has borrowed money for temporary purposes in amounts not exceeding 5%
of its total assets. A Fund will not purchase securities while its
borrowings exceed 5% of its total assets.
4. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that each Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) lend its securities.
5. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Fund may purchase (i) marketable securities
issued by companies which own or invest in REIT's , commodities, or
commodities contracts; and (ii) commodities contracts relating to financial
instruments, such as financial futures contracts and options on such
contracts.
6. Issue senior securities (as defined in the 1940 Act) except as permitted by
rule, regulation or order of the Securities and Exchange Commission (the
"SEC").
7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
The foregoing percentages (except with respect to the limitation on borrowing)
will apply at the time of the purchase of a security and shall not be considered
violated unless an excess or deficiency occurs immediately after or as a result
of a purchase of such security.
NON-FUNDAMENTAL POLICIES
The following investment limitations are non-fundamental policies of each Fund
and may be changed with respect to a Fund by the Board of Directors.
No Fund may:
1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Fund's fundamental limitation on borrowing, provided, such
Fund may segregate assets without limit in order to comply with the SEC's
position regarding the asset segregation requirements of Section 18 of the
1940 Act.
2. Invest in companies for the purpose of exercising control.
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3. Purchase securities on margin or effect short sales, except that each Fund
may (i) obtain short-term credits as necessary for the clearance of
security transactions; (ii) provide initial and variation margin payments
in connection with transactions involving futures contracts and options on
such contracts; and (iii) make short sales "against the box" or in
compliance with the SEC's position regarding the asset segregation
requirements of Section 18 of the 1940 Act.
4. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act.
5. Purchase or hold illiquid securities, I.E., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net assets
would be invested in illiquid securities.
6. Each Fund may not enter into a futures contract or options transaction if
the Fund's total outstanding obligations resulting from such futures
contract or option transaction would exceed 10% of the Fund's total assets,
and will maintain assets sufficient to meet its obligations under such
contracts or transactions with the Fund's custodian or will otherwise
comply with the SEC's position regarding the asset segregation requirements
of Section 18 of the 1940 Act.
THE ADVISER
The Corporation and Robert Fleming Inc. (the "Adviser") have entered into an
advisory agreement (the "Advisory Agreement"). The Advisory Agreement provides
that the Adviser shall not be protected against any liability to the Corporation
or its shareholders by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
The Adviser will not be required to bear expenses of any Fund to an extent which
would result in the Fund's inability to qualify as a regulated investment
company under provisions of the Internal Revenue Code of 1986, as amended (the
"Code").
The Adviser is a wholly-owned subsidiary of The Chase Manhattan Corporation. The
Chase Manhattan Corporation is a global financial services firm headquartered in
New York. On August 1, 2000 Chase Manhattan Corporation acquired Robert Fleming
Holdings Limited, which was Robert Fleming Inc.'s indirect parent. On
_______________, Fund shareholders approved the Advisory Agreement with Robert
Fleming Inc.
The continuance of the Advisory Agreement as to any Fund after the first two
years must be specifically approved at least annually (i) by the vote of the
Directors or by a vote of the shareholders of that Fund, and (ii) by the vote of
a majority of the Directors who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Directors of the Corporation or, with respect to any
Fund, by a majority of the outstanding shares of that Fund, on not less than 30
days' nor more than 60 days' written notice to the Adviser, or by the Adviser on
90 days' written notice to the Corporation.
The Adviser has contractually agreed to waive its advisory fee or reimburse
expenses to each Fund for at least one year through March, 2002 to the extent
necessary to limit the ratio of total operating expenses to average net assets
to 0.75% and 0.85% for the Mid Cap Value Fund and the Small Cap Growth Fund,
respectively. In subsequent years, overall Fund operating expenses will not fall
below the applicable percentage limitation until the Adviser has been fully
reimbursed for fees forgone and expenses paid. Any reductions made by the
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Adviser in its fees or payments or reimbursement of expenses which are a Fund's
obligation are subject to reimbursement by the Fund. The Adviser believes that
it is likely that the Funds will be of a sufficient size to permit the
reimbursement of any such reductions or payments. However, there is no assurance
that any such reimbursements will be made. Reimbursement is contingent upon the
Adviser's determination that it will seek reimbursement from the Fund. In
addition, the Board of Directors must approve any requested reimbursement.
Further, any expenses which cannot be recouped within three years will never be
reimbursed by the Fund. In other words, any unrecouped amount after the three
year period would not require payment either on liquidation of the Fund or
termination of the Advisory Agreement.
For the fiscal year ended September 30, 2000, advisory fees for the Mid Cap
Value Fund and the Small Cap Growth Fund were $____ and $____, respectively; and
the Adviser reimbursed/waived the other expenses, including advisory fees ,
totaling $____ and $_____, respectively. For the fiscal year ended September 30,
1999, advisory fees for the Mid Cap Value Fund and the Small Cap Growth Fund
were $31,499 and $14,900, respectively; and the Adviser reimbursed/waived other
expenses, including advisory fees, totaling $135,310 and $131,914, respectively.
For the periods from November 13, 1997 through September 30, 1998 and November
14, 1997 through September 30, 1998, the advisory fees for the Mid Cap Value and
Small Cap Growth Funds were $18,183 and $10,621, respectively, and the Adviser
reimbursed/waived other expenses, including Advisory fees, totaling $131,012 and
$134,932, respectively.
THE ADMINISTRATOR
Investment Company Administration, LLC (the "Administrator") and the Corporation
are parties to an administration agreement (the "Administration Agreement").
Pursuant to the Administration Agreement, the Administrator supervises the
overall administration of the Corporation, including, among other
responsibilities, the preparation and filing of all documents required by the
Corporation or the Funds with applicable laws and regulations, arranging for the
maintenance of books and records of the Corporation and the Funds, and
supervision of other organizations that provide services to the Corporation and
the Funds. Under the terms of the Administration Agreement, each Fund pays the
Administrator an annual fee of 0.10% of the first $200 million of average daily
net assets, 0.05% of the next $300 million, and 0.03% of assets over $500
million, payable monthly and subject to an annual minimum of $40,000. For the
fiscal year ended September 30, 2000, Administration fees for the Mid Cap Value
Fund and the Small Cap Growth Fund were $___ and $___, respectively. For the
fiscal year ended September 30, 1999, the Administrator received fees of $40,000
from each of the Mid Cap Value and Small Cap Growth Funds, respectively. For the
periods from November 13, 1997 through September 30, 1998 and November 14, 1997
through September 30, 1998, the Administrator received fees of $35,288 and
$35,178, from the Mid Cap Value and Small Cap Growth Funds, respectively.
THE DISTRIBUTOR
First Fund Distributors, Inc. (the "Distributor"), 4455 E. Camelback Road, Suite
261E, Phoenix, AZ 85018, a corporation owned by Mr. Banhazl (also an officer of
the Corporation), Mr. Paggioli (also an officer of the Corporation) and Mr.
Wadsworth, acts as the Funds' principal underwriter in a continuous public
offering of the Funds' shares. The Distributor, a Delaware corporation, and the
Corporation are parties to a distribution agreement (the "Distribution
Agreement"). The Distributor receives no compensation for distribution of shares
of the Funds.
The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and is renewable annually. The
Distribution Agreement may be terminated by the Distributor, by a majority vote
of the Directors who are not interested persons and have no financial interest
in the Distribution Agreement, or by a majority vote of the outstanding
securities of the Corporation upon not more than 60 days' written notice by
either party or upon assignment by the Distributor.
B-9
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DIRECTORS AND OFFICERS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws of the State of Maryland. The Directors and Officers of the
Corporation and their principal occupations for the last five years are set
forth below. Each may have held other positions with the named companies during
that period. The Corporation pays the fees to unaffiliated Directors for their
service as directors.
Unless otherwise noted, the business address of each Director and each Officer
is 320 Park Avenue, New York, New York 10022.
Jonathan K.L. Simon* (Born 1/13/59) - Chairman of the Board of Directors and
President - A Director of Robert Fleming Inc. from 1991 to the present.
Portfolio manager with various affiliates of Robert Fleming Inc. from 1980 to
the present.
Robert E. Marks (Born 1/12/52) - Director - Private invests in of Marks
Ventures, Inc. from 1994 to the present. Managing Director of Carl Marks & Co.
from 1992 to 1995.
Michael A. Petrino (Born 1/26/46) - Director - Chief Investment Officer at
StockJungle.com from October 1999 to 2000. Chief Investment Officer of Calport
Asset Management from 1995 to 1999.
Dominic S. Solly (Born 5/21/52) - Director - Teacher for the New York City Board
of Education since 1996. Consultant for Kleinwort Benson Ltd. (investment
adviser) in 1996. Investment banker with Kleinwort Benson Ltd. from 1976 to
1994.
Christopher M.V. Jones+ (Born 11/8/60) - Vice President - Director of Robert
Fleming Inc. since 1991. Portfolio manager with various affiliates of Robert
Fleming Inc. since 1982.
Arthur A. Levy+ (Born 11/4/42) - Treasurer - Director of Robert Fleming Inc.
from 1985 to the present. Chairman of Robert Fleming Inc. since November 2000.
Vice Chairman of Robert Fleming Holdings Limited since 1989 and President of
Robert Fleming Inc., since April of 1998 to November 2000.
LARRY A. KIMMEL+ (BORN 10/20/47) - SECRETARY - DIRECTOR OF COMPLIANCE OF ROBERT
FLEMING INC. FROM 1996 TO PRESENT. COMPLIANCE DIRECTOR OF WESTMINSTER RESEARCH
ASSOCIATES, INC. FROM 1995 TO 1996. President and Director of Robert Fleming
Inc. since November 2000. Vice President of Robert Fleming Inc. from 1996 to ___
2000. Senior Vice President of Robert Fleming Inc. from ___ 2000 to November
2000.
----------
+ This person is an affiliate of the Adviser and the Funds.
* This Director is an "Interested person" of the Funds, as defined under the
1940 Act.
The Corporation paid the following compensation to the Directors for the fiscal
year ended September 30, 2000. No other compensation or retirement benefits were
received by any Director or officer from the Registrant or other registered
investment company in the Corporation.
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Total Compensation from
Name of Director the Corporation
---------------- ---------------
Robert E. Marks $_____
Michael A. Petrino $_____
Dominic S. Solly $_____
Jonathan K.L. Simon* None
Christopher M.V. Jones* None
----------
* "Interested person" of the Funds, as defined under the 1940 Act. Because of
the recent acquisition of Robert Fleming Holdings Limited by The Chase
Manhattan Corporation, Mr. Jones resigned on August 1, 2000 to comply with
Section 15(f) of the 1940 Act, which requires that the Corporation's Board
of Directors be comprised of at least 75% independent directors for a
period of three years following the date of the acquisition.
CODE OF ETHICS
The Corporation, the Adviser and the Distributor have each adopted a Code of
Ethics pursuant to Rule 17j-1 of the 1940 Act. Each Code permits, subject to
certain conditions, personnel of the Adviser and Distributor to invest in
securities that may be purchased or held by the Funds. Each code has been filed
as an exhibit to this registration statement and is available upon request by
contacting the SEC.
CONTROL PERSONS AND SHARE OWNERSHIP
As of ________________, to the knowledge of the Funds, the following
shareholders owned of record 5% or more of the outstanding shares of the
respective Funds indicated:
Name and Address of Number of Percent
Name of Fund Record Owner Shares Owned of Shares
------------ ------------ ------------ ---------
Mid Cap Value Fund
Small Cap Growth Fund
The persons listed above as owning 25% or more of the outstanding shares of each
Fund may be presumed to "control" (as that term is defined in the 1940 Act) such
Funds. As a result, those persons would have the ability to vote a majority of
the shares of the Funds on any matter requiring the approval of shareholders of
such Funds.
As of _______________, the Trustees and officers of the Corporation, as a group,
owned ____% of the outstanding shares of the Mid Cap Value Fund and owned ____%
of the outstanding shares of the Small Cap Growth Fund.
COMPUTATION OF YIELD AND TOTAL RETURN
From time to time the Corporation may advertise yield and total return of the
Funds. These figures will be based on historical earnings and are not intended
to indicate future performance. No representation can be made concerning actual
future yields or returns. The yield of a Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The yield
is calculated by assuming that the income generated by the investment during
that 30-day period is generated in each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
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Yield = 2[((a-b)/cd + 1)6 - 1] where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period. The yield of a Fund refers to the annualized income generated
by an investment in the Fund over a specified 30-day period. The yield is
calculated by assuming that the same amount of income generated by the
investment during that period is generated in each 30-day period over one year
and is shown as a percentage of the investment. A Fund may periodically compare
its performance to that of other mutual funds as reported by mutual fund rating
services (such as Lipper Analytical Services, Inc.), financial and business
publications and periodicals, broad groups of comparable mutual funds, unmanaged
indices, which may assume investment of dividends but generally do not reflect
deductions for administrative and management costs, or other investment
alternatives. A Fund may quote Morningstar, Inc., a service that ranks mutual
funds on the basis of risk-adjusted performance, and Ibbotson Associates of
Chicago, Illinois, which provides historical returns of the capital markets in
the U.S. A Fund may also quote the Frank Russell Company or Wilshire Associates
consulting firms that compile financial characteristics of common stocks and
fixed income securities, regarding non-performance-related attributes of a
Fund's portfolio. The Fund may use long-term performance of these capital
markets to demonstrate general long-term risk versus reward scenarios and could
include the value of a hypothetical investment in any of the capital markets.
The Fund may also quote financial and business publications and periodicals as
they relate to fund management, investment philosophy, and investment
techniques.
A Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
The total return of a Fund refers to the average compounded rate of return of a
hypothetical investment for designated time periods (including but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable value, as of the end of the designated time period, of a hypothetical
$1,000 payment made at the beginning of the designated time period.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Transfer Agent on days when
the New York Stock Exchange is open for business. Currently, the weekdays on
which the Fund is closed for business are: New Year's Day, Presidents' Day,
Martin Luther King, Jr.'s Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Shares of each Fund are offered
on a continuous basis.
It is currently the Corporation's policy to pay all redemptions in cash. The
Corporation retains the right, however, to alter this policy to provide for
redemptions in whole or in part by a distribution in-kind of securities held by
a Fund in lieu of cash. The Corporation has made an election with the SEC
pursuant to Rule 18f-1 under the 1940 Act to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Such commitment is irrevocable without the prior
approval of the SEC. Redemptions in excess of the above limits may be paid in
whole or in part in investment securities or in cash, as the Directors may deem
advisable; however, payment will be made wholly in cash unless the Directors
believe that the economic or market conditions exist which would make such a
practice detrimental to the best interests of the Fund. Shareholders may incur
brokerage charges on the sale of any such securities so received in payment of
redemptions.
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DETERMINATION OF NET ASSET VALUE
The securities of each Fund may be valued by an independent pricing service to
obtain valuations of securities. The pricing service relies primarily on prices
of actual market transactions as well as on trade quotations obtained from third
parties. The procedures of the pricing service and its valuations are reviewed
by the officers of the Corporation under the general supervision of the
Directors.
TAXES
The following is only a summary of certain tax considerations generally
affecting the Funds and their shareholders, and is not intended as a substitute
for careful tax planning. Shareholders are urged to consult their tax advisors
with specific reference to their own tax situations, including their state and
local tax liabilities.
FEDERAL INCOME TAX
The following discussion of 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. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
Each Fund is treated as a separate entity for federal income tax purposes. Each
Fund intends to qualify or to continue to qualify for the special tax treatment
afforded regulated investment companies as defined under Subchapter M of the
Internal Revenue Code of 1986, as amended. So long as a Fund qualifies for this
special tax treatment, it will be relieved of federal income tax on that part of
its net investment income and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) which it distributes to
shareholders.
In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its shareholders at least the sum of 90% of its net
tax-exempt interest income excludable from gross income plus 90% of its
investment company taxable income (generally, net investment income plus net
short-term capital gain) ("Distribution Requirement") and also must meet several
additional requirements. Among these requirements are the following: (i) at
least 90% of the Fund's gross income each taxable year must be derived from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock or securities, or certain other income
(including gains from options, futures or forward contracts); (ii) at the close
of each quarter of the Fund's taxable year, at least 50% of the value of its
total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer; and (iii) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer, or of two or more
issuers which are engaged in the same, similar or related trades or business if
the Fund owns at least 20% of the voting power of such issuer.
Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
each Fund will be subject to a nondeductible 4% federal excise tax to the extent
it fails to distribute by the end of any calendar year 98% of its ordinary
income for that year and 98% of its capital gain net income (the excess of
short- and long-term capital gains over short-and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain other
amounts.
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In certain cases, a Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service, or (3) has not certified to
that Fund that such shareholder is not subject to backup withholding.
Distributions from net investment income may qualify for the dividends-received
deduction for corporation shareholders only to the extent such distributions are
derived from dividends paid by domestic corporations.
Certain securities purchased by a Fund are sold with original issue discount and
thus do not make periodic cash interest payments. Each Fund will be required to
include as part of its current income the accrued discount on such obligations
even though the Fund has not received any interest payments on such obligations
during that period. Because each Fund distributes all of its net investment
income to its shareholders, a Fund may have to sell portfolio securities to
distribute such accrued income, which may occur at a time when the Adviser would
not have chosen to sell such securities and which may result in a taxable gain
or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 in the year declared, if paid by the Fund at any time during the
following January. Each Fund intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the federal excise tax
applicable to regulated investment companies.
If any Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits, and such
distributions will generally be eligible for the corporate dividends-received
deduction.
STATE TAXES
No Fund is liable for any income or franchise tax in Maryland if it qualifies as
a RIC for federal income tax purposes and avoids liability for federal income
taxes. Distributions by any Fund to shareholders and the ownership of shares may
be subject to state and local taxes.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is authorized to select brokers and dealers to effect securities
transactions for the Funds. The Adviser will seek to obtain the most favorable
net results by taking into account various factors, including price, commission,
if any, size of the transactions and difficulty of executions, the firm's
general execution and operational facilities and the firm's risk in positioning
the securities involved. While the Adviser generally seeks reasonably
competitive spreads or commissions, a Fund will not necessarily be paying the
lowest spread or commission available. The Adviser seeks to select brokers or
dealers that offer a Fund best price and execution or other services which are
of benefit to the Fund.
The Adviser may, consistent with the interests of the Fund, select brokers on
the basis of the research services they provide to the Adviser. Such services
may include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received by
the Adviser will be in addition to and not in lieu of the services required to
be performed by the Adviser under the Advisory Agreement. If, in the judgment of
the Adviser, a Fund or other accounts managed by the Adviser will be benefited
by supplemental research services, the Adviser is authorized to pay brokerage
commissions to a broker furnishing such services which are in excess of
commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
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publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of the
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information, such services may not be used exclusively, or at all,
with respect to the Fund or account generating the brokerage, and there can be
no guarantee that the Adviser will find all of such services of value in
advising that Fund.
It is expected that the Funds may execute brokerage or other agency transactions
through Robert Fleming Inc. or its affiliates, (each an "affiliated broker")
each of which is a registered broker-dealer, for a commission in conformity with
the 1940 Act, the Securities Exchange Act of 1934 and rules promulgated by the
SEC. Under these provisions, an affiliated broker is permitted to receive and
retain compensation for effecting portfolio transactions for a Fund on an
exchange if a written contract is in effect between the Corporation and the
affiliated broker expressly permitting the affiliated broker to receive and
retain such compensation. These rules further require that commissions paid to
the affiliated broker by a Fund for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." The Directors, including those who are not "interested persons" of the
Corporation, have adopted procedures for evaluating the reasonableness of
commissions paid to the affiliated brokers and will review these procedures
periodically.
Because no Fund markets its shares through intermediary brokers or dealers, it
is not the Funds' practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through such firms. However, the
Adviser may place portfolio orders with qualified broker-dealers who recommend a
Fund's shares to clients, and may, when a number of brokers and dealers can
provide best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker-dealers.
The Adviser serves as investment adviser to other clients and investment
vehicles which may invest in securities of the same issuers as those in which
the Funds invest. The Adviser also may invest for its own account and for the
accounts of its affiliates. Certain of the Adviser's activities may cause it to
come into possession of material, nonpublic information ("inside information")
about an issuer. When the Adviser is in possession of inside information about
an issuer, the Adviser may be unable to cause the Funds to purchase or sell
securities of that issuer until the information is released to the public or is
no longer material. As a result, the Funds may be unable to purchase certain
suitable securities, or sell certain securities that it already owns, at the
most opportune time. In particular, a Fund's inability to sell a security that
it already owns may require the Fund to treat the security as an illiquid
security and may have a negative effect on the Fund's valuation of the security.
Should the Fund already own a significant amount of illiquid securities, it
could be forced to sell other illiquid securities at inopportune times and at
prices below what could theoretically be realized in order to comply with the
Fund's 15% limit on holding illiquid securities.
For the fiscal year ended September 30, 2000, the brokerage commissions paid by
the Mid Cap Value and Small Cap Growth Funds totaled $___ and $___,
respectively. For the fiscal year ended September 30, 1999, the brokerage
commissions paid by the Mid Cap Value and Small Cap Growth Funds totaled $12,966
and $1,977, respectively. For the period ended September 30, 1998, brokerage
commissions paid by the Mid Cap Value and Small Cap Growth Funds' totaled
$10,563 and $1,878, respectively.
B-15
<PAGE>
DESCRIPTION OF SHARES
The Articles of Incorporation authorizes the issuance of an unlimited number of
series and shares of each series. Each share of a series represents an equal
proportionate interest in that series with each other share. Shares are entitled
upon liquidation to a pro rata share in the net assets of the series.
Shareholders have no preemptive rights. All consideration received by the
Corporation for shares of any series and all assets in which such consideration
is invested would belong to that series and would be subject to the liabilities
related thereto. Share certificates representing shares will not be issued.
A Director may be removed by Shareholders at a special meeting called upon
written request of majority of Shareholders entitled to cast votes at the
meeting. If such a meeting is requested, the Corporation will provide
appropriate assistance and information to the Shareholders requesting the
meeting to the extent required by law.
LIMITATION OF DIRECTORS' LIABILITY
The Articles of Incorporation provides that a Director shall be liable only for
his own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person. The Articles of
Incorporation also provides that the Corporation will indemnify its Directors
and officers against liabilities and expenses incurred in connection with actual
or threatened litigation in which they may be involved because of their offices
with the Corporation to the fullest extent permitted by law. However, nothing in
the Articles of Incorporation shall protect or indemnify a Director against any
liability for his willful misfeasance, bad faith, gross negligence or reckless
disregard of his duties.
FINANCIAL INFORMATION
The financial statements as of and for the period ended September 30, _____ have
been audited by _______________, independent auditors, as indicated in their
report dated ________________ with respect thereto, and are contained in the
Annual Report to Shareholders which is incorporated herein by reference to the
Annual Report.
B-16
<PAGE>
As filed with the Securities and Exchange Commission on November 29,2000
Registration No: 333-25803
File No: 811-08189
================================================================================
--------------------------------------------------------------------------------
PART C
of
Form N-1A
Registration Statement
Fleming Mutual Fund Group, Inc.
Fleming Mid Cap Value Fund
Fleming Small Cap Growth Fund
--------------------------------------------------------------------------------
================================================================================
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
FORM N-1A
PART C
ITEM 23. EXHIBITS:
(1) Articles of Incorporation
(a) Agreement and Declaration of Trust.(1)
(b) Articles of Incorporation of Trust.(2)
(c) Articles of Merger of Trust.(2)
(2) (a) By-Laws.(1)
(b) By-Laws.(2)
(3) Instruments Defining Rights of Security Holders - Not applicable.
(4) Investment Advisory Agreement.(3)
(5) Distribution Agreement.(3)
(6) Benefit Plan(s) - Not applicable.
(7) Custodian Agreement.(3)
(8) (a) Administration Agreement.(3)
(b) Transfer Agent Agreement.(3)
(c) Account Services Agreement.(3)
(d) Operating Expense Agreement.(4)
(9) Opinion and Consent of Counsel as to legality of Shares.(4)
(10) Opinion and Consent of Independent Auditors. To be filed
(11) Financial Statements omitted from Item 23 - Not applicable.
(12) Initial Capital Agreements - Not applicable.
(13) Rule 12b-1 Plan - Not applicable.
(14) Financial Data Schedule - No longer required.
(15) Rule 18f-3 Plan - Not applicable.
(16) Code of Ethics
(a) Fleming Mutual Fund Group, Inc. - Filed herewith
(b) Robert Fleming Inc. - Filed herewith
(c) First Fund Distributors, Inc. - Filed herewith
----------
(1) Incorporated by reference to the Form N-1A Registration Statement filed on
April 24, 1997.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 to the Form N-1A
Registration Statement filed on September 30, 1997.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to the Form
N-1A Registration Statement filed on April 30, 1998.
(4) Incorporated by reference to Post-Effective Amendment No. 5 to the Form
N-1A Registration Statement filed on February 1, 2000.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 25. INDEMNIFICATION.
Article VIII of the Articles of Incorporation, filed as Exhibit 1(b) to the
Registration Statement, is incorporated by reference. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to the
Directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable in the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
C-1
<PAGE>
or paid by a Director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Information about Fleming Mutual Fund Group, Inc. is set forth in Part B
under "Management of the Funds."
ITEM 27. PRINCIPAL UNDERWRITER.
(a) First Fund Distributors, Inc. is the principal underwriter for the
following investment companies or series thereof:
Advisors Series Trust
Brandes Investment Funds
Builders Fixed Income Fund, Inc.
Dessauer Global Equity Fund
Fleming Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Guinness Flight Investment Funds
Investors Research Fund, Inc,
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
PIC Investment Trust
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
Rochdale Investment Trust
RNC Mutual Fund Group, Inc.
The Purisima Funds
Trust For Investment Managers
(b) The following information is furnished with respect to the officers of
First Fund Distributors, Inc.:
Name and Principal Position and Offices with Positions and Offices
Business Address* First Fund Distributors, Inc. with Registrant
----------------- ----------------------------- ---------------------
Robert H. Wadsworth President and Treasurer N/A
Steven J. Paggioli Vice President and Secretary Assistant Secretary
Eric M. Banhazl Vice President Assistant Treasurer
----------
* The principal business address of persons and entities listed is 4455 East
Camelback Road, Suite 261E, Phoenix, AZ 85018.
C-2
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(i) and (ii); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be
maintained at the offices of Registrant's Custodian:
Firstar Institutional Custody Services
425 Walnut Street
Cincinnati, OH 45202
(b) With respect to Rules 31a-1(a); 31a-1(b); (2)(iii) and (4), the
required books and records are maintained at the offices of
Registrant's Administrator:
Investment Company Administration, LLC
2020 E. Financial Way
Suite 100
Glendora, CA 91741
(c) With respect to Rules 31a-1(b)(5), (6), (7), (9), (10) and (11) and
31a-1(f), the required books and records are maintained at the
principal offices of the Registrant's Adviser:
Robert Fleming Inc.
320 Park Avenue
New York, NY 10022
(d) With respect to Rules 31a-1(b)(iv) and (8), the required books and
records are maintained at the offices of Registrant's Transfer Agent
and Accounting Services Agent:
Countrywide Fund Services, Inc.
312 Walnut Street
21st Floor
Cincinnati, Ohio 45202
(e) With respect to Rule 31a-1(d), certain required books and records will
be maintained at the offices of the Registrant's Principal
Underwriter:
First Fund Distributors, Inc.
4455 E. Camelback Road
Suite 261E
Phoenix, AZ 85018
ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Parts A
and B.
ITEM 30. UNDERTAKINGS.
(a) Registrant has undertaken to comply with Section 16(a) of the
Investment Company Act of 1940, as amended, which requires the prompt
convening of a meeting of shareholders to elect trustees to fill
existing vacancies in the Registrant's Board of Trustees in the event
that less than a majority of the trustees have been elected to such
position by shareholders. Registrant has also undertaken promptly to
call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee or Trustees when requested in
writing to do so by the record holders of not less than 10 percent of
the Registrant's outstanding shares and to assist its shareholders in
communicating with other shareholders in accordance with the
requirements of Section 16(c) of the Investment Company Act of 1940,
as amended.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
the Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and State of
New York on the 29th day of November, 2000.
Fleming Mutual Fund Group, Inc.
By: /s/ Jonathan K.L. Simon
-----------------------------------
Jonathan K. L. Simon
President
Attest:
/s/ Arthur A. Levy
-----------------------------
Arthur A. Levy, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following person
in the capacities and on the date indicated.
/s/ Jonathan K. L. Simon President and Chairman November 29, 2000
----------------------------- of the Board
Jonathan K. L. Simon
/s/Robert E. Marks* Director November 29, 2000
-----------------------------
Robert E. Marks
/s/ Michael A. Petrino* Director November 29, 2000
-----------------------------
Michael A. Petrino
/s/ Dominic S. Sollly* Director November 29, 2000
-----------------------------
Dominic S. Solly
/s/ Arthur A. Levy Treasurer November 29, 2000
----------------------------- (Chief Financial Officer)
Arthur A. Levy
* By: /s/ Larry A. Kimmel
-----------------------------
Larry A. Kimmel, pursuant to a Power of Attorney as filed
with Post-Effective Amendment No. 1
C-4
<PAGE>
As filed with the Securities and Exchange Commission on November 29, 2000
Registration No: 333-25803
File No: 811-08189
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
and
under
THE INVESTMENT COMPANY ACT OF 1940
Fleming Mutual Fund Group, Inc.
(Exact Name of Registrant as Specified in its Charter)
================================================================================
<PAGE>
Exhibit(s) Index
Exhibit No. Document
----------- --------
99.16(a) Code of Ethics of Fleming Mutual Fund Group, Inc.
(b) Code of Ethics of Robert Fleming Inc.
(c) Code of Ethics of First Fund Distributors, Inc.
