[LOGO] PROSPECTUS
November 3, 2000
THE
GEMINI GLOBAL
NEW ECONOMY
FUND(TM)
A Portfolio of Gemini Funds, Inc.
1301 East Ninth Street, Suite 1005
Cleveland, OH 44114
1-877-593-8637
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a crime.
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TABLE OF CONTENTS
BASIC INFORMATION ABOUT THE FUND ......................................... 3
PAST PERFORMANCE INFORMATION ............................................. 5
FEES AND EXPENSES ........................................................ 6
MANAGEMENT OF THE FUND ................................................... 7
HOW TO BUY SHARES ........................................................ 8
HOW TO SELL (REDEEM) SHARES .............................................. 12
INVESTMENT RISKS ASSOCIATED WITH THE FUND ................................ 14
DIVIDENDS AND DISTRIBUTIONS .............................................. 17
FEDERAL TAXES ............................................................ 17
GENERAL INFORMATION ...................................................... 18
FOR MORE INFORMATION ..................................................... 19
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BASIC INFORMATION ABOUT THE FUND
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
--------------------------------------------------------
The Fund is actively managed by Gemini Management & Research, LLC, the Fund's
investment adviser ("GEMINI"). The Fund's investment objective is to achieve
capital appreciation, and GEMINI seeks to achieve the Fund's investment
objective by:
o investing primarily in the equity securities of U.S. and foreign companies
(both directly and in the form of American Depository Receipts (ADRs)
without regard to market capitalization. ADRs are securities issued by U.S.
banks that represent shares of foreign corporations held by those banks.
Although traded on U.S. securities exchanges and valued in U.S. dollars,
ADRs carry most of the risks of investing directly in foreign securities;
o investing in companies believed by GEMINI to have the growth potential to
become leading producers or beneficiaries of technological innovation;
o employing a multi-sector "theme" investment approach that seeks out related
emerging market sectors that GEMINI believes will outperform other market
sectors on a relative scale. As an example, among the related market sector
themes GEMINI believes currently show great potential are the technology,
media and telecommunications sectors ("TMT");
o investing a larger portion of the Fund's assets in those market themes that
GEMINI deems most attractive; and
o investing in new technologies as they are discovered or introduced in the
alternative energy, medical or biotechnology fields. The Fund may also
invest in the stocks of companies that should benefit from the
commercialization of technological advances, although these companies may
not be directly involved in research and development.
The Fund employs an aggressive investment strategy. Although the Fund looks for
companies with the potential for strong earnings growth rates, some of the
Fund's investments may be in companies that are currently experiencing losses.
The Fund also seeks profit and hedging opportunities by short-selling
securities. In a short sale, the Fund sells a security it does not own in
expectation that the price of that security will decline by the time the Fund
closes out the short position by purchasing the security at the then-prevailing
market price.
The Fund may also invest in options, futures and other investments whose values
are based upon the values of equity securities, securities indices and foreign
currencies, both to hedge certain risks in the portfolio and to enhance Fund
performance. The Fund may also engage in borrowing to fund the purchase of
securities, a practice known as "leveraging."
The Fund also seeks to participate in the initial public offering ("IPO")
market. To the extent that the Fund is able to participate in IPO investments, a
significant portion of the Fund's returns may be attributable to IPO investments
in any one fiscal year. Further, the impact on the Fund's performance of IPO
investments will be magnified if the Fund has a small asset base. Although the
IPO market in recent years has been robust, there is no guarantee that it will
continue to be so, and, as the Fund's assets grow, there is no guarantee that
the impact of IPO investing will produce positive performance.
In addition, the Fund may also, from time-to-time, take temporary defensive
positions that are inconsistent with the Fund's principal investment strategies
in attempting to respond to adverse market, economic, political or other
conditions. If the Fund takes such a temporary defensive position, it will not
be investing according to its objective and it may not achieve its investment
objective.
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HOW GEMINI CHOOSES INVESTMENTS FOR THE FUND
-------------------------------------------
The Fund's Adviser employs a combination of "theme specific" and "company
specific" approaches to securities selection and invests in companies that it
believes will be able to achieve and sustain a competitive advantage and
leadership position within designated sectors.
GEMINI conducts extensive fundamental research to identify companies that
exhibit some or all of the following traits:
o LEADERSHIP: They are leaders, or emerging leaders, in their markets,
securing their positions through technology, marketing, distribution or
some other innovative means.
o ABOVE AVERAGE GROWTH: The markets and industries they represent are growing
significantly faster than the economy as a whole.
o FINANCIAL STRENGTH: Their returns -- in the form of sales unit growth,
rising operating margins, internal funding and other factors -- demonstrate
exceptional growth and leadership.
o INNOVATION: They are developing innovative technologies, products and
services.
o INTERNET BENEFICIARIES. Their products and services will directly benefit
from increased exposure to and use of the internet.
o STRATEGIC REPOSITIONING. They are established companies that are
repositioning their business so as to generate and derive greater revenue
streams from various technology-related applications, products and
services.
PRINCIPAL INVESTMENT RISKS
--------------------------
The Fund is subject to a number of risks that could affect its performance. The
principal risks to which the Fund are exposed are summarized below. A more
detailed and complete discussion of the Fund's risks are described and discussed
later in the Prospectus under the heading "Investment Risks Associated With The
Fund."
General Risks- As with all mutual funds, you may lose money by investing in the
Fund. The Fund is not a guaranteed investment, nor is it a complete investment
plan. 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, so when you sell your Fund shares, they may be worth less than
what you paid for them.
Stock Market Risks- The Fund invests primarily in common stock, so it is subject
to the risks associated with common stocks, including price volatility and the
creditworthiness of the issuing company.
Small To Medium-Cap Stocks Risks- The Fund invests in smaller companies.
Smaller, newer companies generally have more volatile share prices than larger
companies.
Issuer-Specific Changes- The value of an individual security or particular type
of security can be more volatile than the market as a whole and can perform
differently than the market as a whole.
Foreign Securities Risk - Investments in foreign securities involve greater
risks compared to domestic investments.
Industry Risk- Industry risk is the possibility that stocks within the same
industry will decline in price due to industry-specific market or economic
developments.
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Non-Diversification Risks - The Fund is non-diversified under the Investment
Company Act of 1940. That means the Fund can concentrate its investments in a
smaller number of companies than a diversified fund.
Leveraging Risks - When the Fund borrows money to buy securities, it is engaging
in a practice known as "leveraging". If the prices of those securities decrease,
or if the cost of borrowing exceeds any increases in the prices of those
securities, the net asset value of the Fund's shares will decrease faster than
if the Fund has not used leverage. To repay borrowings, the Fund may have to
sell securities at a time and at a price that is unfavorable to the Fund.
Interest on borrowings is an expense the Fund would not otherwise incur.
Short Sales Risks - When the Fund sells a security short, it borrows the
security in order to enter into the short sale transaction. If the price of the
security goes up, the Fund will experience a loss. Further, the Fund may also be
required to pay a premium to borrow the security, which reduces the Fund's
overall return on the transaction.
Options and Futures Risk - An option is the right to buy or sell a security or
other instrument, index or commodity at a specific price on or before a specific
date. A future is an agreement to buy or sell a security or other instrument,
index or commodity at a specific price on a specific date. The use of options
and futures may increase the performance of the Fund, but may also increase
market risk.
SUITABILITY FOR INVESTORS
-------------------------
No single Fund should represent your complete investment program, nor should you
attempt to use the Fund for short-term trading purposes. Only you can determine
if an investment in the Fund is right for you based upon your own economic
situation, the risk level with which you are comfortable and other factors. In
general, the Fund is most suitable for investors who:
o have obtained the advice of an investment professional or who themselves
are experienced investors;
o are willing to accept the additional risks entailed in the investment
policies of the Fund;
o understand that shares of the Fund can, and likely will, have daily price
fluctuations; and
o have a long term investment horizon or are investing tax-deferred
retirement accounts, such as traditional and Roth Individual Retirement
Accounts ("IRAs"), as well as employer-sponsored qualified retirement
plans, including 401(k)s and 403(b)s, all of which have longer investment
horizons.
You probably do not want to invest in the Fund if you are:
o unaccustomed to potentially volatile investments;
o primarily seeking current dividend income;
o unwilling to accept the additional risks entailed in the investment
policies of the Fund and potentially significant changes in the price of
Fund shares as a result of those policies; and
o speculating on short-term fluctuations in the stock markets.
PAST PERFORMANCE INFORMATION
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Because this is a new Fund being offered for the first time by this prospectus,
a bar chart and performance table reflecting the Fund's comparative performance
is not yet available.
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FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES YOU MAY PAY IF YOU BUY AND HOLD CLASS
C SHARES OF THE FUND.
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SHAREHOLDER FEES:
(Fees paid directly from your investment)
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MAXIMUM SALES CHARGE (LOAD) IMPOSED
ON PURCHASES NONE
(as a percentage of offering price)
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MAXIMUM DEFERRED SALES CHARGES* 1.00%
(as a percentage of investment proceeds)
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REDEMPTION FEES NONE
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EXCHANGE FEES NONE
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ANNUAL FUND OPERATING EXPENSES:
------------------------------
(expenses that are deducted from Fund assets)
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MANAGEMENT FEES1 1.50%
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SERVICE & DISTRIBUTION (12B-1) FEES2 1.00%
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OTHER EXPENSES 3 0.22%
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TOTAL ANNUAL FUND OPERATING EXPENSES 2.72%
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* You will be charged a contingent deferred sales charge of 1% of the amount
you invested if you redeem your shares within thirteen months.
1. The Fund's annual base management fee is 1.50% of the Fund's daily average
net assets. On a monthly basis, the base fee either will remain unadjusted
or will be adjusted up or down depending upon the investment performance of
the Class C shares of the Fund compared to the investment performance of
the Morgan Stanley Capital International -World Index ("MSCI"). The maximum
or minimum adjustment over any 12-month period will be 1%. As a result, the
Fund could pay an annualized management fee that ranges from 0.50% to 2.50%
of the Fund's average daily net assets. During the first 12 months of the
Fund's operations, the management fee will be charged at the base fee of
1.50%, with no performance adjustment made. Please see the section entitled
"Fund Management -- Performance-Based Fee."
2. 12b-1 fees in the table above represent the maximum fees chargeable to the
Fund's assets on an annual basis, and includes a servicing fee of 0.25%.
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.
3. "Other Expenses" include fees paid to the entities that provide services
such as transfer agency, accounting, legal and administrative services, and
are estimated for the Fund's first year of investment operations.
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 Class C shares of the Fund
for the time periods indicated, reinvest any dividends and distributions, 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 Total
Annual Operating Expenses described above remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
Time Period 1 Year 3 Year
----------- ------ ------
If shares are redeemed $376 $847
If shares are not redeemed $276 $847
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MANAGEMENT OF THE FUND
INVESTMENT ADVISER
------------------
Gemini Management & Research, LLC (the "Adviser"), 95 River Street, Hoboken, NJ
07030, manages the investment of the assets of the Fund in accordance with the
Fund's investment objective, policies and restrictions under a written agreement
with the Company. GEMINI was initially formed on July 9, 1999 and is registered
as an investment advisory firm with the Securities and Exchange Commission.
GEMINI was created to serve as investment adviser to the Fund, and presently the
Fund is GEMINI's sole client, although GEMINI may provide investment advisory
services to others in the future. GEMINI's principal business is the provision
of investment advisory services.
Mr. Marcel L. Engenheiro is a controlling shareholder and Chief Executive
Officer of GEMINI. Mr. Engenheiro also serves as President and Director of
Gemini Funds, Inc. (the "Company"), of which the Fund is a series.
Mr. Mark M. Boehme and Mr. Paulo daSilva are Managing Directors of GEMINI and
serve as portfolio and risk managers for the Fund, respectively. Together they
are responsible for the day-to-day investment management of the Fund's assets,
choose the investments for the Fund, and decide when to buy and sell the Fund's
securities. Mr. Boehme is also a controlling shareholder of GEMINI and is a
Director of the Company. Mr. daSilva is a controlling shareholder of GEMINI.
The Portfolio Manager
---------------------
Prior to joining GEMINI, Mr. Mark M. Boehme was a Vice President and Senior
Technology Analyst with Commerzbank AG from 1992 to July 2000, based in New York
City. At Commerzbank he served as head of the global technology research team
for the Global Asset Management Group. As part of the Global Asset Management
Group, he previously served as Portfolio Manager of CCMC America Equity II, a
Dublin registered mutual fund. Mr. Boehme has amassed over fifteen years of
investment and financial services experience, having served in a variety of
capacities for Bankers Trust Company, Merrill Lynch Capital Markets and Dun &
Bradstreet Corp. Mr. Boehme holds a BA from Clark University and graduated from
Fordham University's Graduate School of Business with an MBA in Finance.
The Risk Manager
----------------
Prior to joining GEMINI, Mr. Paulo daSilva served as Vice President and Senior
Derivatives Trader for Bank of America, NT & SA, Chicago, IL ("BofA") from
September 1998 through March 2000. At BofA he was responsible for the
development and trading of high-end derivative strategies for institutional and
corporate clients. From December 1995 through September 1998, Mr. daSilva was a
professional securities trader for NationsBank, NA, working on trading desks in
London and Singapore. Mr. daSilva holds a Bachelor of Commerce in Finance from
the University of Toronto.
PERFORMANCE-BASED FEES
----------------------
For its services to the Fund, GEMINI is paid a management fee from the Fund that
is comprised of two components. The first component is an annual base fee equal
to 1.50% of the Fund's average daily net assets. The second component is a
performance adjustment that either increases or decreases the base fee,
depending on how the Fund has performed relative to the Morgan Stanley Capital
International-World Index ("the Index"). The Index is a widely recognized
benchmark for the performance of the major developed country stock markets. The
maximum performance adjustment upward or downward is 1.00% annually, calculated
and paid on a quarterly basis. Thereafter, the Base Fee will be adjusted as
described below. Depending on the performance of the Fund, during any fiscal
year after the Fund's initial year, GEMINI may receive a maximum annual
management fee of 2.50% or as little as 0.50% annually in management fees. The
table below sets out the annual management fees payable to GEMINI based on the
Fund's annual performance relative to the Index.
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ANNUALIZED PERFORMANCE OF THE FUND ANNUALIZED ADVISORY FEE
RELATIVE TO THE INDEX
------------------------------------- ---------------------------------
-7% 0.50%
-6% 0.70%
-5% 0.90%
-4% 1.10%
-3% 1.30%
-2% 1.50%
-1% 1.50%
equal 1.50%
1% 1.50%
2% 1.50%
3% 1.70%
4% 1.90%
5% 2.10%
6% 2.30%
7% 2.50%
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For the first twelve months of the Fund's operations, the management fee will be
charged at the Base Fee of 1.50%, with no performance adjustment.
HOW TO BUY SHARES
Determination of Share Price
----------------------------
Shares of the Fund are offered at the public offering price. The public offering
price for 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 Fund's shares will not be priced on any National
Holiday recognized by the NYSE. You should be aware that the Fund may invest in
foreign securities. Foreign securities sometimes trade on exchanges that are
open on days when the new York Stock Exchange is closed. Accordingly, when the
Fund is investing in such securities, the NAV on your shares could change on
days when you cannot purchase or redeem shares.
Payments for Fund shares must be in U.S. dollars and in order to avoid fees and
delays, should be drawn on a U.S. bank. Fund management reserves the right to
reject any purchase order for Fund shares if, in the Fund's opinion, such an
order would cause a material detriment to existing shareholders. Your purchase
of Fund shares is subject to the following minimum investment amounts:
Minimum Investment Amounts
--------------------------
Your purchase of Fund shares is subject to the following minimums:
Account Type To Open Account Additional Investments
-------------------------------------------------------------------------
Regular Account $5,000 $500
IRAs $5,000 $500
401K & 403B Plans $5,000 $500
Automatic Investment Plans $5,000 $500
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CLASS C SHARES
--------------
The Fund offers Class C shares by this prospectus. Class C Shares are sold at
net asset value without an initial sales charge. This means that 100% of your
initial investment is placed into shares of the Fund. However, Class C shares
pay an annual 12b-1 shareholder servicing fee of 0.25% of average daily net
assets and an additional distribution fee of 0.75% per annum of average daily
net assets.
In order to recover commissions paid to dealers on investments in Class C
Shares, you will be charged a contingent deferred sales charge ("CDSC") of 1.00%
of the value of your original investment amount if you redeem your shares within
thirteen months from the date of purchase. You will not be charged a CDSC on
reinvested dividends or capital gains, amounts purchased more than thirteen
months prior to the redemption and increases in the value of your shares.
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 1-877-593-8637. You may also purchase Fund shares through broker-dealers
or other financial organizations.
Purchase By Mail
----------------
To purchase shares of the Fund by mail:
o Complete and sign the Account Application or an IRA transfer/application.
o Enclose your check or other negotiable bank draft made payable to The
Gemini Global New Economy Fund.
o Mail you application and check to:
GEMINI GLOBAL NEW ECONOMY FUND
c/o Mutual Shareholder Services
1301 East Ninth Street, Suite 1005
Cleveland, OH 44114
When purchasing by mail, your purchase order, if 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 public offering price calculated at the
close of regular trading on that day. Otherwise, your shares will be purchased
at the public offering price determined as of the close of regular trading on
the next business day.
To make additional purchases by mail, send a check or other negotiable bank
draft payable to the Gemini Global New Economy Fund to the Transfer Agent at the
address below. Be sure to put your account number on your check.
If you need an Account Application or any other information relating to your
account with the Fund, you may contact the Transfer Agent at:
1-877-593-8637
Mutual Shareholder Services
1301 East Ninth Street, Suite 1005
Cleveland, OH 44114
Or at our Web site: www.geminifunds.com
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By Wire Transfer
----------------
To purchase shares of the Fund by wire transfer:
o Call the Transfer agent at 1-877-593-8637. A representative will mail or
fax an Account Application to you and assign you an account number.
o Contact your bank or financial institution and instruct them to wire
immediately available funds to:
Firstar Bank, N.A., Cincinnati, Ohio
ABA # 042000314
For Credit to
Gemini Funds, Inc.
ACCT # 192828
For Account of
[YOUR NAME]
ACCT # [Your account number with the Fund]
Subsequent Purchases
--------------------
To make additional purchases of Fund shares by wire, instruct your bank to wire
immediately available funds to the Transfer Agent using the same wiring
instructions as above, but also indicate on the wire that you are purchasing
additional shares and indicate which share class to purchase.
If you purchase Fund shares by wire, you must complete and file an Account
Application with the Transfer Agent before any of the shares purchased can be
redeemed. You should contact your bank or other financial institution for
information on sending funds by wire, including any charges that your bank may
make for these services.
Through a Registered Investment Professional
--------------------------------------------
You may buy shares of the Fund through brokers, dealers and other financial
professionals that have entered into agreements with the Fund's principal
underwriter to sell Fund shares. Simply call your investment professional to see
if he or she can buy shares for you.
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 public offering price 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.
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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.
Automatic Investment Plan
-------------------------
Once you have established an account with the Fund and made your initial
purchase, you can make additional purchases through an Automatic Investment
Plan. You can have money automatically transferred from your checking, savings
or other banking account on a weekly, bi-weekly, monthly, or bi-monthly basis.
To be eligible to participate in this plan, your financial institution must be a
member participant in the Automated Clearing House ("ACH") system. Contact your
financial institution to see if they qualify. You can choose to participate in
the plan by so indicating on your initial account application and submitting a
void check, or you can join at any time by contacting the Transfer Agent. You
can also terminate your participation at any time by contacting the Transfer
Agent.
Miscellaneous Purchase Information
----------------------------------
Applications will not be accepted unless they are accompanied by payment in U.S.
funds. 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.
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.
Distribution Fees
-----------------
The Company has adopted a Plan of Distribution Pursuant to Rule 12b-1 under the
1940 Act (the "12b-1 Plan") for its Class C shares. Under the Class C Plan,
Class C shares of the Fund compensate the Adviser and others for distribution
and service fees at an annual rate of 1.00% (0.75% of which is a distribution
fee) payable on a monthly basis, of the Fund's average daily net assets
attributable to Class C shares. These fees are paid to GEMINI and others to
compensate them for services provided and expenses incurred in the distribution
of Class C shares, including the paying of ongoing shareholder servicing fees to
persons who have sold Class C shares. The Class C Plan is designed to allow
investors to purchase Class C shares without incurring a front-end sales load or
a CDSC charge and to permit the distributor to compensate authorized dealers for
selling such shares. Accordingly, the Class C Plan's purpose is to provide for
the financing of the distribution of Class C shares. 12b-1 fees payable on Class
C shares will be paid to GEMINI for the first thirteen months after the shares
are purchased.
The Distribution Plan provides that the Fund may finance activities which are
primarily intended to result in the sale of the Fund's Class C 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.
The Distribution Plan is reviewed annually by the Company's Board of Directors
and may be renewed only by majority vote of the shareholders of the Fund's Class
C shares or by majority vote of the Board, and in
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both cases also a majority vote of the "disinterested" Directors of the Company,
as that term is defined in the 1940 Act.
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.
Principal Underwriter
---------------------
Kenneth Jerome & Company, Inc., 147 Columbia Turnpike, Suite 107, Florham, NJ
07932 (the "Distributor"), serves as principal underwriter for the Fund's
shares. The Distributor is a registered broker/dealer and is a member in good
standing of the NASD. The purpose of acting as an underwriter is to facilitate
the registration of the Funds' shares under state securities laws and to assist
in the sale of shares. The Distributor facilitates the distribution of the
Fund's shares, and is paid a flat fee of $3,000 per year, plus out-of-pocket
expenses, by the Fund.
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 1005
Cleveland, OH 44114
The selling price of the shares being redeemed will be your Fund's per share net
asset value next calculated after receipt of all required documents in Good
Order, less any contingent deferred sales charges. 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.
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In addition, signature guarantees are required for all redemptions of $25,000 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
1-877-593-8637 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 may
be delayed until the check or payment received for investment has cleared, which
may take up to fifteen (15) days.
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 $3000, the Company
may notify you that, unless your account is increased to $3000 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 involuntary
redemption shall not apply if the value of your account drops below $3000 as the
result of market action. The Company reserves this right because of the expense
to the Fund of maintaining very small accounts.
Redeeming Class C Shares
------------------------
Class C shares are subject to a CDSC of 1.00% of the value of your original
investment if they are redeemed within thirteen months of purchase. There is no
CDSC on Class C shares held longer than thirteen months. Shares acquired through
reinvested dividends and distributions are not subject to the CDSC. When you
send a redemption request to the Fund, unless you specify otherwise, shares not
subject to the CDSC are redeemed first, then shares that have been held the
longest, and so on. That way, you will be subject to the smallest charge
possible.
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INVESTMENT RISKS ASSOCIATED WITH THE FUND
Before investing in any security, including the Fund, you should determine the
level of risk with which you are comfortable. Almost all investments are subject
to some risk. The principal risks of investing in any mutual fund, including the
Fund, are:
NOT INSURED. Mutual funds are not insured by the FDIC or any other government
agency, unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its performance, nor
assure you that the market value of your investment will increase. You may lose
the money you invest, and the Fund will not reimburse you for any of these
losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease with
changes in the value of a Fund's underlying investments and changes in the
equity markets as a whole.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Fund is designed to be only a part of
your personal investment plan.
In addition to the risks associated with investments in mutual funds generally,
you should consider the special factors associated with the policies discussed
below in determining the appropriateness of investing in the Fund.
Stock Market Risks- The Fund invests primarily in common stock, so it is 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 significant periods.
Small To Medium-Cap Stocks Risks- The Fund may invest in companies with smaller
market capitalizations (less than $3 billion in market capitalization). These
companies are relatively smaller, engaged in business mostly within their own
geographic region, and may be less well-known to the investment community.
Smaller, newer companies have more volatile share prices for several reasons.
Small companies often have less liquidity, less management depth, narrower
market penetrations, less diverse product lines, and fewer resources than larger
companies. As a result, their stock prices react more violently to changes in
the marketplace.
Issuer-Specific Changes- The value of an individual security or particular type
of security can be more volatile than the market as a whole and can perform
differently than the market as a whole. The value of smaller issuers can be more
volatile than that of larger issuers.
Foreign Securities Risk - 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. Further, foreign securities are often denominated in a currency
other than the U.S. dollar. Accordingly, the Fund will be subject to the risks
associated with fluctuations in currency values. Although the Fund intends to
invest in securities of foreign issuers domiciled in nations which GEMINI
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.
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<PAGE>
Industry Risk- Industry risk is the possibility that stocks within the same
industry will decline in price due to industry-specific market or economic
developments. To the extent that the Fund concentrates its investments in
technology industry, the Fund is subject to the risk that companies in that
industry are likely to react similarly to legislative or regularly changes,
adverse market conditions and/or increased competition affecting that market
segment. Because of the rapid pace of technological development, there is the
risk that the products or services developed by these companies may become
rapidly obsolete or have relatively short product cycles. There is also the risk
that the products and services offered by these companies will not meet
expectations or even reach the marketplace. Although GEMINI currently believes
that investments by the Fund in the technology industry will offer greater
opportunity for growth of capital than investments in other industries, such
investments can fluctuate dramatically in value and will expose you to greater
than average risk
Special Situations - The Fund's portfolio is generally anchored in stable growth
companies. However, the Fund may invest in more aggressive growth companies and
in special situations, such as when, in the opinion of GEMINI, the securities of
a particular issuer will be recognized and appreciate in value due to a specific
development. Developments creating a special situation might include a new
product or process, a technological breakthrough, a management change or other
extraordinary corporate event or a difference in market supply and demand for
the security. The Fund's performance could suffer if the anticipated development
in a "special situation" investment does not occur or does not attract the
expected attention
Non-Diversification Risks- Diversification is a way to reduce risk by investing
in a broad range of stocks or other securities. The Fund is non-diversified. A
"nondiversified" fund has the ability to take larger positions in a smaller
number of issuers. Because the appreciation or depreciation of a single stock
may have a greater impact on the net asset value ("NAV") of a nondiversified
fund, its share price can be expected to fluctuate more than a comparable
diversified fund. This fluctuation, if significant, may negatively affect the
performance of the Fund. The Fund is non-diversified under the 1940 Investment
Company Act, which means that there is no restriction on how much the Fund may
invest in the securities of any one issuer. However, to qualify for tax
treatment as a regulated investment company under the Internal Revenue Code
("Code"), the Fund intends to comply, as of the end of each taxable quarter,
with certain diversification requirements imposed by the Code. Pursuant to these
requirements, the Fund will, among other things, limit its investments in the
securities of any one issuer (with some exceptions) to no more than 25% of the
value of the Fund's total assets. In addition, the Fund with respect to 50% of
its total assets, will limit its investments in the securities of any issuer to
5% of the Fund's total assets, and will not purchase more than 10% of the
outstanding voting securities of any one issuer. Nevertheless, as a general
matter, the Fund may be more susceptible than a diversified mutual fund tot he
effects of adverse economic, political or regulatory developments affecting a
single issuer or industry in which the Fund may have investments.
Leveraging Risks - When the Fund borrows money to buy securities, it is engaging
in a practice known as "leveraging." Leveraging may result from ordinary
borrowings, or may be inherent in the structure of certain Fund investments. If
the prices of those securities decrease, or if the cost of borrowing exceeds any
increases in the prices of those securities, the net asset value of the Fund's
shares will decrease faster than if the Fund has not used leverage. To repay
borrowings, the Fund may have to sell securities at a time and at a price that
is unfavorable to the Fund. Interest on borrowings is an expense the Fund would
not otherwise incur.
Short Sales Risks - When the Fund sells a security short, it borrows the
security in order to enter into the short sale transaction, and the proceeds of
the sale may be used by the Fund as collateral for the borrowing to the extent
necessary to meet margin requirements. The Fund may also be required to pay a
premium to borrow the security.
Moreover, the Fund is required to maintain a segregated account with a broker or
a custodian consisting of cash or highly liquid securities. Until the borrowed
security is replaced, the Fund will maintain this account
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<PAGE>
at a level so that the amount deposited in the account, plus the collateral
deposited with the broker, will equal the current market value of the securities
sold short.
Liquidity Risk - The Fund's portfolio is liquid if the Fund is able to sell the
securities it owns at a fair price within a reasonable time. Liquidity is
generally related to the market trading volume for a particular security.
Investments in smaller companies or in foreign companies or companies in
emerging markets are subject to a variety of risks, including potential lack of
liquidity. If the Fund is unable to timely sell a security because of liquidity
problems, it could suffer a loss.
Derivatives Risk - A derivative is a financial instrument whose value is
"derived," in some manner, from the price of another security, index, asset or
rate. Derivatives include options and futures contracts, among a wide range of
other instruments. The principal risk of holding positions in derivatives used
as a hedging device is that the fluctuations in their values may not behave as
anticipated with respect to the overall securities markets. The Fund may also
use derivatives in an attempt to improve performance, although there is no
guarantee that it will be successful in that effort. Some derivatives are more
sensitive to interest rate changes and market price fluctuations than others,
and thus may increase market risk. Also, derivatives are subject to counter
party risk as described below.
Options and futures. The Fund may occasionally invest in options and/or futures
contracts to 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, or to seek higher
investment returns when an options or futures contract is priced more
attractively than the underlying security or index.
The Fund may write (i.e. sell) puts and covered call options, and may purchase
put and call options, on equity securities traded on a United States exchange or
over-the-counter market. The Fund may also enter into such transactions on
Indexes
The Fund may enter into these transactions so long as the value of the
underlying securities on which options contracts may be written at any one time
does not exceed 100% of the net assets of the Fund, and so long as the initial
margin required to purchase options contracts does not exceed five percent (5%)
of the Fund's total net assets. When writing covered call options or selling
puts, to minimize the risks of entering into these transactions, the Fund will
maintain a segregated account with its Custodian consisting of the underlying
securities upon which the option was written, 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. Over-the counter options
and the assets used to cover such options are considered to be illiquid.
Risk Factors. The primary risks associated with the use of options 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. Investing only in those contracts whose price fluctuations
are expected to resemble those of the Fund's underlying securities will minimize
the risk of imperfect correlation.
Counter party Risk -This is a risk associated primarily with repurchase
agreements and some derivatives transactions. It is the risk that the other
party in the transaction will not fulfill its contractual obligation to complete
the transaction with the Fund.
IPO's - The Fund may participate in the Initial Public Offering ("IPO") market
but IPO investments will not be a principal investment strategy. Investments in
IPO's that are not successful can have a significant negative effect on the
Fund's total return and may carry risks disproportionate to other portfolio
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<PAGE>
investments of equal value. IPO's may significantly increase the Fund's total
returns during any period that the Fund has a small asset base. As the Fund's
assets grow, any impact of IPO investments on the Fund's total return is
expected to decline.
Lack of Timely Information Risk - Timely information about a security or its
issuer may be unavailable, incomplete or inaccurate. This risk is more common to
securities issued by foreign companies and companies in emerging markets than it
is to the securities of U.S.-based companies.
DIVIDENDS AND DISTRIBUTIONS
Dividends paid by the Funds are derived from net investment income. Net
investment income will be distributed at least annually. A 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.
A Fund realizes capital gains when it sells a security for more than it paid for
it. The Fund may make distributions of net realized capital gains (after any
reductions for capital loss carry forwards), generally, once a year.
Unless you elect to have your distributions paid in cash, your distributions
will be reinvested in additional shares of your Fund.
You may change the manner in which your dividends are paid at any time by
writing to the Transfer Agent.
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 Sub-Chapter 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 a 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.
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GENERAL INFORMATION
Total return for each 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 each 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.
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FOR MORE INFORMATION
Additional information about the Fund is available in the Fund's Statement of
Additional Information (SAI). The SAI contains more detailed information on all
aspects of the Fund. A current SAI, dated November 3, 2000, has been filed with
the SEC and is incorporated by reference into this prospectus.
To receive information concerning the Fund, or to request a copy of the SAI or
other documents relating to the Fund, please contact the Fund at:
Gemini Funds, Inc.
c/o Mutual Shareholder Services
1301 East Ninth Street, Suite 1005
Cleveland, OH 44114
1-877-593-8637
A copy of your requested documents will be mailed to you within three days of
your request.
You may also obtain information about the Fund by visiting our web site on the
Internet at WWW.GEMINIFUNDS.COM:
Information about the Fund (including the SAI) can also be reviewed and copied
at the SEC's Public Reference Room in Washington, DC, and information concerning
the operation of the Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. Information about the Fund is also available on the SEC's EDGAR
database at the SEC's web site (www.sec.gov ). Copies of this information can be
obtained, after paying a duplicating fee, by electronic request
([email protected]), or by writing the SEC's Public Reference Section,
Washington, DC 20549-0102.
Investment Company Act No.
811-9443
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 3, 2000
FOR
THE GEMINI GLOBAL NEW ECONOMY FUND
A SERIES OF
GEMINI FUNDS, INC.
95 River Street, Suite 5A
Hoboken, NJ 07030
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of The Gemini Global New Economy Fund, dated
November 3, 2000. Requests for copies of the Prospectus should be made by
writing to Gemini Funds, Inc., 95 River Street, Suite 5A, Hoboken, NJ 07030 or
by calling the Fund at 1-877-593-8637.
TABLE OF CONTENTS
Gemini Funds, Inc.
Investment Policies and Restrictions
Investment Adviser
Directors and Officers
Principal Holders of Securities
Performance Information
Purchasing and Redeeming Shares
Tax Information
Portfolio Transactions
Fund Service Providers
Independent Accountants
Legal Counsel
Financial Statements
GEMINI FUNDS, INC.
Gemini Funds, Inc. (the "Company") was organized on July 9, 1999 as a Maryland
corporation, and is a mutual fund company of the type known as an open-end,
management investment company. It did not begin operations until October, 2000
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.
The Company 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 15,000,000 shares of The Gemini Global
New Economy Fund (the "Fund") which are offered by this prospectus.
The Fund is a "non-diversified" Fund. Non-diversified funds can be riskier
investments than diversified funds. The Investment Company Act of 1940 defines a
"diversified" fund to mean that as to 75% of the fund's total net assets (valued
at the time of investment) a fund will not invest more than 5% of its net assets
in securities of any one issuer other than in securities of the US Government
and its agencies and instrumentalities, thereby reducing the risk of
<PAGE>
loss. The Fund normally will invest, except in defensive periods, at least 80%
of its net assets in domestic and foreign companies engaged in the internet and
internet-related activities.
The Fund's 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.
The Company will not hold annual shareholder meetings. Shareholder meetings will
not be held unless required by Federal or State law or in connection with an
undertaking given by the Fund. The Fund may hold special shareholder meetings,
if required, and shareholders may remove directors of the Company. 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
Company'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.
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's principal investment objective and investment strategies are
discussed in the prospectus. The complete list of investment limitations and
restrictions for the Fund are listed below:
The Fund will not:
1. 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;
2. Borrow money except as permitted under the Investment Company Act of 1940,
as amended, and the regulations promulgated thereunder;
3. 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;
4. Make margin purchases or short sales of securities, except as permitted
under the Investment Company Act of 1940, as amended, and the regulations
promulgated thereunder;
5. Invest in companies for the purpose of management or the exercise of
control;
6. Lend money (but this restriction shall not prevent the Fund from investing
in debt securities or repurchase agreements), or lend its portfolio
securities.
7. 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.
8. Invest in oil, gas or other mineral exploration or development programs;
9. Purchase or sell real estate or real estate loans or real estate limited
partnerships;
10. Issue senior securities.
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11. Invest in commodities, or futures and options on commodities.
12. Will not normally invest more than 25% of its total net assets in the
securities of companies within a single industry.
Restrictions 1 through 12 listed above are fundamental investment policies for
the Fund 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 (illiquid);
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 total net assets (valued at time of
investment) in all investment company securities purchased by the Fund);
c. Invest more than 10% of the Fund's assets (valued at time of investment)
in initial margin deposits of options or futures contracts.
The principal investment strategies of the Fund are not fundamental, which means
that the Board of Directors of the Fund can change the Fund's principal
investment strategies without shareholder approval. However, if that should
occur, you would be informed and would have a period of thirty days from such
notice to redeem your shares without penalty. The Fund's principal investment
strategies are described in the prospectus. What follows is a description of all
of the securities in which the Fund may invest:
COMMON STOCKS. The Fund will ordinarily invest in common stock or securities
convertible into common stock. The market value of common stock can fluctuate
significantly, reflecting the business performance of the issuing company,
investor perceptions 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.
FOREIGN SECURITIES. The Fund may invest, without limitation, in common stock of
foreign issuers, 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.
PREFERRED STOCK. The Fund may invest, without limitation, 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.
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CONVERTIBLE SECURITIES. Traditional convertible securities include corporate
bonds, notes and preferred stocks that may be converted into or exchanged for
common stock, and other securities that also provide an opportunity for equity
participation. These securities are generally convertible either at a stated
price or a stated rate (that is, for a specific number of shares of common stock
or other security). As with other fixed income securities, the price of a
convertible security to some extent varies inversely with interest rates. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a non-convertible
debt security), a convertible security also affords the investor an opportunity,
through its conversion feature, to participate in the capital appreciation of
the common stock into which it is convertible. As the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis and so may not experience market value declines to
the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the price of a convertible security tends to
rise as a reflection of the value of the underlying common stock. To obtain such
a higher yield, the Funds may be required to pay for a convertible security an
amount in excess of the value of the underlying common stock. Common stock
acquired by the Funds upon conversion of a convertible security will generally
be held for so long as the advisor or investment manager anticipates such stock
will provide the Funds with opportunities which are consistent with the Funds'
investment objectives and policies.
WARRANTS. A warrant is an instrument issued by a corporation which gives the
holder the right to subscribe to a specified amount of the issuer's capital
stock at a set price for a specified period of time.
OPTIONS ON EQUITIES. The Fund may invest in options contracts to 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, or to seek higher investment returns when an
options contract is priced more attractively than the underlying security or
index.
The Fund may write (i.e. sell) covered call options, and may purchase put and
call options, on equity securities traded on a United States exchange or
properly regulated over-the-counter market. The Fund may also enter into such
transactions on Indexes. Options contracts can include long-term options with
durations of up to three years.
The Fund may enter into these transactions so long as the value of the
underlying securities on which options contracts may be written at any one time
does not exceed 100% of the net assets of the Fund, and so long as the initial
margin required to enter into such contracts does not exceed ten percent (10%)
of the Fund's total net assets. When writing covered call options, to minimize
the risks of entering into these transactions, the Fund will maintain a
segregated account with its Custodian consisting of the underlying securities
upon which the option was written, 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.
Risk Factors. The primary risks associated with the use of options 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. Investing only in those contracts whose price fluctuations
are expected to resemble those of the Fund's underlying securities will minimize
the risk of imperfect correlation. Entering into such transactions only on
national exchanges and over-the-counter markets with an active and liquid
secondary market will minimize the risk that the Fund will be unable to close
out a position.
DEBT SECURITIES. The Fund may invest in corporate or U.S. Government debt
securities including zero coupon bonds. Corporate debt securities may be
convertible into preferred or common stock. In selecting corporate debt
securities for the Fund, GEMINI reviews and monitors the creditworthiness of
each issuer and issue. U.S. Government securities include direct obligations of
the U.S. Government and obligations issued by U.S. Government agencies and
instrumentalities. The market value of such securities fluctuates in response to
interest
4
<PAGE>
rates and the creditworthiness of the issuer. In the case of securities backed
by the full faith and credit of the United States Government, shareholders are
only exposed to interest rate risk. The Fund will invest only in debt securities
rated BBB or higher by Standard & Poors rating service, or B or higher by
Moody's Rating service.
Zero coupon bonds do not provide for cash interest payments but instead are
issued at a discount from face value. Each year, a holder of such bonds must
accrue a portion of the discount as income. Because issuers of zero coupon bonds
do not make periodic interest payments, their prices tend to be more volatile
than other types of debt securities when market interest rates change.
MONEY MARKET FUNDS. The Fund may invest in securities issued by other registered
investment companies (i.e., mutual funds). 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 Fund's net assets
and/or 3% of any investment company's outstanding securities.
REPURCHASE AGREEMENTS. The Fund may invest a portion of its assets in repurchase
agreements ("Repos") with broker-dealers, banks and other financial
institutions, provided that the Fund's custodian always has possession of the
securities serving as collateral for the Repos or has proper evidence of book
entry receipt of said securities. In a Repo, the Fund purchases securities
subject to the seller's simultaneous agreement to repurchase those securities
from the Fund at a specified time (usually one day) and price. The repurchase
price reflects an agreed-upon interest rate during the time of investment. All
Repos entered into by the Fund must be collateralized by U.S. Government
Securities, the market values of which equal or exceed 102% of the principal
amount of the money invested by the Fund. If an institution with whom the Fund
has entered into a Repo enters insolvency proceedings, the resulting delay, if
any, in the Fund's ability to liquidate the securities serving as collateral
could cause the Fund some loss if the securities declined in value prior to
liquidation. To minimize the risk of such loss, the Fund will enter into Repos
only with institutions and dealers considered creditworthy.
CASH RESERVES. The Fund may hold up to 100% of its net assets in cash to
maintain liquidity and for temporary defensive purposes.
The Fund may take a temporary defensive position when, in GEMINI's opinion,
market conditions are such that investing according to the Fund's normal
investment objectives would place the Fund in imminent risk of loss. In such an
event, GEMINI could temporarily convert some or all of the Fund's investments to
cash. Such actions are subject to the supervision of the Board of Directors. You
should be aware that any time the Fund is assuming a temporary defensive
position, the Fund will not be invested according to its investment objectives,
and its performance will vary, perhaps significantly, from its norm.
RESTRICTED AND ILLIQUID SECURITIES.
The Fund will not invest more than 15% of its net assets in securities that
GEMINI determines, under the supervision of the Board of Directors, to be
illiquid and/or restricted. Illiquid securities are securities that 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. Because illiquid and restricted
securities may present a greater risk of loss than other types of securities,
the Fund will not invest in such securities in excess of the limits set forth
above.
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 GEMINI'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
5
<PAGE>
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.
PORTFOLIO TURNOVER.
The Fund has no operating history and therefore has no annual reportable
portfolio turnover. Higher portfolio turnover rates may result in higher rates
of net realized capital gains to the Fund, thus the portion of the Fund's
distributions constituting taxable gains may increase. In addition, higher
portfolio turnover activity can result in higher brokerage costs to the Fund.
The Fund anticipates that its annual portfolio turnover will be not greater than
100%.
INVESTMENT ADVISER
Information on the Fund's investment adviser, Gemini Management & Research, LLC,
is set forth in the prospectus.
GEMINI is a New Jersey Limited Liability Company. Marcel L. Engenheiro is the
President and Chief Executive Officer with a 36.5% interest in GEMINI and Paulo
daSilva and Mark Boehme are Managing Directors, with a 30.5% and 33% interest,
respectively, in GEMINI.
The Advisory Agreement with the Fund provides that GEMINI 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 GEMINI's willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations and duties under the Advisory Agreement.
The Advisory Agreement expires on October 31, 2002, 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 GEMINI 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).
The Agreement requires that GEMINI manage the investment portfolio of the Fund
in a way that conforms with the Fund's investment policies. GEMINI may directly
manage the Fund itself, or may hire a sub-adviser, which may be an affiliate of
GEMINI, to do so. Specifically, GEMINI is responsible for:
o managing the investment and reinvestment of all the assets of the
Fund, and executing all purchases and sales of portfolio securities;
o maintaining a continuous investment program for the Fund, consistent
with (i) the Fund's investment policies as set forth in the Company's
Articles of Incorporation, Bylaws and Registration Statement, as from
time to time amended, under the 1940 Act, and in any prospectus and/or
statement of additional information of the Fund, as from time to time
amended and in use under the 1933 Act, and (ii) the Company's status
as a regulated investment company under the Internal Revenue Code of
1986, as amended;
6
<PAGE>
o determining what securities are to be purchased or sold for the Fund,
unless otherwise directed by the directors of the Company, and
executing transactions accordingly;
o providing the Fund the benefit of the investment analysis and
research, the reviews of current economic conditions and trends, and
the consideration of a long-range investment policy now or hereafter
generally available to the investment advisory customers of the
adviser or any sub-adviser;
o determining what portion of the Fund's assets should be invested in
the various types of securities authorized for purchase by the Fund;
and
o making recommendations as to the manner in which voting rights, rights
to consent to Fund action and any other rights pertaining to the
Fund's portfolio securities shall be exercised
GEMINI also performs all of the following services for the Fund:
o supplying the Company with officers, clerical staff and other
employees;
o furnishing office space, facilities, equipment, and supplies;
providing personnel and facilities required to respond to inquiries
related to shareholder accounts;
o supplying basic telephone service and other utilities; and
o preparing and maintaining certain of the books and records required to
be prepared and maintained by the Fund under the 1940 Act.
Expenses not assumed by GEMINI are borne by the Fund. For the advisory services
it provides to the Fund, GEMINI is entitled to receive a base management fee
calculated at the annual rate of 1.50% of the Fund's daily net assets (the "Base
Fee"). This Base Fee will be adjusted, on a monthly basis (i) upward at the rate
of 0.20%, on a pro rata basis, for each percentage point the investment
performance of the Class C shares of the Fund exceeds the sum of 2.00% of the
investment record of the Morgan Stanley Capital International - World Index
(MSCI) (the "Index"), or (ii) downward at the rate of 0.20%, on a pro rata
basis, for each percentage point the investment record of the Index less 2.00%
exceeds the investment performance of the Class C shares of the Fund (the "Fee
Adjustment"). The maximum adjustment, if any, will be 1.00% annually. Therefore,
the maximum annual fee payable to GEMINI will be 2.50% of average daily net
assets and the minimum annual fee will be 0.50%. During the first twelve months
of operation, the management fee will be charged at the base fee of 1.50% with
no performance adjustment.
In determining the Fee Adjustment, if any, applicable during any month, GEMINI
will compare the investment performance of the Class C shares of the Fund for
the twelve-month period ending on the last day of the prior month (the
"Performance Period") to the investment record of the Index during the
Performance Period. The investment performance of the Fund will be determined by
adding together (i) the change in the net asset value of the Class C shares
during the Performance Period, (ii) the value of cash distributions made by the
Fund to holders of Class C shares to the end of the Performance Period, and
(iii) the value of capital gains per share, if any, paid or payable on
undistributed realized long-term capital gains accumulated to the end of the
Performance Period, and will be expressed as a percentage of its net asset value
per share at the beginning of the Performance Period. The investment record of
the Index will be determined by adding together (i) the change in the level of
the Index during the Performance Period and (ii) the value, computed
consistently with the Index, of cash distributions made by companies who's
securities comprise the Index accumulated to the end of the Performance Period,
and will be expressed as a percentage of the Index at the beginning of such
Period.
7
<PAGE>
After it determines any Fee Adjustment, GEMINI will determine the dollar amount
of additional fees or fee reductions to be accrued for each day of a month by
multiplying the fee Adjustment by the average daily net assets of the Class C
shares of the Fund during the Performance Period and dividing that number by the
number of days in the Performance Period. The management fee, as adjusted, is
accrued daily and paid monthly.
For the first twelve months of the Fund's operations, the management fee will be
charged at the Base Fee of 1.50%, with no performance adjustment. Thereafter,
the Base Fee will be adjusted as described above. Fractions of a percentage
point will be rounded to the nearer whole point.
If the Fund outperforms the MSCI - World Index by more than 2%, the Base Fee is
adjusted as follows:
%Performance Over
MSCI Index Advisory Fee
------------ ------------
2% 1.50% (no increase in Base Fee)
3% 1.70%
4% 1.90%
5% 2.10%
6% 2.30%
7% 2.50%
%Performance Under
MSCI Index Advisory Fee
------------ ------------
2% 1.50% (no decrease in Base Fee)
3% 1.30%
4% 1.10%
5% 0.90%
6% 0.70%
7% 0.50%
If the directors determine at some future date that another securities index is
a better representative of the composition of the Fund than is the MSCI Index,
the directors may change the securities index used to compute the Fee
Adjustment. If the directors do so, the new securities index (the "New Index")
will be applied prospectively to determine the amount of the Fee Adjustment. The
Index will continue to be used to determine the amount of the Fee Adjustment for
that part of the Performance Period prior to the effective date of the New
Index. A change in the Index will be submitted to shareholders for their
approval unless the SEC determines that shareholder approval is not required.
The amount the Fund will pay to GEMINI in performance fees is not susceptible to
estimation, since it depends upon the future performance of the Fund and the
Index.
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 is 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:
8
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Name, Age, Business Address Position(s) with the Principal Occupation(s) for the Last Five (5)
Company Years
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Marcel L. Engenheiro* (Age 31) President, Treasurer, President, Chief Executive Officer of
95 River Street, Suite 5A, Director GEMINI since January, 1999. Senior
Hoboken, NJ 07030 Account Manager, Canadian Imperial Bank,
Toronto, Canada from 1996 through 1998.
Customer Servicing Representative with
Sottomayor Bank, Canada, Toronto,
Canada, from 1992 through 1994. Bachelor
of Arts degree, University of Toronto,
Canada, 1994.
--------------------------------------------------------------------------------------------------------
Mark M. Boehme* (Age 39) Secretary, Director Managing Director and Portfolio Manager
95 River Street, Suite 5A, for GEMINI since May, 2000. Senior
Hoboken, NJ 07030 Equity Analyst for Commerzbank, NY.,
from 1992 to 2000. Mr. Boehme holds NASD
Series 7, 16, 24 and 8 licenses
--------------------------------------------------------------------------------------------------------
James R. Hocking Director, Chairman of Partner, Cornell Group International
(Age 71) the Board of Directors Consulting, Inc., an executive search
300 Park Avenue, Suite 1700 firm, since 1999. Formerly a private
New York, NY 10022 consultant to investment and
manufacturing firms from 1993 to 1999.
Over 40 years senior management
experience in investment and financial
services field, including senior
management level positions with
Citibank, Templeton Funds, Schroder
Capital Management, Inc., John Hancock
Life Insurance Company and Continental
Illinois Bank, Mr. Hocking also served
as a US Navy Deck Officer and as a Navy
Intelligence Officer.
--------------------------------------------------------------------------------------------------------
Paul F. Starita (Age 59) Director 1997- Present: Director, Executive
University of Victoria Education Institute, University of
Faculty of Business, Business Victoria, Canada. 1997- Acting
& Economics Building, Room 254 President, Marathon Mutual Funds, series
3800 Finnerty Road of First Marathon, Inc. 1995-1996-
Victoria, British Columbia Chairman, CIBC Securities, Inc., a
V8W 2Y2 securities subsidiary of Canadian
Canada Imperial Bank of Commerce. 1985-1994:
Senior management in a variety of
positions with Royal Trust/Royal Bank of
Canada. Mr. Starita has over 30 years
experience in the financial services and
mutual fund industries.
--------------------------------------------------------------------------------------------------------
James W. Bradshaw (Age 65) Director President and founder, Bradshaw
34 Balmoral Avenue Management, Inc., a Canadian
Toronto, Canada M4V 1J4 broker/dealer firm, since 1994. Mr.
Canada Bradshaw has held a variety of
management level positions in the
financial and mutual funds industries
since 1965, including senior management
level positions with the Templeton Fund
Group.
--------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
* Indicates an "interested person" as defined in the Investment Company Act of
1940.
Mr. Marcel L. Engenheiro is the President of GEMINI, and the President and a
Director of the Company. Mr. Mark M. Boehme is also a Director of the Company.
As such, each is considered to be an "affiliated person" of the Fund.
Mr. Paulo daSilva and Mr. Mark M. Boehme are each Managing Directors of GEMINI.
As such, each is considered to be an "affiliated person" of the Fund and a
"control person" of GEMINI.
The table below sets forth the compensation anticipated to be paid by the
Company to each of the directors of the Company during the fiscal year ending
September 30, 2000.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Pension or Total
Retirement Estimated Compensation
Name of Director, Aggregate Benefits Annual From Fund and
Position(s) Compensation Accrued as Part Benefits Upon Fund Complex
from Company of Fund Expenses Retirement Paid to Director
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marcel L.
Engenheiro,
President, $0.00 $0.00 $0.00 $0.00
-----------------------------------------------------------------------------------------
Mark M. Boehme,
Secretary $0.00 $0.00 $0.00 $0.00
-----------------------------------------------------------------------------------------
James R. Hocking,
Chairman $0.00 $0.00 $0.00 $0.00
-----------------------------------------------------------------------------------------
Paul F. Starita $0.00 $0.00 $0.00 $0.00
-----------------------------------------------------------------------------------------
James W. Bradshaw $0.00 $0.00 $0.00 $0.00
-----------------------------------------------------------------------------------------
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
Mr. Mark M. Boehme became the initial and sole shareholder of the Fund on or
about October 20, 2000, prior to its public offering. Accordingly, he is deemed
to then control the Fund and will have significant influence over the Fund and
its operations.
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.
10
<PAGE>
[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
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 prospectus.
Redemptions will be made at net asset value, less any applicable CDSC, depending
on share class. Each 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. The Fund would be subject to corporate income
tax on any undistributed income other than tax-exempt income from municipal
securities. However, if the Fund does not qualify, all of its earnings would be
subject to federal income tax at the prevailing corporate income tax rates.
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
11
<PAGE>
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 a 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 GEMINI 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 GEMINI subject to
review by the Company's Board of Directors. In placing purchase and sale orders
for portfolio securities for the Fund, it is the policy of GEMINI 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
12
<PAGE>
largely judgmental considerations. Among these are GEMINI'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, GEMINI feels that better prices are available from
non-principal market makers who are paid commissions directly.
FUND SERVICE PROVIDERS
The Fund could not function without the services provided by certain companies.
The Fund has entered into contracts with the following companies.
Custodian
---------
FirstStar Bank, N.A., Cincinnati, Ohio (the "Custodian"), 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, 1301 East Ninth Street, Cleveland, Ohio provides
transfer agency and dividend disbursing services for the Fund pursuant to a
written agreement with the Company. 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 Shareholder 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.
Administration
--------------
Mutual Shareholder Services also acts as Administrator to the Fund pursuant to a
written agreement with the Company. 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; and
(g) maintaining the Fund's financial accounts and records
For the services to be rendered as Administrator, the Fund 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.
13
<PAGE>
Principal Underwriter.
---------------------
Kenneth Jerome & Company, Inc., 147 Columbia Turnpike, Suite 107, Florham, NJ
07932 (the "Distributor"), serves as principal underwriter for the Fund's
shares. The Distributor is a registered broker/dealer and is a member in good
standing of the NASD. The purpose of acting as an underwriter is to facilitate
the registration of the Funds' shares under state securities laws and to assist
in the sale of shares. The Distributor facilitates the distribution of the
Fund's shares, and is paid a flat fee of $3,000 per year, plus out-of-pocket
expenses, by the Fund.
INDEPENDENT ACCOUNTANTS
McCurdy & Assoc, CPAs, Inc. has been selected as the independent accountants for
the Fund for its first fiscal year. As such, it performs audits of the Fund's
financial statements.
LEGAL COUNSEL
David Jones & Assoc., P.C., 4747 Research Forest Drive, Suite 180, # 303, The
Woodlands, TX 77381 has passed on certain matters relating to this registration
statement and serves as counsel to the Company.
FINANCIAL STATEMENTS
THE FINANCIAL INFORMATION PRESENTED BELOW IS INTENDED TO HELP YOU UNDERSTAND THE
FUND'S FINANCIAL STATUS AT THE COMMENCEMENT OF ITS INVESTMENT OPERATIONS. THIS
INFORMATION HAS BEEN AUDITED BY MCCURDY & ASSOCIATES, CPA'S, INC.
GEMINI FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 20, 2000
Gemini Global
New Economy Fund
ASSETS:
Cash in Bank $ 117,500
------------
Total Assets $ 117,500
------------
LIABILITIES: $ 0
------------
Total Liabilities $ 0
------------
NET ASSETS $ 117,500
------------
NET ASSETS CONSIST OF:
Capital Paid In $ 117,500
------------
OUTSTANDING SHARES 11,750
NET ASSET VALUE PER SHARE $ 10.00
OFFERING PRICE PER SHARE $ 10.00
See Accountants' Audit Report
14
<PAGE>
GEMINI FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 20, 2000
1. ORGANIZATION
Gemini Funds, Inc. (the "Company") was organized on July 9, 1999 as a
Maryland corporation, and is a mutual fund company of the type known as an
open-end, management investment company.
The Company 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 15,000,000
shares of The Gemini Global New Economy Fund (the "Fund").
The primary investment objective of the Fund is to achieve capital
appreciation.
The Fund uses an independent custodian and transfer agent. No transactions
other than those relating to organizational matters and the sale of 11,750
shares of Gemini Global New Economy Fund have taken place to date.
2. RELATED PARTY TRANSACTIONS
As of October 20, 2000, all of the outstanding shares of the Fund were
owned by Mark M. Boehme Rollover IRA. A shareholder who beneficially owns,
directly or indirectly, more than 25% of the Fund's voting securities may
be deemed a "control person" (as defined in the 1940 Act) of the Fund.
Gemini Management & Research, LLC ("GEMINI"), the Fund's investment
adviser, is registered as an investment adviser under the Investment
Advisers Act of 1940. Certain directors and officers of Gemini Funds, Inc.
are also directors and officers of Gemini Management & Research, LLC.
Expenses not assumed by GEMINI are borne by the Fund. For the advisory
services it provides to the Fund, GEMINI is entitled to receive a base
management fee calculated at the annual rate of 1.50% of the Fund's daily
net assets (the "Base Fee"). This Base Fee will be adjusted, on a monthly
basis (i) upward at the rate of 0.20%, on a pro rata basis, for each
percentage point the investment performance of the Class C shares of the
Fund exceeds the sum of 2.00% of the investment record of the Morgan
Stanley Capital International-World Index (MSCI) (the "Index"), or (ii)
downward at the rate of 0.20%, on a pro rata basis, for each percentage
point the investment record of the Index less 2.00% exceeds the investment
performance of the Class C shares of the Fund (the "Fee Adjustment"). The
maximum or minimum adjustment, if any, will be 1.00% annually. Therefore,
the maximum annual fee payable to GEMINI will be 2.50% of average daily net
assets and the minimum annual fee will be 0.50%. During the first twelve
months of operation, the management fee will be charged at the base fee of
1.50% with no performance adjustment.
3. CAPITAL STOCK AND DISTRIBUTION
At October 20, 2000 paid in capital amounted to $117,500 for Gemini Global
New Economy Fund. Transactions in capital stock were as follows:
Class C Shares Sold:
Gemini Global New Economy Fund 11,750
Class C Shares Redeemed:
Gemini Global New Economy Fund 0
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15
<PAGE>
Net Increase:
Gemini Global New Economy Fund 11,750
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Class C Shares Outstanding:
Gemini Global New Economy Fund 11,750
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To The Shareholders and Directors
Gemini Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of Gemini
Funds, Inc. (comprised of Gemini Global New Economy Fund) as of October 20,
2000. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. Our procedures included
confirmation of cash held by the custodian as of October 20, 2000, by
correspondence with the custodian. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Gemini
Global New Economy Fund as of October 20, 2000, in conformity with generally
accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
October 20, 2000
16