AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION
ON 01/29/99
FILE NOS: 811-_____
333-_____
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
(Check appropriate box or boxes.)
OPTIMAL FUNDS, INC.
-------------------
(Exact name of Registrant as Specified in Charter)
213-G VT Route 15
Jericho, VT 05465
-----------------
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
802-899-2593
------------
MR. MITCHELL M. MAYNARD
213-G VT ROUTE 15
JERICHO, VT 05465
---------------------------------------
(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
------------
Approximate Date of Proposed Public Offering: As soon as practicable following
effective date.
Registrant declares that it is registering an indefinite number or amount of its
securities by this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall became
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
TOTAL NUMBER OF PAGES _____
EXHIBIT INDEX BEGINS
ON PAGE _____
<PAGE>
THE OPTIMAL 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
<PAGE>
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;
Services. Transfer Agent; Administration
16. Brokerage Allocation and Other Portfolio Transactions
Practices
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.
- ------------------------------------------------------------------------------
<PAGE>
PART A
PROSPECTUS
Dated __________, 1999
The Optimal Fund
(the "Fund")
A Portfolio of Optimal Funds, Inc.
The Fund's investment objective is to achieve capital growth. Current income is
a secondary objective of the Fund. The Fund is offered by Optimal Funds, Inc.
(the "Company"), an open-end, diversified management investment company.
The Fund offers a single Class of shares--Class C shares, with a continuing
annual 12b-1 fee of 1.25%.
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.
- --------------------------------------------------------------------------------
<PAGE>
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
Optimal Funds, Inc
Management of the Fund
Fund Service Providers
Federal Taxes
General Information
Distribution Fee
- --------------------------------------------------------------------------------
<PAGE>
RISK/RETURN SUMMARY
The Fund's investment objective is capital growth. Current income is a secondary
objective of the Fund. The Fund seeks to achieve its objective by investing
primarily in stock index futures of indexes tracking the economies of developed
countries all over the world.. The fund may also invest in stock index options.
The Fund will never invest in futures or options if such investments would
require the Fund to use more than five percent (5%) of its net assets as initial
margin. The remaining 95% of the Fund's net assets will be invested in short
term debt instruments, such as certificates of deposit and short-term treasury
notes and bills. As a result, the Fund will limit its exposure to the global
stock market while a large percentage of its assets generates current income.
There are stock indexes for most of the world's stock markets. It is not
possible to invest directly in an index. In order to "invest" in an index, you
must purchase a security that is designed to mirror the performance of that
index. Stock index futures and options contracts are designed to mirror the
performance of a particular stock index. As the value of a particular index
rises and falls, the underlying option or futures contract also rises or falls.
The Fund will invest in futures and options contracts on indexes that are
largely representative of the world's economy. The Fund will not invest in
"emerging" countries. Leveraged Index Management Company, the Fund's Adviser,
will choose the countries in which the Fund will invest.
The Fund will allocate its investments in various countries based on the Gross
Domestic Product of each country as it relates to the total Gross Domestic
Product of all the countries together. In this way, those countries whose
economy is growing the fastest will have the greatest representation on the
fund.
The principal risks of investing in the Fund are:
1. You may lose money by investing in the Fund. Your risk of loss is greater
if you hold your investment for a short period of time. The Fund invests in
futures and options, so the Fund will be subject to the risks associated
with such investments, including price volatility and the potential for
loss of total investment. The primary risks of futures and options is the
risk of an imperfect correlation between the price movement of the option
or future and the price movement of the underlying security, in this case,
stock indexes. 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.
2. Because the Fund invests globally in stock index futures and options, the
Fund will be subject, indirectly, to changes in stock markets, both in the
United States and in many other developed countries in the world. 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. Although the stock market can be more volatile than other
investments, historically in the United States, the stock market has
outperformed other investments over the long term. The Adviser believes
that the differences in performances among the developed countries of the
world will offer greater opportunities for capital growth than investing in
the United States alone. The Adviser also believes that diversifying
investments on a global scale will result in less risk to the Fund than
investing in the united States alone.
3. This is a new Fund without an operating history, and this is a new position
for the Adviser to the Fund. As a result, this may pose additional risks.
4. 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.
1
<PAGE>
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 C Shares
- --------------------------------- --------------
1. Maximum Sales Charges
Imposed on Purchases NONE
(as a percentage of offering price)
2. Maximum Deferred Sales Charges NONE
(as a percentage of offering price)
3. Maximum Sales Charges Imposed
On Reinvested Dividends NONE
(as a percentage of net asset value)
4. Redemption Fees NONE
(as a percentage of amount redeemed)
5. Exchange Fees 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 C Shares
--------------
Management Fees* 1.20%
12b-1 Fees** 1.25%1
Other Expenses (estimated) 0.05%
-----
Total Fund Operating Expenses. 2.50%
* 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 2.50% for the Class C shares. The
Adviser may revise or cancel these expense limitations at any time and will
notify you of any such change.
2
<PAGE>
** 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.
1. Includes an annual fee of 1.00% of average net assets 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 $10,000 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 C
- ----------- -------
One Year $______
Three Years $______
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
As described in the Risk/Return Summary, the Fund's investment objective is
capital growth. Current income is a secondary objective. In seeking to achieve
the Fund's objective, the Fund intends to invest in countries that are largely
representative of the world's economy. The Fund will not invest in "emerging
market" countries. The Fund will only invest in countries that have an
established history, a strong and liquid stock market, and established stock
indexes that have futures and options contracts traded against them. The Fund
will invest in futures and options contracts on the various country indexes both
on United States Exchanges and on foreign exchanges.
Investing in futures and options contracts in foreign countries carries the
additional risk of fluctuations between the value of that country's currency and
the U.S. Dollar. The Fund will attempt to hedge that risk by entering into
currency futures transactions designed to offset the currency exposure of its
underlying trades.
The table below sets out the indexes for various countries in which the Fund
intends to invest:
Country Index
- ------- -----
United States The S&P 500
United Kingdom FTSE-100
France CAC-40
Germany DAX
Japan Nikkei-225
Hong Kong Hang Seng
Australia All Ordinaries
3
<PAGE>
Futures and Options On Securities
- ---------------------------------
The Fund intends to invest in futures contracts relating to the stock indexes
described in the table above, writing (i.e. sell) covered put and call options
contracts on those indexes, and purchasing put and call options on those
indexes. The Fund intends to use futures and options transactions to increase or
decrease its exposure to different world economies and gain maximum benefit with
minimum expenditure of Fund assets. As stated above in the Risk/Return Summary,
the Fund will never invest in futures and options contracts if such investments
will require the Fund to invest more than 5% of its net assets in initial
margin. Investing in futures and options can have other benefits as well, such
as decreasing the Fund's exposure to the effects of changes in security prices,
hedging securities held, maintaining cash reserves while remaining fully
invested, facilitating trading, reducing transaction costs, and possibly
achieving 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.
Other Mutual Funds
- ------------------
The Fund also intends to invest in securities issued by other registered
investment companies that have an investment objective of tracking the
performance of a particular stock market index. The Fund will limit its
investments in these companies to those that trade on a United States Stock
Exchange. 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.
Money Market Instruments
- ------------------------
As stated above, the Fund will not invest more than 5% of its net assets in
initial margin for futures and options contracts. The Fund is also limited to
10% of its assets invested in other registered investment companies. Under
normal circumstances, assets not invested in futures and/or options contracts
and other registered investment companies will be invested in "money market
instruments," a term that includes, among other things, U.S. Dollar denominated
certificates of deposit and time deposits issued or supported by the credit of
U.S. 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.
4
<PAGE>
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, including 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. You should
be aware that there is no assurance that the Adviser will be successful in
achieving the objective of the Fund, since all investments have some degree of
risk.
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.
Because the Fund will invest in foreign securities, the Fund will be subject to
currency risk, and there is no assurance that the Adviser will be successful in
managing that 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-___-____. 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 C Shares
- --------------
Regular Account $500 $50
IRA's $500 $50
<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT TO ADD TO ACCOUNT
<S> <C> <C>
By Mail Complete an Account Make your check payable to
Registration Form, make The Optimal Fund and
a check payable to The mail it to the address at left.
Optimal Fund
and mail the Form and check
to Optimal Funds, Inc. Please include your account
c/o Declaration Services number on your check.
Company, 555 North Lane Or use the convenient form
Suite 6160, Conshohocken, attached to your regular
PA 19428. Fund statement.
5
<PAGE>
By Wire Ask your bank to wire funds Ask your bank to wire immediately
to Account of available funds to the location described
First Union National Bank, N.A. at the left, except that the wire should
ABA#: -------------- note that it is to make a subsequent
Credit: Optimal Funds, Inc. purchase rather than to open
Account #: -------------- a new account.
Further credit: The Optimal
Fund.
The wire should state that the Include your name and
Fund purchase is to be in your account number.
name(s).
The wire should state that you
are opening a new Fund account.
Include your name(s), address and
taxpayer identification number or
Social Security number and the name
of the Fund in which you are
purchasing shares.
Call 1-800-___-____ to inform us
that a wire is being sent.
By Telephone transactions may Call 1-800-___-____ to make
Tele- not be used for initial purchases your purchase.
Phone If you want to make
Purchases subsequent transactions via
trans- telephone, please select this
ferring service on your account
money Registration Form.
from
your
checking,
NOW or
bank
money
market
account.
</TABLE>
Optimal 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.
6
<PAGE>
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 Declaration Services Company, 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 Declaration Service Company's 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:
Declaration Services Company
555 North Lane, Suite 6160
Conshohocken, Pa 19428
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.
7
<PAGE>
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.
Declaration Services Company, 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 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.
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.
8
<PAGE>
By Mail
- -------
Sale requests should be mailed via U.S. mail or overnight courier service to:
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
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."
9
<PAGE>
By Telephone
- ------------
You may redeem your shares in the Fund by calling the Transfer Agent at
1-800-___-____ 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 $500, the Company
may notify you that, unless your account is increased to $500 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
$500 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 $500 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 Declaration Service
Company, 555 North Lane, Suite 6160, Conshocken, PA 19428.
OPTIMAL FUNDS, INC.
Optimal Funds, Inc (the "Company") was organized on January 28, 1999 as a
Maryland corporation, and is a company of the type known as an open-end,
diversified management investment company. It did not begin operations until
April, 1999 nor commence offering its shares until that time. It is authorized
to issue 500,000,000 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 (each a "mutual fund"). A
mutual fund permits an investor to pool his or her assets with those of others
in order to achieve
10
<PAGE>
economies of scale, take advantage of professional money managers and enjoy
other advantages traditionally reserved for large investors. The Board has
authorized the issuance of 50,000,000 shares of Company stock to be classified
as the Optimal 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 Leveraged Index Management Company, (the
"Adviser"), 213-G VT, Route 15, Jericho, VT 05465. Mitchell M. Maynard 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. Maynard 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.
As the founder of Leveraged Index Management Company, Mr. Maynard has been
providing investment advise to the public for over 8 years. In that time, he has
created a number of proprietary investment methodologies designed to maximize
investment return to his clients through the prudent use of futures and options.
Mr. Maynard has been award the designations Certified Investment Management
Consultant ("CIMC") by the Institute of Investment Management Consultants and
Certified Funds Specialist ("CFS") by the Institute of Business and Finance. He
has also obtained his Series 7, Series 24, Series 63, and Series 65 securities
licenses from the National Association of Securities Dealers.
Although Mr. Maynard has extensive experience managing portfolios for himself
and his family, he 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.
11
<PAGE>
The Adviser receives from the Fund, as compensation for its services, a fee,
accrued daily and payable monthly, at an annual rate of 0.70% 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
- ---------
First Union National Bank, N.A., Philadelphia, PA, 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
- -----------------------------------------------------------
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken, PA 19428
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. Declaration Service Company 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 SubChapter M of 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.
12
<PAGE>
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") for its Class
C shares, pursuant to which the Fund may incur shareholder servicing expenses of
up to .25% per annum of the Fund's average daily net assets and up to 1.00% per
annum of the Fund's average daily net assets for distribution services. 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. Declaration
Distributors, Inc., the Fund's principal underwriter, will receive these fees
and pay them to brokers and dealers who sell shares of the Fund and provide
ongoing services to those shareholders.
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.
13
<PAGE>
FOR MORE INFORMATION
STATEMENT OF ADDITIONAL BY MAIL:
INFORMATION (SAI)
Optimal Funds, Inc.
The SAI contains more detailed c/o Declaration Service Company
Information on all aspects of the 555 North Lane, Suite 6160
Fund. A current SAI, dated April 15, Conshohocken, PA 19428
1999, has been filed with the SEC
and is incorporated by reference BY PHONE: 1-800-___-____
into (is legally a part of) this
prospectus. ON THE INTERNET:
www_________.com
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 Optimal Fund
c/o Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
1-800-___-____
Investment Company Act No.
811-_____
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated ___________, 1999
THE OPTIMAL 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 The Optimal Fund, Inc., dated _______,
1999. Requests for copies of the Prospectus should be made by writing to Optimal
Funds, Inc., 213-G VT, Route 15, Jericho, VT 05465 or by calling 800-___-____.
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
<PAGE>
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 on 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;
1
<PAGE>
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, Leveraged Index Management
Company, Inc., is set forth in the prospectus.
The adviser is a Vermont Corporation. Mitchell Maynard is the President of and
controls the Adviser..
2
<PAGE>
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 _________, 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 Adviser
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
* 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 Compensation Pension Annual Total Compensation
Director from Corp. Benefits Benefits Paid to Director
- --------------------------------------------------------------------------------
3
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
The Adviser intends 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.
n
Average Annual Total Return is computed as follows: P(1+T) = 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:
6
Yield = 2[(a-b/cd + 1) - 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
4
<PAGE>
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.
5
<PAGE>
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.
6
<PAGE>
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
______________________, 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. The Custodian 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
Declaration Service Company ("DSC") acts as transfer, dividend disbursing, and
shareholder servicing agent for the Fund pursuant to a written agreement with
the Company and the Adviser, dated ______________, 1999. Under the agreement,
DSC 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 DSC 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 transfer
agent fee shall be _______________________________.
ADMINISTRATION
DSC also acts as Administrator to the Fund pursuant to a written agreement with
the Company and the Adviser, dated ____________, 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:
7
<PAGE>
(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 Administration fee shall be ___________________.
The Fund will distribute its own shares.
INDEPENDENT ACCOUNTANTS
____________________________ has been selected as the independent accountants
for the Fund. As such, _________________ 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 when required by law to include a report of its operations.
8
<PAGE>
PART C
------
OTHER INFORMATION
Item 23. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Articles of Incorporation --- *
(b) By-Laws --- *
(c) Instruments defining rights of Shareholders --- None, See Articles of
Incorporation
(d) Investment Advisory Contracts --- *
(e) Underwriting Contracts --- *
(f) Bonus or Profit Sharing Contracts --- None
(g) Custodian Agreements --- *
(h) Other Material Contracts --- *
(i) Legal Opinion --- Attached as Exhibit 23(I)
(j) Other opinions --- *
(k) Omitted Financial statements --- None
(l) Initial Capital Agreements --- *
(m) Rule 12b-1 Plan --- *
(n) Financial Data Schedule --- Not Applicable
* To be filed by amendment
Item 24. Persons Controlled by or Under Common Control With Registrant
- -------- -------------------------------------------------------------
See Caption "Principal Holders of Securities" in the Statement of
Additional Information
Item 25. 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.
<PAGE>
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.
<PAGE>
(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 26. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
None
Item 27. Principal Underwriter
- -------- ---------------------
Declaration Distributors, Inc., 555 North Lane, Suite 6160,
Conshohocken, PA 19428
Item 28. 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 213-G VT, Route 15, Jericho, VT 05465; the
Fund's accounting and transfer agency records are maintained at
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken,
PA 19428.
Item 29. Management Services
- -------- -------------------
There are no management service contracts not described in Part A or
Part B of Form N-1A.
Item 30. Undertakings
- -------- ------------
The Registrant undertakes to file an amendment to the registration statement
with certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons in the event the Fund chooses
to raise its initial capital under Section 14(a)(3) of the Securities Act.
<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 Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized in Jericho, Vermont on the 29th day of January, 1999.
OPTIMAL FUNDS, INC.
By: /s/ Mitchell M. Maynard
---------------------------
Mitchell M. Maynard
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/ Mitchell M. Maynard President &
- ------------------------- Director January 29, 1999
MITCHELL M. MAYNARD
EXHIBIT 23(I)
OPINION AND CONSENT OF COUNSEL
THE LAW OFFICES OF DAVID D. JONES, P.C.
518 Kimberton, # 134
Phoenixville, PA 19460
(610) 718-5382 (phone)
(610) 528-5391 (fax)
[email protected] (e-mail)
Optimal Funds, Inc. January 29, 1999
213-G VT, Route 15
Jericho, VT 05465
Dear Sirs:
As counsel to Optimal 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
Optimal Fund (the "Fund"). The Shares of the Fund are a series of the Company
consisting of one class of shares, Class C, 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 Exchange 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,
David D. Jones
Attorney & Counselor at Law
