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Monetta Fund Inc – ‘486B24E’ on 4/17/96

As of:  Wednesday, 4/17/96   ·   Effective:  4/17/96   ·   Accession #:  950131-96-1610   ·   File #s:  33-01398, 811-04466

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/17/96  Monetta Fund Inc                  486B24E     4/17/96    5:307K                                   Donnelley R R & S… 03/FA

Post-Effective Amendment to an N-2   —   Form N-2
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 486B24E     Monetta Fund Pe No. 15 to N-1A                       109    484K 
 3: EX-27       Financial Data Schedule                                2      8K 
 5: EX-99       Bell, Boyd & Lloyd Consent                             1      7K 
 4: EX-99.18    Form of Application                                    6±    22K 
 2: EX-99.B11   Kmpg Consent                                           1      6K 


486B24E   —   Monetta Fund Pe No. 15 to N-1A
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
9Monetta Fund
12Investment Objectives and Policies
15Risks and Investment Considerations
16Equity Securities
"Debt Securities
18Investment Restrictions
21How to Purchase Shares
22Purchase Price of Shares
23How to Redeem Shares
"Signature Guarantee
"By Exchange
25General Redemption Policies
26Dividends, Distributions and Federal Taxes
"Determination of Net Asset Value
28Tax-Sheltered Retirement Plans
29Management of the Funds
32Table of Contents
"Investment Adviser
33Custodian
36Other Fund Information
51Performance Information
"Yield
52Total Return
56Directors/Trustees and Officers
60Purchasing and Redeeming Shares
"More Information About Net Asset Value
62Tax Status
"Portfolio Transactions
65Independent Auditors
"Appendix - Ratings
70Average Annual Total Return
91Statements of Operations
93Statements of Changes in Net Assets
96Notes to Financial Statements
"Balanced Fund
"Intermediate Bond Fund
"Government Money Market Fund
103Monetta Mid-Cap Equity Fund
"Monetta Large-Cap Equity Fund
"Monetta Balanced Fund
"Monetta Intermediate Bond Fund
"Monetta Government Money Market Fund
104Item 24. Financial Statement and Exhibits
106Item 25. Persons Controlled By or Under Common Control with Registrant
"Item 26. Number of Holders of Securities
"Item 27. Indemnification
"Item 28. Business and Other Connections of Investment Adviser
"Item 29. Principal Underwriters
107Item 30. Location of Accounts and Records
"Item 31. Management Services
"Item 32. Undertakings
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As filed with the Securities and Exchange Commission on April 17, 1996 Securities Act registration no. 33-1398 Investment Company Act file no. 811-4466 -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 15 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 17 ---------------------------- MONETTA FUND, INC. (Registrant) 1776-A South Naperville Road, Suite 207 Wheaton, Illinois 60187-8133 Telephone number: 708/462-9800 ---------------------------- Robert S. Bacarella Janet D. Olsen Monetta Fund, Inc. Bell, Boyd & Lloyd 1776-A South Naperville Road, #207 Three First National Plaza, #3300 Wheaton, Illinois 60187-8133 Chicago, Illinois 60602 (Agents for service) ---------------------------- Amending Parts A, B and C and filing exhibits. It is proposed that this filing will become effective: immediately upon filing pursuant to rule 485(b) X On April 17, 1996 pursuant to rule 485(b) 60 days after filing pursuant to rule 485(a)(1) on ___________________ pursuant to rule 485(a)(1) 75 days after filing pursuant to rule 485(a)(2) on _______________ pursuant to rule 485(a)(2) [Enlarge/Download Table] ================================================================================================ Proposed Proposed Title of Maximum Maximum Securities Amount Offering Aggregate Amount of Being Registered Being Registered Price Per Unit Offering Price Registration Fee ------------------------------------------------------------------------------------------------ Shares of Beneficial Net Asset Interest, No Par Value at Time Value 2,028,606/1/ of Sale $31,483,978/2/ $100 ================================================================================================ Registrant has elected to register an indefinite number of its shares of common stock pursuant to Rule 24f-2. Registrant filed its Rule 24f-2 Notice for the fiscal year ended December 31, 1995 on February 22, 1996. ----------------------- /1/ Based upon a net asset value of $15.52 on April 15, 1996. /2/ This calculation is made pursuant to Rule 24e-2 under the Investment Company Act of 1940. The actual aggregate redemption price of shares redeemed during the Registrant's fiscal year ended December 31, 1995 was $113,701,649 (7,054,186 shares), of which $82,507,662 was used for reductions pursuant to paragraph (c) of Rule 24f-2 in Registrant's Rule 24f-2 Notice for such period. The aggregate redemption price of redeemed shares used for reductions in this amendment pursuant to 24e-2(a) is $31,193,987. Page 1 of ____ pages (including exhibits) The index of exhibits is on page _____.
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MONETTA FUND, INC. Cross-reference sheet pursuant to rule 495(a) of Regulation C [Download Table] Item Location or caption* -------- -------------------------------- Part A ------ 1(a) & (b) Front Cover 2(a) Fund Expenses (b)-(c) Not Applicable 3(a) Financial Highlights (b) Not Applicable (c) Investment Return 4(a)(i) General Information (a)(ii)&(b) Investment Objectives and Policies; Risks and Investment Considerations; Investment Restrictions (c) Investment Objectives and Policies; Risks and Investment Considerations 5(a) Management of the Funds (b) Management of the Funds; Rear Cover; Fund Expenses (c) Management of the Funds (d) Not Applicable (e) Rear Cover (f) Management of the Funds; Fund Expenses (g) Management of the Funds 5A The required information is included in registrant's annual report to shareholders 6(a) General Information (b)-(d) Not Applicable (e) General Information (f)-(g) Dividends, Distributions and Federal Taxes 7 How to Purchase Fund Shares (a) Not Applicable (b) How to Purchase Fund Shares; Determination of Net Asset Value (c) How to Purchase Fund Shares; Individual Retirement Accounts (d) Front Cover; How to Purchase Fund Shares; Individual Retirement Accounts (e)-(f) Not Applicable 8(a) How to Redeem Fund Shares (b) How to Purchase Fund Shares; How to Redeem Fund Shares (c)-(d) How to Redeem Fund Shares 9 Not Applicable
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[Download Table] Item Location or caption* -------- -------------------------------- Part B (Supplemental Information Statement) ------------------------------------------- 10(a) & (b) Front Cover 11 Table of Contents 12 Not Applicable 13(a)-(c) Investment Objectives and Policies; Risks and Investment Considerations; Investment Restrictions (d) Portfolio Transactions 14(a) Directors/Trustees and Officers (b) Investment Adviser (c) Not Applicable 15(a) & (b) Not Applicable (c) Directors/Trustees and Officers 16(a)-(b) Investment Adviser (c)-(g) Not Applicable (h) Custodian; Independent Auditors (i) Not Applicable 17(a)-(d) Portfolio Transactions; Investment Adviser (e) Not Applicable 18(a) & (b) Not Applicable 19(a)-(c) Purchasing and Redeeming Shares 20 Tax Status 21(a)-(c) Not Applicable 22(a) Not Applicable (b) Performance Information 23 Other Fund Information
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[Download Table] Item Location or caption/*/ -------- ---------------------------- Part C (other information) -------------------------- 24 Financial statements and exhibits 25 Persons controlled by or under common control with registrant 26 Number of holders of securities 27 Indemnification 28 Business and other connections of investment advisor 29 Principal underwriters 30 Location of accounts and records 31 Management services 32 Undertakings -------------------------------- /*/ References are to captions within the part of the registration statement to which the particular item relates except as otherwise indicated.
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PROSPECTUS April 17, 1996 Monetta NO SALES LOAD FUNDS NO REDEMPTION FEE -------------------------------------------------------------------------------- 1776-A SOUTH NAPERVILLE ROAD, SUITE 207 . WHEATON, IL 60187 . 1-800-MONETTA -------------------------------------------------------------------------------- . MONETTA FUND, INC. . MONETTA MID-CAP EQUITY FUND . MONETTA LARGE-CAP EQUITY FUND Each seeks long-term capital growth by investing in common stocks believed to have above average growth potential. The Funds differ from each other with respect to the (i) market capitalizations of the companies in which they invest and (ii) relative importance placed on investing for current income. . MONETTA BALANCED FUND Seeks a favorable total rate of return through capital appreciation and current income consistent with preservation of capital, derived from investing in a portfolio of equity and fixed income securities. . MONETTA INTERMEDIATE BOND FUND Seeks high current income consistent with the preservation of capital by investing primarily in marketable debt securities. . MONETTA GOVERNMENT MONEY MARKET FUND Seeks maximum current income consistent with safety of capital and maintenance of liquidity. The Fund invests in U. S. Government Securities maturing in thirteen months or less from the date of purchase and repurchase agreements for U. S. Government Securities. U. S. Government Securities include securities issued or guaranteed by the U. S. Government or by its agencies or instrumentalities. GOVERNMENT MONEY MARKET FUND IS A "NO-LOAD" MONEY MARKET FUND AND ATTEMPTS TO MAINTAIN ITS NET ASSET VALUE AT $1.00 PER SHARE. SHARES OF THIS FUND ARE NOT INSURED OR GUARANTEED BY THE U. S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT MONETTA GOVERNMENT MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE $1.00 PER SHARE NET ASSET VALUE. Monetta Mid-Cap Equity Fund ("Mid-Cap Fund"), Monetta Large-Cap Equity Fund ("Large-Cap Fund"), Monetta Balanced Fund ("Balanced Fund"), Monetta Intermediate Bond Fund ("Intermediate Bond Fund") and Monetta Government Money Market Fund ("Government Money Market Fund") are series of Monetta Trust (the "Trust"). Monetta Fund, Inc. ("Monetta Fund") and each of the Trust series are collectively referred to as the "Funds." Each Fund is a "no-load" fund. There are no sales or redemption charges, and the Funds have no 12b-1 plans. MINIMUM INVESTMENT: Initial Purchase $1,000 Subsequent Investments $50 Your initial investment may be divided among the Funds, but an investment in any single Fund may not be less than $250. PLANS AVAILABLE: Automatic Investment Plan Individual Retirement Account SEP-IRA Profit Sharing 401(k) 403(b) This Prospectus sets forth concisely the information about the Funds that a prospective investor should know before investing. An investor should read this Prospectus and retain it for future reference. A Statement of Additional Information about the Funds (which bears the same date as this Prospectus and together with any supplement to it is incorporated by reference) has been filed with the Securities and Exchange Commission. That statement is available without charge by writing or calling the Funds at the address and telephone number printed above. ================================================================================ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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SUMMARY Mid-Cap Fund, Large-Cap Fund, Balanced Fund, Intermediate Bond Fund and Government Money Market Fund are series of the Trust. Monetta Fund, Inc. ("Monetta Fund") and each of the Trust series are collectively referred to as the "Funds." Each Fund is a "no-load" fund. There are no sales or redemption charges, and the Funds have no 12b-1 plans. INVESTMENT OBJECTIVES MONETTA FUND, MID-CAP FUND AND LARGE-CAP FUND each seek long-term capital growth by investing in common stocks believed to have above average growth potential. The Funds differ from each other with respect to the (i) market capitalizations of the companies in which they invest and (ii) relative importance placed on investing for current income. MONETTA FUND generally invests in smaller and medium-sized companies with market capitalizations ranging from $50 million to $1 billion. Monetta Fund's primary investment objective is to provide shareholders with capital appreciation by investing at least 70% of the Fund's assets in equity securities. A secondary objective of the Fund is to seek to provide its shareholders with income by investing in dividend-paying equity securities or fixed income securities. MID-CAP FUND typically invests in medium-sized companies with market capitalizations of $1 billion to $5 billion. Under normal market conditions, the Fund invests at least 90% of its total assets in equity securities. LARGE-CAP FUND typically invests in large companies with market capitalizations in excess of $5 billion. Under normal market conditions, the Fund invests at least 90% of its total assets in equity securities. BALANCED FUND seeks a favorable total rate of return through capital appreciation and current income consistent with preservation of capital, derived from investing in a portfolio of equity and fixed income. INTERMEDIATE BOND FUND seeks high current income, consistent with the preservation of capital, by investing primarily in marketable debt securities. GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with safety of capital and maintenance of liquidity. The Fund invests in securities issued or guaranteed by the U. S. Government or by its agencies or instrumentalities ("U. S. Government Securities") maturing in thirteen months or less from the date of purchase and repurchase agreements for U. S. Government Securities regardless of the maturities of such securities. There can be no assurance that any Fund will achieve its investment objective. page 2
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INVESTMENT RISKS All investments, including those in mutual funds, have risks. No investment is suitable for all investors. Monetta Fund, Mid-Cap Fund and Large-Cap Fund are designed for long-term investors who can accept the fluctuations in portfolio value and other risks associated with seeking long-term capital growth through investments in common stocks. Balanced Fund is designed for long-term investors who can accept asset value fluctuations from interest rate changes and credit risks associated with fixed income investments, and other risks associated with investments in common stocks. Intermediate Bond Fund is designed for investors who seek high income with less net asset value fluctuation from interest rate changes than with a longer-term fund but more net asset value fluctuation than with a shorter-term fund, and who can accept the credit and other risks associated with securities that are high and upper-medium quality. Government Money Market Fund is designed for investors who seek income with minimum risk (including the risk of principal loss) other than the risk of changes in yield caused by fluctuations in prevailing levels of interest rates. Because Government Money Market Fund may invest in U. S. Government Securities that are not backed by the full faith and credit of the U. S. Treasury, investment in that Fund might involve risks that are different in some respects from an investment in a fund that invests only in securities that are backed by the full faith and credit of the U. S. Treasury. See "Risks and Investment Considerations" for a more complete description of the risks of investing in each of the Funds. DIVIDENDS AND CAPITAL GAINS Monetta Fund, Mid-Cap Fund and Large-Cap Fund each pay income dividends, if any, at least annually; Balanced Fund pays income dividends, if any, quarterly; and Intermediate Bond Fund and Government Money Market Fund pay income dividends monthly. Capital gains, if any, are distributed by each Fund at least annually. Distributions are automatically reinvested in additional shares of that Fund at net asset value unless payment in cash is requested. See "Dividends, Distributions and Federal Taxes." PURCHASES AND REDEMPTIONS The minimum initial investment in the Monetta Funds is $1,000, which may be allocated among the Funds so long as at least $250 is invested in each Fund in which you choose to invest. The minimum initial investment for Uniform Gifts/Transfers to Minors Act ("UGMA") accounts, Automatic Investment Plan accounts and individual retirement accounts is $250. Additional investments in ANY Fund must be at least $50. Each Fund has a minimum account balance of $250. MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995, HOWEVER, WILL BE ALLOWED TO MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT FUND. There are no sales charges. See "How to Purchase Shares." Shares will be redeemed at current net asset value. There are no redemption charges. See "How to Redeem Shares." ADVISER AND FEES Monetta Financial Services, Inc. (the "Adviser") is investment adviser to the Funds. For a description of the Adviser and the advisory fees paid by the Funds, see "Management of the Funds." page 3
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FUND EXPENSES The purpose of the table below is to assist you in understanding the various costs and expenses that you will bear directly or indirectly in an investment in a Fund. [Enlarge/Download Table] Intermediate Government Monetta Mid-Cap Large-Cap Balanced Bond Money Fund Fund Fund Fund Fund Market Fund ---- ---- ---- ---- ---- ----------- SHAREHOLDER TRANSACTION EXPENSES Maximum sales load on purchases NONE NONE NONE NONE NONE NONE Maximum sales load on reinvested dividends NONE NONE NONE NONE NONE NONE Deferred sales load NONE NONE NONE NONE NONE NONE Redemption fee (a) NONE NONE NONE NONE NONE NONE Telephone exchange fee $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management fees (b) 1.00% 1.00% 1.00% .65% .60% .35% 12b-1 fees NONE NONE NONE NONE NONE NONE Other Expenses .36% .25% .30%* .30%* .27%(c) .24%(c) ----- ----- ----- ---- ------- ------- Total fund operating expenses 1.36% 1.25% 1.30% .95% .87%(c) .59%(c) ----- ----- ----- ---- ------- ------- *Estimates. =============================================================================== (a) If you request payment of redemption proceeds by wire, you must pay the cost of the wire (currently $10.00). (b) The Adviser pays all of the ordinary operating expenses of each Fund, except the fees and expenses of the Funds transfer agent and custodian, and of the non-interested board members. Ordinary operating expenses do not include taxes or interest, if any, or costs relating to purchases and sales of portfolio securities, including brokerage commissions. See "Management of the Funds." (c) In 1995, the Adviser voluntarily waived part or all of its management fee for both the Intermediate Bond Fund and Government Money Market Funds. Additionally, the Adviser absorbed some of the custodial fees for the Government Money Market Fund. As a result, the "Total Fund Operating Expenses" actually paid by the Intermediate Bond Fund in 1995 were .27% of Average Net Assets. The "Total Fund Operating Expenses" actually paid by the Government Money Market Fund were .07% of Average Net Assets in 1995. As of the date of the Prospectus, the waiver of management fees for the Government Money Market Fund continue in effect, subject to review and possible termination by the Adviser at the beginning of each quarter. The Adviser has agreed to limit each Fund's total operating expenses to the most restrictive limit imposed by any state in which shares of the Fund are offered for sale. The Funds believe that the most restrictive current limit is 2.5% of the first $30 million of average net assets, 2% of the next $70 million and 1.5% of assets in excess of $100 million. EXAMPLE You would pay the following expenses on a $1,000 investment, assuming (i) a 5% annual return as required by the Securities and Exchange Commission for purposes of this example; (ii) the percentage amounts listed under Annual Fund Operating Expenses above remain the same in each of the periods; (iii) all income, dividends and capital gain distributions are reinvested in additional shares of the Funds; and (iv) redemption at the end of each period: [Download Table] One Three Five Ten Year Years Years Years ---- ----- ----- ----- Monetta Fund, Inc. $14 $44 $76 $167 Monetta Mid-Cap Equity Fund 13 40 70 154 Monetta Large-Cap Equity Fund 14 42 n/a n/a Monetta Balanced Fund 10 31 n/a n/a Monetta Intermediate Bond Fund 9 28 49 109 Monetta Government Money Market Fund 6 19 34 75 This example is not necessarily indicative of past or future expenses, and actual expenses may be greater or lesser than those shown. Although information such as that shown above is useful in reviewing the Funds' projected expenses and in providing some basis for comparison with other investment alternatives, it should not be used for comparison with other investments using different assumptions or time periods. Because Large-Cap Fund and Balanced Fund are new, the above amounts are estimates and are projected only for the first three years of operations. See "Management of the Funds." page 4
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FINANCIAL HIGHLIGHTS The following information for a share outstanding throughout each period has been audited by KPMG Peat Marwick LLP, independent auditors for Monetta Fund. The audited financial statements of Monetta Fund and the reports thereon are contained in its 1995 annual report to shareholders, which may be obtained upon request at no charge. MONETTA FUND [Enlarge/Download Table] 5/6/86 Through 1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86 ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period $14.515 $15.539 $15.992 $15.731 $10.963 $10.441 $ 9.933 $9.649 $9.670 $10.000 ------------------------------------------------------------------------------------------------------------------------------------ Net investment income (loss) .029 (.026) (.028) .006 .081 .103 .219 .106 .113 .115 Net realized and unrealized gain (loss) on investments 4.075 (.938) .105 .855 6.037 1.106 1.274 2.158 .016 (.335) ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations: 4.104 (.964) .077 .861 6.118 1.209 1.493 2.264 .129 (.220) Less: Distributions from net investment income (.028) 0 0 (.006) (.081) (.103) (.219) (.106) (.150) (.110) Distributions in excess of net investment income (3.000) (.060) (.475) (.594) (1.208) (.584) (.766) (1.874) 0 0 Distributions from net realized gains on securities 0 0 (.055) 0 (.061) 0 0 0 0 0 ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (3.028) (.060) (.530) (.600) (1.350) (.687) (.985) (1.980) (.150) (.110) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of period $15.591 $14.515 $15.539 $15.992 $15.731 $10.963 $10.441 $9.933 $9.649 $ 9.670 Total return 28.0% (6.21)% 0.49% 5.49% 55.90% 11.37% 15.20% 23.07% 1.54% (2.20)% Ratio to average net assets (annualized): Expenses* 1.36% 1.35% 1.38% 1.45% 1.42% 1.50% 1.57%* 1.50% 2.31% 1.27% Net investment income* 0.18% (0.15)% (0.19)% 0.16% 0.93% 1.09% 2.18%* 0.96% 1.33% 2.45% Portfolio turnover 272.0% 191.27% 226.85% 126.60% 153.80% 206.51% 258.42% 170.43% 333.47% 80.02% Net assets (in millions) $362.7 $364.9 $524.3 $408.0 $57.1 $6.1 $3.5 $2.6 $2.1 $1.9 ------------------------------------------------------------------------------------------------------------------------------------ *If certain expenses had not been assumed by the investment advisor in 1989, the ratios of expenses and net investment income to average net assets would have been 1.83% and 1.92%, respectively. The per share ratios are calculated using the weighted average number of shares outstanding during the period. page 5
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FINANCIAL HIGHLIGHTS The following information for a share outstanding throughout each period has been audited by KPMG Peat Marwick LLP, independent auditors for each series of the Trust. The audited financial statements of Mid-Cap Fund, Large-Cap Fund, Balanced Fund, Intermediate Bond Fund and Government Money Market Fund and the reports thereon are contained in the Trust's 1995 annual report to shareholders, which may be obtained upon request at no charge. Monetta Trust [Download Table] MID-CAP LARGE-CAP EQUITY EQUITY FUND FUND --------------------------------- ------ Year Year 3/1/93 9/1/95 Ended Ended Through Through 12/31/95 12/31/94 12/31/93 12/31/95 ------------------------------------------------------------------------------- Net asset value at beginning of period* $12.199 $12.537 $10.000 $10.000 ------------------------------------------------------------------------------- Net investment income 0.059 0.071 0.006 0.005 Net realized and unrealized gain (loss) on investments 2.874 0.193 3.531 0.570 ------------------------------------------------------------------------------- Total from investment operations 2.933 0.264 3.537 0.575 Less: Distributions from net investment income (0.050) (0.069) (0.006) (0.004) Distributions in excess of net investment income (2.990) (0.533) (0.994) 0 Distributions from net realized gains on securities (0.130) 0 0 0 ------------------------------------------------------------------------------- Total distributions (3.170) (0.602) (1.000) (0.004) ------------------------------------------------------------------------------- Net asset value at end of period $11.962 $12.199 $12.537 $10.571 ------------------------------------------------------------------------------- Total return* 24.54% 2.17% 35.40% 5.74% Ratios to average net assets: Expenses** 1.25% 1.30% 1.12% 0.69% Net investment income** 0.44% 0.57% 0.07% 0.05% Portfolio turnover 254.35% 209.97% 128.12% 38.20% Net assets (in thousands) $14,216 $11,736 $9,841 $1,072 ------------------------------------------------------------------------------- *Ratios and total return for the year of inception are calculated from the date of inception to the end of the period. **If certain investment advisory fees and charges of the Trust's custodian and transfer agent had not been assumed by the investment advisor, the ratios of expenses and net income to average net assets would be as follows: for the Intermediate Bond Fund, expenses would have been 0.75%, 0.88% and 0.75% for 1995, 1994 and 1993 respectively. For the Government Money Market Fund, expenses would have been 0.59%, 0.66% and 0.69%, for 1995, 1994 and 1993 respectively. For the Intermediate Bond Fund, net investment income would have been 5.46%, 5.34% and 3.66% for 1995, 1994 and 1993 respectively. For the Government Money Market Fund, the investment income would have been 5.17%, 3.39% and 1.66% for 1995, 1994 and 1993 respectively. The per share ratios are calculated using the weighted average number of shares outstanding during the period. page 6
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[Enlarge/Download Table] INTERMEDIATE GOVERNMENT BALANCED BOND MONEY MARKET FUND FUND FUND -------- ------------------------------------ ---------------------------------- 9/1/95 Year Year 3/5/93 Year Year 3/1/93 Through Ended Ended Through Ended Ended Through 12/31/95 12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93 ------------------------------------------------------------------------------------- $10.000 $9.624 $10.345 $10.000 $1.000 $1.000 $1.000 ------------------------------------------------------------------------------------- 0.009 0.655 0.589 0.357 0.059 0.040 0.023 0.602 0.740 (0.690) 0.447 0 0 0 ------------------------------------------------------------------------------------- 0.611 1.395 (0.101) 0.804 0.059 0.040 0.023 (0.004) (0.655) (0.580) (0.357) (0.059) (0.040) (0.023) (0.002) (0.120) (0.040) (0.102) 0 0 0 0 0 0 0 0 0 0 ------------------------------------------------------------------------------------- (0.006) (0.775) (0.620) (0.459) (0.059) (0.040) (0.023) ------------------------------------------------------------------------------------- $10.605 $10.244 $9.624 $10.345 $1.000 $1.000 $1.000 ------------------------------------------------------------------------------------- 6.16% 14.84% (1.04)% 8.17% 5.87% 4.04% 2.21% 0.91% 0.27% 0.28% 0.28% 0.07% 0.00% 0.03% 0.08% 5.94% 5.94% 4.13% 5.69% 4.04% 2.32% 54.78% 75.07% 94.48% 32.26% N/A N/A N/A $410 $3,589 $3,010 $2,959 $4,393 $3,315 $1,859 ------------------------------------------------------------------------------------- page 7
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INVESTMENT OBJECTIVES AND POLICIES The Funds' investment objectives differ principally in the types of securities selected for investment and the relative importance each Fund places on growth potential, current income and preservation of capital as considerations in selecting investments. . MONETTA FUND, MID-CAP FUND AND LARGE-CAP FUND Monetta Fund, Mid-Cap Fund and Large-Cap Fund each seek long-term capital growth by investing in common stocks believed to have above average growth potential. The Funds differ from each other with respect to the (i) market capitalizations of the companies in which they invest and (ii) relative importance placed on investing for current income. Each Fund's investment approach emphasizes a competitive return in rising markets and preservation of capital in declining markets in an attempt to generate long-term capital growth over a complete business cycle (approximately 3 to 5 years) when compared to the broader stock market indices. The Adviser's emphasis will be on common stocks with improving earnings per share growth, a history of growth and sound management, and a strong balance sheet. The Adviser may also invest up to 20% of Monetta Fund's assets and 25% of the assets of Mid- Cap Fund and Large-Cap Fund's assets in securities not meeting the above criteria but believed by the Adviser to be undervalued based on a company's current price-earnings ratio relative to its estimated earnings growth rate. No Fund intends to invest more than 5% of its assets in derivative securities (options and futures). The securities in which each Fund invests will be listed on a national securities exchange or traded on an over-the-counter market. Monetta Fund, Mid-Cap Fund, Large-Cap Fund and Balanced Fund (in its investments in equity securities, as discussed below) each pursue a selling discipline to preserve capital gains and limit losses. At the time a security is purchased, the Adviser determines approximate prices (on both the upside and the downside) at which a given security will be sold, if such prices are reached. A security will generally be sold if it appreciates or depreciates to the sell points, it becomes less attractive compared to a new stock idea, or company fundamentals deteriorate with little perceived prospect for improvement within a reasonable time frame. The actual timing of the sale of a security may be affected by liquidity constraints or other factors affecting the market for that security. This selling discipline may result in higher than average portfolio turnover. MONETTA FUND'S primary investment objective is to provide its shareholders with capital appreciation by investing at least 70% of the Fund's assets in equity securities believed to have growth potential. A secondary objective of Monetta Fund is to provide its shareholders with income, in part by investing the balance of the Fund's assets in dividend paying equity securities or in long- term (greater than one year) debt securities. The Fund's investments in long- term debt securities will consist of United States Treasury Notes and Treasury Bonds of various maturities and investment grade securities rated at least A or better by either Moody's Investor Services, Inc. ("Moody's") or Standard and Poor's Corporation ("S&P"). A complete description of the ratings is contained in an appendix to the Statement of Additional Information. Monetta Fund generally invests in smaller and medium-sized companies with aggregate market capitalizations ranging from $50 million to $1 billion. See "Risks and Investment Considerations--Equity Securities." page 8
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MID-CAP FUND typically invests in medium-sized companies with market capitalizations of $1 billion to $5 billion ("mid-cap companies"). See "Risks and Investment Considerations--Equity Securities." Under normal market conditions, the Fund invests at least 90% of its total assets in equities, and 65% of its total assets in common stocks of mid-cap companies. LARGE-CAP FUND typically invests in large companies with market capitalizations in excess of $5 billion ("large-cap companies"). Under normal market conditions, at least 90% of the Fund's total assets invested in equities, and 65% of the Fund's total assets will be invested in common stocks of large-cap companies. . BALANCED FUND BALANCED FUND seeks a favorable total rate of return through capital appreciation and current income consistent with preservation of capital, derived from investing in a portfolio of equity and fixed income securities. The investment approach for Balanced Fund combines the equity growth strategy used for Monetta Fund, Mid-Cap Fund and Large-Cap Fund and the income strategy employed by Intermediate Bond Fund, as discussed below. The Fund may emphasize fixed income securities or equity securities or hold equal amounts of both, depending upon the Adviser's analysis of market, financial and economic conditions. Under normal circumstances, the Fund will invest at least 80% of its total assets in fixed income and equity securities. At least 25% of the Fund's assets invested in fixed income securities will consist of corporate bonds and debentures rated A or better and securities issued or guaranteed as to principal and interest by the U.S. Government and its agencies and instrumentalities. The Fund does not presently intend to invest more than 10% of its assets in securities rated below investment grade (commonly called "junk bonds") or, if unrated, determined by the Adviser to be of comparable credit quality. See "Risks and Investment Considerations--Debt Securities." . INTERMEDIATE BOND FUND INTERMEDIATE BOND FUND seeks a high level of current income, consistent with the preservation of capital, by investing primarily in marketable debt securities. Under normal market conditions, Intermediate Bond Fund invests at least 70% of the value of its total assets (taken at market value at the time of investment) in the following: (1) Marketable straight-debt securities of domestic issuers, and of foreign issuers payable in U. S. dollars, rated at the time of purchase within the three highest grades assigned by Moody's or by S&P; (2) Securities issued or guaranteed by the U. S. Government or by its agencies or instrumentalities; (3) Commercial paper rated Prime-1 by Moody's or A-1 by S&P at time of purchase, or, if unrated, issued or guaranteed by a corporation with any outstanding debt rated A or better by Moody's or by S&P; (4) Variable rate demand notes, if unrated, determined by the Adviser to be of credit quality comparable to the commercial paper in which the Fund may invest; or page 9
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(5) Bank obligations, including repurchase agreements*, of banks having total assets in excess of $500 million. Under normal market condition, the Fund invests at least 65% of its total assets in bonds and debentures, and at least 75% of its assets in securities with an average life of less than 15 years, and expects that the dollar-weighted average life of its portfolio will be between 3 and 10 years. Average life is the weighted average period over which the Adviser expects the principal to be paid, and differs from stated maturity in that it includes the estimated effect of maturity-shortening devices, such as calls, refundings or redemption provisions of which the Adviser believes it is probable that the issuer will take advantage. With respect to GNMA securities and other mortgage-backed securities, average life is likely to be substantially less than the stated maturity of the mortgages in the underlying pools. With respect to obligations with call provisions, average life is typically the next call date on which the Adviser believes it is probable that the obligation will be called. Securities without prepayment or call provisions generally have an average life equal to their stated maturity. During periods of rising interest rates, the average life of mortgage-backed securities and callable obligations may increase substantially because they are not likely to be prepaid, which may result in greater net asset value fluctuation. The Fund also may invest in other debt securities (including those convertible into or carrying warrants to purchase common stocks or other equity interests, and privately placed debt securities), preferred stocks, and marketable common stocks that the Adviser considers likely to yield relatively high income in relation to cost. Equity securities acquired by conversion or exercise of a warrant may be held by the Fund for a sufficient time to permit orderly disposition or to establish a long-term holding period for tax purposes. If, after purchase by the Fund, the rating of a portfolio security is lost or reduced, the Fund would not be required to sell the security, but the Adviser would consider such a change in deciding whether the Fund should retain the security in its portfolio. See "Risks and Investment Considerations--Debt Securities." Intermediate Bond Fund will not invest more than 20% of its assets in debt securities rated below investment grade or, if unrated, determined by the Adviser to be of comparable credit quality. ----------------------------- *A repurchase agreement is a sale of securities to a Fund in which the seller (a bank or broker-dealer believed by the Adviser to be financially sound) agrees to repurchase the securities at a higher price, which includes an amount representing interest on the purchase price, within a specified time. . GOVERNMENT MONEY MARKET FUND GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with safety of capital and maintenance of liquidity. The Fund invests in U.S. Government Securities maturing in thirteen months or less from the date of purchase and repurchase agreements for U.S. Government Securities. U.S. Government Securities include: (1) Securities issued by the U.S. Treasury; (2) Securities issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government that are backed by the full faith and credit guarantee of the U.S. Government; (3) Securities issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government that are not backed by the full faith and credit guarantee of the U.S. Government; and page 10
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(4) Repurchase agreements for securities listed in (1), (2), and (3) above, regardless of the maturities of such underlying securities. The Fund is a money market fund and follows procedures, described in the Statement of Additional Information, designed to stabilize its net asset value per share at $1.00. The Fund maintains a dollar-weighted average portfolio maturity appropriate to its objective of maintaining a stable net asset value per share and, in any case, not in excess of 90 days. The U.S. Government Securities in which the Fund is permitted to invest include: (i) bills, notes, bonds, and other debt securities, differing as to maturity and rates of interest, that are issued by and are direct obligations of the U.S. Treasury; and (ii) other securities that are issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government and that include, but are not limited to, Federal Farm Credit Banks, Federal Home Loan Banks, Government National Mortgage Association, Farmers Home Administration, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. The Fund also invests in repurchase agreements for U.S. Government Securities. See "Risks and Investment Considerations." RISKS AND INVESTMENT CONSIDERATIONS RISKS All investments, including those in mutual funds, have risks. No investment is suitable for all investors. The risks inherent in each Fund depend primarily upon the types of securities in the Fund's portfolio, as well as on market conditions. There can be no guarantee that a Fund will achieve its objective. MONETTA FUND, MID-CAP FUND AND LARGE-CAP FUND are designed for long-term investors who can accept the fluctuations in portfolio value and other risks associated with seeking capital growth through investment in common stocks. BALANCED FUND is appropriate for long-term investors who can accept asset value fluctuations from interest rate changes and credit risks associated with fixed income investments, and other risks associated with investments in common stocks. INTERMEDIATE BOND FUND is appropriate for investors who seek high income with less net asset value fluctuation from interest rate changes than that of a longer-term fund but more net asset value fluctuation than with a shorter-term fund, and who can accept the credit and others risks associated with securities that are high and upper-medium quality. A longer-term bond fund will usually provide a higher yield than an intermediate term fund like Intermediate Bond Fund; conversely, an intermediate term fund usually has less net asset value fluctuation, although there can be no guarantee that this will be the case. GOVERNMENT MONEY MARKET FUND is designed for investors who seek income with minimum risk (including the risk of principal loss) other than the risk of changes in yield caused by fluctuation in prevailing levels of interest rates. Because Government Money Market Fund's investment policy permits it to invest in U. S. Government Securities that are not backed by the full faith and credit of the U. S. Government, investment in that Fund may involve risks that are different in some respects from an investment in a fund that invests only in securities that are backed by the full faith and credit of the U. S. Government. Such risks may include a greater risk of loss of principal and interest on the securities in the Fund's portfolio that are supported only by the issuing or guaranteeing U. S. Government agency or instrumentality since the Fund must look principally or solely to that entity for ultimate repayment. There can be no guarantee that Government Money Market Fund will be able at all times to maintain its net asset value per share at $1.00. page 11
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INVESTMENT CONSIDERATIONS Equity Securities. Common stocks represent an equity interest in a corporation. Although common stocks have a history of long-term growth in value, their prices tend to fluctuate in the short term. The securities of smaller companies, as a class, have had periods of favorable results and other periods of less favorable results compared to the securities of larger companies as a class. Stocks of small to mid-size companies tend to be more volatile and less liquid than stocks of large companies. Smaller companies, as compared to larger companies, may have a shorter history of operations, may not have as great an ability to raise additional capital, may have a less diversified product line making them susceptible to market pressure, and may have a smaller public market for their shares. Debt Securities. Bonds and other debt instruments are methods for an issuer to borrow money from investors. Debt securities have varying levels of sensitivity to interest rate changes and varying degrees of quality. A decline in prevailing levels of interest rates generally increases the value of debt securities, while an increase in rates usually reduces the value of those securities. As a result, interest rate fluctuations will affect a Fund's net asset value, but not the income received by a Fund from its portfolio securities. (Because yields on debt securities available for purchase by a Fund vary over time, no specific yield on shares of a Fund can be assured.) In addition, if the bonds in a Fund's portfolio contain call, prepayment or redemption provisions, during a period of declining interest rates, these securities are likely to be redeemed, and the Fund will probably be unable to replace them with securities having a comparable yield. There can be no assurance that payments of interest and principal on portfolio securities will be made when due. "Investment grade" debt securities are those rated within the four highest ratings categories of Moody's or S&P or, if unrated, determined by the Adviser to be of comparable quality. Bonds rated Baa or BBB have speculative characteristics and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity of their issuers to make principal and interest payments than is the case with higher grade bonds. Lower-rated debt securities (commonly called "junk bonds") on balance, are considered predominantly speculative with respect to the issuer's capacity to pay interest and repay principal according to the terms of the obligation and therefore carry greater investment risk, including the possibility of issuer default and bankruptcy; they are likely to be less marketable and more adversely affected by economic downturns than higher-quality debt securities. Convertible debt securities are frequently unrated or, if rated, are below investment grade. For more information, see discussion of debt securities in the Fund's Statement of Additional Information. Short-term Investment. The Funds (other than Government Money Market Fund) may make short-term investments without limitation in periods when the Adviser determines that a temporary defensive position is warranted. Such investments may be in U. S. Government Securities of the type in which Government Money Market Fund may invest; certificates of deposit, bankers' acceptances and other obligations of domestic banks having total assets of at least $500 million and which are regulated by the U. S. Government, its agencies or instrumentalities; commercial paper rated in the highest category by a recognized rating agency; and demand notes comparable in quality, in the Adviser's judgment, to commercial paper rated in the highest category. Loans of Portfolio Securities. Subject to certain restrictions, Balanced Fund and Intermediate Bond Fund may lend their portfolio securities to broker-dealers and banks. Any such loan must be continuously secured by collateral in cash or cash equivalents maintained on a current basis in an amount at least equal to the market value of the securities loaned by the Fund. The Fund would continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned, and would also receive an additional return that may be in the form of a fixed fee or a percentage of the collateral. The Fund would have the right to call the loan and obtain the securities loaned at any time on notice of not more than five business days. In the event of bankruptcy or other page 12
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default of the borrower, the Fund could experience both delays in liquidating the loan collateral or recovering the loaned securities and losses including (a) possible decline in the value of the collateral or in the value of the securities loaned during the period while the Fund seeks to enforce its rights thereto; (b) possible subnormal levels of income and lack of access to income during this period; and (c) expenses of enforcing its rights. When-Issued and Delayed-Delivery Securities. Balanced Fund, Intermediate Bond Fund and Government Money Market Fund may invest in securities purchased on a when-issued or delayed-delivery basis. Although the payment and interest terms of these securities are established at the time the purchaser enters into the commitment, the securities may be delivered and paid for a month or more after the date of purchase, when their value may have changed. A Fund makes such commitments only with the intention of actually acquiring the securities, but may sell the securities before settlement date if the Adviser deems it advisable for investment reasons. Government Money Market Fund may purchase securities on a standby commitment basis, which is a delayed-delivery agreement in which the Fund binds itself to accept delivery of a security at the option of the other party to the agreement. When a Fund commits to purchase securities on a when- issued or delayed-delivery basis, the Fund segregates assets to secure its ability to perform and to avoid the creation of leverage. Repurchase Agreements. Balanced Fund, Intermediate Bond Fund and Government Money Market Fund may enter into repurchase agreements. In the event of a bankruptcy or other default of a seller of a repurchase agreement, a Fund could experience both delays in liquidating the underlying securities and losses, including: (a) possible decline in the value of the collateral during the period while the Fund seeks to enforce its rights thereto; (b) possible subnormal levels of income and lack of access to income during this period; and (c) expenses of enforcing its rights. Options and Futures. Consistent with their objectives, Balanced Fund and Intermediate Bond Fund may each purchase and write both call options and put options on securities and on indexes, and enter into interest rate and index futures contracts and options on such futures contracts (such put and call options, futures contracts, and options on futures contracts are referred to as "derivative products") in order to provide additional revenue, or to hedge against changes in security prices or interest rates. The Fund may write a call or put option only if the option is covered. The Fund will limit its use of futures contracts and options on futures contacts to hedging transactions to the extent required to do so by regulatory agencies. There are several risks associated with the use of derivative products. As the writer of a covered call option, the Fund foregoes, during the option's life, the opportunity to profit from increases in market value of the security covering the call option. Because of low margin deposits required, the use of futures contracts involves a high degree of leverage, and may result in losses in excess of the amount of the margin deposit. Since there can be no assurance that a liquid market will exist when the Fund seeks to close out a derivative product position, these risks may become magnified. Because of these and other risks, successful use of derivative products depends on the Adviser's ability to predict correctly changes in the level and the direction of stock prices, interest rates, and other market factors, but even a well-conceived transaction may be unsuccessful because of an imperfect correlation between the securities and derivative product markets. When either Balanced Fund or Intermediate Bond Fund enter into a futures contract, it segregates assets to secure its ability to perform and to avoid the creation of leverage. For additional information, please refer to the Fund's Statement of Additional Information. page 13
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Portfolio Turnover. Monetta Fund engages in an above-average number of portfolio transactions. Its annual portfolio turnover rate is likely to exceed 100%, and in some years may exceed 200% (excluding Treasury Bills and other short-term money market instruments which mature in less than one year). Mid-Cap Fund, Large-Cap Fund and Balanced Fund may also engage in an above-average number of portfolio transactions and have an annual portfolio turnover rate exceeding 100%, although that rate is not expected to exceed 200% annually under normal market conditions. A high portfolio turnover rate increases aggregate brokerage commission expenses and taxes which must be borne directly by a Fund and ultimately by its shareholders. These portfolio turnover rates and the resulting commission expenses and taxes are higher on a relative basis than those of mutual funds which may not trade as frequently, including those with a policy of capital appreciation. Substantial trading involves substantial risk and may be speculative. Investors should not consider purchase of a Fund's shares as a complete investment program. INVESTMENT RESTRICTIONS The Funds' investment restrictions, noted below, and investment objectives cannot be changed without shareholder approval. All investment restrictions for each Fund are described in the Funds' Statement of Additional Information. . MONETTA FUND In pursuing its investment objective, Monetta Fund will not: (1) Invest more than 5% of its assets in the securities of any one issuer (except obligations issued or guaranteed by the United States Government, its agencies or instrumentalities); (2) Buy more than 10% of any class of securities of any one issuer; or (3) Borrow money in excess of 5% of the value of its total assets, or pledge, mortgage, or hypothecate its assets taken at market value, to an extent greater than 10% of the Fund's total assets taken at cost (and no borrowing may be undertaken except from banks as a temporary measure for extraordinary or emergency purposes). . MID-CAP FUND . LARGE-CAP FUND . BALANCED FUND . INTERMEDIATE BOND FUND . GOVERNMENT MONEY MARKET FUND In pursuing its investment objective, each Fund will not: (1) Invest more than 5% of its total assets (valued at the time of investment) in the securities of any one issuer, except U. S. Government Securities and repurchase agreements (this restriction applies to only 75% of the total assets of all Funds except Government Money Market Fund); (2) Acquire more than 10%, taken at the time of a particular purchase, of the outstanding voting securities of any issuer; or (3) Borrow money, except as a temporary measure for extraordinary or emergency purposes, and then the aggregate borrowings at any one time may not exceed 10% of its assets (at market value). A Fund will not purchase additional securities when its borrowings exceed 5% of total assets. page 14
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INVESTMENT RETURN The Total Return from an investment in a Fund is the percentage change in value during a 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" for a given period may be computed by finding the average annual compounded rate that would equate a hypothetical initial $1,000 investment to the value of that investment that could be redeemed at the end of the period, assuming reinvestment of all dividends and distributions. Balanced Fund and Intermediate Bond Fund may quote their yield, calculated by dividing net investment income per share (a hypothetical figure as defined in the SEC rules) during a 30-day period by the net asset value per share on the last day of the period. The yield formula provides for semi-annual compounding, which assumes that net investment income is earned and reinvested at a constant rate and annualized at the end of a six-month period. Because Government Money Market Fund strives to maintain a $1.00 per share value, its return is usually quoted either as a current seven-day yield, calculated by adding the dividends on a Fund share for the previous seven days and restating that yield as an annual rate, or as an effective yield, calculated by adjusting the current yield to assume daily compounding. To obtain current yield information, call 1-800-MONETTA (1-800-666-3882) or write to the address shown on the back cover. Government Money Market Fund may also quote its Total Return or Average Annual Total Return. In advertising and sales literature, a Fund's performance may be compared to market indexes and to the performance of other mutual funds. A Fund may also publicize its comparative performance as computed in rankings or ratings determined by independent services or publications including Lipper Analytical Services, Inc., Morningstar, Inc. and others. page 15
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The following table illustrates Total Return as of December 31, 1995 of an initial investment in each Fund made the first business day of the period indicated, and Average Annualized Return as of December 31, 1995 for each of Monetta Fund, Mid-Cap Fund and Intermediate Bond Fund for the same periods. Average Annualized Return is not shown for Large-Cap Fund or Balanced Fund because those Funds have been in operation less than one year. The figures assume reinvestment of all income dividends and capital gain distributions in additional shares of the Fund. The table does not take into account any federal, state or local income taxes payable. Returns for Periods Ended December 31, 1995 ------------------------------------------- [Enlarge/Download Table] Average Annualized Total Return Return ------------ ------ Life of Fund 5 Years 1 Year Life of Fund 5 Years 1 Year ----------------------------------------------------------------------------------------------------------------- MONETTA FUND 211.2% 98.4% 28.0% 12.5% 14.7% 28.0% S&P 500** 159.7 86.5 37.5 14.0 16.6 37.5 Nasdaq Composite** 186.0 185.3 39.9 11.0 23.0 39.9 ----------------------------------------------------------------------------------------------------------------- MID-CAP FUND 72.3 n/a 24.5 21.2 n/a 24.5% S&P 400** 44.1 31.0 13.8 31.0 S&P 500** 38.9 37.5 15.4 37.5 ----------------------------------------------------------------------------------------------------------------- LARGE-CAP FUND 5.7 n/a n/a n/a n/a n/a S&P 500** 10.5 ----------------------------------------------------------------------------------------------------------------- BALANCED FUND 6.2 n/a n/a n/a n/a n/a S&P 500** 10.5 Lehman Govt/Corp Intermediate Bond Index** 18.8 Lehman Govt/Corp Bond Index** 7.3 ----------------------------------------------------------------------------------------------------------------- INTERMEDIATE BOND FUND 22.9 n/a 14.8 7.6 n/a 14.8 Lehman Gov/Corp Intermediate Bond Index** 18.8 15.3 6.3 15.3 *Life of Fund is from the following dates: Monetta Fund, 5/6/86; Mid-Cap Fund and Intermediate Bond Fund, 3/1/93; and Large-Cap Fund and Balanced Fund, 9/1/95. ** Comparative information is shown for the following indexes: Standard & Poor's 500 Stock Index ("S&P 500"), Standard & Poor's Stock Price Index ("S&P 400"), and the Nasdaq Composite Index ("Nasdaq"), each of which is a group of unmanaged common stock widely regarded as representative of their respective stock market activities; the Lehman Government/Corporate Bond Index which is composed of Treasury Bond and Agency Bond indices consisting of treasury securities with maturities of one to three years and treasury issues with 20 years or more to maturity and the Corporate Bond Index consisting of corporate debt; and the Lehman Government/Corporate Intermediate Bond Index, which is composed of approximately 5,000 publicly-issued corporate and U.S. debt securities rated Baa or better with a maturity of 1 to 10 years, the specific segment of the bond market in which Intermediate Bond Fund invests. Source: Lipper Analytical Services, Inc. The figures in each of the above tables are not necessarily indicative of future results. The performance of a Fund is a result of conditions in the securities markets, portfolio management and operating expenses. Although information such as that shown above is useful in reviewing a 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. More information about a Fund's performance is included in its 1995 annual report to shareholders, a copy of which may be obtained upon request at no charge. PAGE 16
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HOW TO PURCHASE SHARES You may purchase shares of any of the Funds by check, by wire (into an existing account only) or by exchange from your account with another Fund. Your initial investment in the Monetta Funds must be at least $1,000, which may be allocated among the Funds so long as at least $250 is invested in each Fund in which you choose to invest. The minimum initial investment for UGMA accounts, Automatic Investment Plan accounts and individual retirement accounts is $250. Additional investments in ANY Fund must be at least $50. Each Fund has a minimum account balance of $250. MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995, HOWEVER, WILL BE ALLOWED TO MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT FUND. If you are purchasing shares to be held by a tax-sheltered retirement plan sponsored by the Adviser, you must use special application forms which you can obtain by calling the Funds at 1-800-MONETTA. (See "Shareholder Services-Tax-Sheltered Retirement Plans.") Your purchase order must be received by the Funds' Transfer Agent before the close of regular session trading on the New York Stock Exchange (ordinarily 3:00 p. m., Central time) to receive the net asset value calculated on that day. See "Purchase Price of Shares" below. PURCHASES BY AN INDIVIDUAL SHAREHOLDER CANNOT BE MADE BY TELEPHONING OR FAXING AN APPLICATION TO THE FUNDS OR THE TRANSFER AGENT. PURCHASE BY CHECK To purchase shares of a Fund by check, complete and sign the Share Purchase Application included in this Prospectus and return it, with a check or other negotiable bank draft made payable to MONETTA FUNDS, to: MONETTA, C/O FIRSTAR TRUST COMPANY, P. O. BOX 701, MILWAUKEE, WISCONSIN 53201-0701. IF YOU INTEND TO USE AN OVERNIGHT DELIVERY SERVICE, THE APPLICATION AND CHECK SHOULD BE SENT TO: FIRSTAR TRUST COMPANY, MUTUAL FUND DIVISION, 615 EAST MICHIGAN STREET, 3RD FLOOR, MILWAUKEE, WISCONSIN 53202-5207. If a phone number is requested, use: 1-414-765-4124. Applications will not be accepted unless accompanied by payment. Additional purchases (minimum $50 for any Fund) may be made at any time by mailing a check payable to MONETTA FUNDS, to the address above, together with the detachable form from a prior account statement or a letter indicating the account number to which the subsequent purchase is to be credited and the name(s) of the registered owner(s). Purchases must be made in U. S. dollars and checks must be drawn on U. S. banks. No cash or third party checks will be accepted. If your order to purchase shares is canceled because your check does not clear, you will be responsible for a $20.00 return item fee and any resulting loss incurred by the Fund. PURCHASES BY WIRE Shares may also be purchased by wire transfer of funds INTO AN EXISTING ACCOUNT ONLY. Before wiring funds call Firstar Trust Company at 1-800-241-9772 to ensure prompt and accurate handling of your account. Then, instruct your bank to wire the purchase amount to: Firstar Bank-Milwaukee N. A., 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, ABA number 0750-00022, credit Firstar Trust Company, account number 112-952-137, further credit Monetta Funds, (shareholder name and account number). Your bank may charge you a fee for sending the wire. The Funds will not be responsible for the consequences of any delays, including delays in the banking or Federal Reserve wire systems. PURCHASES BY EXCHANGE You may purchase shares by exchange of shares from another existing Fund account either by phone (if you have not declined the Telephone Exchange Privilege on the account form which the exchange is being made) or by mail. Restrictions apply; please review the information under "How to Redeem Shares--By Exchange." page 17
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PURCHASES THROUGH DEALERS You may also purchase (and redeem) shares through investment dealers, banks or other institutions. The Funds may enter into an arrangement with such an institution allowing the institution to process purchase orders or redemption requests for its customers with the Funds on an expedited basis, including requesting share purchases and redemptions by telephone. Although these arrangements might permit you to effect a purchase or redemption of Fund shares through the institution more quickly than would otherwise be possible, the institution may impose charges for its services. Such fees may constitute a substantial portion of a smaller account and may not be in your best interest. You should check with the investment dealer, bank or other institution through which you purchased Fund shares to determine if that institution offers telephone redemptions. You may purchase or redeem shares directly from the Funds without any charges other than those described in this Prospectus. If you purchase shares through an investment dealer, the dealer will be responsible for promptly forwarding your order to the Fund's transfer agent. Some institutions which maintain moninee accounts with the Funds for their clients who are Fund shareholders charge an annual fee of up to .35% of the average net assets held in those accounts for accounting, servicing and distribution services they provide with respect to the underlying Fund shares. Such fees are paid by the Adviser. PURCHASE PRICE OF SHARES The price paid for shares is the net asset value per share of a Fund next determined after receipt by Firstar Trust Company (the "Transfer Agent") of your purchase order in proper form. (See "Determination of Net Asset Value.") Money sent to purchase additional shares for existing accounts must be accompanied by the shareholder's account number. Money sent to open a new account must be preceded or accompanied by a completed application form. CONDITIONS OF PURCHASE All of your income dividends and capital gain distributions will be reinvested in additional shares of the Fund paying the dividend or distribution unless you elect to have distributions paid to you in cash. (See "Dividends, Distributions and Taxes.") The Funds reserve the right to reinvest the proceeds and future distributions in additional Fund shares at the current net asset values if checks mailed to you for distributions are returned as undeliverable or are not presented for payment within six months. A purchase order for Fund shares is not binding until accepted and entered on the books of that Fund. Once your purchase order has been accepted, you may not cancel or revoke it; however, you may redeem the shares. The Funds reserve the right not to accept any purchase order that it determines not to be in the best interest of the Fund or of a Fund's shareholders. Election of the Telephone Exchange Privilege authorizes the Funds and the Transfer Agent to tape-record instructions to purchase. Reasonable procedures are used to confirm that instructions received by telephone are genuine, such as requesting personal identification information that appears on your application and requiring permission to record the conversation. You will bear the risk of loss due to unauthorized or fraudulent instructions regarding your account, although the Funds may have a risk of such loss if reasonable procedures were not used. The Funds also reserve the right to waive or change the investment minimums for any reason. Monetta Fund and the Trust do not issue certificates for Fund shares because of the availability of the telephone exchange privilege. page 18
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HOW TO REDEEM SHARES FOR CASH To redeem all or part of the shares in your account without charge, send a written redemption request "in good order" to the Transfer Agent, Firstar Trust Company, P. O. Box 701, Attention: Monetta Funds, Milwaukee, Wisconsin 53201- 0701. If you intend to use an overnight delivery service, please send to: Firstar Trust Company, Mutual Fund Division, 615 East Michigan Street, 3rd Floor, Milwaukee, Wisconsin 53202-5207. A redemption request will be considered to have been received in good order if the following conditions are satisfied: (1) The request must be in writing, indicating the Fund, the number of shares or dollar amount to be redeemed, and the shareholder's account number; (2) The request must be signed by the shareholder(s) exactly as the shares are registered; (3) The signature(s) on the written redemption request must be guaranteed if the shares to be redeemed have a value of $50,000 or more or the redemption proceeds are to be sent to an address other than your address of record (see "Signature Guarantee" below). (4) Corporations and associations must submit with each request a form of acceptable resolution; and (5) Other supporting legal documents may be required from organizations, executors, administrators, trustees, or others acting on accounts not registered in their names. SHARES MAY NOT BE REDEEMED BY FACSIMILE OR BY TELEPHONE (except for a telephone exchange). Signature Guarantee. The signature on your redemption request must be guaranteed if the redemption proceeds are $50,000 or more, when the proceeds are to be mailed to an address other than your address of record or if a change of address request has been received by the Fund or transfer agent within the last 15 days. The guarantor must be a bank, member firm of a national securities exchange, savings and loan association, credit union, or other entity authorized by state law to guarantee signatures. A notary public may not guarantee signatures. The signature guarantee must appear on the written redemption request (the guarantor must use the phrase "signature guaranteed" and must include the name of the guarantor bank or firm and an authorized signature). BY EXCHANGE By writing (without charge) to, or by telephoning (for a fee) the Transfer Agent, you may exchange all or any portion of your shares of any of the Monetta Funds for shares of another Fund offered by Monetta for sale in your state. A signed, properly completed Share Purchase Application must be on file. AN EXCHANGE TRANSACTION IS A SALE AND PURCHASE OF SHARES FOR FEDERAL INCOME TAX PURPOSES AND MAY RESULT IN CAPITAL GAIN OR LOSS. The registration of the account to which you are making an exchange must be exactly the same as that of the Fund account from which the exchange is made and the amount you exchange must meet any applicable minimum investment of the Fund being purchased. Unless you have elected to receive your dividends in cash, on an exchange of all shares, any accrued unpaid dividends will be invested in the Fund to which you exchange on the next page 19
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business day. An exchange may be made by following the redemption procedure described above and indicating the Fund to be purchased, except that a signature guarantee normally is not required. To use the Telephone Exchange Privilege to exchange between your Monetta accounts in the amount of $250 or more, call 1-800-241-9772 before 3:00 p. m., Central time. The Funds' Transfer Agent imposes a charge (currently $5.00) for each Telephone Exchange. The general redemption policies apply to redemption of shares of Telephone Exchange. (See "General Redemption Policies" below.) The Funds reserve the right at any time without prior notice to suspend or terminate the use of the Telephone Exchange Privilege by any person or class of persons, or to terminate the Privilege in its entirety. Because such a step would be taken only if their respective Boards believe it would be in the best interests of the Funds, the Funds expect to provide shareholders with prior written notice of any such action unless it appears that the resulting delay in the suspension, limitation, modification, or termination of the Telephone Exchange Privilege would adversely affect the Funds. If the Funds were to suspend, limit, modify, or terminate the Telephone Exchange Privilege, a shareholder expecting to make a Telephone Exchange might find that an exchange could not be processed or that there might be a delay in the implementation of the exchange. During periods of volatile economic and market conditions, you may have difficulty placing your exchange by telephone which might delay implementation of the exchange. Use of the Telephone Exchange Privilege authorizes the Funds and the Transfer Agent to tape-record all instructions to redeem shares. Reasonable procedures are used to confirm that instructions received by telephone are genuine, such as requesting personal identification information that appears on your application and requiring permission to record the conversation. You will bear the risk of loss due to unauthorized or fraudulent instructions regarding your account, although the Funds may have a risk of such loss if reasonable procedures were not used. BY CHECKWRITING - GOVERNMENT MONEY MARKET FUND ONLY An investor in the Government Money Market Fund may request on the Share Purchase Application that the Government Money Market Fund provide redemption checks drawn on the Fund. Checks may be in amounts of $500 up to $50,000. The shares redeemed by check will continue earning dividends until the check has cleared. Checks will not be returned. If selected on the Application Form, a book of 10 checks and 2 deposit forms will be sent to the shareholder. Additional checks and deposit forms will be sent to the shareholder upon request for a fee of $5.00 per book. This amount will be deducted from the shareholder's account. In order to establish this checkwriting privilege after an account has been opened, the shareholder must send a written request to the Government Money Market Fund, P. O. Box 701, Attention: Monetta Funds, Milwaukee, Wisconsin 53201-0701. A fee of $20 will be charged for each stop payment request. If there are insufficient shares in the shareholder's account to cover the amount of the redemption by check, the check will be returned marked "insufficient funds," and a fee of $20 will be charged to the shareholder's account. Because dividends on the Fund accrue daily, checks may not be used to close an account, as a small balance is likely to result. The Checkwriting Privilege is only available to Government Money Market Fund shareholders. The Checkwriting Privilege is not available for IRAs or other retirement accounts. page 20
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REDEMPTION PRICE The redemption price will be the net asset value (see "Determination of Net Asset Value") per share of the Fund next determined after receipt by the Transfer Agent of a redemption request in good order. This means that your redemption request (including a telephone exchange request) must be received in good order by the Transfer Agent before the close of regular session trading on the New York Stock Exchange (ordinarily 3:00 p. m., Central time) to receive the net asset value calculated that day. The principal value and return on your investment will fluctuate and on redemption your shares may be worth more or less than your original cost. GENERAL REDEMPTION POLICIES You may not cancel or revoke your redemption request once instructions have been received and accepted. The Funds cannot accept a redemption request that specifies a particular date or price for redemption or any special conditions. Please telephone the Funds if you have any question about requirements for a redemption before submitting your request. If you wish to redeem shares held by one of the tax-sheltered retirement plans sponsored by the Adviser, special procedures of those plans apply. (See "Tax-Sheltered Retirement Plans.") If you request payment of redemption proceeds by wire, you must pay the cost of the wire (currently $10.00). YOUR REDEMPTION REQUEST MUST BE SENT TO THE TRANSFER AGENT AT ITS ADDRESS IN MILWAUKEE SHOWN ON THE BACK COVER. IF A REDEMPTION REQUEST IS SENT DIRECTLY TO THE FUNDS, IT WILL BE FORWARDED TO THE TRANSFER AGENT AND WILL RECEIVE THE REDEMPTION PRICE NEXT CALCULATED AFTER RECEIPT BY THE TRANSFER AGENT. If you redeem shares though an investment dealer, the dealer will be responsible for promptly forwarding your request to the Fund's transfer agent. The Funds do not consider the U. S. Postal Service or other independent delivery services to be its agents. Deposit in the mail or with such services or receipt of redemption requests at Firstar Trust Company's Post Office Box does not constitute receipt by Firstar Trust Company or the Funds. CORRESPONDENCE BY OVERNIGHT COURIER SHOULD BE SENT TO FIRSTAR TRUST COMPANY, 615 EAST MICHIGAN STREET, 3RD FLOOR, MILWAUKEE, WISCONSIN 53202-5207. The Funds generally pay proceeds of a redemption no later than seven days after proper instructions are received. If you attempt to redeem shares within 15 days after they have been purchased by check, a Fund may delay payment of the redemption proceeds to you until it can verify that payment for the purchase of those shares has been (or will be) collected. Because of the relatively high cost of maintaining smaller accounts, the Funds reserve the right to redeem shares in any account with a balance of less than $250 in share value. Prior to any such redemption, a Fund will give the shareholder thirty days' written notice during which time the shareholder may increase his investment to avoid having his shares redeemed. The $250 minimum balance will be waived if the account balance drops below the required minimum due to market erosion. MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995 WILL BE ALLOWED TO MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT FUND. page 21
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DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES Monetta Fund, Mid-Cap Fund and Large-Cap Fund declare and pay income dividends, if any, at least annually. Balanced Fund pays income dividends, if any, quarterly. Intermediate Bond Fund declares and pays income dividends monthly. Income dividends of Government Money Market Fund are declared daily and paid monthly. Capital gains, if any, are distributed by each Fund at least annually. Distributions of a Fund are automatically reinvested in additional shares of that Fund unless you elect payment in cash. Cash dividends can be sent to you by check or deposited directly into your bank account. Call the Transfer Agent at 1-800-241-9772 for more information and forms to sign up for direct deposit. Each Fund is a separate entity for Federal income tax purposes. Each Fund intends to continue to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code, and thus not be subject to Federal income taxes on amounts it distributes to shareholders. Each Fund will distribute all of its net income and gains to shareholders. Dividends from investment income and net short-term capital gains are taxable as ordinary income. Distributions of long-term capital gains are taxable as long- term gains regardless of the length of time you have held your shares in a Fund. Distributions will be taxable to you whether received in cash or reinvested in shares of a Fund. You will be advised annually as to the source of your distributions for tax purposes. If you are not subject to income taxation, you will not be required to pay tax on amounts distributed to you. If you purchase shares shortly before a record date for a distribution you will, in effect, receive a return of a portion of your investment, but the distribution will be taxable to you even if the net asset value of your shares is reduced below your cost. However, for Federal income tax purposes your original cost would continue as your tax basis. If you fail to furnish your social security or other tax identification number or to certify properly that it is correct, the Funds may be required to withhold Federal income tax, currently at the rate of 31% ("backup withholding"), from dividend, capital gain and redemption payments to you. Your dividend and capital gain payments may also be subject to backup withholding if you fail to certify properly that you are not subject to backup withholding due to the under- reporting of certain income. These certifications are contained in the Share Purchase Application, which you should complete and return when you make your initial investment. DETERMINATION OF NET ASSET VALUE The purchase and redemption price of each Fund's shares is its net asset value per share. The net asset value of a share of each Fund is determined as of the close of trading on the New York Stock Exchange (currently 3:00 p. m., Central time) by dividing the difference between the values of the Fund's assets and liabilities by the number of shares outstanding. This is referred to as "net asset value per share", which is determined as of the close of regular session trading at the New York Stock Exchange on each day on which that exchange is open for trading. A security listed or traded on a national securities exchange or traded on the Nasdaq National Market is valued at its last quoted sales price on the day the valuations are made. Listed securities and securities traded on the over-the-counter market that do not trade on a particular day are valued at the mean between the quoted bid and asked price. page 22
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VALUATION Securities for which market quotations are readily available at the time of valuation are valued on that basis. Each security traded on a national stock exchange is valued at its last sale price on that exchange on the day of valuation or, if there are no sales that day, at the mean of the latest bid and asked quotations. Each over-the-counter security for which the last sale price on the day of valuation is available from the Nasdaq National Market is valued at that price. All other over-the-counter securities for which reliable quotations are available are valued at the mean of the latest bid and asked quotations. Long-term straight-debt securities for which market quotations are not readily available are valued at a fair value based on valuations provided by pricing services approved by the respective Boards, which may employ electronic data processing techniques, including a matrix system, to determine valuations. Short-term debt securities for which market quotations are not readily available are valued by use of a matrix prepared by the Adviser based on quotations for comparable securities. Other assets and securities held by a Fund for which these valuation methods do not produce a fair value are valued by a method that the Board believes will determine a fair value. VALUATION OF GOVERNMENT MONEY MARKET FUND Government Money Market Fund attempts to maintain its net asset value at $1.00 per share. Portfolio securities are valued based on their amortized cost, which does not take into account unrealized gains or losses. Other assets and securities of the Fund for which this valuation method does not produce a fair value are valued at a fair value determined by the Board. The extent of any deviation between the Fund's asset value based upon market quotations or equivalents and $1.00 per share based on amortized cost will be examined by the Board of Trustees. If such deviation were to exceed 1/2 of 1%, the Board would consider what action, if any, should be taken, including selling portfolio instruments, increasing, reducing or suspending distributions, or redeeming shares in kind. SHAREHOLDER SERVICES REPORTING TO SHAREHOLDERS You will receive a confirmation statement reflecting each of your purchases and redemptions of shares of a Fund, as well as periodic statements detailing distributions made by each Fund for which you are a shareholder. You may elect to receive a combined statement for all Funds for which you are a shareholder. In addition, you will receive semi-annual and annual reports showing the portfolio holdings of each Fund and annual tax information. Investors who wish to make a change in their address of record, a change in investments made through an automatic investment plan or a change in the manner in which dividends are received may do so by calling the transfer agent at 1-800-241-9772. AUTOMATIC INVESTMENT PLAN The Funds have an Automatic Investment Plan which permits an existing shareholder to purchase additional shares of any Fund (minimum $50 per transaction) at regular intervals. Under the Automatic Investment Plan, shares are purchased by transferring funds from a shareholder's checking, bank money market, NOW account, or savings account in an amount of $50 or more designated by the shareholder. At your option, the account designated will be debited and shares will be purchased on the date elected by the shareholder. There must be a minimum of seven days between automatic purchases. If the date elected by the shareholder is not a business day, funds will page 23
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be transferred the next business day thereafter. Only an account maintained at a domestic financial institution which is an Automated Clearing House member may be so designated. To establish an Automatic Investment Account, complete and sign Section 7 of the Shareholder Purchase Application included in this Prospectus and send it to the Transfer Agent. You may cancel this privilege or change the amount of purchase at any time by calling 1-800-241-9772 or by mailing written notification to: MONETTA, C/O FIRSTAR TRUST COMPANY, P.O. BOX 701, MILWAUKEE, WISCONSIN 53201-0701. The change will be effective five business days following receipt of your notification by the Transfer Agent. A Fund may modify or terminate this privilege at any time or charge a service fee, although no such fee currently is contemplated. However, a $20.00 fee will be imposed by Firstar Trust Company if sufficient funds are not available in the shareholder's account at the time of the automatic transaction. SYSTEMATIC EXCHANGE PLAN The Funds offer a Systematic Exchange Plan whereby a shareholder may automatically exchange shares (in increments of $250 or more) of one Monetta Fund into another on any day, either monthly or quarterly, the shareholder chooses. For additional information and a Systematic Exchange Plan form, please call Firstar Trust Company at 1-800-241-9772. Before participating in the Systematic Exchange Plan, an investor should consult a tax or other financial adviser to determine the tax consequences of participation. SYSTEMATIC WITHDRAWAL PLAN The Funds offer a Systematic Withdrawal Plan for shareholders who own shares of any Fund worth at least $10,000 at current net asset value. Under the Systematic Withdrawal Plan, a fixed sum (minimum $500) will be distributed at regular intervals (on any day, either monthly or quarterly). In electing to participate in the Systematic Withdrawal Plan, investors should realize that within any given period the appreciation of their investment in a particular Fund may not be as great as the amount withdrawn. A shareholder may vary the amount or frequency of withdrawal payments or temporarily discontinue them by notifying Firstar Trust Company at 1-800-241-9772. The Systematic Withdrawal Plan does not apply to shares of any Fund held in Individual Retirement Accounts or defined contribution retirement plans. For additional information or to request an application please call Firstar Trust Company at 1-800-241-9772. TAX-SHELTERED RETIREMENT PLANS The Adviser offers prototype tax-sheltered retirement plans for individuals, businesses and nonprofit organizations. Please call 1-800-MONETTA for booklets describing the following programs and the forms needed to establish them: INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) for employed individuals and their non- employed spouses. MONEY PURCHASE PENSION AND PROFIT SHARING PLANS, including salary deferral (401(K)) plans, for self-employed individuals, partnerships and corporations. 403(B) RETIREMENT PLANS for nonprofit organizations. SIMPLIFIED EMPLOYEE PENSION PLANS permitting employers to provide retirement benefits, including salary deferral, to their employees using IRAs and minimizing administration and reporting requirements. page 24
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MANAGEMENT OF THE FUNDS The Board of Directors of Monetta Fund and the Board of Trustees of the Trust have overall responsibility for the conduct of the affairs of their respective Funds. Each Fund's investments are managed by the investment adviser, MONETTA FINANCIAL SERVICES, INC. (the "Adviser"). Subject to the overall authority of the respective Boards, the Adviser manages the business and investments of the Funds under investment advisory agreements. The Adviser also furnishes all office space, equipment and personnel used by it in performing its duties and pays all of each Fund's ordinary operating expenses except the fees of the custodian, transfer agent and non-interested board members. The Adviser is controlled by Robert S. Bacarella, the President and Founder of Monetta Fund and the Trust, whose principal occupation has been in the field of money management since 1972. The Adviser's address is 1776-A S. Naperville Road, Suite 207, Wheaton, IL 60187. Mr. Bacarella is the portfolio manager of Monetta Fund and has served in that capacity since it began operations. Mr. Bacarella has been President and Director of the Adviser since 1984, and was Director - Pension Fund Investments, for Borg-Warner Corporation until 1989. John M. Alogna has been the portfolio manager of the Mid-Cap Fund, Large-Cap Fund and Balanced Fund since each began operations, and portfolio manager of the Intermediate Bond Fund and Government Money Market Fund since January 1994. Mr. Alogna, who is a Trustee of the Trust, joined the Adviser as a portfolio manager in January 1993. Mr. Alogna was a private investor immediately prior to joining the Adviser and has been active in the field of professional investment management since 1961. As the Senior Portfolio Manager of a large trust company from 1974 to 1982, he was directly responsible for the management of over $2 billion in assets, including collective equity and special equity funds. Additionally, he served as an investment counselor for a national advisory firm managing personal as well as corporate investment portfolios. In return for its services, and for the assumption of each Fund's ordinary operating expenses except the fees and expenses of the custodian, transfer agent and the non-interested directors and trustees, the Adviser receives a monthly fee from each Fund based on that Fund's average net assets, computed and accrued daily. The annualized rate of fee for each of Monetta Fund, Mid-Cap Fund and Large-Cap Fund is 1% of average net assets; that of Balanced Fund is .65 of 1% of average net assets; that of Intermediate Bond Fund is .60 of 1% of average net assets; and that of Government Money Market Fund is .35 of 1% of average net assets. The rate of fee paid by Monetta Fund, Mid-Cap Fund and Large-Cap Fund is higher than the rate of fee paid by most mutual funds. The advisory agreement also provides that the total annual expenses of each Fund, exclusive of taxes, interest, extraordinary litigation expenses and brokers' commissions and other charges relating to the purchase and sale of securities but including fees paid to the Adviser, shall not exceed the limits, if any, prescribed by any state in which shares of that Fund are qualified for sale, and the Adviser has agreed to reimburse that Fund for any such expenses in excess of such limits. The Adviser believes that currently the most restrictive expense limitation of any state is (i) 2.5% of the first $30 million of average net assets, (ii) 2% of the next $70 million and (iii) 1.5% thereafter. Monetta Fund, the Trust and the Funds use "Monetta" in their names by license from the Adviser and would be required to stop using those names if Monetta Financial Services ceased to be the Adviser. The Adviser has the right to use the name for other enterprises, including other investment companies. page 25
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The Adviser seeks the best combination of net price and execution in selecting broker-dealers to execute portfolio transactions for the Funds. Subject to that overriding consideration, and consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., the Adviser may consider sales of Fund shares, or recommendations that clients purchase Fund shares, as a factor in the selection of broker-dealers to execute transactions for the Funds. Brokerage transactions for the Funds may be executed through Monetta Brokerage, Inc., a registered broker-dealer and an affiliate of the Adviser. At March 31, 1996, the Adviser owned 47.1% of the outstanding shares of the Balanced Fund, 19.5% of the outstanding shares of the Government Money Market Fund, 18.8% of the outstanding shares of the Intermediate Bond Fund, 9.5% of the outstanding shares of the Large-Cap Fund and less than 1% of the Mid-Cap Fund. Ownership of a majority of the outstanding shares of the Government Money Market Fund gives the Adviser control over the outcome of any matter requiring approval of the shareholders of Government Money Market Fund, and ownership of a significant percentage of the outstanding shares of the Trust reduces the number of other shares that must be voted in accordance with the Adviser's vote to approve or disapprove any proposal requiring the approval of the shareholders of the Trust. OTHER INFORMATION All shareholder inquiries and instructions concerning Fund accounts should be directed to: MONETTA, c/o Firstar Trust Company, P. O. Box 701, Milwaukee, Wisconsin 53201-0701. In approving the use of a single combined Prospectus, the Board of Directors of Monetta Fund and the Board of Trustees of the Trust considered the possibility that one Fund might be liable for misstatements in the Prospectus regarding information concerning another Fund. . MONETTA FUND Monetta Fund is an open-end diversified management investment company incorporated under the laws of the State of Maryland on October 16, 1985. The Fund has one class of capital stock, $0.01 par value. Each full share is entitled to one vote and to participate equally in dividends and distributions declared by the Fund (fractional shares have the same rights, proportionally, as full shares). Fund shares are fully paid and non-assessable when issued and have no preemptive, conversion or exchange rights. The obligations and liabilities associated with ownership or shares in the Fund are limited to the extent of a shareholder's investment in the Fund. Voting rights are non-cumulative, so that the holders of more than 50% of the shares voting in any election can, if they choose to do so, elect all of the directors of the Fund. As a Maryland corporation registered under the Investment Company Act of 1940, the Fund is not required to hold routine annual meetings of shareholders and does not expect to do so. Maryland law permits shareholders to remove directors and requires the Fund to assist in shareholder communication under certain circumstances. page 26
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. THE TRUST Mid-Cap Fund, Large-Cap Fund, Balanced Fund, Intermediate Bond Fund and Government Money Market Fund are each a series of Monetta Trust, which was organized as a Massachusetts business trust on October 20, 1992 and is an open- end diversified management investment company. Under the terms of the Trust's agreement and declaration of trust ("Declaration of Trust"), the trustees may issue an unlimited number of shares of beneficial interest without par value for each series of shares authorized by the trustees. All shares issued are fully paid and non-assessable when issued and have no pre- emptive, conversion or exchange rights. Each Fund's shares are entitled to participate pro rata in any dividends and other distributions declared by the Board of Trustees with respect to shares of that Fund. All shares of a Fund have equal rights in the event of liquidation of that Fund. Under Massachusetts law, the shareholders of the Trust may, under certain circumstances, be held personally liable for the Trust's obligations. However, the Declaration of Trust disclaims liability of the shareholders, trustees, and officers of the Trust for acts or obligations of any Fund, which are binding only on the assets and property of that Fund. The Declaration of Trust requires that notice of such disclaimer be given in each agreement, obligation, or contract entered into or executed by the Trust or the Board of Trustees. The Declaration of Trust provides for indemnification out of a Fund's assets of all losses and expenses of any Fund shareholder held personally liable for the Fund's obligations. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is remote, since it is limited to circumstances in which the disclaimer is inoperative and the Fund itself is unable to meet its obligations. The risk of a particular Fund incurring financial loss on account of an unsatisfied liability of another Fund of the Trust is also believed to be remote, because it would be limited to claims to which the disclaimer did not apply and to circumstances in which the other Fund was unable to meet its obligations. Each share has one vote and fractional shares have fractional votes. As a business trust, the Trust is not required to hold annual shareholder meetings. However, special meetings may be called for purposes such as electing or removing trustees, changing fundamental policies or approving an investment advisory agreement. On any matters submitted to a vote of shareholders, shares are voted by individual series and not in the aggregate, except when voting in the aggregate is required by the 1940 Act of other applicable law. Shares of a Fund are not entitled to vote on any matter not affecting that Fund. All shares of the Trust vote together in the election of trustees. The trustees serve indefinite terms of unlimited duration. The trustees appoint their own successors, provided that at least two-thirds of the trustees, after any such appointment, have been elected by the shareholders. Shareholders may remove a trustee, with or without cause, upon the declaration in writing or vote of two-thirds of the outstanding shares of the Trust, respectively. A trustee may be removed with or without cause upon the written declaration of a majority of the trustees. page 27
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[Download Table] TABLE OF CONTENTS Summary 2 Fund Expenses 4 Financial Highlights 5 Investment Objectives and Policies 8 Risks and Investment Considerations 11 Investment Restrictions 14 Investment Return 15 How to Purchase Shares 17 How to Redeem Shares 19 Dividends, Distributions and Federal Taxes 22 Determination of Net Asset Value 22 Shareholder Services 23 Tax-Sheltered Retirement Plans 24 Management of the Funds 25 Other Information 26 Application Centerfold SHAREHOLDERS NOTE: SEND ALL SHARE PURCHASE APPLICATIONS, CHANGES OF ADDRESS, REQUESTS FOR ACCOUNT INFORMATION AND REDEMPTION REQUESTS TO THE TRANSFER AGENT Firstar Trust Company P. O. Box 701 Milwaukee, WI 53201-0701 1-800-241-9772 Hearing Impaired Services TDD 1-800-684-3416 INVESTMENT ADVISER: Monetta Financial Services, Inc. ADDRESS OF FUNDS AND ADVISER: 1776-A South Naperville Road Suite 207 Wheaton, Illinois 60187-8133 AUDITORS: KPMG Peat Marwick LLP Chicago, Illinois 60601 LEGAL COUNSEL: Bell, Boyd & Lloyd Chicago, Illinois 60602 [LOGO OF MONETTA] Monetta Fund, Inc. Monetta Mid-Cap Equity Fund Monetta Large-Cap Equity Fund Monetta Balanced Fund Monetta Intermediate Bond Fund Monetta Government Money Market Fund No-Load Mutual Funds No Redemption Fees No 12b-1 Charges PROSPECTUS APRIL 17, 1996
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SHARE PURCHASE APPLICATION Mail Completed Application to: Overnight Express Mail to: Monetta Monetta Mutual Fund Services Mutual Fund Services, 3rd Floor P.O. Box 701 615 East Michigan Street Milwaukee, WI 53201-0701 Milwaukee, WI 53202 1-800-MONETTA Use this form for individual, custodial, trust, profit sharing or pension plan accounts. Do not use this form for Monetta Funds-sponsored IRA, Defined Contribution (401(k) or 403(b)) plans which require forms available from Monetta Funds. For information please call 1-800-666-3882. ================================================================================ 1. ACCOUNT REGISTRATION [_] Individual Name ---------------------------------------------------------------------------- Social Security Number Citizen of [_] US [_] Other ============================================================================ [_] Joint Owner* Name ---------------------------------------------------------------------------- Social Security Number Citizen of [_] US [_] Other ============================================================================ [_] Gift to Minor Custodian ---------------------------------------------------------------------------- Minor Minor's Birthdate ---------------------------------------------------------------------------- Minor's Social Security Number Citizen of [_] US [_] Other ============================================================================ [_] Corporation, Partnership or Other Entity Name of Entity ---------------------------------------------------------------------------- Taxpayer Identification Number ---------------------------------------------------------------------------- . A corporate resolution form or certificate is required for corporate accounts. ============================================================================ [_] Trust, Estate or Guardianship Name ---------------------------------------------------------------------------- Name of Fiduciary(s) ---------------------------------------------------------------------------- Taxpayer Identification Number Date of Trust ============================================================================ . Additional documentation and certification may be requested. *Registration will be Joint Tenants with Rights of Survivorship (JTWROS) unless otherwise specified ================================================================================ 2. MAILING ADDRESS [_] Send Duplicate Confirmations To: ----------------------------------- ------------------------------------ Street, Apt. Name ----------------------------------- ------------------------------------ City, State, Zip Code Street, Apt. ----------------------------------- ------------------------------------ Daytime Phone Number City, State, Zip Code ================================================================================ 3. INVESTMENT INSTRUCTION & DISTRIBUTION The minimum initial investment is $1,000 for shares in any of the Monetta Funds which may be allocated among the Funds so long as at least $250 is invested in each Fund in which you choose to invest (For UGMA, AIP, or IRA the minimum initial investment is $250). Subsequent investment to any Fund is $50 (also $50 for the Automatic Investment Plan). DISTRIBUTION OPTIONS Capital Gains and Dividends Amount Reinvested Cash [_] Monetta Fund $ [_] [_] ------------------------------------------------------------------------------- [_] Monetta Mid-Cap Equity Fund $ [_] [_] ------------------------------------------------------------------------------- [_] Monetta Large-Cap Equity Fund $ [_] [_] ------------------------------------------------------------------------------- [_] Monetta Balanced Fund $ [_] [_] ------------------------------------------------------------------------------- [_] Monetta Intermediate Bond Fund $ [_] [_] ------------------------------------------------------------------------------- [_] Monetta Government Money Market Fund $ [_] [_] ------------------------------------------------------------------------------- Total Investment $ (If no distribution option ========= is checked, dividends and capital gains will be reinvested.) ================================================================================ 4. CHECKWRITING (Monetta Government Money Market Fund Only. Not available for IRA or other retirement accounts.) [_] Check this box if you would like to establish check redemption privileges for the Monetta Government Money Market Fund and have 10 checks and 2 deposits forms printed. Each additional book of checks and deposit forms will be $5.00. This amount will be deducted from your account. Check redemption privileges are subject to the conditions on the reverse side. ---------------------------------- ---------------------------------- ---------------------------------- Account Number (For Bank Use Only) ---------------------------------------------------------------------------- Name on Monetta Government Money Market Fund Account (must be the same as Account Registration-please print) ---------------------------------------------------------------------------- Authorized Signature(s) (For joint accounts, all owners must sign.) For a corporate, trust, or other entity, or a joint account, how many authorized signatures are required? ---------
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================================================================================ 5. BACKUP WITHHOLDING [_] Check this box only if the IRS has notified you that you are subject to backup withholding. ================================================================================ 6. Telephone Exchange Privilege You automatically have the Telephone Exchange Privilege unless you check the box below. Under this Privilege, the Funds and their transfer agent are authorized to accept telephone instructions from any person to redeem shares from your account and apply the proceeds to purchase shares for your account in another Fund offered by Monetta, for sale in your state ("exchange"). The Exchange Privilege may not be used to redeem shares purchased by check (except certified and cashier checks) within the preceding 15 days. Telephone exchanges must be for at least $250. Telephone exchanges may be made only to accounts with identical registrations. You further agree that your election shall continue until five business days after the Fund and its transfer agent receive written notice of termination from you. The Privilege will be transferred automatically to any new account you open within the Fund into which a telephone or written exchange is made. See the statements below under "Signature." [_] DECLINE TELEPHONE EXCHANGE. If you want to establish a Telephone Exchange Privilege at a later date, you will be required to obtain a signature guarantee. ================================================================================ 7. AUTOMATIC INVESTMENT PLAN (AIP) Your signed Application must be received at least 15 business days prior to initial transaction. An unsigned voided check from your checking account or a savings account deposit slip is required with your application. In many cases, the key to achieving long-term investment objectives is a periodic and consistent investment program. The Funds' Automatic Investment Plan will provide you with an easy and systematic approach to investing. Based on your instructions, Firstar Trust Company, the transfer agent for Monetta Funds, will automatically transfer money directly from your checking, bank money market, NOW account or savings account named below on the day of each month or funds will be transferred the next business day thereafter. If you have any questions, call 1-800-MONETTA. Your Monetta account must be established with $250 minimum deposit before the Plan goes into effect. Please start my AIP as described in the Prospectus beginning: Month __________ Year ______. I hereby instruct Firstar Trust Company, transfer agent for Monetta Funds, to automatically transfer $_________ (minimum $50) directly from my checking, Now or savings account named below on the ______ day of each month or the first business day thereafter into my _______________________ account. I understand that I will be assessed a $20 fee if the automatic purchase cannot be made due to insufficient funds, stop payment, or for any other reason. Name(s) on Bank Account --------------------------------------------------------- Bank Name Account Number ------------------------------------ -------------------- Bank Address -------------------------------------------------------------------- ------------------------------------- --------------------------------------- Signature of Bank Account Owner Signature of Joint Owner . Termination must be in writing or by calling Firstar Trust Company. Allow 5 business days to become effective. Your participation in the Plan will terminate automatically if you redeem all your Monetta Fund shares. . IRA contributions apply as a current year purchase (purchases may not be used for prior year contributions). ================================================================================ 8. SIGNATURE & CERTIFICATION Required by The Internal Revenue Service I affirm that I have received a current prospectus of the Funds and agree to be bound by its terms. I certify that I have full authority and legal capacity to purchase shares of the Fund(s) and to establish and use any related Privileges, and agree that such Privileges and their terms and conditions shall be governed by Illinois law. If I have not provided a social security or other tax identification number in Part 1 of the Application, by signing the Application, 1: (i) certify, under penalties of perjury, that I have not been issued a number, but have applied (or soon will apply for one; and (ii) understand that if I do not provide the Funds or their transfer agent with a certified number within 60 days, they will be required to withhold 31% from all dividend, capital gain, and redemption payments from my account(s) until I provide them with a certified number. I understand that the Telephone Exchange Privilege will apply to my account unless I have specifically declined the privilege in Part 6, above. I understand that by signing this application unless the Privilege is declined, I agree that neither the Funds nor their transfer agent, their agents, officers, trustees or employees will be liable for any loss, liability, cost or expense for acting instructions given under the Privilege, placing the risk of any loss on me. See "How to Redeem Shares--By Exchange" in the prospectus. I agree that any of the Funds and their transfer agent may redeem shares and retain the proceeds from any of my account(s) with any Fund(s) up to a total of (a) any IRS penalties attributable to my failure to provide any of the Funds or their transfer agent with correct and complete information requested by either, and (b) any tax not withheld from distributions to me which should have been withheld by them. UNDER THE PENALTY OF PERJURY, I CERTIFY THAT (1) THE SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER, AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. The IRS does not require your consent to any provision of this document other than the certification in this paragraph required to avoid backup withholding. (Note: you must check the box in Part 5 of this Application if the IRS has notified you that you are subject to backup withholding due to your failure to report such income.) ------------ ----------------------------- --------------------------------- Date Signature* Signature of Co-Owner, if any *If shares are to be registered in the name of (1) two persons jointly, both persons must sign, (2) a custodian for a minor, the custodian must sign, (3) a trust, the trustee(s) must sign, or (4) a corporation or other entity, an officer must sign and print name and title on space provided below. -------------------------------------------------------------------------------- Print name and title of officer signing for a corporation or other entity ================================================================================ CONDITIONS OF REDEMPTION OPTION Checks may not be for less than $500 or such other minimum amounts as may from time to time be established by the Monetta Government Money Market Fund upon prior written notice to its shareholders. Maximum amount for withdrawal is $50,000. Shares purchased by check, (including certified or cashier's check) will not be redeemed by check-writing or any other method of redemption until the transfer agent is reasonably satisfied that the check has been collected, which could take up to 7 days from the purchase date. By signing this card, I appoint the Firstar Bank Milwaukee, NA my agent to present checks drawn on this account to the transfer agent, Firstar Trust Company, as requests to redeem shares and I authorize the Monetta Government Money Market Fund and Firstar Trust Company to honor such requests and redeem shares in an amount equal to the amount of the check. I agree to be subject to the rules pertaining to the check redemption privileges as amended from time to time. The Monetta Government Money Market Fund or Firstar Trust Company may reserve the right to modify or terminate this account and authorization at any time. B.N. 0 ________ ________ ________ ________ Internal Use Only
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STATEMENT OF ADDITIONAL INFORMATION APRIL 17, 1996 MONETTA FUND, INC. MONETTA TRUST NO-LOAD FUNDS 1776-A SOUTH NAPERVILLE ROAD, SUITE 207 WHEATON, IL 60187 1-800-MONETTA (1-800-666-3882) MONETTA FUND, INC. MONETTA MID-CAP EQUITY FUND MONETTA LARGE-CAP EQUITY FUND MONETTA BALANCED FUND MONETTA INTERMEDIATE BOND FUND MONETTA GOVERNMENT MONEY MARKET FUND TABLE OF CONTENTS PAGE ---- Other Fund Information............................................ B-1 Investment Objectives and Policies................................ B-1 Risks and Investment Considerations............................... B-5 Investment Restrictions........................................... B-11 Performance Information........................................... B-16 Investment Adviser.............................................. B-20 Directors/Trustees and Officers................................... B-21 Purchasing and Redeeming Shares................................. B-25 More Information About Net Asset Value.......................... B-25 Tax Status...................................................... B-27 Portfolio Transactions.......................................... B-27 Custodian....................................................... B-29 Independent Auditors............................................ B-30 Appendix - Ratings................................................ B-30
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OTHER FUND INFORMATION Monetta Fund, Inc. ("Monetta Fund") is an open-end diversified management investment company organized under the laws of the State of Maryland. Monetta Mid-Cap Equity Fund ("Mid-Cap Fund"), Monetta Large-Cap Equity Fund ("Large-Cap Fund"), Monetta Balanced Fund ("Balanced Fund"), Monetta Intermediate Bond Fund ("Intermediate Bond Fund") and Monetta Government Money Market Fund ("Government Money Market Fund") are series of Monetta Trust (the "Trust"), a Massachusetts business trust (the "Trust"). Monetta Fund and each of the Trust series are collectively referred to as the "Funds." This Statement of Additional Information is not a prospectus, but provides additional information that should be read in conjunction with the Funds' prospectus dated April 17, 1996 and any supplement thereto. The 1994 annual reports of Monetta Fund and the Trust, copies of which accompany this Statement of Additional Information, contain financial statements, notes thereto, and the report of independent auditors, all of which (but no other part of the annual report) are incorporated herein by reference. The prospectus and additional copies of the annual reports may be obtained without charge by writing or telephoning the Funds at the address or telephone number shown on the previous page. INVESTMENT OBJECTIVES AND POLICIES The following information supplements the discussion of the Funds' investment objectives and policies in the prospectus. In pursuing its objective, each Fund will invest as described below and in the prospectus. Each Fund's investment objective is a fundamental policy, which may not be changed without the approval of a "majority of the outstanding voting securities" of that Fund./1/ The Funds' investment objectives differ principally in the types of securities selected for investment and the relative importance each Fund places on growth potential, current income and preservation of capital as considerations in selecting investments. In pursuing the investment objectives of each of Mid-Cap Fund, Large-Cap Fund and Balanced Fund, the Adviser pursues an active and disciplined trading strategy. Those selling disciplines result in a higher than average rate of portfolio turnover, as discussed in the prospectus. In addition, it may be necessary for a Fund to sell short against the box rather than sell outright a security it wants to sell, to control the timing of the disposition of that security for federal income tax purposes. In a short sale against the box, the Fund sells short a security it owns and enters into an arrangement with the broker/dealer through which the short sale is executed to receive income from the proceeds of the short sale for as long as the short position remains open. The Fund incurs transaction costs in connection with short sales that are likely to -------------------- /1/ A "majority of the outstanding voting securities" means the approval of the lesser of (i) 67% of the Fund's shares present at a meeting if more than 50% of the shares outstanding are present or (ii) more than 50% of the Fund's outstanding shares. B-1
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exceed the transaction costs that would be incurred in an outright sale. See "Risks and Investment Considerations." The Funds have no present intention to sell short securities comprising 5% or more of its total assets. . Monetta Fund, Mid-Cap Fund and Large-Cap Fund Monetta Fund, Mid-Cap Fund and Large-Cap Fund each seek long-term capital growth by investing in common stocks believed to have above average growth potential. The Funds differ from each other with respect to the (i) market capitalizations of the companies in which they invest and (ii) relative importance placed on investing for current income. Each Fund's investment approach emphasizes a competitive return in rising markets and preservation of capital in declining markets in an attempt to generate long-term capital growth over a complete business cycle (approximately 3 to 5 years) when compared to the broader stock market indices. The Adviser's emphasis will be on common stocks with improving earnings per share growth, a history of growth and sound management, and a strong balance sheet. The Adviser may also invest up to 20% of Monetta Fund's assets and 25% of Mid-Cap Fund and Large-Cap Fund's assets in securities not meeting the above criteria but believed by the Adviser to be undervalued based on a company's current price- earnings ratio relative to its estimated earnings growth rate. The securities in which each Fund invests will be listed on a national securities exchange or traded on an over-the-counter market. MONETTA FUND'S primary investment objective is to provide its shareholders with capital appreciation by investing at least 70% of the Fund's assets in equity securities believed to have growth potential. A secondary objective of Monetta Fund is to provide its shareholders with income, in part by investing the balance of the Fund's assets in dividend paying equity securities or in long-term (greater than one year) debt securities. The Fund's investments in long-term debt securities will consist of United States Treasury Notes and Treasury Bonds of various maturities and investment grade securities rated at least A or better by either Moody's Investor Services, Inc. ("Moody's") or Standard and Poor's Corporation ("S&P"). Monetta Fund generally invests in smaller and medium-sized companies with aggregate market capitalizations ranging from $50 million to $1 billion. MID-CAP FUND typically invests in medium-sized companies with market capitalizations of $1 billion to $5 billion ("mid-cap companies"). Under normal market conditions, the Fund invests at least 90% of its total assets in equities, and 65% of its total assets in common stocks of mid-cap companies. LARGE-CAP FUND typically invests in large companies with market capitalizations in excess of $5 billion ("large-cap companies"). Under normal market conditions, at least 90% of the Fund's total assets invested in equities, and 65% of the Fund's total assets, will be invested in common stocks of large- cap companies. B-2
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. BALANCED FUND BALANCED FUND seeks a favorable total rate of return through capital appreciation and current income consistent with preservation of capital, derived from investing in a portfolio of equity and fixed income securities. The investment approach for Balanced Fund combines the equity growth strategy used for Monetta Fund, Mid-Cap Fund and Large-Cap Fund and the income strategy employed by Intermediate Bond Fund, as discussed below. The Fund may emphasize fixed income securities or equity securities or hold equal amounts of both, depending upon the Adviser's analysis of market, financial and economic conditions. Under normal circumstances, the Fund will invest at least 80% of its net assets in fixed income and equity securities. At least 25% of the Fund's assets invested in fixed income securities will consist of corporate bonds and debentures rated A or better and securities issued or guaranteed as to principal and interest by the U.S. Government and its agencies and instrumentalities. The Fund does not presently intend to invest more than 10% of its assets in securities rated below investment grade or, if unrated, determined by the Adviser to be of comparable credit quality. . INTERMEDIATE BOND FUND INTERMEDIATE BOND FUND seeks high current income, consistent with the preservation of capital, by investing primarily in marketable debt securities. Under normal market conditions, Intermediate Bond Fund invests at least 65% of the total value of its total assets in bonds and debentures and at least 70% of the value of its total assets (taken at market value at the time of investment) in the following: 1. Marketable straight-debt securities of domestic issuers, and of foreign issuers payable in U.S. dollars, rated at time of purchase within the three highest grades assigned by Moody's or S&P; 2. Securities issued or guaranteed by the U.S. Government or by its agencies or instrumentalities; 3. Commercial paper rated Prime-1 by Moody's or A-1 by S&P at time of purchase, or, if unrated, issued or guaranteed by a corporation with any outstanding debt rated A or better by Moody's or S&P; 4. Variable rate demand notes, if unrated, determined by the Adviser to be of credit quality comparable to the commercial paper in which the Fund may invest; or B-3
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5. Bank obligations, including repurchase agreements,/2/ of banks having total assets in excess of $500 million. . GOVERNMENT MONEY MARKET FUND GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with safety of capital and maintenance of liquidity. The Fund invests in U.S. Government Securities maturing in 13 months or less from the date of purchase. U.S. Government Securities include: 1. Securities issued by the U.S. Treasury; 2. Securities issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government that are backed by the full faith and credit guarantee of the U.S. Government; 3. Securities issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government that are not backed by the full faith and credit guarantee of the U.S. Government; and 4. Repurchase agreements for securities listed in (1), (2), and (3) above, regardless of the maturities of such underlying securities. U.S. Government Securities include: (i) bills, note, bonds and other debt securities, differing as to maturity and rates of interest, that are issued by and are direct obligations of the U.S. Treasury; and (ii) other securities that are issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government and that include, but are not limited to, Federal Farm Credit Banks, Federal Home Loan Banks, Government National Mortgage Association, Farmers Home Administration, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. Because the Fund's investment policy permits it to invest in U.S. Government Securities that are not backed by the full faith and credit of the U.S. Treasury, investment in the Fund may involve risks that are different in some respects from an investment in a fund that invests only in securities that are backed by the full faith and credit of the U.S. Treasury. Such risks may include a greater risk of loss of principal and interest in the securities in the Fund's portfolio that are supported only by the issuing or guaranteeing agency or instrumentality and, accordingly, the Fund must look principally or solely to that entity for ultimate repayment. -------------------- /2/ A repurchase agreement is a sale of securities to a Fund in which the seller (a bank or broker-dealer believed by the Adviser to be financially sound) agrees to repurchase the securities at a higher price, which includes an amount representing interest on the purchase price, within a specified time. B-4
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The Fund will not enter into a repurchase agreement maturing in more than seven days if as a result thereof more than 10% of its net assets (taken at market value at the time of investment) would be invested in illiquid securities, including repurchase agreements maturing in more than seven days: however, there is otherwise no limitation on the percentage of the Fund's assets that may be invested in repurchase agreements. The Fund will enter into repurchase agreements only where (i) the underlying securities are U.S. Government Securities and (ii) the seller agrees that the value of the underlying U.S. Government Securities, including accrued interest (if purchased), will at all times be equal to or exceed the value of the repurchase agreement. The Fund maintains a dollar-weighted average portfolio maturity appropriate to its objective of maintaining a stable net asset value per share, and, in any case, not in excess of 90 days. It is the Fund's intention, in general, to hold securities to maturity. However, the Fund may attempt, from time to time, to increase its yield by trading to take advantage of variations in the markets for U.S. Government Securities. In addition, redemptions of the Fund's shares could necessitate the sale of portfolio securities, and such sales may occur at times when sales would not otherwise be desirable. An increase in prevailing interest rates will generally reduce the value of the Fund's portfolio investments, and a decline in prevailing interest rates will generally increase the market value of the Fund's portfolio investments. RISKS AND INVESTMENT CONSIDERATIONS Debt Securities. In pursuing its investment objective, the Fund may invest in debt securities of corporate and governmental issuers. The risks inherent in debt securities depend primarily on the term and quality of the obligations in the Fund's portfolio as well as on market conditions. A decline in the prevailing levels of interest rates generally increases the value of debt securities, while an increase in rates usually reduces the value of those securities. As a result, interest rate fluctuations will affect a Fund's net asset value, but not the income received by the Fund from its portfolio securities. (Because yields on debt securities available for purchase by the Fund vary over time, no specific yield on shares of the Fund can be assured.) In addition, if the bonds in a Fund's portfolio contain call, prepayment or redemption provisions, during a period of declining interest rates, these securities are likely to be redeemed, and the Fund will probably be unable to replace them with securities having a comparable yield. There can be no assurance that payments of interest and principal on portfolio securities will be made when due. Convertible Securities. Convertible securities include any corporate debt security or preferred stock that may be converted into underlying shares of common stock. The common stock underlying convertible securities may be issued by a different entity than the issuer of the convertible securities. Convertible securities entitle the holder to receive interest payments paid on corporate debt securities or the dividend preference on a preferred stock until such time as the convertible security matures or is redeemed or until the holder elects to exercise the conversion privilege. B-5
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The value of convertible securities is influenced by both the yield of non- convertible securities of comparable issuers and by the value of a convertible security viewed without regard to its conversion feature (i.e., strictly on the basis of its yield) is sometimes referred to as its investment value. The investment value of the convertible security will typically fluctuate inversely with changes in prevailing interest rates. However, at the same time, the convertible security will be influenced by its `conversion value,' which is the market value of the underlying common stock that would be obtained if the convertible security were converted. Conversion value fluctuates directly with the price of the underlying common stock. By investing in convertible securities, a Fund obtains the right to benefit from the capital appreciation potential in the underlying stock upon exercise of the conversion right, while earning higher current income than would be available if the stock were purchased directly. In determining whether to purchase a convertible security, the Adviser will consider substantially the same criteria that would be considered in purchasing the underlying stock. Although convertible securities purchased by a Fund are frequently rated investment grade. Convertible securities rated below investment grade (a) tend to be more sensitive to interest rate and economic changes, (b) may be obligations of issuers who are less creditworthy than issuers of higher quality convertible securities, and (c) may be more thinly traded due to such securities being less well known to investors than either common stock or conventional debt securities. Lending of Portfolio Securities. Subject to certain restrictions under "Investment Restrictions" in this statement of additional information, Balanced Fund and Intermediate Bond Fund may lend its portfolio securities to broker- dealers and banks. Any such loan must be continuously secured by collateral in cash or cash equivalents maintained on a current basis in an amount at least equal to the market value of the securities loaned by the Fund. The Fund would continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned, and also would receive an additional return that may be in the form of a fixed fee or a percentage of the collateral. The Fund would have the right to call the loan and obtain the securities loaned at any time on notice of not more than five business days. The Fund would not have the right to vote the securities during the existence of the loan but would call the loan to permit voting of the securities if, in the Adviser's judgment, a material event requiring a shareholder vote would otherwise occur before the loan was repaid. In the event of bankruptcy or other default of the borrower, the Fund could experience both delays in liquidating the loan collateral or recovering the loaned securities and losses, including (a) possible decline in the value of the collateral or in the value of the securities loaned during the period while the Fund seeks to enforce its rights thereto, (b) possible subnormal levels of income and lack of access to income during this period, and (c) expenses of enforcing its rights. When-Issued and Delayed Delivery Securities. Balanced Fund, Intermediate Bond Fund and Government Money Market Fund may purchase securities on a when- issued or delayed-delivery basis. Although the payment and interest terms of these securities are established at the time a Fund enters into the commitment, the securities may be delivered and paid for a month or more after the date of purchase, when their value may have changed. A Fund makes such commitments only with the intention of actually acquiring the securities, but may sell the securities before settlement date if the Adviser deems it advisable for investment reasons. At the B-6
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time a Fund enters into a binding obligation to purchase securities on a when- issued or delayed-delivery basis, liquid assets (cash, U.S. Government securities or other "high-grade" debt obligations) of the Fund having a value at least as great as the purchase price of the securities to be purchased will be segregated on the books of the Fund and held by the custodian throughout the period of the obligation. The use of this investment strategies may increase net asset value fluctuation. Repurchase Agreements. A repurchase agreement is a sale of securities to a Fund in which the seller (a bank or broker-dealer believed by the Adviser to be financially sound) agrees to repurchase the securities at a higher price, which includes an amount representing interest on the purchase price, within a specified time. In the event of a bankruptcy or other default of a seller of a repurchase agreement, a Fund could experience both delays in liquidating the underlying securities and losses, including: (a) possible decline in the value of the collateral during the period while the Fund seeks to enforce its rights thereto; (b) possible below normal levels of income and lack of access to income during this period; and (c) expenses of enforcing its rights. Options on Securities and Indexes. Balanced Fund and Intermediate Bond Fund may purchase and sell put options and call options on securities and on indexes and enter into interest rate and index futures contracts and options on futures contracts. An option on a security (or index) is a contract that gives the purchaser (holder) of the option, in return for a premium, the right to buy from (call) or sell to (put) the seller (writer) of the option the security underlying the option (or the cash value of the index) at a specified exercise price at any time during the term of the option (normally not exceeding nine months). The writer of an option on an individual security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security or foreign currency. Upon exercise, the writer of an option on an index is obligated to pay the difference between the cash value of the index and the exercise price multiplied by the specified multiplier for the index option. (An index is designed to reflect specified facets of a particular financial or securities market, a specific group of financial instruments or securities, or certain economic indicators.) A Fund will write call options and put options only if they are "covered." For example, in the case of a call option on a security, the option is "covered" if a Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, cash or cash equivalents in such amount are held in a segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio. If an option written by a Fund expires, the Fund realizes a capital gain equal to the premium received at the time the option was written. If an option purchased by the Fund expires, the Fund realizes a capital loss equal to the premium paid. B-7
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Prior to the earlier of exercise or expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security or index, exercise price, and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be effected when a Fund desires. A Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option, or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the Fund will realize a capital loss. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security or index in relation to the exercise price of the option, the volatility of the underlying security or index, and the time remaining until the expiration date. A put or call option purchased by a Fund is an asset of the Fund, valued initially at the premium paid for the option. The premium received for an option written by a Fund is recorded as a deferred credit. The value of an option purchased or written is marked-to-market daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no closing price is available, at the mean between the last bid and asked prices. There are several risks associated with transactions in options. For example, there are significant differences between the securities markets, the currency markets, and the options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or expected events. There can be no assurance that a liquid market will exist when a Fund seeks to close out an option position. If a Fund were unable to close out an option that it had purchased on a security, it would have to exercise the option in order to realize any profit or the option would expire and become worthless. If a Fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security until the option expired. As the writer of a covered call option on a security, a Fund foregoes, during the option's life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the exercise price of the call. If trading were suspended in an option purchased or written by the Fund, the Fund would not be able to close out the option. If restrictions on exercise were imposed, the Fund might be unable to exercise an option it has purchased. B-8
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Futures Contracts and Options on Futures Contracts. A Fund may use interest rate futures contracts, index futures contracts, and options on such futures contracts. An interest rate, index or option on a futures contract provides for the future sale by one party and purchase by another party of a specified quantity of a financial instrument or the cash value of an index/3/ at a specified price and time. A public market exists in futures contracts covering a number of indexes (including, but not limited to: the S&P 500 Index, the Value Line Composite Index, and the New York Stock Exchange Composite Index) as well as financial instruments (including, but not limited to: U.S. Treasury bonds, U.S. Treasury notes, Eurodollar certificates of deposit, and foreign currencies). Other index and financial instrument futures contracts are available and it is expected that additional futures contracts will be developed and traded. A Fund may purchase and write call and put futures options. Futures options possess many of the same characteristics as options on securities and indexes (discussed above). A futures option gives the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true. A Fund might, for example, use futures contracts to hedge against or gain exposure to fluctuations in the general level of stock prices, anticipated changes in interest rates or currency fluctuations that might adversely affect either the value of the Fund's securities or the price of the securities that the Fund intends to purchase. Although other techniques could be used to reduce or increase a Fund's exposure to stock price, interest rate and currency fluctuations, a Fund may be able to achieve its exposure more effectively and perhaps at a lower cost by using futures contracts and futures options. A Fund will only enter into futures contracts and futures options that are standardized and traded on an exchange, board of trade, or similar entity, or quoted on an automated quotation system. There are several risks associated with the use of futures contracts and futures options. A purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. In trying to increase or reduce market exposure, there can be no guarantee that there will be a correlation between price movements in the futures contract and in the portfolio exposure sought. In addition, there are significant differences between the securities and futures markets that could result in an imperfect correlation between the markets, causing a given -------------------- /3/ A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Although the value of a securities index is a function of the value of certain specified securities, no physical delivery of those securities is made. B-9
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transaction not to achieve its objectives. The degree of imperfection of correlation depends on circumstances such as: variations in speculative market demand for futures, futures options and the related securities, including technical influences in futures and futures options trading and differences between the securities market and the securities underlying the standard contracts available for trading. For example, in the case of index futures contracts, the composition of the index, including the issuers and the weighting of each issue, may differ from the composition of a Fund's portfolio, and, in the case of interest rate futures contracts, the interest rate levels, maturities, and creditworthiness of the issues underlying the futures contract may differ from the financial instruments held in a Fund's portfolio. A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected stock price or interest rate trends. Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses. Stock index futures contracts are not normally subject to such daily price change limitations. There can be no assurance that a liquid market will exist at a time when the Fund seeks to close out a futures or futures option position. A Fund would be exposed to possible loss on the position during the interval of inability to close, and would continue to be required to meet margin requirements until the position is closed. In addition, many of the contracts discussed above are relatively new instruments without a significant trading history. As a result, there can be no assurance that an active secondary market will develop or continue to exist. Short Sales. The Fund may make short sales "against the box." In a short sale, the Fund sells a borrowed security and is required to return the identical security to the lender. A short sale "against the box" involves the sale of a security with respect to which the Fund already owns an equivalent security in kind and amount. A short sale "against the box" enables the Fund to obtain the current market price of a security which it desires to sell but is unavailable for settlement. Portfolio Turnover. Monetta Fund engages in an above-average number of portfolio transactions. Its annual portfolio turnover rate is likely to exceed 100%, and in some years may exceed 200% (excluding Treasury Bills and other short-term money market instruments which mature in less than one year). Mid- Cap Fund, Large-Cap Fund and Balanced Fund may also engage in an above-average number of portfolio transactions and an annual portfolio turnover rate exceeding 100%, although that rate is not expected to exceed 200% annually under normal B-10
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market conditions. A high portfolio turnover rate increases aggregate brokerage commission expenses and taxes which must be borne directly by a Fund and ultimately by its shareholders. These portfolio turnover rates and the resulting commission expenses and taxes are higher on a relative basis than those of mutual funds which may not trade as frequently, including those with a policy of capital appreciation. Substantial trading involves substantial risk and may be speculative. Investors should not consider purchase of a Fund's shares as a complete investment program. INVESTMENT RESTRICTIONS MONETTA FUND operates under the following investment restrictions: 1. The Fund will not issue any senior securities; 2. The Fund will not (i) sell securities short (unless the Fund owns an equal amount of such securities or owns securities that are convertible or exchangeable, without payment of further consideration, into an equal amount of such securities), (ii) purchase securities on margin, or (iii) write put and call options; 3. The Fund will not borrow money in excess of 5% of the value of its total assets, or pledge, mortgage or hypothecate its assets taken at market value to an extent greater than 10% of the Fund's total assets taken at cost (and no borrowing may be undertaken except from banks as a temporary measure for extraordinary or emergency purposes); 4. The Fund will not invest more than 5% of its total assets in the securities of any one issuer (except that this limitation shall not apply to obligations issued or guaranteed by the United States Government, its agencies or instrumentalities); 5. The Fund will not purchase the securities of companies in a particular industry if thereafter more than 25% of the Fund's total assets would consist of securities issued by companies in that industry (except that this limitation shall not apply to obligations issued or guaranteed by the United States Government, its agencies or instrumentalities); 6. The Fund will not acquire more than 10% of the outstanding voting securities, or 10% of all of the securities, of any one issuer; 7. The Fund will not purchase the securities of any other investment company; 8. The Fund will not purchase securities of any company with a record of less than 3 years continuous operation (including that of predecessor companies) if such purchase would cause the Fund's investments in all such companies taken at cost to exceed 5% of the value of the Fund's total assets; B-11
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9. The Fund will not purchase or retain the securities of any issuer if the officers and directors of the Fund or its Investment Adviser own individually more than 1/2 of 1% of the securities of such issuer or together own more than 5% of the securities of such issuer; 10. The Fund will not act as securities underwriter, except to the extent necessary in connection with the disposition of Fund shares, or invest in real estate (although it may purchase shares of a real estate investment trust),/4/ or invest in commodities, commodities contracts or financial futures contracts; 11. The Fund will not invest in companies for the purpose of exercising control or management of such company. 12. The Fund will not invest in securities commonly called "restricted securities", or repurchase agreements which mature in more than seven days, which it would be required to register under the Securities Act of 1933 before the securities could be resold to the public; 13. The Fund will not purchase shares which are not readily marketable; and 14. The Fund will not make loans other than in accordance with the Fund's investment objectives, including for the purchase of a portion of an issue of publicly distributed bonds, debentures, or other securities whether or not the purchase was made upon the original issuance of the securities. Each of the restrictions noted above is "fundamental" which means that it. cannot be changed without the approval of a majority of the Fund's outstanding voting securities. THE TRUST AND EACH OF ITS FUNDS operate under the following investment restrictions. A Fund may not: 1. [for all Funds except Government Money Market Fund] With respect to 75% of the value of the Fund's total assets, invest more than 5% of its total assets (valued at the time of investment) in securities of a single issuer, except that this restriction does not apply to U.S. Government Securities; [for Government Money Market Fund] Invest more than 5% of its total assets (valued at the time of investment) in securities of a single issuer, except that this restriction does not apply to (i) U.S. Government Securities or (ii) repurchase agreements; -------------------- /4/ Monetta Fund has not invested in real estate investment trusts and does not currently intend to do so. B-12
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2. Acquire securities of any one issuer that at the time of investment represent more than 10% of the outstanding voting securities of the issuer; B-13
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3. Invest more than 25% of its total assets (valued at the time of investment) in securities of companies in any one industry, except that this restriction does not apply to U.S. Government Securities or [for Government Money Market Fund only] to repurchase agreements; 4. Make loans, but this restriction shall not prevent the Fund from: [for all Funds except Government Money Market Fund] (a) buying bonds, debentures, or other debt obligations that are publicly distributed or a type privately placed with financial institutions, (b) investing in repurchase agreements, or (c) lending portfolio securities, provided that it may not lend securities if, as a result, the aggregate value of all securities loaned would exceed 33% of its total assets (taken at market value at the time of such loan);/5/ for Government Money Market Fund] (a) purchasing U.S. Government Securities or (b) entering into repurchase agreements; 5. Borrow money except (a) from banks for temporary or emergency purposes in amounts not exceeding 10% of the value of the Fund's total assets at the time of borrowing, provided that the Fund will not purchase additional securities when its borrowings exceed 5% of total assets and (b) [for Balanced Fund and Intermediate Bond Fund only] in connection with transactions in options, futures and options on futures; 6. Underwrite the distribution of securities of other issuers except insofar as it may be deemed to be an "underwriter" for purposes of the Securities Act of 1933 on disposition of securities subject to legal or contractual restrictions on resale;/6/ 7. Purchase and sell real estate or interests in real estate, although it may invest in marketable securities of enterprises that invest in real estate or interests in real estate;/7/ 8. Purchase and sell commodities or commodity contracts, except [for Balanced Fund and Intermediate Bond Fund only] that it may enter into futures and options on futures; -------------------- /5/ Although they have the power to do so, the Balanced Fund and Intermediate Bond Fund do not intend to lend portfolio securities. /6/ The Funds do not currently intend to invest in restricted securities. In addition, as long as shares of a Fund are offered for sale in Arkansas, that Fund will not invest more than 10% of its total assets in restricted securities. /7/ As long as shares of a Fund are offered for sale in Texas, that Fund will not purchase interests in real estate limited partnerships. B-14
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9. Make margin purchases of securities, except for use of such short-term credits as are needed for clearance of transactions and [for Balanced Fund and Intermediate Bond Fund only] except in connection with transactions in options, futures and options on futures; 10. Sell securities short or maintain a short position, except securities that the Fund owns or has the right to acquire without payment of additional consideration; and 11. Issue any senior security except to the extent permitted under the Investment Company Act of 1940. Restrictions 1 through 11 above are "fundamental." In addition, Mid-Cap Fund, Large-Cap Fund, Balanced Fund, Intermediate Bond Fund and Government Money Market Fund are subject to a number of restrictions that may be changed by the Board of Trustees of the Trust without shareholder approval. Under those non- fundamental restrictions, a Fund will not: a. Invest in companies for the purpose of management or the exercise of control; b. Invest in oil, gas or other mineral leases or exploration or development programs, although it may invest in marketable securities of enterprises engaged in oil, gas or mineral exploration; c. Invest more than 5% of its net assets (valued at time of investment) in warrants, nor more than 2% of its net assets in warrants that are not listed on the New York or American stock exchanges, valued at the lower of cost or market; provided that warrants acquired in units or attached to securities shall be deemed to be without value for purposes of this restriction; d. Invest more than 5% of its total assets (valued at time of investment) in securities of issuers with less than three years' operation (including predecessors); e. Acquire securities of other registered investment companies except in compliance with the Investment Company Act of 1940 and applicable state law; f. Purchase or retain securities of a company if all of the Trustees, Directors and Officers of the Trust and of its investment adviser who individually own beneficially more than 1/2% of the securities of the company collectively own beneficially more than 5% of such securities; g. Pledge, mortgage or hypothecate its assets, except as may be necessary in connection with permitted borrowing, short sales, options, futures and options on futures; h. Invest more than 10% of its net assets (valued at the time of each investment) in illiquid securities, including repurchase agreements maturing in more than seven days; B-15
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i. Write, purchase or sell puts, calls, straddles or spreads, except [for Intermediate Bond Fund only] for permitted transactions in options, futures and options on futures; and j. [for Balanced Fund and Intermediate Bond Fund only]: (i) Write an option on a security unless the option is issued by the Options Clearing Corporation, an exchange, or similar entity; (ii) Buy or sell an option on a security, a futures contract, or an option on a futures contract unless the option, the futures contract, or the option on the futures contract is offered through the facilities of a recognized securities association or listed on a recognized exchange or similar entity; and (iii) Purchase a put or call option if the aggregate premiums paid for all put and call options exceed 20% of its net assets (less the amount by which any such positions are in-the-money), excluding put and call options purchased as closing transactions./8/ PERFORMANCE INFORMATION Yield. Balanced Fund and Intermediate Bond Fund may quote yield figures from time to time. "Yield" is computed by dividing the net investment income per share earned during a 30-day period (using the average number of shares entitled to receive dividends) by the net asset value per share on the last day of the period. The Yield formula provides for semiannual compounding which assumes that net investment income is earned and reinvested at a constant rate and annualized at the end of a six-month period. The Yield formula is as follows: 6 YIELD = 2[((a-b/cd) + 1) - 1] Where: a = dividends and interest earned during the period. (For this purpose, the Fund will recalculate the yield to maturity based on market value of each portfolio security on each business day on which net asset value is calculated.) b = expenses accrued for the period (net of reimbursements). -------------------- /8/ As long as shares of Balanced Fund and Intermediate Bond Fund are offered for sale in Arkansas, neither Fund will not purchase puts, calls, straddles, spreads or any combination thereof if as a result the value of its aggregate investment in such classes of securities would exceed 5% of its total assets. B-16
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c = the average daily number of shares outstanding during the period that were entitled to receive dividends. d = the net asset value of the Fund. Intermediate Bond Fund's yield for the 30 days ended December 31, 1995 was 5.95%. Current or Effective Yield. Government Money Market Fund may quote a "Current Yield" or "Effective Yield" or both from time to time. The Current Yield is an annualized yield based on the actual total return for a seven-day period. The Effective Yield is an annualized yield based on a daily compounding of the Current Yield. These yields are each computed by first determining the "Net Change in Account Value" for a hypothetical account having a share balance of one share at the beginning of a seven-day period ("Beginning Account Value"), excluding capital changes. The Net Change in Account Value will always equal the total dividends declared with respect to the account, assuming a constant net asset value of $1.00. The Yields are then computed as follows: Current Yield = Net Change in Account Value x 365 --------------------------- --- Beginning Account Value 7 365/7 Effective Yield = [1 + Net Change in Account Value] - 1 --------------------------------- Beginning Account Value In addition to fluctuations reflecting changes in net income of the Fund resulting from changes in income earned on its portfolio securities and in its expenses, the Fund's yield also would be affected if the Fund were to restrict or supplement its dividends in order to maintain its net asset value at $1.00. (See "Net Asset Value" in the Prospectus and "Additional Information on the Determination of Net Asset Value" herein.) Portfolio changes resulting from net purchases or net redemptions of Fund shares may affect yield. Accordingly, the Fund's yield may vary from day to day and the yield stated for a particular past period is not a representation as to its future yield. The Fund's yield is not assured, and its principal is not insured; however, the Fund will attempt to maintain its net asset value per share at $1.00. Government Money Market Fund's current yield and effective yield for the seven days ended December 31, 1995 were 5.38% and 5.53%, respectively. Total Return. From time to time, each Fund may give information about its performance by quoting figures in advertisements and sales literature. "Total Return" for a period is the percentage change in value of an investment in a Fund's 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. B-17
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Average annual return is computed as follows: n ERV = P(1+T) Where: P = the amount of an assumed initial investment in Fund shares T = average annual total return n = number of years from initial investment to the end of the period ERV = ending redeemable value of shares held at the end of the period Each Fund's total return (other than Large-Cap Fund and Balanced Fund) for the year ended December 31, 1995 was: Monetta Fund, 28.0% Mid-Cap Fund, 24.5%; Large-Cap Fund, 5.7% since inception (September 1, 1995); Balanced Fund, 6.2% since inception (September 1, 1995); Intermediate Bond Fund, 14.8%; and Government Money Market Fund, 5.9%. Average annual total return for the twelve months ended December 31, 1995, for the five-year period ended December 31, 1995 and from the commencement of operations through December 31, 1995 for Monetta Fund were 28.0%, 14.7% and 12.5%. Average annual total return for the twelve months ended December 31, 1995 and from the commencement of operation through December 31, 1995 for the other Funds were: Mid-Cap Fund, 24.5% and 21.2%, respectively; Intermediate Bond Fund, 14.8% and 7.6%, respectively; and Government Money Market Fund, 5.9% and 4.2%, respectively. General. Investment performance figures assume reinvestment of all dividends and distributions, and do not take into account any Federal, state or local income taxes which shareholders must pay on a current basis. They are not necessarily indicative of future results. In advertising and sales literature, a Fund may compare its yield and performance with that of other mutual funds, indexes or averages of other mutual funds, indexes of related financial assets or data and other competing investment and deposit products available from or through other financial institutions. The composition of these indexes or averages differs from that of the Funds. Comparison of a Fund to an alternative investment should be made with consideration of differences in features and expected performance. All of the indexes and averages used will be obtained from the indicated sources or reporting services, which the Funds believe to be generally accurate. A Fund may also note its mention in newspapers, magazines or other media from time to time. However, the Funds assume no responsibility for the accuracy of such data. Newspapers and magazines which might mention a Fund include, but are not limited to, the following: B-18
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Business Week Los Angeles Times Changing Times Money Chicago Tribune Mutual Fund Letter Chicago Sun-Times Morningstar Crain's Chicago Business Newsweek Consumer Reports The New York Times Consumer Digest Pensions and Investment Financial World Personal Investor Forbes Stanger Reports Fortune Time Investor's Daily USA Today Kiplinger's U.S. News and World Report L/G No-Load Fund Analyst The Wall Street Journal When a newspaper, magazine or other publication mentions the Fund, such mention may include: (i) listings of some or all of the Fund's holdings, (ii) descriptions of characteristics of some or all of the securities held by the Fund, including price-earnings ratios, earnings, growth rates and other statistical information, and comparisons of that information to similar statistics for the securities comprising any of the indexes or averages listed above; and (iii) descriptions of the Fund's or a portfolio manager's economic and market outlook. A Fund's performance is a result of conditions in the securities markets, portfolio management, and operating expenses. Although information such as that described above may be useful in reviewing a Fund's performance and in providing some basis for comparison with other investment alternatives, it is not necessarily indicative of future performance and should not be used for comparison with other investments using different reinvestment assumptions or time periods. The Funds may also compare their performances to various stock indices (groups of unmanaged common stocks), including Standard & Poor's 500 Stock Index, the Value Line Composite Average, the Nasdaq Composite Index and the Dow Jones Industrial Average, or to the Consumer Price Index or groups of comparable mutual funds, including rankings determined by Lipper Analytical Services, Inc., an independent service that monitors the performance of over 1,000 mutual funds, Morningstar, Inc., or that of another service. The Funds may also cite its ranking, recognition, or other mention by Morningstar. Morningstar's ranking system is based on risk-adjusted total return performance and is expressed in a star-rated format. The risk-adjusted number is computed by subtracting a fund's risk score (which is a function of the fund's monthly return less the 3-month T-bill return) from the fund's load- adjusted total return score. This numerical score is then translated into ranking categories, with the top 10% labeled five star, the next 22.5% labeled four star, the next 35% labeled three star, and next 22.5% labeled two star, and the bottom 10% one star. A high ranking reflects either above-average performance or below average risk or both. B-19
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INVESTMENT ADVISER The investment adviser for Monetta Fund and the Trust is Monetta Financial Services, Inc. ("MFSI" or the "Adviser"). The Adviser furnishes continuing investment supervision to the Funds and is responsible for overall management of the Trust's business affairs pursuant to investment advisory agreements dated November 10, 1988 and January 19, 1993, respectively. The Adviser furnishes office space, equipment and personnel to the Funds and assumes all of the Funds' ordinary operating expenses except the charges of the custodian, transfer agent and fees paid to non-interested trustees. Please refer to the description of the Adviser, investment agreement and advisory fees under "Management of the Funds" in the Prospectus, which is incorporated herein by reference. For the year ended December 31, 1995, the Funds paid aggregate advisory fees to the Adviser of: Monetta Fund - $3,648,564; Mid-Cap Fund - $134,677; Large-Cap Fund - $2,844; Balanced Fund - $570; Intermediate Bond Fund - $19,834; and Government Money Market Fund - $12,563. Investment advisory fees waived though December 31, 1995, for the Intermediate Bond Fund were $17,132 of total fees of $19,834. Investment advisory fees waived through December 31, 1995 for the Government Money Market Fund were $12,563. Custodian and Transfer Agent charges of $6,111 for the period ending December 31, 1995 for the Government Money Market Fund were absorbed by the Adviser. The investment advisory agreements each provide that the Adviser will reimburse each Fund to the extent that a Fund's total annual operating expenses exceed the most restrictive limits prescribed by any state in which Fund shares are being offered for sale. The Adviser believes that the most restrictive limit to which the Funds are subject is 2 1/2% of the first $30 million of the average net asset value, 2% of the next $70 million, and 1 1/2% of the average net asset value in excess of $100 million, exclusive of (i) taxes, (ii) interest charges, (iii) litigation and other extraordinary expenses, and (iv) brokers' commissions and other charges relating to the purchase and sale of a Fund's portfolio securities. Robert S. Bacarella, president and a director of the Monetta Fund and president and a trustee of the Trust, owns 71% of the outstanding voting securities of the Adviser. Paul W. Henry and John W. Bakos, directors of Monetta Fund, each own 2% of the outstanding voting securities of the Adviser. The Adviser's address is 1776-A South Naperville Road, Wheaton, Illinois 60187. Messrs. Bacarella, Henry and Bakos and John P. Rozinsky, a director and officer of the Fund and trustee and officer of the Trust, are also shareholders of Monetta Brokerage, Inc. ("MBI"), a registered broker-dealer. Their percentage ownership interests in MBI are: Mr. Bacarella - 44%; and Mr. Rozinsky - 3%; Mr. Henry - 3%; and Mr. Bakos - 2%. The investment advisory agreements each authorize MBI to act as broker for a Fund in connection with the purchase or sale of securities by or to the Fund in conformity with SEC rules. See "Portfolio Transactions." B-20
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DIRECTORS/TRUSTEES AND OFFICERS The ages at March 31, 1996 and principal business activities during the past five years of the directors/ trustees and officers of Monetta Fund and the Trust are: [Enlarge/Download Table] POSITIONS POSITIONS HELD HELD PRINCIPAL OCCUPATIONS NAME AGE WITH FUND WITH TRUST AND OTHER AFFILIATIONS ---- ---- ------------ ----------- ---------------------- Robert S. Bacarella+* 46 Director and Trustee President and Director, MFSI President and since 1984; Secretary, President Treasurer and Director, Monetta Brokerage, Inc., since 1987; President and Director, Monetta Trust (registered investment company), since 1993; President and Director, Monetta Fund, Inc., since 1985; Director, Pension Investment Dept., Borg-Warner Corporation (manufacturer of automobile parts and accessories), 1972-1989. John M. Alogna* 59 n/a Trustee Portfolio manager, MFSI, since January and Vice 1993; private investor, 1986-1992; President Portfolio Manager, M.H. Investment Council, 1982-1986; Senior Portfolio Manager, Harris Trust & Savings Bank, 1974-1982. John W. Bakos+ 49 Director n/a Inventory Planner, Sears, Roebuck & Co., since 1969; Director, MFSI, since 1984 and vice president, 1984-1991. John L. Guy Jr. 42 n/a Trustee President, Heller First Capital Corporation, since May 1995; Senior Vice President and Treasurer, Heller Financial Inc., (August 1992-May 1995); Senior Vice President, Director Internal Audit (November 1989- August 1992) and Vice President Financial Planning and Analysis (December 1987-November 1989) prior thereto. B-21
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[Enlarge/Download Table] POSITIONS POSITIONS HELD HELD PRINCIPAL OCCUPATIONS NAME AGE WITH FUND WITH TRUST AND OTHER AFFILIATIONS ---- ---- ------------ ----------- ---------------------- Paul W. Henry+ 53 Director n/a Manager, Financial Systems, Signature Group (Telemarketing) since August 1994; Manager, Computer Systems, Bann International, (Computer Software) December 1993 to June 1994; Manager, Special Projects, Waste Management, Inc. (waste collection of hazardous and chemical waste materials), since 1987 to December 1993; Director, MFSI, since 1984, and vice president, 1984-1991. Mark F. Ogan 53 Director Trustee President and Secretary, Salida Corp. (formerly Pollenex Corp.) February 1993 to Present; Vice President, Sunbeam-Oster Corp. May 1992 to December 1992; President, Sunbeam-Oster Household Products Group, May 1991 to May 1992; Vice President, Business Development and Corporate Strategy, Sunbeam-Oster Co., October 1990 - May 1991; Management consultant (self-employed), February 1989 - September 1990; President, Borg-Warner Equities Corporation, 1986-1989. John P. Rozinsky+* 57 Director Trustee Vice President MFSI, since May 1991; Director, and Vice and Vice MFSI, May 1991 to February 1994; Vice President, President President treasurer and trustee, Monetta Trust, since 1993; Vice President and Director, MBI, since January 1990; Vice President and Director Monetta Fund, Inc., since 1985. Richard D. Russo 43 n/a Trustee Attorney at law-Richard Russo & Associates, Associated Legal Services Chartered, 1985 to Present. B-22
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[Enlarge/Download Table] POSITIONS POSITIONS HELD HELD PRINCIPAL OCCUPATIONS NAME AGE WITH FUND WITH TRUST AND OTHER AFFILIATIONS ---- ---- ------------ ----------- ---------------------- William M. Valiant* 70 n/a Trustee Retired; Vice President and Treasurer, Borg-Warner Corporation, until July 1990 and consultant to Borg-Warner corporation, July - December 1990. Albert A. Pisterzi 55 Vice Vice Vice President, MFSI since January 1995; President President prior thereto, Director of Marketing, Harris Associates, L.P. since September 1988. Maria Cesario DeNicolo 47 Treasurer Secretary Treasurer MFSI, since February 1994; Controller, MFSI, since June 1992; Secretary, Monetta Trust, since 1993; Sole proprietor, Cesario DeNicolo C.P.A. and Associates, since May 1990 to June 1993; Partner, Menconi & Cesario P.C., C.P.A., September 1989 to April 1990. Valerie A. LeFevre 61 Secretary n/a Employee, MFSI since January 1986. + Messrs. Bacarella, Bakos, Henry and Rozinsky are "interested persons" of Monetta Fund, as defined in the Investment Company Act of 1940 (the "1940 Act"), for the following reasons: Mr. Bacarella - as an officer of Monetta Fund and as a shareholder, officer and director of MFSI; Mr. Rozinsky - as an officer of Monetta Fund and as an officer and director of MFSI; and Messrs. Bakos and Henry - as shareholders of MFSI. * Messrs. Bacarella, Alogna, Rozinsky and Valiant are "interested persons" of the Trust, as defined in the 1940 Act, as officers of the Trust and as officers and directors (and, in Mr. Bacarella's case, as a shareholder) of MFSI. The address of Messrs. Alogna, Bacarella, Pisterzi, Rozinsky and Valiant and of Ms. DeNicolo and Ms. LeFevre is 1776-A South Naperville Road, Suite 207, Wheaton, Illinois 60187. The addresses of the other directors and trustees are: Mr. Bakos - 1261 Spring Valley Drive, Carol Stream, Illinois 60018; Mr. Guy - 500 West Monroe Street, Chicago, Illinois 60661; Mr. Henry - 1384 Hunter Circle, Naperville, Illinois 60540; Mr. Ogan - One Oakbrook Terrace, Suite 802, Oak Brook Terrace, Illinois 60181, and Mr. Russo - 1155 South Naperville Road, Wheaton, Illinois 60187. B-23
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At March 31, 1996, the directors and officers of Monetta Fund as a group owned beneficially less than 1% of the issued and outstanding shares of common stock of Monetta Fund. No person was known by Monetta Fund to own beneficially 5% or more of the outstanding shares of the Fund at that date. Shares owned by the Adviser, trustees and officers at March 31, 1996 were as follows: [Download Table] Adviser Trustees & Officers ---------------- ------------------- % of % of Shares Fund Shares Fund --------- ----- -------- ----- Mid-Cap Fund 7,347 0.6% 72,256 6.0% Large-Cap Fund 10,004 8.8% 3,594 3.2% Balanced Fund 19,945 46.1% 7,537 17.4% Intermediate Bond Fund 70,278 18.9% 3,382 0.9% Government Money Market Fund 1,075,302 21.1% 234,375 4.6% Ownership of a significant percentage of the outstanding shares of the Balanced Fund, the Intermediate Bond Fund and of the Money Market Fund reduces the number of other shares that must be voted in accordance with the Adviser's vote to approve or disapprove any proposal requiring the approval of the shareholders of the Trust or of the Funds. Robert S. Bacarella and John M. Alogna serve as members of the Executive Committee of the board of each of Monetta Fund and the Trust. The Executive Committees, which meet between regular meetings of the respective boards, are authorized to exercise all of the powers of the boards. Each Executive Committee held four meetings during 1995. The following table sets forth compensation paid by Monetta Fund and the Trust to their respective directors and trustees during 1995. [Download Table] COMPENSATION COMPENSATION COMPENSATION RECEIVED FROM RECEIVED FROM RECEIVED FROM NAME OF PERSON THE FUND THE TRUST FUND COMPLEX -------------- ------------- ------------- ------------- Robert S. Bacarella(1) 0 $ 0 $ 0 John M. Alogna(1) 0 0 0 John W. Bakos(1) 0 0 0 John L. Guy, Jr. 0 100 100 Paul W. Henry(1) 0 0 0 Mark F. Ogan 2,000 400 2,400 John P. Rozinsky(1) 0 0 0 Richard Russo 0 300 300 William Valiant 0 200 200 B-24
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(1) Directors and/or trustees who are interested persons, including all employees of MFSI receive no compensation from Monetta Fund or the Trust. (2) The Monetta Fund Complex consists of Monetta Fund, the Trust and the five Trust portfolios. Neither Monetta Fund nor the Trust offers any retirement or deferred compensation plan to Board Members. PURCHASING AND REDEEMING SHARES Purchases and redemptions are discussed in the Funds' Prospectus under the headings "How to Purchase Shares," "How to Redeem Shares" and "Determination of Net Asset Value." All of that information is incorporated herein by reference. The Prospectus discloses that you may purchase (or redeem) shares through investment dealers, banks or other institutions. The State of Texas has asked that the Funds disclose in the Statement of Additional Information, as a reminder to any such institution, that it must be registered as a dealer in Texas. The Funds reserves the right to suspend or postpone redemptions of shares of any Fund during any period when: (a) trading on the New York Stock Exchange ("NYSE") is restricted, as determined by the Securities and Exchange Commission, or the NYSE is closed for other than customary weekend and holiday closings; (b) the Securities and Exchange Commission has by order permitted such suspension; or (c) an emergency, as determined by the Securities and Exchange Commission, exists, making disposal of portfolio securities or valuation of net assets of such Fund not reasonably practicable. Monetta Fund and the Trust have each elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which it is obligated to redeem shares of each Fund solely in cash up to the lesser of $250,000 or 1% of the net asset value of that Fund during any 90-day period for any one shareholder. Redemptions in excess of the above amounts will normally be paid in cash, but may be paid wholly or partly by a distribution of securities in kind. MORE INFORMATION ABOUT NET ASSET VALUE Each Fund's net asset value is determined on days on which the New York Stock Exchange ("NYSE") is open for trading. The NYSE is regularly closed on Saturdays and Sundays and on New Year's Day, the third Monday in February, Good Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving and Christmas. If one of these holidays falls on a Saturday or Sunday, the Exchange will be closed on the preceding Friday or the following Monday, respectively. For purposes of calculating the net asset value per share, the assets of the Fund are valued as follows: Valuation. Securities for which market quotations are readily available at the time of valuation are valued on that basis. Each security traded on a national stock exchange or on the Nasdaq National Market is valued at its last sale price on that day or, if there are no sales that day, at the mean of the latest bid and asked quotations. All other over-the-counter securities for B-25
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which reliable quotations are available are valued at the mean of the latest bid and asked quotations. Long-term straight-debt securities for which market quotations are not readily available are valued at a fair value based on valuations provided by pricing services approved by the Board, which may employ electronic data processing techniques, including a matrix system, to determine valuations. Short-term debt securities for which market quotations are not readily available are valued by use of a matrix prepared by the Adviser based on quotations for comparable securities. Other assets and securities held by a Fund for which these valuation methods do not produce a fair value are valued by a method that the Board believes will determine a fair value. Valuation of Government Money Market Fund. Government Money Market Fund values its portfolio by the "amortized cost method" by which it attempts to maintain its net asset value at $1.00 per share. This involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. Although this method provides certainty in valuation, it may result in periods during which value as determined by amortized cost is higher or lower than the price the Fund would receive if it sold the instrument. Other assets are valued at a fair value determined in good faith by the board of trustees. In connection with the Government Money Market Fund's use of amortized cost and the maintenance of the Fund's per share net asset value of $1.00, the Trust has agreed (i) to seek to maintain a dollar-weighted average portfolio maturity appropriate to the Fund's objective of maintaining relative stability of principal and not in excess of 90 days; (ii) not to purchase a portfolio instrument with a remaining maturity of greater than thirteen months; and (iii) to limit its purchase of portfolio instruments to those instruments that are denominated in U.S. dollars which the Board of Trustees determines present minimal credit risks and that are of eligible quality as determined by any major rating service as defined under SEC Rule 2a-7 or, in the case of any instrument that is not rated, of comparable quality as determined by the Board. The Trust has established procedures reasonably designed to stabilize the Fund's price per share as computed for the purpose of sales and redemptions at $1.00. Those procedures include review of the Fund's portfolio holdings by the Board of Trustees, at such intervals as it deems appropriate to determine whether the Fund's net asset values calculated by using available market quotations or market equivalents deviate from $1.00 per share based on amortized cost. Calculations are made to compare the value of its investments valued at amortized cost with market value. Market values are obtained by using actual quotations provided by market makers, estimates of market value, values from yield data obtained from the Adviser's matrix, or values obtained from an independent pricing service. Any such service might value the Fund's investments based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. The service may also employ electronic data processing techniques, a matrix system or both to determine valuations. In connection with the Fund's use of the amortized cost method of portfolio valuation to maintain its net asset value at $1.00 per share, the Fund might incur or anticipate an unusual B-26
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expense, loss, depreciation, gain or appreciation that would affect its net asset value per share or income for a particular period. The extent of any deviation between the Fund's net asset value based upon available market quotations or market equivalents and $1.00 per share based on amortized cost will be examined by the Board of Trustees as it deems appropriate. If such deviation exceeds 1/2 of 1%, the Board of Trustees will promptly consider what action, if any, should be initiated. In the event the Board of Trustees determines that a deviation exists that may result in material dilution or other unfair results to investors or existing shareholders, it will take such action as it considers appropriate to eliminate or reduce to the extent reasonably practicable such dilution or unfair results. Actions which the Board might take include: selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; increasing, reducing or suspending dividends or distributions from capital or capital gains; or redeeming shares in kind. The board might also establish a net asset value per share by using market values, as a result of which the net asset value might deviate from $1.00 per share. TAX STATUS Each Fund intends to continue to qualify to be taxed as a regulated investment company under the Internal Revenue Code of 1986, as amended, so as to be relieved of federal income tax on its capital gains and net investment income currently distributed to shareholders. PORTFOLIO TRANSACTIONS The Adviser has discretion to select brokers and dealers to execute portfolio transactions initiated by the Adviser and to select the markets in which such transactions are to be executed. The primary responsibility regarding portfolio transactions is to seek the best combination of net price and execution for the Funds. When executing transactions for the Funds, the Adviser will consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer and the reasonableness of the commission. Transactions of the Funds in the over-the-counter market are executed with primary market makers acting as principal except where it is believed that better prices and execution may be obtained otherwise. In selecting brokers or dealers to execute particular transactions and in evaluating the best net price and execution available, the adviser is authorized to consider "brokerage and research services" (as those terms are defined in Section 28 (e) of the Securities Exchange Act of 1934), statistical quotations, specifically the quotations necessary to determine the Funds' asset values, and other information provided to the Funds or the Adviser. The Adviser is also authorized to cause the Funds to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction. The Adviser must determine in good faith, however, that such commission was reasonable in relation to the value of the brokerage and research services provided, viewed in terms of that particular transaction or in terms of all the accounts over which the Adviser exercises investment discretion. It is possible B-27
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that certain of the services received by the Adviser attributable to a particular transaction will benefit one or more other accounts for which investment discretion is exercised by the Adviser. In valuing research services, the Adviser makes a judgment of the usefulness of research and other information provided by a broker to the Adviser in managing the Funds' investment portfolios. In some cases, the information, e.g., data or recommendations concerning particular securities, relates to the specific transaction placed with the broker, but for the greater part, the research consists of a wide variety of information concerning companies, industries, investment strategy and economic, financial and political conditions and prospects, useful to the Adviser in advising the Funds. The Adviser is the principal source of information and advice to the Funds and is responsible for making and initiating the execution of investment decisions by the Funds. However, the respective boards recognize that it is important for the Adviser, in performing its responsibilities to the Funds, to continue to receive and evaluate the broad spectrum of economic and financial information that many securities brokers have customarily furnished in connection with brokerage transactions, and that in compensating brokers for their services, it is in the interest of the Funds to take into account the value of the information received for use in advising the Funds. The extent, if any, to which the obtaining of such information may reduce the expenses of the Adviser in providing management services to the Funds is not determinable. In addition, it is understood by the respective board that other clients of the Adviser might also benefit from the information obtained for the Funds, in the same manner that the Funds might also benefit from the information obtained by the Adviser in performing services for others. Although investment decisions for the Funds are made independently from those for other investment advisory clients of the Adviser, it may develop that the same investment decision is made for a Fund and one or more other advisory clients. If a Fund and other clients purchase or sell the same class of securities on the same day, the transactions will be allocated as to amount and price in a manner considered equitable to each. The board of directors of Monetta Fund and the board of trustees of the Trust have each determined that portfolio brokerage transactions for their respective Funds may be executed through Monetta Brokerage, Inc. ("MBI") if, in the judgment of the Adviser, the use of MBI is likely to result in prices and execution at least as favorable to the Fund as those available from other qualified brokers and, if, in such transaction, MBI charges the Fund commission rates consistent with those charged by MBI to comparable unaffiliated customers in similar transactions. The board of directors of Monetta Fund, including a majority of the directors who are not "interested" directors, and the board of trustees of the Trust, including a majority of the trustees who are not "interested" trustees, have each adopted procedures which are reasonably designed to provide that any commissions, fees or other remuneration paid to MBI are consistent with the foregoing standard. The Funds will not effect principal transactions with MBI. Brokerage commissions incurred by Monetta Fund for 1995, 1994 and 1993 aggregated $1,449,063, $1,974,854 and $2,080,880, respectively, not including the gross underwriting spread on securities purchased in underwritten public offerings. Of this amount, B-28
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the Fund paid brokerage commissions aggregating $1,034,235, $1,290,759 and $1,394,802 in 1995, 1994 and 1993, respectively, in connection with portfolio transactions involving purchases and sales aggregating $366,529,232, $512,538,346, and $556,301,080, respectively, to brokers who furnished investment research services to the Fund. Brokerage commissions incurred by Mid-Cap Fund for the years ended December 31, 1995 and 1994 aggregated $85,201 and $69,865, respectively, not including the gross underwriting spread on securities purchased in underwritten public offerings. Of this amount, Mid-Cap Fund paid brokerage commissions of $78,743 and $50,407, for 1995 and 1994, respectively, in connection with portfolio transactions involving purchases and sales aggregating $33,625,853 and $20,848,618, for 1995 and 1994, respectively, to brokers who furnished research services to the Fund. Brokerage commissions incurred by Large-Cap Fund and Balanced Fund for the period September 1, 1995 through December 31, 1995 aggregated $1,507 and $350, respectively, not including the gross underwriting spread on securities purchased in underwritten public offerings. The brokerage commissions set forth above include brokerage commissions paid to MBI. Of the aggregate brokerage commissions paid by Monetta Fund in 1995, 1994 and 1993, 4.8%, 8.7% and 15.7%, respectively, was paid to MBI for transactions aggregating 6.4%, 10.3% and 23.4%, respectively, of the aggregate dollar amount of transactions involving the payment of commissions. Aggregate brokerage commissions paid to MBI by Mid-Cap Fund during 1995 and 1994, were -0- and 5.9%, respectively, aggregating -0- and 10.6% respectively of the aggregate dollar amount of transactions involving the payment of commissions. All securities transactions of Large-Cap Fund and Balanced Fund in 1995 were executed on a principal basis. All securities transactions of Intermediate Bond Fund and Government Money Market Fund in 1995 and 1994 were executed on a principal basis. The portfolio turnover rates of Monetta Fund for 1995 and 1994 were 272.0% and 191.27%, respectively. The Fund's portfolio turnover rate may vary greatly from year to year, and is likely to be greater than 100% and in some years may exceed 200%. Greater portfolio activity increases the Fund's transaction costs, including brokerage commissions. The portfolio turnover rate of the Intermediate Bond Fund for 1995 was 75.1%, and is expected to be less than 100% annually. The portfolio turnover rate of Mid-Cap Fund was 254.4% for 1995, and may continue to be greater than 100%. There was no significant variation in either Fund's respective 1995 and 1994 portfolio turnover rates. The portfolio turnover rate for Large-Cap Fund for 1995 was 38.2% and 54.8% for Balanced Fund. Greater portfolio activity a Fund's transaction costs, including brokerage commissions. CUSTODIAN Firstar Trust Company, 615 East Michigan Street, 3rd Floor, Milwaukee, Wisconsin 53202 is the custodian for the Funds. It is responsible for holding all securities and cash of the B-29
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Funds, receiving and paying for securities purchased, delivering against payment securities sold, receiving and collecting income from investments, making all payments covering expenses of the Funds, and performing other administrative duties, all as directed by authorized persons of the Funds. The custodian does not exercise any supervisory function in such matters as purchase and sale of portfolio securities, payment of dividends, or payment of expenses of the Funds. The Funds have authorized the custodian to deposit certain portfolio securities in central depository systems as permitted under federal law. The Funds may invest in obligations of the custodian and may purchase or sell securities from or to the custodian. INDEPENDENT AUDITORS The independent auditors for the Funds are KPMG Peat Marwick LLP, 303 Wacker Drive, Chicago, Illinois 60601. The independent auditors audit and report on the Funds' annual financial statements, review certain regulatory reports and the Fund's income tax returns, and perform other professional accounting, auditing, tax and advisory services when engaged to do so by the Funds. APPENDIX - RATINGS ------------------ RATINGS IN GENERAL ------------------ A rating by a rating service represents the service's opinion as to the credit quality of the security being rated. However, the ratings are general and are not absolute standards of quality or guarantees as to the credit- worthiness of an issuer. Consequently, the Adviser believes that the quality of debt securities in which the Fund invests should be continuously reviewed and that individual analysts give different weightings to the various factors involved in credit analysis. A rating is not a recommendation to purchase, sell, or hold a security, because it does not take into account market value or suitability for a particular investor. When a security has received a rating from more than one service, each rating should be evaluated independently. Ratings are based on current information furnished by the issuer or obtained by the rating services from other sources which they consider reliable. Ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information, or for other reasons. The following is a description of the characteristics of ratings used by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P"). BOND RATINGS RATINGS BY MOODY'S: Aaa. Bonds rated Aaa are judged to be the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or an exceptionally stable margin and principal is secure. Although the various protective B-30
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elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such bonds. Aa. Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protections may not be as large as in the Aaa Bonds, fluctuation of protective elements may be of greater amplitude, or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa bonds. A. Bonds rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa. Bonds rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba. Bonds rate Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during other good and bad times over the future. Uncertainty of position characterizes bonds in this class. B. Bonds rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa. Bonds rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each of these generic rating classifications in its corporate bond rating systems. The modifier 1 indicates that the security ranks in the higher end of its generic rating category. Ratings by Standard and Poor's: AAA. Debt rated AAA has the highest rating. Capacity to pay interest and repay principal is extremely strong. AA. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. A. Debt rated A has a very strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. B-31
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BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions, or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for debt in higher rated categories. BB-B-CC. Bonds rated BB, B and CC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. NOTE: These ratings may be modified by the addition of a plus(+) or minus(-) sign to show relative standing within the major rating categories. COMMERCIAL PAPER RATINGS Ratings by Moody's: The rating Prime-1 (P-1) is the highest commercial paper rating assigned by Moody's. Among the factors considered by Moody's in assigning ratings are the following: (1) evaluation of the management of the issuer; (2) economic evaluation of the issuer's industry or industries and an appraisal of speculative type risks which may be inherent in certain areas; (3) evaluation of the issuer's products in relation to competition and customer acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over a period of ten years; (7) financial strength of a parent company and the relationships which exist with the issuer; and (8) recognition by the management of obligations which may be present or may arise as a result of public interest questions and preparations to meet such obligations. These factors are all considered in determining whether the commercial paper is rated P-2 or P-3. RATINGS BY STANDARD & POOR'S: The rating A-1+ is the highest, and A-1 the second highest, commercial paper rating assigned by S&P. Paper rated A-1+ must have either the direct credit support of an issuer or guarantor that possesses excellent long-term operating and financial strengths combined with strong liquidity characteristics (typically, such issuers or guarantors would display credit quality characteristics which would warrant a senior bond rating of AA or higher), or the direct credit support of an issuer or guarantor that possesses above average long-term fundamental operating and financing capabilities combined with ongoing excellent liquidity characteristics. Paper rated A-1 must have the following characteristics: liquidity ratios are adequate to meet cash requirements, long- term senior debt is rated A or better, the issuer has access to at least two additional channels of borrowing, and basic earnings and cash flow have an upward trend with allowance made for unusual circumstances. Typically, the issuer's industry is well established and the issuer has a strong position within the industry and the reliability and quality of management are unquestioned. Relative strength or weakness of the above factors determines whether the issuer's commercial paper is rated A-2 or A-3. B-32
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------------------------------------------------------------------------------- FAMILY OF FUNDS ------------------------------------------------------------------------------- Dear Fellow Shareholders: January 16, 1996 1995 was a banner year for the financial markets. Both the Dow Jones Industrial Average and the S & P 500 Index recorded their best annual gains since 1958. The NASDAQ Composite turned in its second-best performance in its twenty-four year existence. The market gains can be attributed to the Federal Reserve Board orchestrating a rare "soft landing" that led to modest economic growth, declining interest rates, and low inflation. This environment propelled corporate profitability to record levels as companies benefited from improved operating rates, stable pricing and stronger balance sheets. In terms of sector performance last year, the best performing groups were financial, technology and healthcare. The under-performing groups were basic industry, retail, energy and transportation. In the last few months of the year, the larger capitalization stocks significantly out performed the smaller companies as investors shifted out of the hot technology and financial sectors to the energy-related and drug groups to take advantage of rising oil prices and a promising pipeline of new drugs. MARKET OUTLOOK/INVESTMENT STRATEGY We remain bullish on stocks, although they are unlikely to surpass the spectacular returns of 1995. In our view, the economy is poised for modest growth, low inflation and stable interest rates. The Federal Reserve policy is expected to ease in 1996, with the bulk of the move to occur in the first part of the year. This type of economic environment should be positive for the financial markets. Two limiting factors for the stock market are a slowdown in corporate earnings growth and/or consumer spending levels, which affects about two-thirds of economic activity. A sharp drop in spending could kick off a recession, but based on current economic conditions, this appears unlikely in 1996. As for 1996 being a Presidential election year, history suggests a "no fear" attitude. Not since 1960 has the stock market been down in an election year. Most gains have been in the 10-15% range. The technology sector has been undergoing a significant reappraisal over the last few weeks. We believe this to be a normal market pullback after this sector's huge advance. We do not expect the correction to be long lasting and believe it to be a buying opportunity. We favor sectors with above average revenue growth potential trading at below average price-earnings multiples relative to their two year growth rates. Favored groups would include financials, computer service companies, telecommunications, food and healthcare. We also look for the small cap issues to gain the momentum this sector lost in the fourth quarter. We appreciate your support of the Monetta Family of Funds and look forward to a profitable 1996. Sincerely, ROBERT S. BACARELLA President and Founder Page 1
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TABLE OF CONTENTS [Download Table] PERFORMANCE HIGHLIGHTS Monetta Fund.......................... 3 Monetta Mid-Cap Equity Fund........... 4 Monetta Large-Cap Equity Fund......... 5 Monetta Balanced Fund................. 6 Monetta Intermediate Bond Fund........ 7 Monetta Government Money Market Fund.. 8 INDEPENDENT AUDITORS REPORT 10 SCHEDULE OF INVESTMENTS Monetta Fund.......................... 11 Monetta Mid-Cap Equity Fund........... 14 Monetta Large-Cap Equity Fund......... 16 Monetta Balanced Fund................. 18 Monetta Intermediate Bond Fund........ 20 Monetta Government Money Market Fund.. 21 FINANCIAL STATEMENTS Statements of Assets and Liabilities.. 22 Statements of Operations.............. 24 Statements of Changes in Net Assets... 26 Notes to Financial Statements......... 29 FOOTNOTE: Past performance is no guarantee of future results. The principal value and return on your investment will fluctuate and on redemption may be worth more or less than your original cost. References to individual securities are the views of the Adviser at the date of this report and may change. References are not a recommendation to buy or sell any security. Page 2
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MONETTA FUND PERIOD ENDED 12/31/95 Investment Objective: Market Capitalization Range: Total Net Assets: Capital Appreciation/Income $50 million - $1 billion $363 million ------------------------------------------------------------------------------- PERFORMANCE: [Download Table] AVERAGE ANNUAL TOTAL RETURN Since Incep. ------------ 1 Year 5 Years (5/6/86) ------ ------- ------------ MONETTA FUND 28.0% 14.7% 12.5% RUSSELL 2500 31.7 21.0 11.9 NASDAQ COMPOSITE* 39.9 23.0 11.0 S &P 500* 37.5 16.6 14.0 *Source Lipper Analytical Services, Inc. [Download Table] Measurement Period (Fiscal Year Covered) MONETTA FUND RUSSELL 2500 S & P NASDAQ -------------------- ------------ ------------ ------- ------- 6/86 $10,100 $10,533 $10,590 $10,130 9/86 9,474 9,505 9,849 8,783 12/86 9,815 9,631 10,400 8,765 3/87 11,297 11,753 12,615 10,834 6/87 11,376 11,823 13,246 10,736 9/87 11,012 12,402 14,121 11,262 12/87 9,966 9,180 10,943 8,402 3/88 10,584 10,651 11,567 9,544 6/88 11,928 11,374 12,331 10,079 9/88 12,202 11,281 12,368 9,928 12/88 12,263 11,266 12,751 9,789 3/89 12,643 12,137 13,656 10,464 6/89 13,655 13,058 14,858 11,228 9/89 14,297 14,012 16,448 12,227 12/89 14,125 14,568 16,793 11,787 3/90 14,888 14,163 16,289 11,316 6/90 16,634 14,721 17,299 12,040 9/90 13,425 11,485 14,929 8,994 12/90 15,735 12,401 16,258 9,785 3/91 18,645 15,559 18,632 12,672 6/91 19,205 15,529 18,576 12,558 9/91 21,797 16,864 19,560 13,964 12/91 24,522 18,192 21,204 15,598 3/92 24,679 18,971 20,673 16,144 6/92 23,100 18,109 21,066 15,127 9/92 23,786 18,604 21,719 15,717 12/92 25,862 21,137 22,827 18,294 3/93 24,147 22,138 23,010 18,642 6/93 24,326 22,602 23,102 19,071 9/93 26,219 24,200 23,702 20,673 12/93 25,991 24,632 24,247 20,962 3/94 25,305 24,086 23,324 20,062 6/94 23,933 23,221 23,415 19,050 9/94 25,618 24,886 23,560 20,624 12/94 24,375 24,360 24,555 20,292 3/95 26,725 26,160 26,945 22,053 6/95 28,572 28,623 29,512 25,189 9/95 32,129 31,374 31,870 28,160 12/95 31,204 32,231 33,764 28,392 The graph above to the right compares the changes in value of a $10,000 investment in the Monetta Fund, the S & P 500 Composite Index, and the NASDAQ Composite Index and the Russell 2500 Stock Index. The S & P 500 and the Russell 2500 indices are a broad measure representative of the general market, while the NASDAQ measures performance of stocks in the over-the-counter market. Please refer to footnote on the botton of page 2. -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION: [Download Table] TOP 5 HOLDINGS** % OF NET ASSETS Genzyme Corp. 3.2% Glenayre Technologies Inc. 2.6 Clear Channel Communications 2.4 American Oncology Resources 2.3 Reynolds & Reynolds 2.1 ---- TOTAL TOP 5 HOLDINGS 12.6% ==== **excluding short-term investments -------------------------------------------------------------------------------- COMMENTARY: Over the past year the performance of Monetta Fund surged with the overall stock market advance. The Fund posted a 28% return, its second best annual return since inception. Through most of the year, the Fund benefited from its investments in Technology and Healthcare sectors. The Fund's best performing technology holdings were Ascend Communications, U.S. Robotics, Altera Corporation and Teradyne Inc. The healthcare component of the Fund was dominated with those companies that would benefit from a capitated medical environment. The best performing Fund securities in this sector were Oxford Health Plans, Physician Sales & Services, HBO & Co. and Phycor, Inc. During the year the Fund was very active as securities were sold in accordance with our sell discipline. Net realized gains totaled approximately $62 million, which resulted in a three dollar short-term capital gain dividend paid in the fourth quarter. As we enter 1996 the economy continues to advance at a moderate pace, however we are detecting some concerns over consumer spending power. This suggests a more cautious approach to investing, emphasizing those sectors/companies that will generate solid earning momentum and accelerating revenue growth. As such, the Fund is positioned to concentrate on those companies generating strong earning results such as: Glenayre Technologies, Inc., which manufactures telecommunication equipment; American Oncology Resources, a leading physician practice management company focused on oncology; and General Nutrition Company, which operates a chain of health products stores. The Fund's above average cash position provides a cushion in the event of a short-term market sell-off and an opportunity to purchase superior growth companies at a discount to their growth rates. Page 3
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[Enlarge/Download Table] MONETTA MID-CAP EQUITY FUND PERIOD ENDED 12/31/95 Investment Objective: Market Capitalization Range: Total Net Assets: Capital Appreciation $1 billion - $5 billion $14.2 million ----------------------------------------------------------------------------------------------------------------------------------- PERFORMANCE: AVERAGE ANNUAL TOTAL RETURN Since Incep. --------------- 1 Year 2 Years (3/1/93) ------ ------- --------------- MONETTA MID-CAP EQUITY FUND 24.5% 12.8% 21.2% S & P 400* 31.0 12.4 13.8 S & P 500* 37.5 18.0 15.4 *Source Lipper Analytical Services, Inc. [Performance Graph Appears Here] [Download Table] Measurement Period MIDCAP S & P (Fiscal Year Covered) EQUITY FUND 400 INDEX S & P 500 LEHMAN ------------------- ----------- --------- --------- ------ 3/1/93 10,000 10,000 10,000 10,007 3/93 11,670 10,220 10,080 10,018 6/93 11,880 10,455 10,120 10,255 9/93 13,120 10,978 10,383 10,486 12/93 13,540 11,274 10,622 10,504 3/94 13,475 10,793 10,218 10,291 6/94 13,109 10,399 10,258 10,229 9/94 13,887 11,103 10,759 10,313 12/94 13,835 10,817 10,757 10,302 3/95 14,835 11,692 11,804 10,754 6/95 16,536 12,723 12,929 11,292 9/95 17,603 13,965 13,955 11,479 12/95 17,233 14,165 14,785 11,883 The graph above to the right compares the change in value of a $10,000 investment in the Monetta Trust Mid-Cap Equity Fund to the S & P 500 and 400. The S & P 500 and 400 indices are a broad measure representative of the general market. Please refer to footnote on the bottom of page 2. ------------------------------------------------------------------------------- PORTFOLIO COMPOSITION: [Download Table] [Pie Chart Appears Here] TOP 5 HOLDINGS** % OF NET ASSETS Paychex 2.8% American Oncology Resources 2.7 Analog Devices 2.5 Coleman Inc. 2.5 Kohl's Corp. 2.4 ------ TOTAL TOP 5 HOLDINGS 12.9% ====== **excluding short-term investments ------------------------------------------------------------------------------- COMMENTARY: For the one-year period ended December 31, 1995, the Monetta Mid-Cap Equity Fund posted a 24.5% return. And while past performance is no guarantee of future results, the Fund continues to do well on a long-term basis, generating an annualized return, since inception (March 1993) of 21.2%, significantly outperforming the major stock market indices. Through much of the year, the Fund was underweighted in the top performing Technology sector. However, the Fund's weightings in the Industrial and Financial sectors produced competitive investment returns last year. The Fund's top performing securities last year were Discreet Logic, Inc., Cascade Communication, 3Com Corporation and Analog Devices. The Fund's financial investments benefited from the declining interest rate environment as gains were realized on the following issues Money Store, Beneficial Corporation, and Mercury Finance Corporation. In addition, the Fund benefited from its investments in a diverse group of industries. Some of the better performers were Harman International, Kennametal, Inc. and Value Jet Airlines, Inc. Looking ahead, the manager believes the Fund's current emphasis in Industrial, Financial, and Consumer Related sectors should remain intact. Any significant weakness in the Technology or Healthcare areas would be considered buying opportunities as the long-term attractiveness of these industries is appealing.
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MONETTA LARGE-CAP EQUITY FUND PERIOD ENDED 12/31/95 Investment Objective: Market Capitalization Range: Total Net Assets: Capital Appreciation $5 billion + $1.1 million ------------------------------------------------------------------------------ PERFORMANCE: TOTAL RETURN QUARTER ENDING Since Incep. (9/1/95) 12/31/95 --------------------- -------------- MONETTA LARGE-CAP EQUITY FUND 5.7% 5.8% S & P 500* 10.5 6.0 *Source Lipper Analytical Services, Inc. The S & P 500 is a broad measure representative of the general market. Please refer to footnote on the bottom of page 2. ------------------------------------------------------------------------------ PORTFOLIO COMPOSITION: [Pie chart appears here showing % of holdings.] TOP 5 HOLDINGS** % OF NET ASSETS Amgen, Inc. 4.4% United Technologies 4.4 General Motors Corp. - Class E 4.4 Norwest Corp. 4.3 Worldcom Inc. 3.9 ----- TOTAL TOP 5 HOLDINGS 21.4% ===== **excluding short-term investments ------------------------------------------------------------------------------ COMMENTARY: Monetta Large-Cap Equity Fund was launched on September 1, 1995. From its inception through December 31, 1995, the Fund posted a 5.7% return. The Fund has benefited from its holdings in the Technology and Basic Industry sectors. The Fund's best performing issues were Computer Associates, Amgen Inc., First Interstate Bank and Pfizer, Inc. At year-end approximately 90% of the Fund was invested in established growth companies. Technology continues to be the dominate theme for the Fund, especially the semiconductor and telecommunication sectors. At this point, it appears the economy is poised for modest growth. With inflationary risk receding, the previous degree of restrictive Federal Reserve monetary policy is no longer needed. This suggests a stable interest rate environment which should continue to benefit the Financial and Industrial sectors of the market. Page 5
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MONETTA BALANCED FUND PERIOD ENDED 12/31/95 Investment Objective: Market Average Capitalization Range: Maturity: Total Net Assets: Capital Appreciation/Income $50 million + 4.9 years $410 thousand -------------------------------------------------------------------------------- PERFORMANCE: TOTAL RETURN QUARTER ENDING Since Incep. (9/1/95) 12/31/95 --------------------- -------- MONETTA BALANCED FUND 6.2% 7.2% S & P 500* 10.5 6.0 LEHMAN GOVT/CORP BOND INDEX* 7.3 4.7 *Source Lipper Analytical Services, Inc. The S & P 500 is broad measure representative of the general market, while the Lehman Government/Corporate Bond Index measures that specific segment of the bond market. Please refer to footnote on the bottom of page 2. -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION: [Pie chart appears here showing % of holdings.] TOP 5 HOLDINGS % OF NET ASSETS U.S. Treasury Bill Due 1/25/96 24.3% U.S. Treasury Notes Due 10/31/00 9.9 First Tennessee Nat'l 3.0 Intel Corp. 2.8 Greenpoint Financial Corp. 2.6 ----- TOTAL TOP 5 HOLDINGS 42.6% ===== -------------------------------------------------------------------------------- COMMENTARY: Monetta Balanced Fund was launched on September 1, 1995. Since inception through year-end the Fund appreciated 6.2%. At year-end approximately 64% of the Fund was invested in common stocks and 36% in the fixed income markets. This is a conservatively managed fund as the fixed income sector are invested primarily in short-term Treasury Bills. The common stock portion of the Fund is invested in solid growth stocks representing all market capitalization ranges. Approximately half of the stock portfolio is invested in the larger capitalization growth companies with the balance split between mid-cap and small-cap issues. The Fund will continue to maintain an asset composition in line with its primary investment objective of capital appreciation and income. During 1996, the Fund will continue to seek growth companies with the potential of generating upside earning surprises. The average maturity of the fixed income portfolio is not expected to change materially, as long as interest rates remain in a narrow yield range. Page 6
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------------------------------ MONETTA INTERMEDIATE BOND FUND PERIOD ENDED 12/31/95 ------------------------------ Investment Objective: 30-Day SEC Average Yield: Maturity: Total Net Assets: Income 5.95% 5.5 Years $3.6 million ------------------------------------------------------------------------------- PERFORMANCE: AVERAGE ANNUAL TOTAL RETURN Since Incep. ------------ 1 Year 2 Years (3/5/93) ------ ------- -------- MONETTA INTERMEDIATE BOND FUND 14.8% 6.6% 7.6% LEHMAN GOV/CORP INTERMEDIATE BOND INDEX* 15.3 6.4 6.3 *Source Lipper Analytical Services, Inc. [PERFORMANCE GRAPH APPEARS HERE] [Download Table] INTERMEDIATE BOND S & P DATE FUND S & P 400 500 LEHMAN ---- ------------ --------- ----- ------ X 3/1/93 10,000 10,000 10,000 10,007 3/93 10,000 10,220 10,080 10,028 6/93 10,399 10,455 10,120 10,255 9/93 10,732 10,978 10,383 10,486 12/93 10,817 11,274 10,622 10,504 3/94 10,585 10,793 10,218 10,291 6/94 10,494 10,399 10,258 10,229 9/94 10,613 11,103 10,759 10,313 12/94 10,705 10,817 10,757 10,302 3/95 11,270 11,692 11,804 10,754 6/95 11,866 12,723 12,929 11,292 9/95 12,046 13,965 13,955 11,479 12/95 12,282 14,165 14,785 11,883 The graph above to the right compares the change in value of a $10,000 investment in the Monetta Trust Intermediate Bond Fund to the Lehman Government/Corporate Intermediate Bond Index. The Lehman Government/Corporate Intermediate Bond Index measures that specific segment of the bond market. Please refer to footnote on the bottom of page 2. ------------------------------------------------------------------------------- PORTFOLIO COMPOSITION: MATURITY PROFILE 1 Year or Less 15.7% 1-3 Years 5.9 [Pie Chart appears here 4-6 Years 31.8 showing % of holdings.] 7-10 Years 45.9 Over 10 Years 0.6 ----- 100.0% ===== ------------------------------------------------------------------------------- COMMENTARY: For the one-year period ended December 31, 1995 the Monetta Intermediate Bond Fund was up 14.8%, slightly below the 15.3% return of the Lehman Government/Corporate Intermediate Bond Index. The Fund was managed conservatively during the year as maturities were shortened during market rallies and assets were reinvested in the U.S. Treasury market. The average maturity of the Fund during the year was approximately four years. At year-end over half of the Fund was invested in Treasury Notes and Government Agency issues with a weighted maturity of 7.1 years. Corporate Bonds, representing 31% of the Fund, generally outperformed the Treasury securities with similar maturities as investors worries over a possible recession diminished. In the coming months, we do not anticipate any major changes in the Fund's asset mix or average duration. Based on the assumption of moderate economic growth, we anticipate a relatively stable interest rate environment during 1996. Page 7
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MONETTA GOVERNMENT MONEY MARKET FUND PERIOD ENDED 12/31/95 Investment Objective: 7-Day Yield: Average Days Total Net to Maturity: Assets: Income and Capital Preservation 5.38% 78 Days $4.4 million ------------------------------------------------------------------------------- PERFORMANCE: AVERAGE ANNUAL TOTAL RETURN 1 Year 2 Years Since Incep. (3/1/93) ------ ------- --------------------- MONETTA GOVERNMENT MONEY MARKET FUND 5.9%** 5.0%** 4.2%** LIPPER U.S. GOV'T MONEY MARKET FUNDS AVG.* 5.3 4.4 3.9 *Source Lipper Analytical Services, Inc. **Total returns are net of advisory fees waived and voluntary absorption of the Funds' operating expenses by the Advisor. Please refer to footnote on the bottom of page 34. An investment in the Monetta Government Money Market Fund is neither insured or guaranteed by the U.S. Government. There can be no assurance that the Fund will be able to maintain a stable $1.00 per share net asset value. Please refer to footnote on the bottom of page 2. ------------------------------------------------------------------------------- PORTFOLIO COMPOSITION: [Pie chart appears here showing % of holdings.] ALLOCATION % OF NET ASSETS U.S. Treasuries 53.4% Government Agencies 46.3 Total Investments 99.9 Other Assets & Liabilities 0.1 ------ TOTAL 100.0% ====== ------------------------------------------------------------------------------- COMMENTARY: According to Lipper Analytical Services, Inc., Monetta Government Money Market Fund ranked second for 1995 in its category of 105 Government Money Market Funds with a one year return of 5.9%. Throughout most of the year we maintained a bullish outlook. This was due to economic growth, low inflation and declining interest rates. As a result, the Fund average maturity during the year was in excess of 70 days, capitalizing on declining interest rates. As of December 31, 1995, the Fund's 7-day yield was 5.38% down from the third quarter yield of 5.75%. Approximately 53% of the Fund's assets are invested in U.S. Treasury securities, with the balance in government agencies. We believe the Federal Reserve Board will be accommodative in 1996 and therefore we expect a relatively stable interest rate environment next year. Page 8
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Independent Auditors' Report The Board of Directors and Trustees and the Shareholders of Monetta Fund, Inc. and Monetta Trust: We have audited the accompanying statements of assets and liabilities of Monetta Fund, Inc. and Monetta Trust (comprising, respectively, the Mid-Cap Equity Fund, Large-Cap Equity Fund, Balanced Fund, Intermediate Bond Fund and Government Money Market Fund), collectively referred to as the "Funds", including the schedules of investments, as of December 31, 1995, and the related statements of operations for the period then ended, the statements of changes in net assets for each of the periods presented in the two-year period then ended, and the financial highlights for each of the periods presented in the ten-year period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned, as of December 31, 1995, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Monetta Fund, Inc. and each of the respective funds constituting the Monetta Trust as of December 31, 1995, the results of their operations for the period then ended, the changes in their net assets for each of the periods presented in the two-year period then ended, and the financial highlights for each of the periods presented in the ten-year period then ended, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois January 16, 1996 Page 10
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Schedule of Investments December 31, 1995 ================================================================================ ------------------------ MONETTA FUND ------------------------ [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- COMMON STOCKS -76.4% ------------------------------------------------------------------ CONSUMER RELATED - 19.5% $70,634 ------------------------------------------------------------------ BROADCASTING/CABLE TV - 4.2% *200,000 Clear Channel Communications $ 8,825 *220,000 Lin Television Corp 6,545 ------- 15,370 ------- MISCELLANEOUS SERVICES - 2.8% *235,000 ATC Environmental 2,762 *1,250,000 Aura Systems Inc. 7,031 ------- 9,793 ------- RESTAURANTS & LODGING - 2.5% *225,000 DAKA International, Inc. 6,187 *116,000 IHOP Corp. 3,016 ------- 9,203 ------- RETAIL TRADES - 10.0% *100,000 CDW Computer Centers 4,050 *300,000 General Nutrition Cos., Inc. 6,900 *100,000 Nautica 4,375 *200,000 Officemax, Inc. 4,475 *150,000 Proffitt's, Inc. 3,938 120,000 St. John's Knits Inc. 6,375 *180,000 Starbucks Corp. 3,780 *100,000 Sunglass Hut International 2,375 ------- 36,268 ------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- ------------------------------------------------------------------ FINANCIAL RELATED - 13.3% $48,268 ------------------------------------------------------------------ FINANCIAL SERVICES - 13.3% *100,000 American Travelers Corp. 2,812 175,000 First Security Corp. 6,738 150,000 Firstar Corp. 5,944 *200,000 Glendale Federal Bank 3,500 375,000 Money Store 5,859 *210,000 PC Quote Inc. 3,334 *100,000 PMT Services, Inc. 3,025 100,000 Paychex Inc. 4,987 200,000 Reynolds & Reynolds 7,775 *150,000 Verifone Inc. 4,294 ------- 48,268 ------- ------------------------------------------------------------------ MEDICAL RELATED - 20.9% $75,825 ------------------------------------------------------------------ PHARMACEUTICALS - 5.5% *185,000 Genzyme Corp. $11,539 *400,003 ICN Pharmaceuticals, Inc. 7,700 *100,000 Quidel Corp. 713 ------- 19,952 ------- PHYSICIAN SERVICES - 9.3% *150,000 American Medical Response 4,875 *175,000 American Oncology Resources 8,509 *80,000 Compdent Corp. 3,320 *71,700 IDX Systems Corp. 2,492 *225,000 Occusystems, Inc. 4,500 *150,000 Phamis, Inc. 4,462 Page 11
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Schedule of Investments December 31, 1995 ================================================================================ ------------------------ MONETTA FUND (CONTINUED) ------------------------ [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- *290,000 Sheriden Healthcare 3,516 *50,000 United Dental Care Inc. 2,063 ------- 33,737 ------- MEDICAL SUPPLY - 6.1% *77,000 ICU Medical Inc. 1,309 *225,000 Inamed Corp. 1,997 *185,000 Laser Vision Centers Inc. 2,683 120,000 Mentor Corp. 2,760 *150,000 Patterson Dental Co. 4,050 150,000 Physician Sales & Services 4,275 *150,000 Summit Technology Inc. 5,062 ------- 22,136 ------- ------------------------------------------------------------------ TECHNOLOGY RELATED - 22.7% $82,345 ------------------------------------------------------------------ SEMICONDUCTORS - 6.3% *120,000 Altera Corporation $ 5,970 *150,000 Cypress Semiconductor Corp. 1,912 *160,000 Integrated Circuit Systems 1,980 *155,000 Kulicke & Soffa Industries 3,604 *300,000 S3, Inc. 5,288 *100,000 Sierra Semiconductor Corp. 1,387 *100,000 Ultra Tech. Stepper 2,575 ------- 22,716 ------- COMPUTER SOFTWARE - 3.2% *100,000 Davidson & Associates 2,200 *166,500 Maxis Inc. 6,327 *96,700 Meta Group 2,961 ------- 11,488 ------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- COMPUTERS & OFFICE EQUIPMENT - 4.4% *100,000 FTP Software 2,900 *105,000 Hutchinson Tech 4,436 *150,000 Informix Corp. 4,500 *18,800 Natural Microsystems Corp. 573 *150,000 Read-Rite Corp. 3,488 ------- 15,897 ------- TELECOMMUNICATIONS SERVICES & EQUIP. - 8.9% *100,000 Anicom Inc. 1,063 *70,000 Ascend Communications, Inc. 5,679 *150,000 Glenayre Technologies, Inc. 9,337 *100,000 Madge Networks 4,475 *70,500 Shiva Corp. 5,129 *145,000 Sync Research 6,561 ------- 32,244 ------- TOTAL COMMON STOCKS (COST $267,667)(a) 277,072 VARIABLE DEMAND NOTES - 0.5% 89,800 American Family - 5.49% 90 1,100,000 Eli Lily - 5.32% 1,100 17,700 General Mills - 5.53% 18 370,200 Sara Lee - 5.47% 370 170,500 Southwestern Bell - 5.72% 170 ------- TOTAL DEMAND NOTES 1,748 ------- Page 12
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Schedule of Investments December 31, 1995 ================================================================================ ------------------------ MONETTA FUND (CONTINUED) ------------------------ [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- COMMERCIAL PAPER - 21.9% 7,700,000 AT & T Corp. - 5.68% Due 01/02/96 7,699 10,500,000 Philip Morris - 5.60% Due 01/03/96 10,497 3,000,000 Philip Morris - 5.60% Due 01/04/96 2,999 12,000,000 GE Capital - 5.72% Due 01/05/96 11,992 11,000,000 GE Capital - 5.72% Due 01/08/96 10,988 10,000,000 Cargil - 5.72% Due 01/09/96 9,987 5,000,000 AT & T Corp. - 5.72% Due 01/10/96 4,993 5,000,000 Cargil Inc. - 5.75% Due 01/11/96 4,992 5,000,000 Duke Power - 5.78% Due 01/12/96 4,991 10,500,000 Merrill Lynch - 5.70% Due 01/16/96 10,475 -------- TOTAL COMMERCIAL PAPER 79,613 -------- [Download Table] Quoted Market Value (In Thousands) -------------- TOTAL SHORT-TERM INVESTMENTS 81,361 -------- TOTAL INVESTMENTS - 98.8% (COST $349,028)(a) 358,433 -------- OTHER ASSETS LESS LIABILITIES - 1.2% 4,287 -------- NET ASSETS - 100% $362,720 ======== (a) Cost is identical for book and tax purposes; the aggregate gross unrealized appreciation is $27,729 and aggregate gross unrealized depreciation is $18,324, resulting in net unrealized appreciation of $9,405 (in thousands). * Non-income producing security. Page 13
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Schedule of Investments December 31, 1995 ================================================================================ ------------------------------- MONETTA MID-CAP EQUITY FUND ------------------------------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- COMMON STOCKS - 91.2% ------------------------------------------------------------------ CONSUMER RELATED - 14.7% $2,090 ------------------------------------------------------------------ RECREATION & ENTERTAINMENT - 3.3% *10,000 Coleman, Inc. $ 351 4,000 Hasbro Inc. 124 ------- 475 ------- FOOD PROCESSING - 5.5% 15,000 Flowers Industries, Inc. 182 *10,000 Smithfield Foods 317 12,000 Whitman Co. 279 ------- 778 ------- RETAIL TRADES - 5.9% *14,000 General Nutrition 322 *6,600 Kohl's Corp. 347 *8,000 Starbucks Corp. 168 ------- 837 ------- ------------------------------------------------------------------ FINANCIAL RELATED - 24.0% $3,411 ------------------------------------------------------------------ FINANCIAL SERVICES - 24.0% 4,300 AON Corp. $ 214 *15,100 Boston Fed Bancorp Inc. 177 3,500 Comerica, Inc. 140 5,000 Compass Bancorp 165 3,500 Crestar Financial Corp. 207 *15,000 Dime Bancorp Inc. 174 2,700 Fifth Third Bancorp 198 5,000 First Tennessee National 303 [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- 12,000 Green Tree Financial Corp. 317 10,000 Greenpoint Financial Corp. 267 12,000 Mercury Finance Co. 159 5,000 PHH Corp. 234 8,000 Paychex Inc. 399 10,000 Roosevelt Financial Group 194 10,000 Southern National Corp. 263 ------- 3,411 ------- ------------------------------------------------------------------ INDUSTRIAL RELATED - 37.8% $5,374 ------------------------------------------------------------------ INDUSTRIAL/ELECTRONICS PRODUCTS - 21.7% 18,000 Ametek, Inc. 338 14,000 Albany International Corp. - Class A 254 10,000 Applied Power Inc. Class A 300 3,000 Consolidated Papers Inc. 168 10,000 Danaher Corp. 318 *10,000 Lydall, Inc. 228 8,000 Millipore Corp. 329 2,625 Molex, Inc. 83 6,000 Sigma Aldrich Corp. 297 14,400 Tri Mas Corp. 272 3,000 Williamette Inds. 169 7,000 York International Corp. 329 ------- 3,085 ------- RETAIL MANUFACTURERS/DISTRIBUTION - 8.2% 6,000 Alco Standard Corp. 274 6,000 Avery Dennison Corp 301 8,000 Black & Decker Corp 282 12,000 Newell Co. 310 ------- 1,167 ------- Page 14
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Schedule of Investments December 31, 1995 ================================================================================ ------------------------------- MONETTA MID-CAP EQUITY FUND (CONTINUED) ------------------------------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- TRANSPORTATION - 1.8% *18,000 Knight Transportation 252 ------- ENERGY RESOURCES & SERVICES - 1.8% 4,000 Kerr McGee Corp. 254 ------- HOUSING - 2.1% 8,000 Oakwood Homes 307 ------- MINING & MINERAL RELATED - 2.2% 5,000 Vigoro Corp. 309 ------- ------------------------------------------------------------------ MEDICAL RELATED - 5.1% $728 ------------------------------------------------------------------ PHARMACEUTICALS - 2.4% *7,500 Forest Laboratories $ 339 ------- PHYSICIAN SERVICES - 2.7% *8,000 American Oncology Resources 389 ------- ------------------------------------------------------------------ TECHNOLOGY RELATED - 9.6% $1,365 ------------------------------------------------------------------ SEMICONDUCTORS - 4.3% *10,000 Analog Devices 354 6,000 Watkins-Johnson Co. 262 ------- 616 ------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- COMPUTERS & OFFICE EQUIPMENT - 0.7% *4,000 Read-Rite Corp. 92 ------- TELECOMMUNICATIONS SERVICES & EQUIP. - 4.6% *4,500 Bay Networks Inc. $185 *5,000 DSC Communications Corp. 185 *3,000 Tellabs, Inc. 111 *5,000 Worldcom, Inc. 176 ------- 657 ------- TOTAL COMMON STOCKS (COST $12,675)(a) 12,968 ------- VARIABLE DEMAND NOTES - 17.2% 521,800 Eli Lilly - 5.32% 522 468,800 General Mills - 5.58% 469 373,400 Sara Lee - 5.47% 373 585,300 Southwestern Bell - 5.72% 585 502,600 Warner Lambert - 5.46% 503 ------- TOTAL DEMAND NOTES 2,452 ------- TOTAL INVESTMENTS - 108.4% (COST $15,127)(a) 15,420 ------- OTHER ASSETS LESS LIABILITIES - (8.4%) (1,204) ------- NET ASSETS - 100% $14,216 ======= (a) Cost is identical for book and tax purposes; the aggregate gross unrealized appreciation is $615 and aggregate gross unrealized depreciation is $322, resulting in net unrealized appreciation of $293 (in thousands). *Non-income producing security Page 15
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Schedule of Investments December 31, 1995 ================================================================================ ------------------------------- MONETTA LARGE-CAP EQUITY FUND ------------------------------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- COMMON STOCKS - 89.8% ------------------------------------------------------------------ CONSUMER RELATED - 7.7% $83 ------------------------------------------------------------------ FOOD PROCESSING - 4.3% 400 Philip Morris $36 300 Seagram Co., Ltd. 10 ------- 46 ------- RETAIL MANUFACTURERS/DISTRIBUTORS - 3.4% 800 Alco Standard Corp. 37 ------- ------------------------------------------------------------------ FINANCIAL RELATED - 12.5% $134 ------------------------------------------------------------------ FINANCIAL SERVICES - 12.5% 400 American Int'l Group 37 300 Federal Nat'l Mortgage 37 100 First Interstate Bank 14 1,400 Norwest Corp. 46 ------- 134 ------- ------------------------------------------------------------------ INDUSTRIAL RELATED - 19.3% $207 ------------------------------------------------------------------ INDUSTRIAL/ELECTRONICS PRODUCTS - 19.3% 800 Allied Signal, Inc. 38 500 Boeing Co. 39 600 Eastman Kodak 40 800 Rockwell Int'l. 42 500 United Technologies 48 ------- 207 ------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- ------------------------------------------------------------------ MEDICAL RELATED - 18.6% $199 ------------------------------------------------------------------ PHARMACEUTICALS - 14.7% 200 American Home Products $ 19 *800 Amgen, Inc. 48 200 Bristol-Myers Squibb Co. 17 200 Eli Lilly & Co. 11 200 Johnson & Johnson Co. 17 200 Pfizer, Inc. 13 600 Schering Plough 33 ------- 158 ------- PHYSICIAN SERVICES - 3.8% 800 Columbia Healthcare 41 ------- ------------------------------------------------------------------ TECHNOLOGY RELATED - 31.7% $340 ------------------------------------------------------------------ SEMICONDUCTORS - 4.3% 500 Intel Corp. 28 *700 Teradyne, Inc. 18 ------- 46 ------- COMPUTERS & OFFICE EQUIPMENT - 3.3% 200 Hewlett Packard 17 200 Int'l Business Machines 18 ------- 35 ------- COMPUTER SOFTWARE - 17.7% *100 Arbor Software Corp. $ 4 *400 Cisco Systems, Inc. 30 400 Computer Associates 23 900 General Motors Corp. - Class E 47 Page 16
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Schedule of Investments December 31, 1995 ================================================================================ ------------------------ MONETTA LARGE-CAP EQUITY FUND (CONTINUED) ------------------------ [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- *400 Microsoft 35 *100 Network Appliance Inc. 4 *700 Oracle Systems 30 *400 People Soft 17 ------ 190 ------ Telecommunications Services & Equip. - 6.4% *600 DSC Communications Corp. 22 *100 Sync Research 5 *1,200 Worldcom Inc. 42 ------ 69 ------ Total Common Stocks (Cost $900)(a) 963 ------ Variable Demand Notes - 20.6% 50,400 American Family - 5.49% 50 49,000 Eli Lilly - 5.32% 49 4,500 General Mills - 5.58% 5 25,000 Pitney Bowes - 5.49% 25 45,200 Sara Lee - 5.47% 45 30,900 Southwestern Bell - 5.72% 31 15,400 Warner Lambert - 5.46% 15 ------ Total Demand Notes 220 ------ Total Investments - 110.4% (Cost $1,120)(a) 1,183 ------ Other Assets Less Liabilities - (10.4)% (111) ------ Net Assets - 100% $1,072 ====== (a) Cost is identical for book and tax purposes; the aggregate gross unrealized appreciation is $72 and aggregate gross unrealized depreciation is $9, resulting in net unrealized appreciation of $63 (in thousands). * Non-income producing security. Page 17
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Schedule of Investments December 31, 1995 ================================================================================ ----------------------------- MONETTA BALANCED FUND ----------------------------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- COMMON STOCKS - 64.4% --------------------------------------------------------- Consumer Related - 3.9% $16 --------------------------------------------------------- Food Processing - 0.7% *100 Boston Beer Co. - Class A $ 3 --- Retail Trades - 3.2% *400 General Nutrition Co. 9 *200 Starbucks Corp. 4 --- 13 --- --------------------------------------------------------- Financial - 18.5% $76 --------------------------------------------------------- Financial Services - 18.5% 100 American Int'l Group $ 9 *400 Bostonfed Bancorp Inc. 5 *600 Dime Bancorp Inc. 7 200 First Tennessee Nat'l 12 300 Green Tree Financial Corp. 8 400 Greenpoint Financial Corp. 11 500 Mercury Finance Co. 6 200 Paychex Inc. 10 400 Roosevelt Fin'l Group Inc. 8 --- 76 --- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- --------------------------------------------------------- Industrial - 12.4% $51 --------------------------------------------------------- Energy Resources & Services - 1.5% 100 Kerr McGee Corp. 6 --- Housing - 1.0% 100 Oakwood Homes 4 --- Industrial/Electronics Products - 3.6% 100 Allied Signal, Inc. 5 100 United Technologies 10 --- 15 --- Retail Manufacturers/Distribution - 6.3% 200 Alco Standard Corp. 9 200 Avery Dennison Corp. 10 200 Black & Decker Corp. 7 --- 26 --- --------------------------------------------------------- Medical - 10.1% $41 --------------------------------------------------------- Pharmaceuticals - 4.9% *100 Amgen, Inc. 6 100 Johnson & Johnson Co. 9 100 Schering Plough 5 --- 20 --- Physician Services - 5.2% *200 American Oncology Resources 10 100 Columbia Healthcare 5 *100 Henry Schein Inc. 3 *100 IDX Systems Corp. 3 --- 21 --- Page 18
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Schedule of Investments December 31, 1995 ================================================================================ ----------------------------- MONETTA BALANCED FUND (CONTINUED) ----------------------------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- ----------------------------------------------------------- Technology - 19.5% $80 ----------------------------------------------------------- Semiconductors - 2.7% 200 Intel Corp. 11 --- Computers & Office Equipment - 4.4% 100 Hewlett Packard $ 9 100 Int'l Business Machines 9 --- 18 --- Computer Software - 7.8% *100 Arbor Software Corp. 5 *100 Corestaff Inc. 4 100 General Motors Corp. - Class E 5 *100 Meta Group 3 *100 Metatools Inc. 2 *100 Microsoft 9 *100 Network Appliance Inc. 4 --- 32 --- Telecommunication Services & Equip. - 4.6% *100 Bay Networks Inc. 4 *100 Sync Research 4 300 Worldcom Inc. 11 --- 19 --- [Download Table] Shares or Quoted Principal Market Amount Value (In Thousands) (In Thousands) -------------- -------------- Total Common Stocks (Cost $243)(a) 264 ---- U.S. Treasury Bills - 24.4% 100,000 Due 01/25/96 100 ---- U.S. Treasury Notes - 9.8% 40,000 5.75% Due 10/31/00 40 ---- Variable Demand Notes - 9.0% 9,900 Eli Lilly - 5.32% 10 5,900 General Mills - 5.58% 6 8,400 Sara Lee - 5.47% 8 12,600 Southwestern Bell - 5.72% 13 ---- Total Demand Notes 37 ---- Total Investments - 107.6% (Cost $420)(a) 441 ---- Other Assets Less Liabilities - (7.6%) (31) ---- Net Assets - 100% $410 ==== (a) Cost is identical for book and tax purposes; the aggregate gross unrealized appreciation is $26 and aggregate gross unrealized depreciation is $5, resulting in net unrealized appreciation of $21 (in thousands). *Non-income producing security. Page 19
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SCHEDULE OF INVESTMENTS December 31, 1995 ================================================================================ -------------------------- MONETTA INTERMEDIATE BOND FUND -------------------------- [Download Table] Quoted Shares or Market Principal Value Amount (In Thousands) --------- -------------- TREASURY NOTES - 46.5% 100,000 7.00% Due 04/15/99 105 100,000 6.87% Due 07/31/99 105 100,000 7.12% Due 09/30/99 106 200,000 5.50% Due 04/15/00 202 100,000 7.50% Due 11/15/01 110 200,000 6.37% Due 08/15/02 210 200,000 5.75% Due 08/15/03 203 200,000 5.87% Due 02/15/04 204 200,000 6.50% Due 05/15/05 213 200,000 6.50% Due 08/15/05 213 ------- 1,671 ------- GOVERNMENT AGENCY - 1.2% 40,000 Sheboygan, WI TIF#6 8.25% Due 03/15/03 43 ------- CORPORATE BONDS - 30.9% 100,000 Delta Airlines, 7.73% Due 05/14/97 102 50,000 American Airlines, 8.70% Due 01/15/98 53 50,000 Salomon, Inc., 9.37% Due 04/15/98 53 100,000 Kroger Co., 9.00% Due 08/15/99 102 100,000 Chase Manhattan Corp. 8.80% Due 02/01/00 103 50,000 ADT Operations, 8.25% Due 08/01/00 53 50,000 American Standard, 9.87% Due 06/01/01 54 100,000 Harrah's Jazz, 14.25% Due 11/15/01(b) 29 100,000 Albany Int'l, Corp., 5.25% Due 03/15/02 90 50,000 Dayton-Hudson, 9.75% Due 07/01/02 59 100,000 IBM Corp., 7.25%, Due 11/01/02 107 100,000 RJR Nabisco, Inc., 8.62%, Due 12/01/02 104 100,000 Webb, Del E., 9.75%, Due 03/01/03 103 100,000 Salomon, Inc., 6.75%, Due 01/15/06 98 ------- 1,110 ------- FEDERAL HOME BANK LOAN - 2.8% 100,000 6.44% Due 11/28/05 100 ------- MORTGAGE OBLIGATIONS - 0.6% 21,177 GNMA, 8.50%, Due 07/15/21 22 ------- CLOSED-END BOND FUND - 1.0% 4,500 Putnam Master Income Trust 36 ------- DEMAND NOTES - 15.4% 84,700 Eli Lilly - 5.32% 85 132,300 General Mills - 5.58% 132 83,300 Pitney Bowes - 5.49% 83 125,000 Sara Lee - 5.47% 125 125,900 Southwest Bell - 5.72% 126 ----- 551 ----- TOTAL INVESTMENTS - 98.4% (COST: $3,542)(a) 3,533 ------- OTHER ASSETS LESS LIABILITIES - 1.6% 56 -------- NET ASSETS - 100% $3,589 ======== (a) Cost is identical for book and tax purposes, the aggregate gross unrealized appreciation is $80 and aggregate gross unrealized depreciation is $89, resulting in net unrealized depreciation of $9 (in thousands). (b) Harrah's Jazz filed a voluntary bankruptcy petition under Chapter 11 on November 22. Therefore the Fund ceased accruing interest on that date. Harrah's Jazz is required to submit a petition for reorganization by March 21, 1996. Page 20
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SCHEDULE OF INVESTMENTS December 31, 1995 ================================================================================ ------------------------ MONETTA GOVERNMENT MONEY MARKET FUND ------------------------ [Download Table] Shares or Value Principal (In Thousands) Amount ------------ ------------ GOVERNMENT OBLIGATIONS - 53.4% U.S. TREASURY BILLS - 53.4% 760,000 Due 01/11/96 $ 759 130,000 Due 03/21/96 129 1,260,000 Due 04/04/96 1,243 225,000 Due 11/14/96 215 ----- 2,346 ----- GOVERNMENT AGENCIES - 46.6% FEDERAL FARM CREDIT DISCOUNT NOTE - 0.9% 40,000 5.55% Due 03/26/96 39 ----- FEDERAL AGRICULTURE MORTGAGE CORP DISCOUNT NOTE - 3.1% 135,000 5.55% Due 01/03/96 135 ----- FEDERAL HOME LOAN BANK DISCOUNT NOTES - 17.4% 160,000 5.54% Due 01/24/96 159 240,000 5.50% Due 03/01/96 238 135,000 5.39% Due 05/01/96 133 240,000 5.46% Due 07/26/96 232 ---- 762 ---- FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES - 13.9% 495,000 5.67% Due 01/12/96 494 70,000 5.44% Due 02/20/96 69 50,000 5.52% Due 07/15/96 49 ---- 612 ---- FEDERAL HOME LOAN MORTGAGE CORP DISCOUNT NOTE - 11.2% 500,000 5.47% Due 03/07/96 495 ---- TOTAL INVESTMENTS - 99.9% (a) 4,389 ----- OTHER ASSETS LESS LIABILITIES - 0.1% 4 ----- NET ASSETS - 100% $4,393 ====== (a) Cost is identical for book and tax purposes. Page 21
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Statements of Assets and Liabilities December 31, 1995 (In Thousands) [Enlarge/Download Table] ========================================================================================= Monetta Mid-Cap Fund Equity Fund ---------------------- Assets Investments in common stocks at market value (cost: $349,028; $15,127; $1,120; $420; $3,542; $4,389)(Note 1) $358,433 $15,420 Cash 0 10 Interest and dividends receivable 27 18 Receivable for securities sold 13,841 247 ----------------------------------------------------------------------------------------- Total assets 372,301 15,695 ----------------------------------------------------------------------------------------- Liabilities Payables: Custodial bank 165 0 Investment advisory fees (Note 2) 307 12 Investments purchased 9,019 1,464 Accrued expenses 90 3 ----------------------------------------------------------------------------------------- Total liabilities 9,581 1,479 ----------------------------------------------------------------------------------------- Net assets $362,720 $14,216 ----------------------------------------------------------------------------------------- Analysis of net assets Paid in capital (b) 354,376 14,177 Accumulated undistributed net realized gain (loss) (1,061) (254) Net unrealized appreciation (depreciation) on investments 9,405 293 ----------------------------------------------------------------------------------------- Net assets $362,720 $14,216 ----------------------------------------------------------------------------------------- Net asset value, offering price, and redemption price per share (23,265 shares of capital stock and 1,188; 101.416; 38.66; 350.356; 4,393 shares of beneficial interest outstanding respectively) $ 15.59 $ 11.96 ========================================================================================= See accompanying notes to financial statements (a) Rounds to less than $1,000 (b) Amount for Monetta Fund represents $233 of $0.01 par value and $354,143 of additional paid in capital, 100 million shares are authorized. Each fund of Monetta Trust has an unlimited number of no par value shares of beneficial interest authorized. Page 22
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[Enlarge/Download Table] ================================================================================================================================= Large-Cap Balanced Intermediate Government Money Fund Fund Bond Fund Market Fund ------------------------------------------------------------- Assets Investments in common stocks at market value (cost: $349,028; $15,127; $1,120; $420; $3,542; $4,389)(Note 1) $1,183 $ 441 $3,533 $4,389 Cash (a) 1 0 6 Interest and dividends receivable 2 (a) 61 (a) Receivable for securities sold 0 0 0 0 --------------------------------------------------------------------------------------------------------------------------------- Total assets 1,185 442 3,594 4,395 --------------------------------------------------------------------------------------------------------------------------------- Liabilities Payables: Custodial bank 0 0 3 0 Investment advisory fees (Note 2) 1 (a) 1 0 Investments purchased 111 31 0 0 Accrued expenses 1 1 1 2 --------------------------------------------------------------------------------------------------------------------------------- Total liabilities 113 32 5 2 --------------------------------------------------------------------------------------------------------------------------------- Net assets $1,072 $ 410 $3,589 $4,393 --------------------------------------------------------------------------------------------------------------------------------- Analysis of net assets Paid in capital (b) 1,017 393 3,580 4,393 Accumulated undistributed net realized gain (loss) (8) (4) 18 0 Net unrealized appreciation (depreciation) on investments 63 21 (9) 0 --------------------------------------------------------------------------------------------------------------------------------- Net assets $1,072 $ 410 $3,589 $4,393 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, offering price, and redemption price per share (23,265 shares of capital stock and 1,188; 101.416; 38.66; 350.356; 4,393 shares of beneficial interest outstanding respectively) $10.57 $10.61 $10.24 $ 1.00 ================================================================================================================================= Page 23
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Statements of Operations December 31, 1995 (In Thousands) ================================================================================ [Enlarge/Download Table] Mid-Cap Monetta Equity Fund Fund ------------------------------ Investment income and expenses: Investment income: Interest $ 4,041 $ 114 Dividends 1,100 112 Miscellaneous income 476 0 ------------------------------------------------------------------------------------------ Total investment income 5,617 226 ------------------------------------------------------------------------------------------ Expenses: Investment advisory fee (Note 2) 3,648 134 Custodial fees and bank cash management fee 105 12 Transfer and shareholder servicing agent fee 1,217 21 Other 0 (a) ------------------------------------------------------------------------------------------ Total expenses 4,970 167 Expenses waived and reimbursed 0 0 ------------------------------------------------------------------------------------------ Expenses net of waived and reimbursed expenses 4,970 167 ------------------------------------------------------------------------------------------ Net investment income 647 59 ------------------------------------------------------------------------------------------ Realized and unrealized gain (loss) on investments: Realized gains (loss) on investments: Proceeds from sales 903,424 29,873 Cost of securities sold 841,762 27,389 ------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 61,662 2,484 ------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) on investments: Beginning of period (17,513) (23) End of period 9,405 293 ------------------------------------------------------------------------------------------ Net change in net unrealized appreciation/depreciation on investments during the period 26,918 316 ------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 88,580 2,800 ------------------------------------------------------------------------------------------ Net increase (decrease) in net assets from operations $ 89,227 $2,859 ========================================================================================== See accompanying notes to financial statements (a) Rounds to less than $1,000 Page 24
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================================================================================ [Enlarge/Download Table] Intermediate Government Large-Cap Balanced Bond Money Market Fund Fund Fund Fund ------------------------------------------------------------ Investment income and expenses: Investment income: Interest $ 3 $ 2 $ 220 $ 207 Dividends 3 1 3 0 Miscellaneous income 0 0 0 0 ------------------------------------------------------------------------------------------------------------------------ Total investment income 6 3 223 207 ------------------------------------------------------------------------------------------------------------------------ Expenses: Investment advisory fee (Note 2) 3 1 20 13 Custodial fees and bank cash management fee 2 1 3 4 Transfer and shareholder servicing agent fee 1 1 4 4 Other (a) 0 0 0 ------------------------------------------------------------------------------------------------------------------------ Total expenses 6 3 27 21 Expenses waived and reimbursed 0 0 17 19 ------------------------------------------------------------------------------------------------------------------------ Expenses net of waived and reimbursed expenses 6 3 10 2 ------------------------------------------------------------------------------------------------------------------------ Net investment income (a) (a) 213 205 ------------------------------------------------------------------------------------------------------------------------ Realized and unrealized gain (loss) on investments: Realized gains (loss) on investments: Proceeds from sales 332 121 2,160 16,792 Cost of securities sold 340 125 2,077 16,792 ------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments (8) (4) 83 0 ------------------------------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) on investments: Beginning of period 0 0 (165) 0 End of period 63 21 (9) 0 ------------------------------------------------------------------------------------------------------------------------ Net change in net unrealized appreciation/depreciation on investments during the period 63 21 156 0 ------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 55 17 239 0 ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets from operations $ 55 $17 $452 $205 ======================================================================================================================== Page 25
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[Enlarge/Download Table] Statements of Changes in Net Assets December 31, 1995 (In Thousands) ======================================================================================================================= Monetta Mid-Cap Equity Fund Fund --------------------- --------------------- Year Year Year Year Ended Ended Ended Ended 12/31/95 12/31/94 12/31/95 12/31/94 ======================================================================================================================= From investment activities: Operations: Net investment income $ 647 $ (648) $ 59 $ 64 Net realized gain (loss) on investments 61,662 (3,144) 2,484 488 Net change in net unrealized appreciation (depreciation) on investments during the period 26,918 (22,651) 316 (298) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 89,227 (26,443) 2,859 254 Distribution from net investment income (647) 0 (59) (64) Distribution in excess of net investment income (59,578) (1,654) (2,897) (498) Distribution from net realized gains on securities 0 0 (19) 0 ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from investment activities 29,002 (28,097) (116) (308) ======================================================================================================================= From capital transactions (Note 3): Proceeds from shares sold 22,913 44,169 2,203 3,474 Net asset value of shares issued through dividend reinvestment 59,595 1,632 2,930 554 Cost of shares repurchased (113,702) (177,077) (2,538) (1,824) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital transactions (31,194) (131,276) 2,595 2,204 ======================================================================================================================= Total increase (decrease) in net assets (2,192) (159,373) 2,479 1,896 ----------------------------------------------------------------------------------------------------------------------- Net assets at beginning of period 364,912 524,285 11,737 9,841 ----------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 362,720 $ 364,912 $14,216 $11,737 ======================================================================================================================= See accompanying notes to financial statements (a) Rounds to less than $1,000 Page 26
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[Enlarge/Download Table] ======================================================================================================================= Large-Cap Equity Balanced Fund Fund --------------------- --------------------- Period Period Ended Ended 12/31/95 12/31/95 ======================================================================================================================= From investment activities: Operations: Net investment income $ (a) $ (a) Net realized gain (loss) on investments (8) (4) Net change in net unrealized appreciation (depreciation) on investments during the period 63 21 ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 55 17 Distribution from net investment income (a) (a) Distribution in excess of net investment income 0 (a) Distribution from net realized gains on securities 0 0 ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from investment activities 55 17 ======================================================================================================================= From capital transactions (Note 3): Proceeds from shares sold 1,019 445 Net asset value of shares issued through dividend reinvestment (a) (a) Cost of shares repurchased (2) (52) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital transactions 1,017 393 ======================================================================================================================= Total increase (decrease) in net assets 1,072 410 ----------------------------------------------------------------------------------------------------------------------- Net assets at beginning of period 0 0 ----------------------------------------------------------------------------------------------------------------------- Net assets at end of period $1,072 $410 ======================================================================================================================= [Enlarge/Download Table] ======================================================================================================================= Intermediate Bond Government Money Fund Market Fund --------------------- --------------------- Year Year Year Year Ended Ended Ended Ended 12/31/95 12/31/94 12/31/95 12/31/94 ======================================================================================================================= From investment activities: Operations: Net investment income $ 213 $ 173 $ 205 $ 92 Net realized gain (loss) on investments 83 (28) 0 0 Net change in net unrealized appreciation (depreciation) on investments during the period 156 (173) 0 0 ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations 452 (28) 205 92 Distribution from net investment income (215) (171) (205) (92) Distribution in excess of net investment income (38) (11) 0 0 Distribution from net realized gains on securities 0 0 0 0 ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from investment activities 199 (210) 0 0 ======================================================================================================================= From capital transactions (Note 3): Proceeds from shares sold 701 697 4,068 2,559 Net asset value of shares issued through dividend reinvestment 229 167 196 89 Cost of shares repurchased (550) (603) (3,186) (1,192) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital transactions 380 261 1,078 1,456 ======================================================================================================================= Total increase (decrease) in net assets 579 51 1,078 1,456 ----------------------------------------------------------------------------------------------------------------------- Net assets at beginning of period 3,010 2,959 3,315 1,859 ----------------------------------------------------------------------------------------------------------------------- Net assets at end of period $3,589 $3,010 $ 4,393 $ 3,315 ======================================================================================================================= Page 27
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NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. SIGNIFICANT ACCOUNTING POLICIES: Monetta Fund, Inc. ("Monetta Fund") is an open-end diversified management investment company registered under the Investment Company Act of 1940, as amended. The primary objective of Monetta Fund is capital appreciation by investing primarily in equity securities believed to have growth potential. The Fund generally invests in companies with a market capitalization range of $50 million to $1 billion. Monetta Trust ("the Trust") is an open-end diversified management investment company registered under the Investment Company Act of 1940, as amended. The following funds are series of the Trust: Mid-Cap Equity Fund. The primary objective of this fund is long-term capital growth by investing in common stocks believed to have above average growth potential. The Fund typically invests in companies within a market capitalization range of $1 billion to $5 billion. Large-Cap Equity Fund. The primary objective of this fund is to seek long-term capital growth by investing in common stocks believed to have above average growth potential. The Fund typically invests in companies with market capitalization of greater than $5 billion. Balanced Fund. The objective of this fund is to seek a favorable total rate of return through capital appreciation and current income consistent with preservation of capital, derived from investing in a portfolio of equity and fixed income securities. Intermediate Bond Fund. The objective of this fund is to seek high current income consistent with the preservation of capital by investing primarily in marketable debt securities. Government Money Market Fund. The primary objective of this fund is to seek maximum current income consistent with safety of capital and maintenance of liquidity. The Fund invests in U. S. Government securities maturing in thirteen months or less from the date of purchase and repurchase agreements for U. S. Government securities. U. S. Government securities include securities issued or guaranteed by the U.S. Government or by its agencies or instrumentalities. Monetta Family of Funds is comprised of Monetta Fund, Inc. and each of the Trust Series and are collectively referred to as the "Funds". The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with generally accepted accounting principles: (a) Securities Valuation Investments are stated at market value based on the last reported sale price on national securities exchanges, or the NASDAQ Market, on the last business day of the period. Listed securities and securities traded on the over-the-counter markets that did not trade on the last business day are valued at the mean between the quoted bid and asked prices. Short-term securities, including all securities held by the Government Money Market Fund, are stated at amortized cost, which is substantially equivalent to market value. Page 29
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NOTES TO FINANCIAL STATEMENTS December 31, 1995 (b) Federal Income Taxes It is each Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no provision for federal income taxes is required. The Funds intend to utilize provisions of the federal income tax laws which allow them to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At December 31, 1995, the Large-Cap Fund had an accumulated capital loss carry forward for tax purposes of $1,591 which will expire on December 31, 2003. Net realized losses of the funds may differ for financial statements and tax purposes because of the deferral of post October 31 losses for tax purposes. (c) General Security transactions are accounted for on a trade date basis. Daily realized gains and losses from security transactions are reported on the first-in, first- out cost basis. Interest income is recorded daily on the accrual basis and dividend income on the ex-dividend date. (d) Distributions of incomes and gains Distributions to shareholders are recorded by the Funds (except for the Government Money Market Fund) on the ex-dividend date. The Government Money Market Fund declares dividends daily and automatically reinvests such dividends daily. Due to inherent differences in the characterization of short-term capital gains under generally accepted accounting principles and for federal income tax purposes, the amount of distributable net investment income for book and federal income tax purposes may differ. These differences are permanent in nature, and may result in distributions in excess of book basis net investment income for certain periods. 2. RELATED PARTIES: Robert S. Bacarella is an officer and director of the Funds and also an officer, director and majority shareholder of the investment adviser, Monetta Financial Services, Inc. "Adviser". For twelve months ended December 31, 1995, remuneration required to be paid to any director or trustee has been absorbed by the Adviser. Each Fund pays an investment advisory fee to the Adviser, based on that Fund's individual net assets, payable monthly at the annual rate of 1% for Monetta Fund, Mid-Cap and Large-Cap Equity Funds; 0.65% for Balanced Fund; 0.60% for Intermediate Bond Fund and 0.35% for the Government Money Market Fund. From these fees the Adviser pays all the Fund's ordinary operating expenses other than the advisory fee and charges of the Fund's custodian and transfer agent. Investment advisory fees waived through December 31, 1995, for the Intermediate Bond Fund were $17,132 of total fees of $19,834. Investment advisory fees waived through December 31, 1995 for the Government Money Market Fund were $12,563. Custodian and transfer agent charges of $6,111 for the period ending December 31, 1995 for the Government Money Market Fund were absorbed by the Adviser. Additionally, brokerage commissions of $70,235 were paid by the Monetta Fund to Monetta Brokerage, Inc. during 1995. Page 30
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Notes to Financial Statements December 31, 1995 Shares Owned by the Advisor ================================== Shares % of Fund ------ --------- Mid-Cap Fund 7,347 0.6% Large-Cap Fund 10,004 9.9% Balanced Fund 19,883 51.3% Intermediate Bond Fund 69,318 19.8% Government Money Market Fund 1,062,110 24.2% 3. CAPITAL STOCK AND SHARE UNITS: There are 100,000,000 shares of $0.01 par value capital stock authorized for Monetta Fund. There is an unlimited number of no par value shares of beneficial interest authorized for each series of the Trust. [Enlarge/Download Table] ========================================================================================================== Monetta Mid-Cap Large-Cap Balanced Intermediate Government (In Thousands) Fund Equity Fund Equity Fund Fund Bond Fund Money Market ========================================================================================================== 1994 Beginning shares 33,741 785 - - 286 1,859 ---------------------------------------------------------------------------------------------------------- Shares sold 2,898 276 - - 70 2,560 Shares issued upon dividend reinvestment 104 46 - - 17 89 Shares redeemed (11,603) (145) - - (60) (1,193) ========================================================================================================== Net increase (decrease) in shares outstanding (8,601) 177 - - 27 1,456 ========================================================================================================== 1995 Beginning shares 25,140 962 - - 313 3,315 ---------------------------------------------------------------------------------------------------------- Shares sold 1,400 161 101 44 69 4,068 Shares issued upon dividend reinvestment 3,779 249 (a) (a) 22 196 Shares redeemed (7,054) (184) (a) (5) (54) (3,186) ========================================================================================================== Net increase (decrease) in shares outstanding (1,875) 226 101 39 37 1,078 ========================================================================================================== Ending Shares 23,265 1,188 101 39 350 4,393 ========================================================================================================== (a) Rounds to less than $1,000 4. PURCHASES AND SALES OF INVESTMENT SECURITIES: The cost of purchases and proceeds from sales of securities for the period ending December 31, 1995, excluding short-term securities were: Monetta Fund $797,769,176 and $903,424,497; Mid-Cap Fund $29,441,667 and $29,873,302; Large-Cap Fund $1,239,640 and $331,924; Balanced Fund $408,253 and $121,069; and Intermediate Bond Fund $2,190,691 and $2,160,247. Page 31
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NOTES TO FINANCIAL STATEMENTS December 31, 1995 ================================================================================ 5. FINANCIAL HIGHLIGHTS: MONETTA FUND Financial highlights for Monetta Fund for a share of capital stock outstanding throughout the period is presented below: [Enlarge/Download Table] 1995 1994 1993 1992 --------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $14.515 $15.539 $15.992 $15.731 --------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .029 (.026) (.028) .006 Net realized and unrealized gain (loss) on investments 4.075 (.938) .105 .855 --------------------------------------------------------------------------------------------------------------------------- Total from investment operations: 18.619 (.964) .077 .861 Less: Distributions from net investment income (.028) 0 0 (.006) Distributions in excess of net investment income (3.000) (.060) (.475) (.594) Distributions from net realized gains on securities 0 0 (.055) 0 --------------------------------------------------------------------------------------------------------------------------- Total distributions (3.028) (.060) (.530) (.600) =========================================================================================================================== Net asset value at end of period $15.591 $14.515 $15.539 $15.992 =========================================================================================================================== Total return 28.0% (6.21)% 0.49% 5.49% Ratio to average net assets Expenses* 1.36% 1.35% 1.38% 1.45% Net investment income* 0.18% (0.15)% (0.19)% .16% Portfolio turnover 272.0% 191.27% 226.85% 126.60% Net assets (in millions) $ 362.7 $ 364.9 $ 524.3 $ 408.0 --------------------------------------------------------------------------------------------------------------------------- *If certain expenses had not been assumed by the investment advisor in 1989, the ratios of expenses and net investment income to average net assets would have been 1.83% and 1.92%, respectively. The per share ratios are calculated using the weighted average number of shares outstanding during the period. Page 32
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NOTES TO FINANCIAL STATEMENTS December 31, 1995 ================================================================================ [Enlarge/Download Table] 5/6/86 Through 1991 1990 1989 1988 1987 12/31/86 --------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $10.963 $10.441 $ 9.933 $ 9.649 $ 9.670 $10.000 --------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .081 .103 .219 .106 .113 .115 Net realized and unrealized gain (loss) on investments 6.037 1.106 1.274 2.158 .016 (.335) --------------------------------------------------------------------------------------------------------------------------- Total from investment operations: 6.118 1.209 1.493 2.264 .129 (.220) Less: Distributions from net investment income (.081) (.103) (.219) (.106) (.150) (.110) Distributions in excess of net investment income (1.208) (.584) (.766) (1.874) 0 0 Distributions from net realized gains on securities (.061) 0 0 0 0 0 --------------------------------------------------------------------------------------------------------------------------- Total distributions (1.350) (.687) (.985) (1.980) (.150) (.110) =========================================================================================================================== Net asset value at end of period $15.731 $10.963 $10.441 $ 9.933 $ 9.649 $ 9.670 =========================================================================================================================== Total return 55.90% 11.37% 15.20% 23.07% 1.54% (2.20)% Ratio to average net assets Expenses* 1.42% 1.50% 1.57% 1.50% 2.31% 1.27% Net investment income* .93% 1.09% 2.18% .96% 1.33% 2.45% Portfolio turnover 153.80% 206.51% 258.42% 170.43% 333.47% 80.02% Net assets (in millions) $ 57.1 $ 6.1 $ 3.5 $ 2.6 $ 2.1 $ 1.9 --------------------------------------------------------------------------------------------------------------------------- Page 33
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NOTES TO FINANCIAL STATEMENTS December 31, 1995 -------------------------------------------------------------------------------- Financial highlights for each Fund of the Trust for a share outstanding throughout the period is presented below: [Download Table] Mid-Cap Large-Cap Equity Equity Fund Fund ---------------------------- --------- 3/1/93 9/1/95 Through Through 12/31/95 12/31/94 12/31/93 12/31/95 ---------------------------------------- Net asset value at beginning of period* $12.199 $12.537 $10.000 $10.000 -------------------------------------------------------------------------------- Net investment income 0.059 0.071 0.006 0.005 Net realized and unrealized gain (loss) on investments 2.874 0.193 3.531 0.570 ------------------------------------------------------------------------------- Total from investment operations 2.933 0.264 3.537 0.575 Less: Distributions from net investment income (0.050) (0.069) (0.006) (0.004) Distributions in excess of net investment income (2.990) (0.533) (0.994) 0 Distributions from net realized gains on securities (0.130) 0 0 0 -------------------------------------------------------------------------------- Total distributions (3.170) (0.602) (1.000) (0.004) ================================================================================ Net asset value at end of period $11.962 $12.199 $12.537 10.571 ================================================================================ Total return* 24.54% 2.17% 35.40% 5.74% Ratios to average net assets: Expenses** 1.25% 1.30% 1.12% 0.69% Net investment income** 0.44% 0.57% 0.07% 0.05% Portfolio turnover 254.35% 209.97% 128.12% 38.20% Net assets (in thousands) $14,216 $11,736 $ 9,841 $ 1,072 ================================================================================ *Ratios and total return for the year of inception are calculated from the date of inception to the end of the period. **If certain investment advisory fees and charges of the Trust's custodian and transfer agent had not been assumed by the investment advisor, the ratios of expenses and net income to average net assets would be as follows: for the Intermediate Bond Fund, expenses would have been 0.75%, 0.88% and 0.75% for 1995, 1994 and 1993 respectively. For the Government Money Market Fund, expenses would have been 0.59%, 0.66% and 0.69%, for 1995, 1994 and 1993 respectively. For the Intermediate Bond Fund, net investment income would have been 5.46%, 5.34% and 3.66% for 1994 and 1993 respectively. For the Government Money Market Fund, the investment income would have been 5.17%, 3.39% and 1.66% for 1995, 1994 and 1993 respectively. The per share ratios are calculated using the weighted average number of shares outstanding during the period. Page 34
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[Enlarge/Download Table] ---------------------------------------------------------------------------------------------------------------- Intermediate Government Balanced Bond Money Market Fund Fund Fund -------- ----------------------------- ----------------------------- 9/1/95 3/5/93 3/1/93 Through Through Through 12/31/95 12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93 ---------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period* $10.000 $9.624 $10.345 $10.000 $1.000 $1.000 $1.000 ---------------------------------------------------------------------------------------------------------------- Net investment income 0.009 0.655 0.589 0.357 0.059 0.040 0.023 Net realized and unrealized gain (loss) on investments 0.602 0.740 (0.690) 0.447 0 0 0 ---------------------------------------------------------------------------------------------------------------- Total from investment operations 0.611 1.395 (0.101) 0.804 0.059 0.040 0.023 Less: Distributions from net investment income (0.004) (0.655) (0.580) (0.357) (0.059) (0.040) (0.023) Distributions in excess of net investment income (0.002) (0.120) (0.040) (0.102) 0 0 0 Distributions from net realized gains on securities 0 0 0 0 0 0 0 ---------------------------------------------------------------------------------------------------------------- Total distributions (0.006) (0.775) (0.620) (0.459) (0.059) (0.040) (0.023) ================================================================================================================ Net asset value at end of period 10.605 10.244 $9.624 $10.345 $1.000 $1.000 $1.000 ================================================================================================================ Total return* 6.16% 14.84% (1.04)% 8.17% 5.87% 4.04% 2.21% Ratios to average net assets: Expenses** 0.91% 0.27% 0.28% 0.28% 0.07% 0.0% 0.03% Net investment income** 0.08% 5.94% 5.94% 4.13% 5.69% 4.04% 2.32% Portfolio turnover 54.78% 75.07% 94.48% 32.26% N/A N/A N/A Net assets (in thousands) $410 $3,589 $3,010 $2,959 $4,393 $3,315 $1,859 ================================================================================================================ Page 35
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================================================================================ Annual Report December 31, 1995 MONETTA FAMILY OF FUNDS Monetta Fund, Inc. Monetta Mid-Cap Equity Fund Monetta Large-Cap Equity Fund Monetta Balanced Fund Monetta Intermediate Bond Fund Monetta Government Money Market Fund Monetta Funds 1776-A South Naperville Road Suite 207 Wheaton, Illinois 60187 1-800-MONETTA ================================================================================
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PART C -- OTHER INFORMATION --------------------------- Item 24. Financial Statement and Exhibits ------- -------------------------------- (a) Financial statements: (1) Financial statements included in Part A of this registration statement: None (2) Financial statements included in Part B of this amendment: The following financial statements, but no other part of the report, are incorporated by reference to the following portions of Monetta Fund's annual report to shareholders for the fiscal year ended December 31, 1995: Schedule of Investments at December 31, 1995 Statement of Assets and Liabilities at December 31, 1995 Statement of Operations for the Year Ended December 31, 1995 Statement of Changes in Net Assets for the Years Ended December 31, 1995 and 1994 Notes to financial statements Independent Auditors' Report Note: The following schedules have been omitted for the following reasons: Schedule I - The required information is presented in the schedule of investments at December 31, 1995. Schedules II, III, IV, V, VI and VII - the required information is not present. (b) Exhibits: NOTE: As used herein the term "Registration Statement" refers to the registration statement of registrant on form N-1A, no. 33-1398. 1 Amended and restated charter of registrant (2) 1.1 Articles supplementary dated February 4, 1992 (3) 1.2 Articles of amendment dated February 14, 1992 (3) 2 Bylaws of registrant (amended and restated 11/10/88) (2) 3 None
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4 Form of stock certificate (1) 5 Investment advisory agreement with Monetta Financial Services, Inc. dated November 10, 1988 (2) 6 None 7 None 8 Custody agreement with Firstar Trust Company (formerly First Wisconsin Trust Company) (1) 9 None 10 Opinion of counsel (1) 11 Consent of independent auditors 12 None 13 Subscription agreement (1) 14 Monetta Funds Individual retirement account prototype plan, disclosure statement and application (4) 15 None 16 Schedule for computation of performance quotations (2) 17 Financial Data Schedule 18 Form of application ------------------------ (1) Incorporated by reference to the exhibit of the same number to the Registration Statement. (2) Incorporated by reference to the exhibit of the same number filed with post-effective amendment no. 4 to the Registration Statement. (3) Incorporated by reference to the exhibit of the same number filed with post-effective amendment no. 9 to the Registration Statement. (4) Incorporated by reference to the exhibit of the same number filed with post-effective amendment no. 13 to the Registration Statement. C-2
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Item 25. Persons Controlled By or Under Common Control with Registrant ------- ------------------------------------------------------------- The registrant does not consider that there are any persons directly or indirectly controlling, controlled by, or under common control with, the registrant within the meaning of this item. The information in the prospectus under the caption "Management of the Fund" and in the Statement of Additional Information under the captions "Investment Adviser" and "Directors/Trustees and Officers" is incorporated by reference. Item 26. Number of Holders of Securities ------- ------------------------------- As of March 31, 1996 there were 65,507 record holders of capital stock of the registrant. The registrant has no other class of securities outstanding. Item 27. Indemnification ------- --------------- Section 2-418 of the General Corporation Law of Maryland authorizes the registrant to indemnify its directors and officers under specified circumstances. Section 9.01 of Article IX of the bylaws of the registrant (exhibit 2 to this amendment, which is incorporated herein by reference) provides in effect that the registrant shall provide certain indemnification of its directors and officers. In accordance with section 17(h) of the Investment Company Act, this provision of the bylaws shall not protect any person against any liability to the registrant or its shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 28. Business and Other Connections of Investment Adviser ------- ---------------------------------------------------- Monetta Financial Services, Inc. ("MFSI"), registrant's investment adviser, also acts as investment adviser to Monetta Trust and to individual and institutional clients. The directors and officers of MFSI are: Robert S. Bacarella, President and Director; Paul W. Henry, Director; William M. Valiant, Director; Albert A. Pisterzi, Vice President; John P. Rozinsky, Vice President and Secretary; and Maria C. DeNicolo, Controller and Treasurer. The information in the Statement of Additional Information under the heading "Directors/Trustees and Officers" describing the principal occupations and other affiliations of Mr. Bacarella, Mr. Henry, Mr. Pisterzi, Mr. Rozinsky and Ms. DeNicolo is incorporated herein by reference. Mr. Valiant, who is now retired, was Vice President and Treasurer, Borg-Warner Corporation, until July 1990. Item 29. Principal Underwriters ------- ---------------------- None C-3
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Item 30. Location of Accounts and Records ------- -------------------------------- Robert S. Bacarella Monetta Fund, Inc. 1776-A South Naperville Road, Suite 207 Wheaton, Illinois 60187-8133 Item 31. Management Services ------- ------------------- None Item 32. Undertakings ------- ------------ (a) Not applicable. (b) Not applicable (c) Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of Registrant's latest annual report to shareholders, upon request and without charge. C-4
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SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it meets all of the requirements for effectiveness of this amendment to the registration statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Wheaton, Illinois on April 15, 1996. MONETTA FUND, INC. /s/ Robert S. Bacarella By___________________________ Robert S. Bacarella, President Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following persons in the capacities and on the dates indicated. [Download Table] Name Title Date ---- ----- ---- /s/ Robert S. Bacarella ___________________________ Director and President ) Robert S. Bacarella (principal executive officer) ) ) ) /s/ John W. Bakos ) ___________________________ Director ) John W. Bakos ) ) ) /s/ Paul W. Henry ) ___________________________ Director ) Paul W. Henry ) ) ) April 15, 1996 /s/ Mark F. Ogan ) ___________________________ Director ) Mark F. Ogan ) ) ) /s/ John P. Rozinsky ) ___________________________ Director and ) Vice President ) John P. Rozinsky ) ) ) /s/ Maria Cesario DeNicolo ) ___________________________ Treasurer ) Maria Cesario DeNicolo (principal financial officer) )
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Index of Exhibits Filed with this Amendment ------------------------------------------- Exhibit Number Exhibit Page ------- ---------------- ---- 11 Consent of independent auditors 17 Financial Data Schedule 18 Form of Application 99 Opinion of counsel required by Section F(3) of the General Instructions to Form N-1A

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