AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION
ON 01/11/99
FILE NOS: 811-08617
333-47541
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [1]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. [7]
(Check appropriate box or boxes.)
HUGHES FUNDS, INC.
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(Exact name of Registrant as Specified in Charter)
741 Cox Road
Moorestown, NJ 08057
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(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
609-234-3903
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MR. CHARLES J. HUGHES
741 COX ROAD
MOORESTOWN, NJ 08057
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(Name and Address of Agent for Service)
Please send copy of communications to:
DAVID D. JONES, ESQUIRE
518 Kimberton Road, # 134
Phoenixville, Pennsylvania 19460
610-718-5381
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Approximate Date of Proposed Public Offering: As soon as practicable following
effective date.
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)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on March 1, 1999 pursuant to paragraph (a)(1)
/ X/ 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 filed post-effective amendment.
Registrant declares hereby that an indefinite number or amount of its securities
has been registered by this Registration Statement.
THE HUGHES MARKET NEUTRAL FUND
CROSS-REFERENCE SHEET
(As required by Rule 495)
Item No. on Form N-1A Caption or Subheading in Prospectus
or Statement of Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Front and Back Cover Pages. Cover Page; Back Cover Page
2. Risk/Return Summary: Investments,
Risks, and Performance. Risk/Return Summary; Fees and Expenses
3. Risk/Return Summary/ Fee Table. Fees and Expenses
4. Investment Objectives, Principal Risk/Return Summary; Investment
Investment Strategies, and Related Objectives and Policies, Risk Factors
Risks
5. Management's Discussion of Not Applicable
Fund Performance
6. Management, Organization and Management of the Fund; Investment
Capital Structure Adviser; General Information
7. Shareholder Information Investing in the Fund; How to Sell
(Redeem) Your Shares; Distribution Fee;
Federal Taxes; General Information;
Dividends and Distributions
8. Distribution Arrangements Distribution Fee;
9. Financial Highlights Information Not Applicable
PART B. STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Not covered in Statement of Additional
Information (covered under Item 6 of
Part A)
12. Description of the Fund and its Investment Policies and Restrictions
Investments and Risks
13. Management of the Fund. Investment Adviser; Directors and
Officers
14. Control Persons and Principal Directors and Officers; Principal
Holders of Securities Holders of Securities
15. Investment Advisory and other Investment Adviser; Custodian; Transfer
Servicies Agent; Administration
16. Brokerage Allocation and Other
Practices Portfolio Transactions
17. Capital Stock and Other Portfolio Transactions
Securities.
18. Purchase, Redemption and Pricing Purchasing and Redeeming Shares
of Securities Being Offered
19. Taxation of the Fund. Tax Information
20. Underwriters Transfer Agent; Administration
and Transfer Agents
21. Calculations of Performance Data. Performance Information
22. Financial Statements Not Applicable.
PART C
Information required to be included in PART C is set forth under the appropriate
Item, so numbered, in PART C of the Registration Statement.
______________________________________________________________________________
PART A
PROSPECTUS
Dated March 31, 1999
The Hughes Market Neutral Fund
(the "Fund")
A Portfolio of Hughes Funds, Inc.
The Fund's investment objective is to achieve capital growth. The Fund is
offered by Hughes Funds, Inc. (the "Company"), an open-end, diversified
management investment company.
The Fund offers three classes of shares so that you can choose the type of
shares that best suits your investment needs. The Fund offers Class A shares,
with a 3.75% front-end sales load, Class C shares,with a continuing annual 12b-1
fee of 1.00%, and a No-Load Class that requires an initial minimum investment
of $5,000.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Anyone who
tells you otherwise is committing a federal crime.
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TABLE OF CONTENTS
Risk/Return Summary
Fees And Expenses
Investment Objectives And Policies
Risk Factors
Investing In The Fund
How To Sell (Redeem) Shares
Dividends and Distributions
Hughes Funds, Inc
Management of the Fund
Fund Service Providers
Federal Taxes
General Information
Distribution Fee
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RISK/RETURN SUMMARY
The Fund's investment objective is capital growth. The Fund seeks to achieve
its objective by investing primarily in a diversified portfolio of common
stocks, options and futures contracts.
In order to achieve the Fund's investment objective, the Adviser will purchase
or sell short equity, debt and index securities that appear to be under- or
over-valued and will take an offsetting position in a related futures or options
contract, thereby creating a "market neutral" hedge. A market neutral hedge is
designed to minimize risk of price losses and achieve capital appreciation
during flat or declining markets as well as in generally rising markets.
However, these investment techniques may be unsuccessful during severe market
corrections.
The principal risks of investing in the Fund are:
1.You may lose money by investing in the Fund. The Fund invests in common
stock, so the Fund will be subject to the risks associated with common stocks,
including price volatility and the creditworthiness of the issuing company.
The stock market trades in a cyclical price pattern, with prices generally
rising or falling over time. These cyclical periods may last for a significant
period of time. The Fund may also sell short. This means that the Fund will
sell securities it does not own in the expectation that it will buy them at a
later time at a lower price. These transactions often require that the Fund
borrow securities until the Fund buys back the security. The fund may
experience difficulties in borrowing securities at an acceptable price, or for
sufficient time periods.
2.The Fund is also subject to the risks of investing in futures and options.
Although the Adviser will invest in futures and options primarily as a tool to
create a hedge against adverse price movements, investing in these instruments
requires skills and knowledge that is different from those associated with
investments in other securities.
3.The Adviser may not be successful in creating a perfect market neutral
hedge. There is always the risk that an offsetting futures or options contract
will not correlate exactly to the underlying security. When that happens,price
movements of the underlying security will not be completely offset by the
related options or futures contract, and losses can occur.
4.This is a new Fund without an operating history, and this may pose
additional risks.
5.The Fund may also invest in a variety of other securities. Accordingly,
you will be subject to the risks associated with those securities, including
the risk of price declines due to market factors and changes to the
creditworthiness of the issuer.
The Fund is appropriate for investors who want capital appreciation and are
willing to accept moderate to high amounts of volatility and risk.
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
Shareholder Transaction Expenses: Class A Class C No-Load
1. Maximum Sales Charges
Imposed on Purchases 3.75% NONE NONE
(as a percentage of offering price)
2. Maximum Deferred Sales Charges NONE NONE NONE
(as a percentage of offering price)
3. Maximum Sales Charges Imposed
On Reinvested Dividends NONE NONE NONE
(as a percentage of net asset value)
4. Redemption Fees NONE NONE NONE
(as a percentage of amount redeemed)
5. Exchange Fees NONE NONE NONE
Annual Fund Operating Expenses: (expenses that are deducted from Fund assets)
This table sets out the regular operating expenses that are paid out of the
Fund's average daily assets. These fees are used to pay for services such as
the investment management of the Fund, maintaining shareholder records and
furnishing shareholder statements.
Class A Class C No-Load
Management Fees* 1.00% 1.00% 1.00%
12b-1 Fees** 0.25% 1.00%*** 0.25%
Other Expenses (estimated) 0.05% 0.05% 0.05%
------- ------- -------
Total Fund Operating Expenses. 1.30% 2.05% 1.30%
* The Adviser has voluntarily agreed to waive its advisory fee and/or to
reimburse the Fund, if necessary, if the advisory fee or expenses would cause
the Total Fund Operating expenses to exceed 1.25% for the Class A or No-Load
Class Shares and 2.00% for the Class C shares. The Adviser may revise or cancel
these expense limitaitons at any time and will notify you of any such change.
** You should be aware that if you hold your shares for a substantial period of
time, you may indirectly pay more than the economic equivalent of the maximum
front-end sales charge allowed by the National Association of Securities Dealers
due to the recurring nature of Distribution (12b-1) fees.
*** Includes a fee of 0.75% for distribution-related expenses and 0.25% for
shareholder service expenses.
Example: This example is intended to help you compare the costs of investing in
the Fund with the costs of investing in other mutual funds.
The Example below assumes that you invest $1,000 in the Fund for the time
periods 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 and that
the Fund's operating expenses that were described above remain the same.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
Time Period Class A Class C No-Load
One Year $14 $22 $14
Three Years $42 $66 $42
Because the Fund does not charge a redemption fee, you would pay the same fees
set forth above even if you did not redeem your shares.
The Fund is required by law to use a 5% assumed annual rate of return in the
example. The Fund's actual annual rate of return may be higher or lower than
the example.
INVESTMENT OBJECTIVES AND POLICIES
Common Stock
The Fund seeks to realize capital appreciation by investing in a diversified
portfolio of common stocks that are, in the Adviser's opinion, undervalued in
the market. Common stock is issued by companies to raise cash for business
purposes and represents a proportionate equity interest in the issuing
companies. Therefore, the Fund participates in the success or failure of any
company in which it holds common stock. The market values of common stock can
fluctuate significantly, reflecting the business performance of the issuing
company, investor perception and general economic or financial market movements.
Smaller companies are especially sensitive to these factors. Despite the risk of
price volatility, however, common stocks historically have offered the greatest
potential for gain on investment, compared to other classes of financial assets.
In choosing common stocks for the Fund's portfolio, the Adviser conducts
extensive fundamental security analysis to develop earnings forecasts and to
identify attractive investment opportunities relative to market valuation.
Individual companies are scrutinized concerning their individual growth
prospects and their competitive positions within their respective industries.
Individual company analysis focuses upon the outlook for sales, profit margins,
returns on capital, cash flow and earnings per share. The Adviser may also
engage in short sales of stocks when the Adviser believes that a stock is
overvalued and poised to decline in price. Short sales require that the Fund
borrow securities during the period when the stock is sold short. At such
times, the Fund may be leveraged.
Futures and Options On Securities
The Fund also seeks to achieve capital appreciation by entering into futures
contracts relating to equity, debt and index securities, writing (i.e. sell)
covered put and call options, and purchasing put and call options, on securities
traded on a United States exchange or properly regulated over-the-counter
market. Such options can include long-term options with durations of up to three
years. The Fund intends to use futures and options transactions to increase or
decrease its exposure to the effects of changes in security prices, to hedge
securities held, to maintain cash reserves while remaining fully invested, to
facilitate trading, to reduce transaction costs, and to seek higher investment
returns when a futures or options contract is priced more attractively than the
underlying security or index.
Risk Factors. The primary risks associated with the use of options and futures
are; (1) imperfect correlation between a change in the value of the underlying
security or index and a change in the price of the option or futures contract,
and (2) the possible lack of a liquid secondary market for an options or futures
contract and the resulting inability of the Fund to close out the position prior
to the maturity date. The risk of imperfect correlation will be minimized by
investing only in those contracts whose price fluctuations are expected to
resemble those of the Fund's underlying securities. The risk that the Fund will
be unable to close out a position will be minimized by entering into such
transactions only on national exchanges and over-the-counter markets with an
active and liquid secondary market.
Under normal circumstances, the Adviser intends to utilize a combination of
common stock, debt and index securities purchases and offsetting futures and
options transactions to create a "market neutral hedge". A market neutral hedge
means that, due to the nature and structure of the offsetting securities
transactions, if the price of the common stock declines, that decline will be
offset by a corresponding rise in the value of the related futures or options
contract, and vice versa. The Adviser believes that investing in this manner
will allow the Fund to achieve capital appreciation in both flat and declining
markets, as well as in generally rising markets. However, you should be aware
that such an investment strategy is potentially risky and involves specialized
investment techniques not traditionally associated with investment companies.
Although the Fund will normally concentrate its investments as described above,
if the Adviser believes that it will help the Fund achieve its investment
objective, the Fund may also invest, without limit, in the following securities:
Preferred Stock
The Fund may invest in preferred stock. Preferred stock generally pays dividends
at a specified rate and generally has preference over common stock in the
payments of dividends and the liquidation of the issuer's assets. Dividends on
preferred stock are generally payable at the discretion of the issuer's board of
directors. Accordingly, Shareholders may suffer a loss of value if dividends are
not paid. The market prices of preferred stocks are also sensitive to changes in
interest rates and in the issuer's creditworthiness. Accordingly, shareholders
may experience a loss of value due to adverse interest rate movements or a
decline in the issuer's credit rating.
Foreign Securities
The Fund may invest in securities of foreign issuers which are publicly traded
on U.S. exchanges either directly or in the form of American Depository Receipts
(ADRs). The Fund will only invest in ADRs that are issuer sponsored. Sponsored
ADRs typically are issued by a U.S. bank or trust company and evidence ownership
of underlying securities issued by a foreign corporation. Investments in
foreign securities involve greater risks compared to domestic investments.
Foreign companies are not subject to the regulatory requirements of U.S.
companies and, as such, there may be less publicly available information about
issuers than is available in the reports and ratings published about companies
in the U.S. Additionally, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards. Dividends and interest
on foreign securities may be subject to foreign withholding taxes. Such taxes
may reduce the net return to shareholders. Although the Fund intends to invest
in securities of foreign issuers domiciled in nations which the Adviser
considers as having stable and friendly governments, there is the possibility of
expropriation, confiscation, taxation, currency blockage or political or social
instability which could affect investments of foreign issuers domiciled in such
nations.
Real Estate Investment Trusts
The Fund may invest in real estate investment trusts (REITs). Equity REITs
invest directly in real property while mortgage REITs invest in mortgages on
real property. REITs may be subject to certain risks associated with the direct
ownership of real estate including declines in the value of real estate, risks
related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, and variations
in rental income. REITs pay dividends to their shareholders based upon available
funds from operations. It is quite common for these dividends to exceed the
REITs taxable earnings and profits resulting in the excess portion of such
dividends being designated as a return of capital. The Fund intends to include
the gross dividends from such REITs in its distribution to its shareholders
and, accordingly, a portion of the Fund's distributions may also be designated
as a return of capital.
Money Market Funds
The Fund may invest in securities issued by other registered investment
companies that invest in short-term debt securities (i.e., money market fund).
As a shareholder of another registered investment company, the Fund would bear
its pro rata portion of that company's advisory fees and other expenses. Such
fees and expenses will be borne indirectly by the Fund's shareholders. The Fund
may invest in such instruments to the extent that such investments do not exceed
10% of the Funds net assets and/or 3% of any one investment company's
outstanding securities.
Restricted And Illiquid Securities
The Fund will not invest more than 15% of its net assets in securities that the
Advisor determines, under the supervision of the Board of Directors, to be
illiquid and/or restricted. Illiquid securities may be difficult to sell
promptly at an acceptable price because of lack of available market and other
factors. The sale of some illiquid and other types of securities may be subject
to legal restrictions.
When-Issued Securities And Delayed-Delivery Transactions
The Fund may purchase securities on a when-issued basis, and it may purchase or
sell securities for delayed-delivery. These transactions occur when securities
are purchased or sold by the Fund with payment and delivery taking place at some
future date. The Fund may enter into such transactions when, in the Advisor's
opinion, doing so may secure an advantageous yield and/or price to the Fund that
might otherwise be unavailable. The Fund has not established any limit on the
percentage of assets it may commit to such transactions, but to minimize the
risks of entering into these transactions, the Fund will maintain a segregated
account with its Custodian consisting of cash, cash equivalents, U.S. Government
Securities or other high-grade liquid debt securities, denominated in U.S.
dollars or non-U.S. currencies, in an amount equal to the aggregate fair market
value of its commitments to such transactions.
Money Market Instruments
During periods when the Fund's Adviser deems it advisable for the Fund to be in
a defensive posture, the Fund may invest, without limit, in "money market
instruments," a term that includes, among other things, bank obligations (which
include U.S. Dollar denominated certificates of deposit, bankers acceptances and
time deposits issued or supported by the credit of U.S. or foreign banks or
savings institutions having total assets at the time of purchase in excess of $1
billion), commercial paper, obligations of the U.S. Government, its agencies and
instrumentalities, and repurchase agreements backed by U.S. Government
securities.
RISK FACTORS
You may lose money by investing in the Fund. The likelihood of loss is greater
if you invest for a shorter period of time. The Fund intends to engage in
certain aggressive investment techniques, which may include engaging in short
sales and transactions in futures contracts and options on securities. The Fund
has no operating history, and the Adviser has no previous experience advising
this type of mutual fund.
The value of the Fund's investments will vary from day-to-day, reflecting
changes in market conditions, interest rates and other company, political, and
economic news. Over the short-term, stock prices can fluctuate dramatically in
response to these factors. However, over longer time periods, stocks, although
more volatile, have historically shown greater growth potential than other
investments. There is no assurance that the Fund can achieve its investment
objective, since all investments are inherently subject to market risk.
A complete listing of the Fund's investment restrictions, including those that
may be changed only by a vote of the Fund's shareholders, may be found in the
Statement of Additional Information ("SAI") for the Fund.
INVESTING IN THE FUND
Opening And Adding To Your Account
You can invest directly in the Fund in a number of ways. Simply choose the one
that is most convenient for you. Any questions you may have can be answered by
calling 1-800-446-2987. You may also purchase Fund shares through broker-dealers
or other financial organizations.
Payments for Fund shares should be in U.S. dollars, and in order to avoid fees
and delays, should be drawn on a U.S. bank. Please remember that Fund
management reserves the right to reject any purchase order for Fund shares.
Your purchase of Fund shares is subject to the following minimum investment
amounts:
Minimum Investment To Open Account Additional Investments
Class A Shares
Regular Account $2,500 $1000
IRAs $1,000 $500
Class C Shares
Regular Account $2500 $1000
IRAs $1000 $500
No-Load Shares
Regular Accounts $5,000 $1000
IRAs $ 1,000 $500
TO OPEN AN ACCOUNT TO ADD TO ACCOUNT
By Mail Complete an Account Make your check payable to
Registration Form, make The Hughes Market Neutral Fund and
a check payable to The mail it to the address at left.
Hughes Market Neutral Fund
and mail the Form and check
to Hughes Funds, Inc. Please include your account
c/o Mutual Shareholder number on your check.
Services, 1301 East Ninth Or use the convenient form
Street, Suite 3600, Cleveland, attached to your regular
OH 44114. Fund statement.
Hughes Funds, Inc. wants you to be kept current regarding the status of your
account in the Fund. To assist you, the following statements and reports will
be sent to you:
Confirmation Statements After every transaction that affects your
account balance or your account registration.
Financial Reports Semi-annually -- to reduce Fund expenses, only
one copy of the Fund report will be mailed
to each taxpayer identification number even if
you have more than one account in the Fund.
Purchase By Mail
Your purchase order, if in proper form and accompanied by payment, will be
processed upon receipt by Mutual Shareholder Services, the Fund's Transfer
Agent. If the Transfer Agent receives your order and payment by the close of
regular trading on the Exchange (currently 4:00 p.m. East Coast time), your
shares will be purchased at the Fund's net asset value calculated at the close
of regular trading on that day. Otherwise, your shares will be purchased at the
net asset value determined as of the close of regular trading on the next
business day.
The Company does not consider the U.S. Postal Service or any other independent
delivery service to be its agent. Therefore, deposit in the mail or with such
services, or receipt at Mutual Shareholder Services Post Office Box, of
purchase applications or redemption requests does not constitute receipt by the
Custodian or the Fund. Do not mail letters by overnight courier to the post
office box address. Correspondence mailed by overnight courier should be sent
to the Fund at:
Mutual Shareholder Services
1301 East Ninth Street, Suite 3600
Cleveland, OH 44114
All applications to purchase shares of the Fund are subject to acceptance or
rejection by authorized officers of the Company and are not binding until
accepted. Applications will not be accepted unless they are accompanied by
payment in U.S. funds. Payment must be made by check or money order drawn on a
U.S. bank, savings & loan or credit union. The Custodian will charge a $20.00
fee against your account, in addition to any loss sustained by the Fund, for any
payment check returned to the Custodian for insufficient funds. The Company
reserves the right to refuse to accept applications under circumstances or in
amounts considered disadvantageous to shareholders. If you place an order for
Fund shares through a securities broker, and you place your order in proper form
before 4:00 p.m. East Coast time on any business day in accordance with their
procedures, your purchase will be processed at the public offering price
calculated at 4:00 p.m. on that day, if the securities broker then transmits
your order to the Transfer Agent before the end of its business day (which is
usually 5:00 p.m. East Coast time). The securities broker must send to the
Transfer Agent immediately available funds in the amount of the purchase price
within three business days for the order.
By Financial Service Organization
If you are a client of a securities broker or other financial organization, you
should note that such organizations may charge a separate fee for administrative
services in connection with investments in Fund shares and may impose account
minimums and other requirements. These fees and requirements would be in
addition to those imposed by the Fund. If you are investing through a
securities broker or other financial organization, please refer to its program
materials for any additional special provisions or conditions that may be
different from those described in this Prospectus (for example, some or all of
the services and privileges described may not be available to you). Securities
brokers and other financial organizations have the responsibility of
transmitting purchase orders and funds, and of crediting their customers'
accounts following redemptions, in a timely manner in accordance with their
customer agreements and this Prospectus.
Telephone Purchases
In order to be able to purchase shares by telephone, your account authorizing
such purchases must have been established prior to your call. Your initial
purchase of shares may not be made by telephone. Shares purchased by telephone
will be purchased at the per share net asset value determined at the close of
business on the day that the transfer agent receives payment through the
Automatic Clearing House. Call the Transfer Agent for details.
You may make purchases by telephone only if you have an account at a bank that
is a member of the Automated Clearing House. Most transfers are completed
within three business days of your call. To preserve flexibility, the Company
may revise or eliminate the ability to purchase Fund shares by phone, or may
charge a fee for such service, although the Company does not currently expect to
charge such a fee.
Mutual Shareholder Services, the Fund's transfer agent, employs certain
procedures designed to confirm that instructions communicated by telephone are
genuine. Such procedures may include, but are not limited to, requiring some
form of personal identification prior to acting upon telephonic instructions,
providing written confirmations of all such transactions, and/or tape recording
all telephonic instructions. Assuming procedures such as the above have been
followed, neither the Transfer Agent nor the Fund will be liable for any loss,
cost, or expense for acting upon telephone instructions that are believed to be
genuine. The Company shall have authority, as your agent, to redeem shares in
your account to cover any such loss. As a result of this policy, you will bear
the risk of any loss unless the Fund has failed to follow procedures such as the
above. However, if the Fund fails to follow such procedures, it may be liable
for such losses.
Wire Purchases
If you purchase Fund shares by wire, you must complete and file an Account
Registration Form with the Transfer Agent before any of the shares purchased can
be redeemed. You should contact your bank (which will need to be a commercial
bank that is a member of the Federal Reserve System) for information on sending
funds by wire, including any charges that your bank may make for these services.
Miscellaneous Purchase Information
Federal regulations require that you provide a certified taxpayer identification
number whenever you open or reopen an account. Congress has mandated that if
any shareholder fails to provide and certify to the accuracy of the
shareholder's social security number or other taxpayer identification number,
the Company will be required to withhold a percentage, currently 31%, of all
dividends, distributions and payments, including redemption proceeds, to such
shareholder as a backup withholding procedure.
For economy and convenience, share certificates will not be issued.
The public offering price for Class C and No-Load shares of the Fund is based
upon the Fund's net asset value per share. Net asset value per share is
calculated by adding the value of Fund investments, cash and other assets,
subtracting Fund liabilities, and then dividing the result by the number of
shares outstanding. The assets of the Fund are valued at market value or, if
market quotes cannot be readily obtained, fair value is used as determined by
the Board of Directors. The net asset value of the Fund's shares is computed
on all days on which the New York Stock Exchange is open for business at the
close of regular trading hours on the Exchange, currently 4:00 p.m. East Coast
time. The public offering price for Class A shares is the NAV plus a sales
charge of 3.75% of your investment.
HOW TO SELL (REDEEM) YOUR SHARES
You may sell (redeem) your shares at any time. You may request the sale of your
shares either by mail, by telephone or by wire.
By Mail
Sale requests should be mailed via U.S. mail or overnight courier service to:
Mutual Shareholder Services
1301 East Ninth Street, Suite 3600
Cleveland, OH 44114
The selling price of the shares being redeemed will be the Fund's per share net
asset value next calculated after receipt of all required documents in Good
Order. Payment of redemption proceeds will be made no later than the third
business day after the valuation date unless otherwise expressly agreed by the
parties at the time of the transaction.
Good Order means that the request must include:
1. Your account number.
2. The number of shares to be sold (redeemed) or the dollar value of the
amount to be redeemed.
3. The signatures of all account owners exactly as they are registered on the
account.
4. Any required signature guarantees.
5. Any supporting legal documentation that is required in the case of estates,
trusts, corporations or partnerships and certain other types of accounts.
Signature Guarantees --
A signature guarantee of each owner is required to redeem shares in the
following situations, for all size transactions:
i) if you change the ownership on your account;
ii) when you want the redemption proceeds sent to a different address than is
registered on the account;
iii) if the proceeds are to be made payable to someone other than the account's
owner(s);
iv) any redemption transmitted by federal wire transfer to your bank; and
v) if a change of address request has been received by the Company or
Declaration Service Company within 15 days previous to the request for
redemption.
In addition, signature guarantees are required for all redemptions of $2,500 or
more from any Fund shareholder account. A redemption will not be processed
until the signature guarantee, if required, is received in Good Order.
Signature guarantees are designed to protect both you and the Fund from fraud.
To obtain a signature guarantee, you should visit a bank, trust company, member
of a national securities exchange or other broker-dealer, or other eligible
guarantor institution. (Notaries public cannot provide signature guarantees.)
Guarantees must be signed by an authorized person at one of these institutions,
and be accompanied by the words "Signature Guarantee."
By Telephone
You may redeem your shares in the Fund by calling the Transfer Agent at 1-800-
446-2987 if you elected to use telephone redemption on your account application
when you initially purchased shares. Redemption proceeds must be transmitted
directly to you or to your pre-designated account at a domestic bank. You may
not redeem by telephone if a change of address request has been received by the
Company or the Transfer Agent within 15 days previous to the request for
redemption. During periods of substantial economic or market changes,
telephone redemptions may be difficult to implement. If you are unable to
contact the Transfer Agent by telephone, shares may be redeemed by delivering
the redemption request in person or by mail. You should understand that with
the telephone redemption option, you may be giving up a measure of security that
you might otherwise have had were you to redeem your shares in writing. In
addition, interruptions in telephone service may mean that you will be unable to
effect a redemption by telephone if desired.
Shares purchased by check for which a redemption request has been received will
not be redeemed until the check or payment received for investment has cleared.
By Wire
You may request the redemption proceeds be wired to your designated bank if it
is a member bank or a correspondent of a member bank of the Federal Reserve
System. A $10 fee is charged for outgoing wires.
Redemption At The Option Of The Fund
If the value of the shares in your account falls to less than $1000, the Company
may notify you that, unless your account is increased to $1000 in value, it
will redeem all your shares and close the account by paying you the redemption
proceeds and any dividends and distributions declared and unpaid at the date of
redemption. You will have thirty days after notice to bring the account up to
$1000 before any action is taken. This minimum balance requirement does not
apply to IRAs and other tax-sheltered investment accounts. This right of
redemption shall not apply if the value of your account drops below $1000 as the
result of market action. The Company reserves this right because of the expense
to the Fund of maintaining very small accounts.
DIVIDENDS AND DISTRIBUTIONS
Dividends paid by the Fund are derived from its net investment income. Net
investment income will be distributed at least annually. The Fund's net
investment income is made up of dividends received from the stocks it holds, as
well as interest accrued and paid on any other obligations that might be held in
its portfolio.
The Fund realizes capital gains when it sells a security for more than it paid
for it. The Fund may make distributions of its net realized capital gains
(after any reductions for capital loss carryforwards), generally, once a year.
Unless you elect to have your distributions paid in cash, your distributions
will be reinvested in additional shares of the Fund. You may change the manner
in which your dividends are paid at any time by writing to Mutual Shareholder
Services,1301 East Ninth Street, Suite 3600, Cleveland, OH 44114.
HUGHES FUNDS, INC.
Hughes Funds, Inc was organized on December 15, 1997 as a Maryland
corporation, and is a mutual fund of the type known as an open-end, diversified
management investment company. It did not begin operations until 1998 nor
commence offering its shares until that time. A mutual fund permits an investor
to pool his or her assets with those of others in order to achieve economies of
scale, take advantage of professional money managers and enjoy other advantages
traditionally reserved for large investors. It is authorized to issue
100,000,000 shares of .001 cent par value common capital stock. The
Company's Articles of Incorporation permit its Board of Directors to classify
any unissued shares into one or more classes of shares. The Board has
authorized the issuance of 25,000,000 shares of The Hughes Market Neutral
Fund, which are offered by this prospectus. The Fund shares are fully paid and
non-assessable. They are entitled to such dividends and distributions as may be
paid with respect to the shares and shall be entitled to such sums on
liquidation of the Fund as shall be determined. Other than these rights,
they have no preference as to conversion, exchange, dividends, retirement
or other features and have no preemption rights.
Shareholder meetings will not be held unless required by Federal or State law or
in connection with an undertaking given by the Fund (See Statement of
Additional Information).
MANAGEMENT OF THE FUND
The business affairs of the Fund are managed under the general supervision of a
Board of Directors.
Investment Adviser
Management Agreements: The Company has entered into an Investment Advisory
Contract (the "Contract") with Hughes Investment Advisors LLC, (the "Adviser"),
741 Cox Road, Moorestown NJ 08057. Charles J Hughes is the president of and
controls the Adviser and is responsible for all its investment decisions,
including the day-to-day management of the Fund. Mr. Hughes also serves as the
President and as a Director of the Company. The Adviser manages the investment
of the assets of the Fund in accordance with the Fund's investment objective,
policies, and restrictions. The Adviser was formed on December 9, 1997 and
registered as an Investment Advisory Firm with the Securities and Exchange
Commission on March 13, 1998. The Advisor formerly operated as Hughes Trading
L.L.C., and developed financial futures and timing model software for equity
trading. In addition, Mr. Hughes has been a commercial airline pilot for
American Airlines since 1988. Although Mr. Hughes has extensive experience
managing portfolios for himself and his family, Mr. Hughes does not have any
previous experience in providing investment management services to any
registered investment company.
The Adviser receives from the Fund, as compensation for its services, a fee,
accrued daily and payable monthly, at an annual rate of 0.50% of the Fund's net
assets.
Operating Services Agreement; the Company has also entered into an Operating
Services Agreement with the Adviser where the Adviser will provide, or arrange
to provide, essentially all other services needed to the Fund. These services
include transfer agent, accounting, distribution and custodial services. The
effect of the Investment Advisory Agreement and the Operating Services Agreement
is to cap the Fund's normal operating expenses. These contracts do not cover
expenses incurred by the Fund for taxes, interest, brokerage fees, legal
expenses for litigation, and other extraordinary expenses.
The Adviser receives from the Fund, as compensation for its services, a fee,
accrued daily and payable monthly, at an annual rate of 0.50% of the Fund's net
assets.
Under these agreements, the Adviser furnishes at its own expense office space to
the Company and all necessary office facilities, equipment, and personnel for
managing the assets of the Fund. The Adviser also pays all expenses of marketing
shares of the Fund, and related bookkeeping.
FUND SERVICE PROVIDERS
The Fund could not function without the services provided by certain companies.
With the Board's permission, the Adviser and the Fund have entered into
contracts with the following companies. All fees charged by these companies
will be paid by the Adviser.
Custodian
Fifth Third National Bank, N.A., Cincinnati, Ohio, holds the investments and
other assets that the Fund owns. The Custodian is responsible for receiving
and paying for securities purchased, delivering against payment securities
sold, receiving and collecting income from investments, making all payments
covering expenses of the Fund, and performing other administrative duties, all
as directed by persons authorized by the Fund. The Custodian does not exercise
any supervisory function in such matters as the purchase and sale of portfolio
securities, payment of dividends, or payment of expenses of the Fund.
Portfolio securities of the Fund are maintained in the custody of the
Custodian, and may be entered in the Federal Reserve Book Entry System, or the
security depository system of The Depository Trust Company.
Transfer, Dividend Disbursing And Accounting Services Agent
Mutual Shareholder Services provides transfer agency and dividend disbursing
services for the Fund. This means that its job is to maintain, accurately, the
account records of all shareholders in the Fund as well as to administer the
distribution of income earned as a result of investing in the Fund. Mutual
Shareholders Services also provides accounting services to the Fund including
portfolio accounting services, expense accrual and payment services, valuation
and financial reporting services, tax accounting services and compliance control
services.
FEDERAL TAXES
As with any investment, you should consider the tax implications of an
investment in the Fund. The following is only a short summary of the important
tax considerations generally affecting the Fund and its shareholders. You should
consult your tax adviser with specific reference to your own tax situation.
The Fund intends to qualify and maintain its qualification as a "regulated
investment company" under the Internal Revenue Code (hereafter the "Code"),
meaning that to the extent a fund's earnings are passed on to
shareholders as required by the Code, the Fund itself is not required to pay
federal income taxes on the earnings. Accordingly, the Fund will pay dividends
and make such distributions as are necessary to maintain its qualification as a
regulated investment company under the Code.
Before you purchase shares of the Fund, you should consider the effect of both
dividends and capital gain distributions that are expected to be declared or
that have been declared but not yet paid. When the Fund makes these payments,
its share price will be reduced by the amount of the payment, so that you will
in effect have paid full price for the shares and then received a portion of
your price back as a taxable dividend distribution.
The Fund will notify you annually as to the tax status of dividend and capital
gains distributions paid by the Fund. Such dividends and capital gains may
also be subject to state and local taxes.
You may realize a taxable gain or loss when redeeming shares of the Fund
depending on the difference in the prices at which you purchased and sold the
shares.
Because your state and local taxes may be different than the federal taxes
described above, you should see your tax adviser regarding these taxes.
GENERAL INFORMATION
Total return for the Fund may be calculated on an average annual total return
basis or an aggregate total return basis. Average annual total return reflects
the average annual percentage change in value of an investment over the
measuring period. Aggregate total return reflects the total percentage change in
value of an investment over the measuring period. Both measures assume the
reinvestment of dividends and distributions.
Total return of the Fund may be compared to those of mutual funds with
similar investment objectives and to bond, stock or other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor mutual fund performance.
DISTRIBUTION FEE
The Fund has adopted a distribution plan (the "Distribution Plan"), pursuant to
which the Fund may incur shareholder servicing expenses of up to .25% per
annum of the Fund's average daily net assets on all of its share classes
The Fund has also adopted a distribution plan (the "Distribution Plan"),
pursuant to which the Fund may incur distribution expenses of up to .75% per
annum of the Fund's average daily net assets on its Class C shares. This fee is
available to broker, dealers and other persons who provide distribution and
other services to the Fund to help sell Class C shares.
The Distribution Plans provide that the Fund may finance activities which are
primarily intended to result in the sale of the Fund's shares, including but not
limited to, advertising, printing of prospectuses and reports for other than
existing shareholders, preparation and distribution of advertising materials and
sales literature, and payments to dealers and shareholder servicing agents.
Year 2000 Risks: As with other mutual funds, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Adviser and the Fund's other
service providers don't properly process and calculate date-related information
and data from and after January 1, 2000. This is commonly known as the "Year
2000" or "Y2K" problem. The Adviser is taking steps to address the Y2K problem
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Fund's other major service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund.
FOR MORE INFORMATION
Statement of Additional By Mail:
Information (SAI)
Hughes Funds, Inc.
The SAI contains more detailed c/o Mutual Shareholder Services
Information on all aspects of the 1301 East Ninth Street, Suite 3600
Fund. A current SAI, dated march 31, Cleveland, OH 44114
1999, has been filed with the SEC
and is incorporated by reference By Phone: 1-800-446-2987
into (is legally a part of) this
prospectus.
To request a free copy of the SAI,
Please contact the Fund: Or you may view or obtain these
documents from the SEC.
In person: at the SEC's Public
Reference Room in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section,
Securities and Exchange Commission,
Washington, D.C. 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
The Hughes Market Neutral Fund
c/o Mutual Shareholder Services
1301 East Ninth Street, Suite 3600
Cleveland, OH 44114
1-800-446-2987
Investment Company Act No.
811-08617
STATEMENT OF ADDITIONAL INFORMATION
Dated March 31, 1999
THE HUGHES MARKET NEUTRAL FUND
741 Cox Road
Moorestown NJ 08057
This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Prospectus of
Hughes Growth and Income Fund, Inc., dated March 31, 1999.
Requests for copies of the Prospectus should be made by
writing to Hughes Funds, Inc., 741 Cox Road, Moorestown NJ
08057 or by calling 609-234-3903.
TABLE OF CONTENTS
Investment Policies and Restrictions Custodian
Investment Adviser Transfer Agent
Directors and Officers Administration
Performance Information Independent Accountants
Purchasing and Redeeming Shares Independent Auditors Report*
Tax Information Financial Statements*
Portfolio Transactions Principal Holders of Securities
* to be filed by amendment
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objective and the manner in which the
Fund pursues its investment objective is discussed in the
prospectus. The Fund's investment limitations and
restrictions are listed below:
The Fund will not:
1. To the extent of 75% of its assets (valued at time of
investment), invest more than 5% of its assets in securities
of any one issuer, except in obligations of the United
States Government and its agencies and instrumentalities;
2. Acquire securities of any one issuer that at the time of
investment (a) represent more than 10% of the voting
securities of the issuer or (b) have a value greater than
10% of the value of the outstanding securities of the
issuer;
3. Borrow money except from banks for temporary or emergency
purposes in amounts not exceeding 5% of the value of the
Fund's assets at the time of borrowing;
4. Underwrite the distribution of securities of other
issuers, or acquire "restricted" securities that, in the
event of a resale, might be required to be registered under
the Securities Act of 1933;
5. Make margin purchases of equity securities;
6. Invest in companies for the purpose of management or the
exercise of control;
7. Lend money (but this restriction shall not prevent the
Fund from investing in debt securities or repurchase
agreements).
8. Acquire or retain any security issued by a company, an
officer or director of which is an officer or director of
the Company or an officer, director or other affiliated
person of the Advisor.
9. Invest in oil, gas or other mineral exploration or
development programs, although it may invest in marketable
securities of companies engaged in oil, gas or mineral
exploration;
10. Purchase or sell real estate or real estate loans or
real estate limited partnerships, although it may invest in
marketable securities of companies that invest in real
estate or interests in real estate.
11. Purchase warrants on securities.
12. Issue senior securities.
13. Invest in commodities, or futures and options on commodities.
14. Invest more than 25% of its net assets (valued at the
time of investment) in securities of any one industry.
Restrictions 1 through 14 listed above are fundamental
policies, and may be changed only with the approval of a
"majority of the outstanding voting securities" of the Fund
as defined in the Investment Company Act of 1940.
The Fund has also adopted the following restrictions that
may be changed by the Board of Directors without shareholder
approval:
The Fund may not:
a. Invest more than 15% of its net assets in securities that
are not readily marketable;
b. Acquire securities of other investment companies except (a) by purchase in
the open market, where no commission or profit to a sponsor or dealer results
from such purchase other than the customary broker's commission and (b) where
acquisition results from a dividend or merger,consolidation or other
reorganization (in addition to this investment restriction, the Investment
Company Act of 1940 provides that the Fund may neither purchase more
than 3% of the voting securities of any one investment company
nor invest more than 10% of the Funds assets (valued at time of investment)
in all investment company securities purchased by the Fund);
c. Pledge, mortgage or hypothecate its assets, except for temporary or emergency
purposes and then to an extent not greater than 5% of its total assets at
cost;
INVESTMENT ADVISER
Information on the Fund's investment adviser, Hughes
Investment Advisors LLC, is set forth in the prospectus.
The adviser is a New Jersey Limited Liability Company.
Charles J Hughes is the President with a 51% interest in the
company and his brother Daniel J Hughes is a member of the
company with a 49% interest. Although Mr. Hughes
has extensive experience in managing personal investment
portfolios for himself and his family, he does not have any
previous experience in providing investment management
services to any registered investment company.
The Advisory Agreement provides that the adviser shall not
be liable for any loss suffered by the Fund or its
shareholders as a consequence of any act or omission in
connection with services under the Agreement, except by
reason of the adviser's willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations
and duties under the Advisory Agreement.
The Advisory Agreement expires on March 31, 2001, but may be
continued from year to year so long as its continuance is
approved annually (a) by the vote of a majority of the
Directors of the Fund who are not "interested persons" of
the Fund or the adviser cast in person at a meeting called
for the purpose of voting on such approval, and (b) by the
Board of Directors as a whole or by the vote of a majority
(as defined in the 1940 Act) of the outstanding shares of
the Fund. The Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
DIRECTORS AND OFFICERS
The board of directors has overall responsibility for
conduct of the Company's affairs. The day-to-day operations
of the Fund are managed by the Advisor subject to the bylaws
of the Company and review by the Board of Directors. The
directors of the Company, including those directors who are
also officers, are listed below:
Name, Age, Address, Position Principal Occupation For the
with Fund Last Five Years
Charles J Hughes Age 48 * Fund Adviser
741 Cox Road President Hughes Trading LLC since
Moorestown NJ 08057 February, 1996. Pilot for American
President, Treasurer & Director Airlines since 1988.
BA Degree LaSalle University
Frank G Solecki Age 52 Director of Manufacturing PCD
48 Cove Road Division of FMC Corporation
Moorestown NJ 08057 BS Degree Penn State University
Secretary and Director
Neal K Smith Age 47 Sales Engineer for Del-Val
144 Knotty Oak Dr. Equipment, Inc.
Mount Laurel NJ 08054 BS Degree Grove City College
Director
* Indicates an "interested person" as defined in the
Investment Company Act of
1940.
The Corporation was organized as a Maryland Corporation on
December 15, 1997. The table below sets forth the
compensation anticipated to be paid by the Corporation to
each of the directors of the Corporation during the fiscal
year ending June 30, 1999.
Name of Director Compensation Pension Annual Total Compensation
from Corp. Benefits Benefits Paid to Director
Charles J Hughes 0 0 0 0
Frank G Solecki $500 0 0 $500
Neal K Smith $500 0 0 $500
PRINCIPAL HOLDERS OF SECURITIES
Charles J Hughes and Daniel J. Hughes intend to purchase all
of the outstanding shares of the Fund prior to the effective
date of the Fund's registration and will be deemed initially
to control the Fund.
The Company will call a meeting of shareholders for the
purpose of voting upon the question of removal of a director
or directors when requested in writing to do so by record
holders of at least 10% of the Fund's outstanding common
shares. The Corporation's bylaws contain procedures for the
removal of directors by its stockholders. At any meeting of
stockholders, duly called and at which a quorum is present,
the stockholders may by the affirmative vote of the holders
of a majority of the votes entitled to be cast thereon,
remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for
the unexpired terms of the removed directors.
PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures.
"Total Return" for a period is the percentage change in
value during the period of an investment in Fund shares,
including the value of shares acquired through reinvestment
of all dividends and capital gains distributions. "Average
Annual Total Return" is the average annual compounded rate
of change in value represented by the Total Return
Percentage for the period.
Average Annual Total Return is computed as follows: P(1+T)[n] = ERV
Where: P =a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of shares at the end of the period
Yield. The Fund may advertise performance in terms of a 30-
day yield quotation. The 30-day yield quotation is computed
by dividing the net investment income per share earned
during the period by the maximum offering price per share on
the last day of the period, according to the following
formula:
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 average daily number of shares outstanding during the
period that they were entitled to receive dividends
d = the maximum offering price per share
on the last day of the period
Income taxes are not taken into account. The Fund's
performance is a function of conditions in the securities
markets, portfolio management, and operating expenses.
Although information such as that shown above is useful in
reviewing the Fund's performance and in providing some basis
for comparison with other investment alternatives, it should
not be used for comparison with other investments using
different reinvestment assumptions or time periods.
In sales literature, the Fund's performance may be compared
with that of market indices and other mutual funds. In
addition to the above computations, the Fund might use
comparative performance as computed in a ranking determined
by Lipper Analytical Services, Morningstar, Inc., or that of
another service.
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Fund's
prospectus.
Redemptions will be made at net asset value. The Fund's net
asset value is determined on days on which the New York
Stock Exchange is open for trading.
TAX INFORMATION
Taxation Of The Fund. The Fund intends to qualify as a
"regulated investment company" under Subchapter M of the
Internal Revenue Code. To qualify as a regulated investment
company, the Fund must, among other things, derive at least
90% of its gross income from dividends, interest, payments
with respect to securities loans, gains from the sale or
other disposition of stock, securities, or other income
derived with respect to its business of investing in such
stock or securities.
If the Fund qualifies as a regulated investment company and
distributes at least 90% of its net investment income, the
Fund will not be subject to Federal income tax on the income
so distributed. However, the Fund would be subject to
corporate income tax on any undistributed income other than
tax-exempt income from municipal securities.
Taxation Of The Shareholder. Taxable distributions
generally are included in a shareholder's gross income for
the taxable year in which they are received. However,
dividends declared in October, November and December and
made payable to shareholders of record in such month will be
deemed to have been received on December 31st if paid by the
Fund during the following January.
Distributions by the Fund will result in a reduction in the
fair market value of the Fund's shares. Should a
distribution reduce the fair market value below a
shareholder's cost basis, such distribution would be taxable
to the shareholder as ordinary income or as a long-term
capital gain, even though, from an investment standpoint, it
may constitute a partial return of capital. In particular,
investors should be careful to consider the tax implications
of buying shares of the Fund just prior to a distribution.
The price of such shares include the amount of any
forthcoming distribution so that those investors may receive
a return of investment upon distribution which will,
nevertheless, be taxable to them.
A redemption of shares is a taxable event and, accordingly,
a capital gain or loss may be recognized. Each investor
should consult a tax advisor regarding the effect of
federal, state, local, and foreign taxes on an investment in
the Fund.
Dividends. A portion of the Fund's income may qualify for
the dividends-received deduction available to corporate
shareholders to the extent that the Fund's income is derived
from qualifying dividends. Because the Fund may earn other
types of income, such as interest, income from securities
loans, non-qualifying dividends, and short-term capital
gains, the percentage of dividends from the Fund that
qualifies for the deduction generally will be less than
100%. The Fund will notify corporate shareholders annually
of the percentage of Fund dividends that qualifies for the
dividend received deductions.
A portion of the Fund's dividends derived from certain U.S.
Government obligations may be exempt from state and local
taxation. Short-term capital gains are distributed as
dividend income. The Fund will send each shareholder a
notice in January describing the tax status of dividends and
capital gain distributions for the prior year.
Capital Gain Distribution. Long-term capital gains earned
by the Fund from the sale of securities and distributed to
shareholders are federally taxable as long-term capital
gains, regardless of the length of time shareholders have
held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the Fund, and such
shares are held six months or less and are sold at a loss,
the portion of the loss equal to the amount of the long-term
capital gain distribution will be considered a long-term
loss for tax purposes. Short-term capital gains distributed
by the Fund are taxable to shareholders as dividends, not as
capital gains.
PORTFOLIO TRANSACTIONS
The Fund will generally purchase and sell securities without
regard to the length of time the security has been held.
Accordingly, it can be expected that the rate of portfolio
turnover may be substantial. Since investment decisions are
based on the anticipated contribution of a security to the
Fund's investment objective, the rate of portfolio turnover
is not a factor when the Adviser believes a change is in
order to achieve those objectives. The Fund expects that
its annual portfolio turnover rate will not exceed 100% under
normal conditions. However, there can be no assurance that
the Fund will not exceed this rate, and the portfolio
turnover rate may vary from year to year.
High portfolio turnover in any year will result in the
payment by the Fund of above-average transaction costs and
could result in the payment by shareholders of above-average
amounts of taxes on realized investment gains. Distributions
to shareholders of such investment gains, to the extent they
consist of short-term capital gains, will be considered
ordinary income for federal income tax purposes.
Decisions to buy and sell securities for the Fund are made
by the Adviser subject to review by the Corporation's Board
of Directors. In placing purchase and sale orders for
portfolio securities for the Fund, it is the policy of the
Adviser to seek the best execution of orders at the most
favorable price. In selecting brokers to effect portfolio
transactions, the determination of what is expected to
result in the best execution at the most favorable price
involves a number of largely judgmental considerations.
Among these are the Adviser's evaluation of the broker's
efficiency in executing and clearing transactions. Over-the-
counter securities are generally purchased and sold directly
with principal market makers who retain the difference in
their cost in the security and its selling price. In some
instances, the Adviser feels that better prices are
available from non-principal market makers who are paid
commissions directly.
CUSTODIAN
Fifth Third National Bank, N.A., Cincinnati, Ohio, acts as
custodian for the Fund. As such, it holds all securities and
cash of the Fund, delivers and receives payment for
securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties,
all as directed by officers of the Company. Fifth Third does
not exercise any supervisory function over management of the
Fund, the purchase and sale of securities or the payment of
distributions to shareholders.
TRANSFER AGENT
Mutual Shareholder Services acts as transfer, dividend
disbursing, and shareholder servicing agent for the Fund
pursuant to a written agreement with the Company and the
Adviser, dated March 31, 1999. Under the agreement, Mutual
Shareholder Services is responsible for administering and
performing transfer agent functions, dividend distribution,
shareholder administration, and maintaining necessary
records in accordance with applicable rules and regulations.
All fees charged by the transfer agent will be paid by the
Adviser. For the services to be rendered as transfer agent,
The Adviser shall pay mutual Shareholder Services an annual
fee, paid monthly, based on the average net assets of the
Fund, as determined by valuations made as of the close of
each business day of the month.
ADMINISTRATION
Mutual Shareholder Services also acts as Administrator to
the Fund pursuant to a written agreement with the Company
and the Adviser, dated March 31, 1999. The Administrator
supervises all aspects of the operations of the Fund except
those performed by the Fund's investment adviser under the
Fund's investment advisory agreement. The Administrator is
responsible for:
(a) calculating the Fund's net asset value
(b) preparing and maintaining the books and accounts specified in Rule 31a-1
and 31a-2 of the Investment Company Act of 1940
(c) preparing financial statements contained in reports to stockholders of the
Fund
(d) preparing the Fund's federal and state tax returns
(e) preparing reports and filings with the Securities and Exchange Commission
(f) preparing filings with state Blue Sky authorities
(g) maintaining the Fund's financial accounts and records
For the services to be rendered as Administrator, The
Adviser shall pay mutual Shareholder Services an annual fee,
paid monthly, based on the average net assets of the Fund,
as determined by valuations made as of the close of each
business day of the month.
The Fund will distribute its own shares.
INDEPENDENT ACCOUNTANTS
DeAngelis & Higgins LLC, 39 North Main Street, Cranbury NJ 08512 has been
selected as the independent accountants for the Fund. As such, DeAngelis &
Higgins LLC performs audits of the Fund's financial statements.
FINANCIAL STATEMENTS
This is a new fund without an operating history, so it has
no financial statements at this time. An amendment to the
registration statement will be filed after six months to
include the Fund's financial report of its operations for
that time period.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B
Independent Auditors Report
Statement of Assets and Liabilities
(b) Exhibits
1. Articles of Incorporation---(included in Pre-effective Amendment No. 1
filed on April 28, 1998)
2. By-Laws of Registrant (included in Pre-effective Amendment No. 1 filed on
April 28, 1998)
3. Instruments defining rights of Shareholders---None,
See Articles of Incorporation
4. See Exhibit 1, Articles of Incorporation, Article IV
5. Investment Advisory Contracts *
6. Underwriting Contracts--- none
7. Bonus or Profit Sharing Contracts--- None
8. Custodian Agreements *
9. Transfer Agent Contracts *
9.1 Administration Agreement *
10 Opinion of Counsel Attached as Exhibit 10
11 Consent of Independent Auditors *
12 Omitted Financial statements--- None
13 Initial Capital Agreements--- not Applicable
14 Not Applicable
15 Rule 12b-1 Plan *
16 Not Applicable
27 Financial Data Schedule--- Not Applicable
18 Not Applicable
* To be filed by amendment
Item 25. Persons Controlled by or Under Common Control With Registrant
See Caption "Principal Holders of Securities" in the Statement of
Additional Information
Item 26. Number of Holders of securities.
As of the date of filing of this registration statement there were no
record holders of capital stock of registrant. Mr. Charles J Hughes and
Daniel J Hughes each intend to purchase 5,000 shares of the Fund prior
to the effective date of the Fund's registration and will be deemed
initially to control the Fund.
Item 27. Indemnification
(a) General. The Articles of Amendment and Restatement of Charter
(the "Articles") of the Corporation provide that to the fullest
extent permitted by Maryland and federal statutory and decisional
law, as amended or interpreted, no director or officer of this
Corporation shall be personally liable to the Corporation or the
holders of Shares for money damages for breach of fiduciary duty
as a director and each director and officer shall be indemnified
by the Corporation; provided, however, that nothing herein shall
be deemed to protect any director or officer of the Corporation
against any liability to the Corporation or the holders of Shares
to which such director or officer would otherwise be subject by
reason of breach of the director's or officer's duty of loyalty
to the Corporation or its stockholders, for acts or omissions not
in good faith or which involved intentional misconduct or a
knowing violation of law or for any transaction from which the
director derived any improper personal benefit.
The By-Laws of the Corporation provide that the Corporation shall
indemnify any individual who is a present or former director or
officer of the Corporation and who, by reason of his or her
position was, is or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(hereinafter collectively referred to as a "Proceeding") against
judgments, penalties, fines, settlements and reasonable expenses
actually incurred by such director or officer in connection with
such Proceeding, to the fullest extent that such indemnification
may be lawful under Maryland law.
(b) Disabling Conduct. The By-Laws provide that nothing therein shall
be deemed to protect any director or officer against any
liability to the Corporation or its shareholders to which such
director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office (such conduct hereinafter referred to as "Disabling
Conduct").
The By-Laws provide that no indemnification of a director or
officer may be made unless: (1) there is a final decision on the
merits by a court or other body before whom the Proceeding was
brought that the director or officer to be indemnified was not
liable by reason of Disabling Conduct; or (2) in the absence of
such a decision, there is a reasonable determination, based upon
a review of the facts, that the director or officer to be
indemnified was not liable by reason of Disabling Conduct, which
determination shall be made by: (i) the vote of a majority of a
quorum of directors who are neither "interested persons" of the
Corporation as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the Proceeding; or (ii) an
independent legal counsel in a written opinion.
(c) Standard of Conduct. Under Maryland law, the Corporation may not
indemnify any director if it is proved that: (1) the act or
omission of the director was material to the cause of action
adjudicated in the Proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty; or
(2) the director actually received an improper personal benefit;
or (3) in the case of a criminal proceeding, the director had
reasonable cause to believe that the act or omission was
unlawful. No indemnification may be made under Maryland law
unless authorized for a specific proceeding after a determination
has been made, in accordance with Maryland law, that
indemnification is permissible in the circumstances because the
requisite standard of conduct has been met.
(d) Required Indemnification. Maryland law requires that a director
or officer who is successful, on the merits or otherwise, in the
defense of any Proceeding shall be indemnified against reasonable
expenses incurred by the director or officer in connection with
the Proceeding. In addition, under Maryland law, a court of
appropriate jurisdiction may order indemnification under certain
circumstances.
(e) Advance Payment. The By-Laws provide that the Corporation may pay
any reasonable expenses so incurred by any director or officer in
defending a Proceeding in advance of the final disposition
thereof to the fullest extent permissible under Maryland law. In
accordance with the By-Laws, such advance payment of expenses
shall be made only upon the undertaking by such director or
officer to repay the advance unless it is ultimately determined
that such director or officer is entitled to indemnification, and
only if one of the following conditions is met: (1) the director
or officer to be indemnified provides a security for his
undertaking; (2) the Corporation shall be insured against losses
arising by reason of any lawful advances; or (3) there is a
determination, based on a review of readily available facts, that
there is reason to believe that the director or officer to be
indemnified ultimately will be entitled to indemnification, which
determination shall be made by: (i) a majority of a quorum of
directors who are neither "interested persons" of the
Corporation, as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the Proceeding; or (ii) an
independent legal counsel in a written opinion.
(f) Insurance. The By-Laws provide that, to the fullest extent
permitted by Maryland law and Section 17(h) of the Investment
Company Act of 1940, the Corporation may purchase and maintain
insurance on behalf of any officer or director of the
Corporation, against any liability asserted against him or her
and incurred by him or her in and arising out of his or her
position, whether or not the Corporation would have the power to
indemnify him or her against such liability.
Item 28. Business and Other Connections of Investment Adviser
None
Item 29. Principal Underwriter
The Fund does not have a principal underwriter
Item 30. Location of Accounts and Records
The books and records of the Fund, other than the accounting and
transfer agency (including dividend disbursing) records, are
maintained by the Fund at 741 Cox Road,Moorestown NJ 08057; the Fund's
accounting and transfer agency records are maintained at Mutual
Shareholder Services, 1301 East ninth Street, Suite 3600, Cleveland,
OH 44114.
Item 31. Management Services
There are no management service contracts not described in Part A or
Part B of Form N-1A.
Item 32. Undertakings
Not Applicable
The Registrant will not accept subscriptions from any persons in excess of
twentyfive until Registrant shall have filed an amendment containing certified
financial statements showing the initial capital received.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933 and the Investment Company Act of 1940, the Registrant has
duly caused this Post-Effective Amendment No. 1 to its Registration Statement
to be signed on its behalf by the undersigned, hereunto duly authorized
in Moorestown, NJ on the 11th day of January, 1999.
HUGHES FUNDS, INC.
/s/ Charles J Hughes.
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date indicated:
NAME TITLE DATE
/s/ Charles J. Hughes President & January 11, 1999
Director
/s/ Frank G. Soleki Secretary & January 11, 1999
Director
/s/ Neal K. Smith Director January 11, 1999
EXHIBIT INDEX
Exhibit No. Exhibit
EX-99.B1 Registrant's Articles of Incorporation (on file)
EX-99.B2 Registrants Bylaws (on file)
EX-99.B4 See Exhibit B1, Articles of Incorporation, Article IV
EX-99.B5 Investment Advisory Agreement *
EX-99.B8 Custodian Agreement *
EX-99.B9 Transfer Agent Agreement *
EX-99.B9.1 Administraion Agreement *
EX-99.B10 Opinion of Counsel
EX-99.B11 Consent of Independent Auditors *
EX-99.B13 Subscription Agreement *
EX-27 Financial Data Schedule *
* To be filed by amendment.
Opinion and Consent of Counsel
THE LAW OFFICES OF DAVID D. JONES, P.C.
518 Kimberton, # 134
Phoenixville, PA 19460
610-718-5381 (phone)
610-718-5391 (fax)
[email protected] (e-mail)
Hughes Funds, Inc. January 4, 1999
741 Cox Road
Moorestown NJ 08057
Dear Sirs:
As counsel to Hughes Funds, Inc. (the "Company"), a corporation organized under
the laws of the State of Maryland, I have been asked to render my opinion with
respect to the issuance of an indefinite number of shares of beneficial interest
of the Company (the"Shares") representing proportionate interests in the
Hughes Market Neutral Fund (the "Fund"). The shares of the Fund are a series of
the Company consisting of three classes of shares, Class A, Class C, and
No-Load Class, all as more fully described in the Prospectus and Statement of
Additional Information contained in the Registration Statement on Form N-1A,
to which this opinion is an exhibit, to be filed with the Securities and Exhange
Commission.
I have examined the Company's Articles of Incorporation, the Prospectus and
Statement of Additional Information contained in the Registration Statement,
and such other documents, records and certificates as deemed necessary for the
purposes of this opinion.
Based on the foregoing, I am of the opinion that the Shares, when issued,
delivered and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, will be legally issued, fully paid, and
non-assessable by the Company.
Further, I give my permission to use this opinion for whatever purposes needed
by the company.
Very Truly Yours,
/s/ David D. Jones
Attorney & Counselor at Law
Sincerely,
/s/ David D. Jones
