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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M N-1A
Registration Statement Under the Securities Act of 1933 /x/
Pre-Effective Amendment No. __ / /
Post-Effective Amendment No. 6 /x/
and
Registration Statement Under the Investment Company Act of 1940 /x/
Amendment No. 7 /x/
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BERKELEY FUNDS
(Exact Name of Registrant as Specified in Charter)
650 California Street, Suite 2800, San Francisco, California 94108
(Address of Principal Executive Office)
(415) 393-0300
(Registrant's Telephone Number, Including Area Code)
ROBERT A. CORNMAN
650 California Street, Suite 2800, San Francisco, California 94108
(Name and Address of Agent for Service)
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Approximate Date of Proposed Public Offering: As soon as possible after this
Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate box):
- --- immediately upon filing pursuant to paragraph (b)
- --- on pursuant to paragraph (b)
----------------
x
- --- 60 days after filing pursuant to paragraph (a)(1)
- --- on [date] pursuant to paragraph (a)(1)
- --- 75 days after filing pursuant to paragraph (a)(2)
- --- on [date] pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
- --- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Please Send Copy of Communications to:
MITCHELL E. NICHTER, ESQ.
KELVIN K. LEUNG, ESQ.
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, CA 94104
(415) 835-1600
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BERKELEY FUNDS
BERKELEY MONEY MARKET FUND
CONTENTS OF POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement of Berkeley
Funds contains the following documents:
- Facing Sheet
- Contents of Post-Effective Amendment to Registration Statement
- Part A: Prospectus for Berkeley Money Market Fund
- Part B: Statement of Additional Information for Berkeley Money
Market Fund
- Part C: Other Information
- Signature Page
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BERKELEY FUNDS
Berkeley Money Market Fund
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PART A
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PROSPECTUS
Berkeley Money Market Fund
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BERKELEY FUNDS
Berkeley Money Market Fund
Supplement dated February 28, 1999 to
Prospectus dated February 28, 1999
This supplement replaces the section titled "Management of the Fund" on
page 6 of the Prospectus.
MANAGEMENT OF THE FUND
The Board of Trustees of the Fund, during its [January , 1999] board
meeting, approved a new investment management agreement (the "New Management
Agreement") between the Fund and City National Bank ("CNB"), effective as
soon as practicable after shareholders' approval have been obtained. Proxy
materials have been mailed to shareholders and a special meeting of
shareholders is scheduled to be held on , 1999, during which
shareholders will be asked to approve the New Management Agreement and other
matters. In connection with the change of investment advisor, various other
service providers, including the administrator, transfer agent, shareholder
servicing agent and principal underwriter of the Fund will be replaced.
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[LOGO]
BERKELEY MONEY MARKET FUND
PROSPECTUS DATED FEBRUARY 28, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
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INTRODUCING OUR FUND
WHO SHOULD INVEST IN OUR FUND?
This Fund is a money market fund designed for investors seeking current
income and price stability from a low-risk, liquid investment. It is especially
appropriate for short-term investors (for example, those waiting to invest in
stocks or bonds), as well as for long-term investors.
KEY DEFINITIONS
"We", "Us" and "Our"- means the Berkeley Money Market Fund. "You" and
"Your"- means the prospective investor or current shareholder.
IMPORTANT TERMS TO KNOW
"Liquidity"- means the ability to turn investments into cash.
"Quality"- means the credit rating given to a security by a nationally
recognized rating organization.
"Yield"- means the interest rate you would receive if you kept your
investment in the Fund for a year. It is based on the current interest rate for
a trailing seven-day period.
"Effective Yield"- means the interest rate, compounded weekly, you would
receive if you kept your investment in the Fund for a year.
IF YOU WOULD LIKE TO KNOW THE CURRENT SEVEN-DAY YIELD, CALL: 1-888-889-0799
IF YOU HAVE ANY QUESTIONS ABOUT OUR FUND, PLEASE CALL OUR TRANSFER AGENT,
FIRSTAR MUTUAL FUND SERVICES, LLC ("FIRSTAR") AT 1-888-889-0799.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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THE OVERVIEW.......................................................................... 4
Our goal............................................................................ 4
How we plan to achieve our goal..................................................... 4
Types of securities................................................................. 4
Risks of investing in our Fund...................................................... 4
Past performance.................................................................... 5
UNDERSTANDING EXPENSES................................................................ 5
Fee table........................................................................... 5
Fee example......................................................................... 5
MANAGEMENT OF THE FUND................................................................ 6
ACCOUNT POLICIES...................................................................... 6
UNDERSTANDING EARNINGS AND TAXES...................................................... 6
HOW TO BUY AND SELL SHARES............................................................ 7
Opening an account.................................................................. 8
Buying shares....................................................................... 8
Selling shares...................................................................... 9
FINANCIAL HIGHLIGHTS.................................................................. 11
FOR MORE INFORMATION (BACK COVER)..................................................... 12
</TABLE>
More detailed information on all subjects covered in this simplified
prospectus is contained within the Statement of Additional Information
(SAI). Investors seeking more in-depth explanations of this Fund should
request the SAI and review it before purchasing shares.
3
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THE OVERVIEW
OUR GOAL
The Fund is a money market fund that seeks to provide current income through
low-risk investments and to maintain a $1.00 per share net asset value. The goal
of the Fund can only be changed with shareholder approval.
HOW WE PLAN TO ACHIEVE OUR GOAL
OUR STRATEGY. We purchase liquid, high quality, short-term debt securities
in U.S. dollar denominated money market instruments. The securities must have
maturities of no more than 397 days and, in our opinion, present minimal credit
risk.
DIVERSIFICATION. The Berkeley Money Market Fund is a diversified fund,
which means it generally invests no more than 5% of its assets in one issuer and
no more than 25% in one industry. Certificates of deposit and bankers'
acceptances invested in bank branches located in the U.S., and obligations of or
guaranteed by the U.S. Government are exempt from the industry portion of this
policy.
TYPES OF SECURITIES
The Fund invests primarily in short-term money market instruments including:
- Certificates of deposit, time deposits;
- Commercial paper;
- Short-term corporate obligations;
- Shares of investment companies who invest exclusively in the same types of
securities as we do (up to 10% of the Fund's total assets, with no more
than 5% in any individual investment company).
Please review the SAI for more detailed descriptions of these securities.
RISKS OF INVESTING IN OUR FUND
As with any money market fund, there are risks of investing. We cannot
guarantee that we will meet our investment goals. Here are some other risks to
consider:
MAINTAINING THE NET ASSET VALUE. We cannot guarantee that the Fund will be
able to maintain a stable net asset value of $1.00 per share. You may lose money
by investing in the Fund.
NO FEDERAL GUARANTEES. As with any money market mutual fund, an investment
in the Fund is not a deposit of a bank and is not insured, guaranteed, or
protected by the FDIC, Federal Reserve Board, or any agency of the U.S.
Government.
THE EFFECT OF INTEREST RATES. A money market fund's yield is affected by
interest rate changes. When rates decline, the Fund's yield will tend to be
somewhat higher than prevailing market rates. When rates rise, the Fund's yield
will tend to be somewhat lower.
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ISSUER DEFAULT. We may not be able to maintain a $1 per share value if the
issuers of securities do not make their principal or interest payments on time.
We attempt to minimize the risk of default by purchasing only highly rated
securities.
OTHER ADVERSE CONDITIONS. The Fund's performance may be affected by changes
in market, economic, political, or other conditions. Companies offering
securities we invest in may also be affected by these conditions as well as by
government regulations and interest rate volatility.
YEAR 2000 COMPLIANCE. Many computer software systems cannot distinguish the
year 2000 from 1900. This is known as the "Year 2000 Problem." The systems'
inability to tell the difference could cause accounting and other problems. Our
software vendors and service providers have assured us, but not guaranteed, that
their systems will be adapted in time to avoid serious problems. We do not
expect Year 2000 conversion costs to have much impact on the Fund because those
costs are borne primarily by the vendors and service providers and not directly
by the Fund.
PAST PERFORMANCE
The Fund began operations on March 23, 1998. The Fund's performance results
have not been provided because it has not been in existence for a full calendar
year.
UNDERSTANDING EXPENSES
FEE TABLE
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund. You pay no sales charges or transaction fees for buying or
selling shares of the Fund. Annual Fund Operating Expenses (as a percentage of
average net assets)
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Management Fee.................................................................. 0.25%
Other Expenses
Service Fee................................................................. 0.25%
Miscellaneous Expenses...................................................... 0.23%
Total Other Expenses........................................................ 0.48%
Total Fund Operating Expenses*.................................................. 0.73%
</TABLE>
* The investment manager has voluntarily agreed to limit its fees or reimburse
the Fund for expenses to the extent necessary to keep "Total Fund Operating
Expenses" at or below 0.63%. For the past year, after reductions and
reimbursements, shareholders paid actual total Fund operating expenses of
0.63%. The investment manager may remove this limit at any time and may recoup
the expenses it has reduced or absorbed.
The "Management Fee" is an annual fee, payable monthly out of the Fund's net
assets.
FEE EXAMPLE
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other money market funds. It assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower.
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Based on these assumptions your costs would be:
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1 Year............................................................... $ 80
3 Years.............................................................. $ 249
</TABLE>
The example does not reflect account fees. If these fees were included, as
may be the case with other funds, your costs would be higher. The example should
not be considered a representation of past or future expenses or performance
MANAGEMENT OF THE FUND
INVESTMENT MANAGER
The Fund's investment manager, Berkeley Capital Management (BCM), is located
at 650 California Street, Suite 2800, San Francisco, California 94108. BCM has
been in the investment management business since 1972, and currently provides
investment management services to institutional and other investors for fixed
income securities, equity securities of large cap issuers, and asset allocation
strategies. As of September 30, 1998, BCM had assets totaling approximately $1.8
billion under discretionary management.
TRANSFER AGENT
Firstar Mutual Fund Services, LLC is the transfer agent and shareholder
services agent for the Fund. They are located at P.O. Box 701, Milwaukee,
Wisconsin 53201-0701 and can be reached at 1-888-889-0799.
PRINCIPAL UNDERWRITER
Berkeley International Securities Corporation, 650 California Street, Suite
2800, San Francisco, California 94108 is the Fund's principal underwriter.
ACCOUNT POLICIES
HOW WE PRICE SHARES. Shares are priced at net asset value (NAV). The NAV is
calculated by adding the values of all securities and other assets of the Fund,
subtracting the liabilities, and dividing the net amount by the number of
outstanding shares. Securities are valued at amortized cost, which approximates
market value.
WHEN SHARES ARE PRICED. NAV calculations are made once each day, after the
close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time). Shares are not priced on any days when either the New York Stock Exchange
or the Federal Reserve Bank's Fedline System is closed.
REPORTING FUND PERFORMANCE. From time to time the Fund may advertise its
yield and effective yield. Performance figures are based upon historical results
and are not intended to indicate future performance.
UNDERSTANDING EARNINGS AND TAXES
DECLARING AND PAYING DIVIDENDS. Dividends are declared each day the NAV is
calculated. Dividends and capital net gains (if any) are normally paid on the
last business day of each month.
WHEN DO DIVIDENDS ACCRUE? Your dividends begin to accrue on the day of
purchase for shares bought before 1:30 p.m. Eastern time. They begin to accrue
on the following day for shares purchased after 1:30 p.m. Eastern time. You will
not be credited with dividends for shares on the day you sell them.
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DISTRIBUTION OPTIONS. You may choose to receive your distributions in one
of two ways:
- Your dividends will be automatically reinvested in additional full or
fractional shares, unless you instruct Firstar otherwise.
- You may receive dividends by mail, but only if you instruct Firstar to do
so. Checks will normally be mailed to you on the business day after
distributions are credited to your account.
To change your distribution option, call Firstar at 1-888-889-0799.
TAX CONSIDERATIONS. Generally, all distributions, whether received in cash
or reinvested in additional shares of the Fund, may be subject to federal and
state income tax. Dividends, distributions, purchases, and sales will appear on
your account statements. You will be notified at least annually about the
federal income tax consequences of distributions made each year. Be sure to
consult your own tax advisor about the specific tax implications of your
investments.
BACKUP WITHHOLDING. You must provide your social security or tax
identification number on your account application form and specify whether or
not you are subject to backup withholding. Otherwise, you may be subject to
backup withholding at a rate of 31%.
HOW TO BUY AND SELL SHARES
Here are the details you should know about opening an account, and buying
and selling shares:
HOW TO PLACE AN ORDER. You may place an order with:
- the transfer agent, Firstar;
- an approved broker-dealer; or
- any other approved financial institution.
ORDERING THROUGH A BROKER-DEALER OR FINANCIAL INSTITUTION. If you place an
order with anyone other than Firstar, you must resolve any problems directly
with that entity. Other financial institutions may offer different services and
charge additional fees.
WHEN ORDERS WILL BE COMPLETED. If Firstar receives your purchase order
before 1:30 p.m., Eastern time, the order will be executed that same day. Orders
received after 1:30 p.m., Eastern time will be executed the following business
day. Your shares will be bought, only after Firstar receives a properly
completed order with full payment.
PURCHASE MINIMUMS. You may buy shares for:
- an initial amount of $100,000; and,
- additional investments of $1,000 or more.
Exceptions may be made at our discretion.
MINIMUM ACCOUNT BALANCES. Accounts of less than $100,000 are expensive to
maintain. Therefore, if you sell an amount of shares that drops your account
balance below the minimum, you may be asked to add money to the account to raise
it above the minimum balance. If, after 30 days, the account balance
7
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remains below the minimum, your shares may be sold and your account closed
without your consent. The proceeds will be mailed to you.
PAYMENT RESTRICTIONS. We only accept payments in U.S. funds. Checks must be
drawn on a U.S. bank, savings and loan association, or credit union. Cash and
third-party checks will not be accepted. We charge a $25 fee against your
account for a returned check or stop payment request.
WIRING FEE. We do not charge a fee for buying shares by wire, although
Firstar charges a $12 fee for wiring redemption proceeds. The financial
institution placing your order may charge its own wiring fees.
OPENING AN ACCOUNT
To open an account, complete and sign an account application and mail it to:
Berkeley Money Market Fund
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
or, if you send your application by overnight courier, address it to:
Berkeley Money Market Fund
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
ADDITIONAL REQUIREMENTS. If additional information is required, your
application will be considered incomplete until Firstar receives the missing
information. We reserve the right to reject any applications we feel might
adversely affect the Fund.
BUYING SHARES
FIRST TIME PURCHASES. Your initial purchase must be made by mail. Include a
check made payable to "Berkeley Money Market Fund" and an application. After
that, you may place orders by wiring or mailing money to Firstar.
BY MAIL
Orders in writing must include:
- your account number or a completed and signed application; and
- the dollar amount of shares you want to buy.
Mail your order to the address on the back cover. Mailed purchase orders may
not be revoked, modified or canceled.
BY WIRE
Call Firstar at 1-888-889-0799 to buy shares by wire. Wires must be received
by Firstar through the Federal Reserve Wire System before is closes (generally,
4:00 p.m. Eastern time) or Firstar will not be able to process your order that
day.
8
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SELLING SHARES
GENERAL RESTRICTIONS. We may suspend the right to sell shares or postpone
payment for a sale of shares when either the New York Stock Exchange or the
Federal Reserve Bank's Fedline System is closed or restricted. We reserve the
right to reject any order that is not received in proper form.
PAYMENT MAY BE DELAYED. If you buy shares by check and sell them before
your check clears, we will not send your proceeds until the check clears your
bank. This delay may take up to 12 days from the date of your purchase. (You can
avoid this delay by purchasing shares by wire.)
WHEN CHECKS ARE MAILED. Normally, a check will be mailed to you within one
or two business days, but no later than the seventh business day after Firstar
receives your sell order in proper form. Once a check is mailed, the sale is
irrevocable and may not be modified or canceled.
WHERE CHECKS ARE MAILED. Money from the sale of your shares may be sent to
your designated bank account via the Federal Reserve Wire System, or to your
address of record. Checks will not be sent to third parties other than the bank
or brokerage account listed on your account application; nor will they be
forwarded by the U.S. postal service.
CHANGING YOUR MONEY'S DESTINATION. To change your designated bank account,
write to Firstar and include the name and address of the new bank and your
account number. Be sure to include an acceptable signature guarantee.
SIGNATURE GUARANTEE REQUIREMENT. We require a signature guarantee on any
sale you request in writing if:
- you change the bank or brokerage account from the one listed on your
account application, or
- the address of record has changed within the last 15 days.
The guarantor must be authorized by state law to guarantee signatures. A
bank or broker-dealer is acceptable; a notary public is not.
ADDITIONAL SIGNATURE REQUIREMENT. Sale orders placed by a corporation,
partnership, trust, fiduciary, executor, or administrator require additional
written evidence of authority. Call Firstar at 1-888-889-0799 if you need
assistance.
OTHER REDEMPTION OPTIONS. Under conditions where cash redemptions are
detrimental to the Fund and its shareholders, we reserve the right to make
redemptions in readily marketable securities other than cash. Please see the SAI
for a more detailed discussion.
BY MAIL
Send a written request including:
- your name;
- your account number;
- the number of shares you want to sell; and
- the signature of all registered account holders exactly as they appear on
the account.
9
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BY TELEPHONE
Call Firstar at 1-888-889-0799 and give them:
- your name and account number;
- your social security number/tax identification number; and
- the number of shares you want to sell.
CONFIRMING AUTHENTICITY. Firstar will make every effort to verify that an
order is authentic. To do so, they may:
- ask for a form of personal identification or written confirmation of
instructions; and
- tape record your telephone instructions.
The Fund and Firstar reserve the right to refuse an order if we cannot
reasonably confirm the authenticity of the instructions.
LIABILITY. We or Firstar may be liable for losses from unauthorized or
fraudulent orders only if reasonable steps are not taken to verify an order's
authenticity.
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FINANCIAL HIGHLIGHTS
The financial highlights for the period of March 23, 1998(1) through October
31, 1998 were audited by PricewaterhouseCoopers LLP, our independent
accountants. This information also appears in our 1998 annual report.
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NET ASSET VALUE AT BEGINNING OF PERIOD $1.00
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INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03
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Total from investment operations 0.03
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LESS DISTRIBUTION TO SHAREHOLDERS:
Dividends from net investment income (0.03)
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Total distributions (0.03)
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NET ASSET VALUE AT END OF PERIOD $1.00
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TOTAL RETURN (NOT ANNUALIZED) 3.11%
SUPPLEMENTAL DATA AND RATIOS:
Net assets at end of period $133,427,960
Ratio of net expenses to average net assets(2) 0.63%
Ratio of net investment income to average net assets(2) 4.99%
</TABLE>
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(1) Commencement of operations
(2) Annualized. Net of fees waived amounting to 0.15% of average net assets
11
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FOR MORE INFORMATION
BERKELEY MONEY MARKET FUND
Additional information is available free of charge in the Statement of
Additional Information (SAI). The SAI is incorporated by reference (legally
considered part of this document). Additional information about the Fund's
performance is available in the Fund's Annual Report. To receive a free copy of
this prospectus, the SAI, or the Annual Report, please contact:
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701.
1-888-889-0799
Documents will be sent within 3 business days of receipt of your request.
Information about the Fund may be reviewed and copied:
- at the SEC's Public Reference Room in Washington, D.C. (1-800-SEC-0330);
- on the Commission's Internet site (http://www.sec.gov); or
- by written request (including duplicating fee) to the Public Reference
Section of the Commission, Washington, D.C. 20549-6009.
Investment Company Act file number: 811-07923
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PART B
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STATEMENT OF ADDITIONAL INFORMATION
Berkeley Money Market Fund
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
BERKELEY FUNDS
650 California Street, Suite 2800, San Francisco, CA 94108
BERKELEY MONEY MARKET FUND
February 28, 1999
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus dated February 28, 1999, which may be
amended from time to time, for Berkeley Money Market Fund (the "Fund"). The
Fund was formerly called "Berkeley Capital Management Money Market Fund." The
Fund is a diversified investment portfolio of Berkeley Funds (the "Trust"),
an open-end, management investment company. The Trust was formerly called
"Berkeley Capital Management Funds."
To obtain a free copy of the above-referenced Prospectus, please contact
Firstar Mutual Fund Services, LLC (the "Transfer Agent") at 1-888-889-0799.
TABLE OF CONTENTS
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INVESTMENT TECHNIQUES. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .6
RISK CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
MANAGEMENT OF THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . 10
PORTFOLIO TRANSACTIONS AND TURNOVER. . . . . . . . . . . . . . . . . . . . 15
DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 16
SHARE PRICE CALCULATION. . . . . . . . . . . . . . . . . . . . . . . . . . 19
YIELD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . 20
PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . 21
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
APPENDIX - RATINGS OF INVESTMENT SECURITIES. . . . . . . . . . . . . . . .A-1
</TABLE>
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INVESTMENT TECHNIQUES
The Fund invests exclusively in the following types of U.S. dollar-denominated
money market instruments which are deemed to mature in 397 days or less in
accordance with federal securities regulations and which the Investment Manager
has determined present minimal credit risk:
- Certificates of deposit, time deposits, notes and bankers' acceptances
of U.S. domestic banks (including their foreign branches), Canadian
chartered banks, U.S. branches of foreign banks and foreign branches
of foreign banks having total assets of $5 billion or greater.
- Commercial paper, including asset-backed commercial paper, rated in
one of the two highest rating categories by Moody's Investors Services
("Moody's) Standard and Poor's Corporation ("S&P") Duff and Phelps
Credit Rating Co. ("Duff"), Fitch Investors Service, Inc. ("Fitch"),
or any other nationally recognized statistical rating organization
("NRSRO"), or commercial paper or notes of issuers with an unsecured
debt issue outstanding currently rated in one of the two highest
rating categories by any NRSRO where the obligation is on the same or
a higher level of priority and collateralized to the same extent as
the rated issue.
- The Fund may also invest in other corporate obligations such as
publicly traded bonds, debentures, and notes rated in one of the two
highest rating categories by any NRSRO and other similar securities
which, if unrated by any NRSRO, are determined by the Investment
Manager, using guidelines approved by the Trust's Board of Trustees,
to be at least equal in quality to one or more of the above referenced
securities.
- Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
- Repurchase agreements involving obligations that are suitable for
investment under the categories listed above.
ASSET-BACKED COMMERCIAL PAPER. The Fund can invest a portion of its assets
in asset-backed commercial paper and other money market fund Eligible
Securities (as that term is defined on page 8). The credit quality of most
asset-backed commercial paper depends primarily on the credit quality of the
assets underlying such securities, how well the entity issuing the security
is insulated from the credit risk of the originator (or any other affiliated
entities), and the amount and quality of any credit support provided to the
securities.
Repayment of asset-backed commercial paper is intended to be obtained from an
identified pool of assets including automobile receivables, credit-card
receivables, and other types of assets. Asset-backed commercial paper is
issued by a special purpose vehicle (usually a corporation) that has been
established for the purpose of issuing the commercial paper and purchasing
the underlying pool of assets. The issuer of commercial paper bears the
direct risk of prepayment on the receivables constituting the underlying pool
of assets.
To lessen the effect of failures by obligors on these underlying assets to
make payments, such securities may contain elements of credit support. Credit
support for asset-backed securities may be based on the underlying assets or
credit enhancements provided by a third party. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees, and
over-collateralization.
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Credit support falls into two classes: liquidity protection and protection
against ultimate default on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering
the pool of assets, to ensure that scheduled payments on the underlying pool
are made in a timely fashion. Protection against ultimate default ensures
payment on at least a portion of the assets in the pool. The degree of
credit support provided on each issue is based generally on historical
information respecting the level of credit risk associated with such
payments. Delinquency or loss in excess of that anticipated could adversely
affect the return on an investment in an asset-backed security.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities.
These types of securities represent a direct or indirect participation in, or
are secured by and payable from, pools of assets, such as motor vehicle
installment sales contracts, installment loan contracts, leases of various
types of real and personal property, and receivables from revolving credit
(e.g., credit card) agreements. Payments or distributions of principal and
interest on asset-backed securities may be supported by credit enhancements,
such as various forms of cash collateral accounts or letters of credit.
These securities are subject to the risk of prepayment. Prepayments of
principal of asset-backed securities affect the average life of the
asset-backed securities in the Fund's portfolio. Prepayments are affected by
the level of interest rates and other factors, including general economic
conditions. In periods of rising interest rates, the prepayment rate tends
to decrease, lengthening the average life of a pool of asset-backed
securities. In periods of falling interest rates, the prepayment rate tends
to increase, shortening the average life of a pool. Reinvestment of
prepayments may occur at higher or lower interest rates than the original
investment, affecting the Fund's yield. Thus, asset-backed securities may
have less potential for capital appreciation in periods of falling interest
rates than other fixed-income securities of comparable duration, although
they may have a comparable risk of decline in market value in periods of
rising interest rates. Payment of principal and interest may be largely
dependent upon the cash flows generated by the assets backing the securities.
SECTION 4(2) COMMERCIAL PAPER. The Fund may invest in commercial paper and
other securities that are issued in reliance on the so-called "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act") ("Section 4(2) paper").
Federal securities laws restrict the disposition of Section 4(2) paper.
Section 4(2) paper generally is sold to institutional investors such as the
Fund who agree that they are purchasing the paper for investment and not for
public distribution. Any resale of Section 4(2) paper by the purchaser must
be in an exempt transaction and may be accomplished in accordance with Rule
144A under the 1933 Act. Section 4(2) paper normally may be resold to other
institutional investors such as the Fund through or with the assistance of
the issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Because it is not possible to predict with
assurance exactly how this market for Section 4(2) paper sold and offered
under Rule 144A will continue to develop, the Investment Manager, pursuant to
guidelines approved by the Trust's Board of Trustees, will monitor the Fund's
investments in these securities, focusing on such important factors, among
others, as valuation, liquidity, and availability of information.
RULE 144A SECURITIES. Rule 144A under the 1933 Act establishes a safe harbor
from the registration requirements of the 1933 Act for resales of certain
securities to qualified institutional buyers. Institutional markets for
restricted securities sold pursuant to Rule 144A in many cases provide both
readily ascertainable values for restricted securities and the ability to
liquidate an investment to satisfy share redemption orders. Such markets
might include automated systems for the trading, clearance, and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified buyers interested in purchasing Rule
144A-eligible restricted securities, however, could adversely affect the
marketability of such portfolio securities and result in the Fund's inability
to dispose of such securities promptly or at favorable prices.
3
<PAGE>
The Board of Trustees may delegate the function of making day-to-day
determination of liquidity to the Fund's Investment Manager pursuant to
guidelines approved by the Board. The Investment Manager will take into
account a number of factors in reaching liquidity decisions, including, but
not limited to: (i) the frequency of trades for the security, (ii) the number
of dealers that quote prices for the security, (iii) the number of dealers
that have undertaken to make a market in the security, (iv) the number of
other potential purchasers, and (v) the nature of the security and how
trading is effected (e.g., the time needed to see the security, how bids are
solicited, and the mechanics of transfer). To the extent the Investment
Manager, according to guidelines approved by the Board, determines a Rule
144A-eligible security to be liquid, such a security, would not be subject to
the Fund's percentage limit on illiquid securities investment.
ILLIQUID SECURITIES. The Fund will not purchase illiquid securities,
including time deposits and repurchase agreements maturing in more than seven
days, if, as a result of the purchase, more than 10% of the Fund's net assets
valued at the time of the transaction are invested in such securities. The
Fund will monitor the level of liquidity and take appropriate action if
necessary to attempt to maintain adequate liquidity. The investment policy
on the purchase of illiquid securities is nonfundamental.
BANK NOTES. The Fund may invest in bank notes, which are unsecured
promissory notes representing debt obligations that are issued by banks in
large denominations.
INVESTMENT COMPANIES. The Fund may invest up to 10% of its total assets in
shares of other investment companies investing exclusively in securities in
which it may otherwise invest, with no more than 5% in any one individual
investment company. The Fund does not intend to invest in investment
companies unless, in the Investment Manager's judgment, the potential
benefits exceed associated costs. As a shareholder in an investment company,
the Fund bears its ratable share of that investment company's expenses,
including advisory and administration fees.
TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial paper is unsecured
short-term obligations issued by a government or political sub-division
thereof. It is not currently expected that the Fund will invest more than 5%
of its net assets in tax-exempt commercial paper.
EURODOLLAR CERTIFICATES OF DEPOSIT AND FOREIGN SECURITIES. Before investing
in Eurodollar certificates of deposit, the Fund will consider their
marketability, possible restrictions on international currency transactions,
and any regulations imposed by the domicile country of the foreign issuer.
Eurodollar certificates of deposit may not be subject to the same regulatory
requirements as certificates of deposit issued by U.S. banks, and associated
income may be subject to the imposition of foreign taxes, including
withholding taxes.
Investments in securities of foreign issuers or securities principally traded
overseas may involve certain special risks due to foreign economic,
political, and legal developments, including expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments, and possible difficulty in obtaining and enforcing judgments
against foreign entities. Furthermore, issuers of foreign securities are
subject to different, often less comprehensive, accounting, reporting, and
disclosure requirements than domestic issuers. The securities of some foreign
companies and foreign securities markets are less liquid and at times more
volatile than securities of comparable U.S. companies and U.S. securities
markets. Foreign brokerage commissions and other fees are also generally
higher than in the United States. There are also special tax considerations
which apply to securities of foreign issuers and securities principally
traded overseas. All such securities will be U.S. dollar denominated.
4
<PAGE>
REPURCHASE TRANSACTIONS. The Fund may engage in repurchase agreements, which
are instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. Maturity of
the securities subject to repurchase agreements may exceed one year.
If the seller in a repurchase agreement becomes bankrupt or otherwise
defaults, the Fund might incur expenses in enforcing its rights, and could
experience losses, including a decline in the value of the underlying
securities and loss of income. The Fund will enter into repurchase
agreements only with banks and broker-dealers that the Investment Manager
deems creditworthy.
It is not currently anticipated that the Fund will engage in reverse
repurchase agreements.
VARIABLE RATE SECURITIES. The Fund may invest in instruments having rates of
interest that are adjusted periodically, or which "float" continuously
according to formulas intended to minimize any fluctuation in the values of
the instruments ("Variable Rate Securities"). The interest rate of Variable
Rate Securities ordinarily is determined by reference to, or is a percentage
of, an objective standard such as a bank's prime rate, the 90-day U.S.
Treasury Bill rate, or the rate of return on commercial paper or bank
certificates of deposit. As interest rates decrease or increase, Variable
Rate Securities can be expected to experience less appreciation or
depreciation than fixed-rate obligations.
Some Variable Rate Securities ("Variable Rate Demand Securities") have a
demand feature entitling the purchaser to resell the securities at an amount
approximately equal to amortized cost, or the principal amount thereof plus
accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. The Fund determines the maturity of Variable Rate Securities in
accordance with Securities and Exchange Commission ("SEC") rules.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a "when-issued" or "delayed delivery" basis. When-issued or
delayed delivery securities are securities purchased for future delivery at a
stated price and yield. The Fund generally will not pay for such securities
or start earning interest on them until they are received. Securities
purchased on a when-issued or delayed delivery basis are recorded as an
asset. The value of such securities may change as the general level of
interest rates changes.
The Fund will not invest more than 25% of its assets in when-issued or
delayed delivery securities. The Fund will not purchase these types of
securities for speculative purposes and will expect to acquire the securities
when purchased. However, the Fund reserves the right to sell any of these
securities before their settlement dates if the Investment Manager deems such
a sale advisable.
BORROWING POLICY. The Fund may not borrow money except as a temporary
measure for extraordinary or emergency purposes, and then only in an amount
up to one-third of the value of its total assets in order to meet redemption
requests without immediately selling any portfolio securities. The Fund will
not borrow for leverage purposes or purchase securities or make investments
while borrowings are outstanding. If for any reason the current value of the
total assets of the Fund falls below an amount equal to three times the
amount of indebtedness for money borrowed, the Fund will, within three days,
(not including Sundays and holidays), reduce its indebtedness to the extent
necessary to meet that limitation. Any borrowings under this provision will
not be collateralized.
5
<PAGE>
INVESTMENT RESTRICTIONS
EXCEPT AS OTHERWISE NOTED WITH AN *, THE RESTRICTIONS BELOW ARE
NONFUNDAMENTAL AND CAN BE CHANGED WITHOUT APPROVAL OF THE HOLDERS OF A
MAJORITY OF THE OUTSTANDING VOTING SECURITIES (AS DEFINED IN THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, HEREINAFTER THE "1940 ACT") OF THE FUND.
THE FUND MAY NOT:
(1)* Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as
a result thereof, more than 5% of the value of its assets would be invested
in the securities of such issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one class.
(3)* Concentrate 25% or more of the value of its total assets in any one
industry; provided, however, that the Fund may invest up to 100% of its
assets in certificates of deposit or bankers' acceptances issued by domestic
branches of U.S. banks and U.S. branches of foreign banks (which the Fund has
determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities in accordance with its investment objective and policies.
(4) Enter into repurchase agreements if, as a result thereof, more than 10%
of its net assets valued at the time of the transaction would be subject to
repurchase agreements maturing in more than seven days and invested in
securities restricted as to disposition under the federal securities laws
(except commercial paper issued under Section 4(2) of the Securities Act of
1933). The Fund will invest no more than 10% of its net assets in illiquid
securities.
(5) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws (except (i) commercial paper
issued under Section 4(2) of the Securities Act of 1933 and (ii) liquid Rule
144A - eligible restricted securities).
(6)* Invest in commodities or commodity contracts, futures contracts, real
estate or real estate limited partnerships, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(7) Invest for the purpose of exercising control or management of another
issuer.
(8) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization, or acquisition of assets, or as
may otherwise be permitted by the prospectus and the 1940 Act.
(9)* Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objectives and
policies).
(10)* Borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value
of its total assets in order to meet redemption requests without immediately
selling any portfolio securities. The Fund will not borrow for leverage
purposes or purchase securities or make investments while borrowings are
outstanding. Any borrowings by the Fund will not be collateralized. If for
any reason the current value of the total assets of the Fund falls below an
6
<PAGE>
amount equal to three times the amount of indebtedness for money borrowed,
the Fund will, within three business days, reduce its indebtedness to the
extent necessary to meet that limitation.
(11) Write, purchase, or sell puts, calls, or combinations thereof.
(12) Make short sales of securities or purchase any securities on margin,
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(13)* Underwrite securities issued by others, except to the extent it may be
deemed to be an underwriter under the federal securities laws in connection
with the disposition of securities from its investment portfolio.
(14)* Issue senior securities as defined in the 1940 Act.
Except for restrictions (3), (4) and (10), if a percentage restriction is
adhered to at the time of investment, a later increase in percentage
resulting from a change in values or net or total assets will not be
considered a violation of that restriction.
The Fund will only purchase securities that the Investment Manager has
determined, according to procedures approved by the Board and factors set
forth in Rule 2a-7 under the Investment Company Act of 1940, to present
minimal credit risk and which are First Tier or Second Tier Securities
(otherwise referred to as "Eligible Securities"). An Eligible Security is:
(1) a security with a remaining maturity of 397 days or less: (a) that is
rated by the requisite nationally recognized statistical rating
organizations ("NRSROs") designated by the Securities and Exchange
Commission (the "SEC") (currently Moody's Investors Service ("Moody's"),
Standard & Poor's Ratings Group ("S&P"), Duff and Phelps Credit Rating
Co. ("Duff"), Fitch Investors Service, Inc. ("Fitch"), Thomson BankWatch,
and, with respect to debt issued by banks, bank holding companies, United
Kingdom building societies, broker-dealers and broker-dealers' parent
companies, and bank-supported debt, IBCA Limited and its affiliate, IBCA,
Inc.) in one of the two highest rating categories for short-term debt
obligations (two NRSROs are required but one rating suffices if only one
NRSRO rates the security), or (b) that itself was unrated by any NRSRO,
but was issued by an issuer that has outstanding a class of short-term
debt obligations (or any security within that class) meeting the
requirements of subparagraph 1(a) above that is of comparable priority
and security;
(2) a security that at the time of issuance was a long-term security but has
a remaining maturity of 397 days or less, and whose issuer received a
rating within one of the two highest rating categories from the requisite
NRSROs for short-term debt obligations with respect to a class of
short-term debt obligations (or any security within that class) that is
now comparable in priority and security with the subject security; or
(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Trust's Board of Trustees, to be of
comparable quality to securities described in (1) and (2) above and to
represent minimal credit risk.
A First Tier Security is any Eligible Security that carries (or if other
relevant securities issued by its issuer carry) top NRSRO ratings from at
least two NRSROs (a single top rating suffices if only one NRSRO rates the
security), that has been determined by the Investment Manager, pursuant to
guidelines adopted by the Trust's Board of Trustees, to be of comparable
quality to such a security, that is a security
7
<PAGE>
issued by a registered investment company that is a money market fund, or
that is a U.S. government security (a "Government security"). A Second Tier
Security is any other Eligible Security.
The Fund will limit its investments in the First Tier Securities of any one
issuer to no more than 5% of its total assets. (Repurchase agreements
collateralized by non-Government securities will be taken into account when
making this calculation.) Moreover, the Fund's total holdings of Second Tier
Securities will not exceed 5% of its total assets, with investment in the
Second Tier Securities of any one issuer being limited to the greater of 1%
of the Fund's total assets or $1 million. In addition, the underlying
securities involved in repurchase agreements collateralized by non-Government
securities will be First Tier Securities at the time the repurchase
agreements are executed.
8
<PAGE>
RISK CONSIDERATIONS.
The Fund's portfolio will be affected by general changes in interest rates
which will result in increases or decreases in the market value of the
obligations held by the Fund. The market value of the obligations in the
Fund's portfolio can be expected to vary inversely to changes in prevailing
interest rates. Investors also should recognize that, in periods of declining
interest rates, the Fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates, the Fund's
yield will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the Fund from the continuous sale of its
shares will likely be invested in portfolio instruments producing lower
yields than the balance of its portfolio, thereby reducing the Fund's current
yield. In periods of rising interest rates, the opposite can be expected to
occur. In addition, securities in which the Fund may invest may not yield as
high a level of current income as might be achieved by investing in
securities with less liquidity and safety and longer maturities.
The value of commercial paper and other securities in the Fund's portfolio
may be adversely affected by the inability of the issuers (or related
supporting institutions) to make principal or interest payments on the
obligations in a timely manner. As discussed above, the Fund will invest in
securities which the Investment Manager has determined, according to
procedures approved by the Board, and factors set forth under Rule 2a-7 under
the Investment Company Act of 1940, to present minimal credit risk. The
ratings assigned to commercial paper and other corporate obligations, as well
as the guidelines approved by the Trust's Board of Trustees, are intended to
enable the Investment Manager to minimize the credit risk with respect to the
securities in the Fund's portfolio, but there can be no absolute assurance
that the Investment Manager will be successful in this regard. If issuer
defaults nevertheless occur respecting a sufficiently large portion of the
Fund's portfolio, the Fund may be unable to maintain a stable net asset value
of $1.00 per share.
The Fund's performance also may be affected by changes in market or economic
conditions and other circumstances affecting the financial services industry.
Government regulation of banks, savings and loan associations, and finance
companies may limit both the amounts and types of loans and other financial
commitments these entities can make and the interest rates and fees they can
charge. The profitability of the financial services industry, which is
largely dependent on the availability and, cost of capital funds, has
fluctuated in response to volatility in interest rate levels. In addition,
the financial services industry is subject to risks resulting from general
economic conditions and the potential exposure to credit losses.
9
<PAGE>
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their principal occupations during
the past five years, and their affiliations, if any, with the Investment
Manager or Berkeley International Securities Corporation are as follows:
<TABLE>
<CAPTION>
Position with the Principal Occupation
Name Age Trust for the Past Five Years
- ----- --- ----------------- -----------------------
<S> <C> <C> <C>
Debra McGinty-Poteet* 42 Chairman of the Board Executive Vice President
225 Broadway of Trustees and and Chief Operating
San Diego, CA 92101-5030 President Officer, North American
Trust Co. (February
1997-present); formerly,
Senior Vice President and
Managing Director, Bank
of America Funds
Management (1986-1997)
Cindee Beechwood* 43 Trustee, Treasurer, Assistant Group Financial
and Principal Controller, London
Financial Officer Pacific Group Limited and
Controller, Berkeley
Capital Management (1992-
present); Financial and
Operations Principal and
Chief Financial Officer,
Berkeley International
Securities (1997-present)
Wendy J. Beller* 36 Compliance Officer Director of Compliance,
Berkeley Capital
Management and Berkeley
International Securities
(1997-present); formerly,
Contract Compliance
Officer, Chancellor LGT
Asset Management and GT
Global, Inc., (1996-1997)
prior thereto, Assistant
Compliance Director,
Robertson Stephens &
Company LLC (1993-1996)
Bryan W. Brown 53 Trustee Financial and
950 Hayman Place technological systems
Los Altos, CA 94024 consultant (1992-
present); formerly, Chief
Financial Officer,
Bailard, Biehl & Kaiser,
Inc. (1980-1992)
William R. Sweet 61
81 Mt. Tiburon Road Trustee Retired; formerly,
Tiburon, CA 94920 Executive Vice President,
The Bank of California
(1985-1996)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Position with the Principal Occupation
Name Age Trust for the Past Five Years
- ----- --- ----------------- -----------------------
<S> <C> <C> <C>
Barnett Teich 74 Trustee Retired; formerly
78280 Willowrich Drive consultant (1987-1989);
Palm Desert, CA 92211 prior thereto, First Vice
President, Lehman
Management Co., Inc.
(1958-1986)
Danell J. Doty* 35 Vice President and Vice President of
Secretary Operations, Berkeley
Capital Management (1995-
present) and Operations
Manager, Berkeley
International Securities
(1991-present)
Joseph C. Neuberger* 36 Assistant Secretary Vice President and
615 East Michigan St. Manager of Fund
Milwaukee, WI 53202 Administration and
Compliance, Firstar
Mutual Fund Services, LLC
(1994-present); formerly,
Manager, Arthur Andersen
LLP (1984-1994)
Dana L. Armour* 30 Assistant Secretary Trust Officer and
615 East Michigan St. Compliance Administrator,
Milwaukee, WI 53202 Firstar Mutual Fund
Services, LLC
(1992-present)
</TABLE>
*These individuals are interested persons of the Trust as defined in Section
2(a)(19) of the 1940 Act. Ms. Beller and Ms. Doty are employed by the
Investment Manager.
The address of each individual listed above, unless otherwise indicated, is 650
California Street, Suite 2800, San Francisco, California 94108.
11
<PAGE>
COMPENSATION TABLE(1)
---------------------
<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation From Registrant and Fund
Name, Position From Registrant Complex Paid to Directors
-------------- --------------- -------------------------
<S> <C> <C>
Debra McGinty-Poteet, None None
Trustee
Cindee Beechwood, Trustee None None
Barnett Teich, Trustee $4,000 $4,000
Bryan W. Brown, Trustee $4,000 $4,000
William R.Sweet, Trustee $4,000 $4,000
</TABLE>
- ----------------------
(1) Estimated for current fiscal year.
INVESTMENT MANAGER
Berkeley Capital Management serves as the Fund's discretionary investment
manager pursuant to an Investment Management Agreement dated January 22, 1997
between it and the Trust on behalf of the Fund. The Investment Manager
provides a continuous investment program including general investment and
economic advice regarding the Fund's investment strategies, manages the
Fund's investment portfolio and provides other services necessary to the
operation of the Fund and the Trust. The Investment Manager is registered as
an investment adviser under the Investment Advisers Act of 1940, as amended,
and currently provides investment management services to institutional and
other investors. As of September 30, 1998, the Investment Manager had
approximately $1.8 billion of total assets under management under several
investment strategies (including over $1 billion invested in fixed-income
securities).
The Investment Management Agreement will be in effect for a two-year term
from its effective date, and thereafter will continue in effect for one-year
terms, subject to annual approval by: (1) the Trust's Board of Trustees or
(2) a vote of the majority (as defined in the 1940 Act) of the outstanding
voting securities of the Fund. In either event, the continuance must also be
approved by a majority of the Trust's Board of Trustees who are not parties
to the Agreement, or interested persons (as defined in the 1940 Act) of any
such party, by vote cast in person at a meeting called for the purpose of
voting on such approval. The Investment Management Agreement may be
terminated at any time upon 60-days notice by either party, or by a majority
vote of the outstanding shares of the Fund, and will terminate automatically
upon assignment (as defined in the 1940 Act).
Pursuant to the Investment Management Agreement, the Investment Manager is
entitled to receive from the Fund an annual fee, payable monthly, of 0.25% of
the Fund's average daily net assets. The Investment Management Agreement
allows the Investment Manager voluntarily to waive any portion of its fees
payable under the Agreement and to reimburse all or a portion of the Fund's
expenses. The Investment Management Agreement further provides that the Fund
may reimburse the Investment Manager for any reductions made to its
management fee and any payments by the Investment Manager of operating
expenses that the Fund is obligated to pay within the three-year period
following such reduction or payment. The reimbursement to the Investment
Manager is subject to (1) the Investment Manager's request for such
reimbursement, (2) approval of such request by the Trust's Board of
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<PAGE>
Trustees, and (3) the reimbursement of such request can be achieved within
the Fund's then current expense limits provided that such reimbursements
shall only be paid after the Fund's current expenses of the fiscal year have
been paid and that such reimbursements do not require the Investment Manager
to waive or reduce its fees or to pay current Fund expenses. For the initial
fiscal year ended October 31, 1998, the Investment Manager earned $192,672 in
fees under the Investment Management Agreement, of which $111,811 was waived
by the Investment Manager, but may be subject to reimbursement as described
above.
SHAREHOLDER SERVICES AGREEMENT.
The Investment Manager has entered into a Shareholder Services Agreement with
the Trust on behalf of the Fund. Pursuant to the Shareholder Services
Agreement, the Investment Manager will provide, or will arrange for others to
provide, certain specified shareholder services to shareholders of the Fund.
As compensation for the provision of such services, the Fund will pay the
Investment Manager a fee of up to 0.25% of the Fund's average daily net
assets on an annual basis, payable monthly. The Investment Manager will pay
certain banks, trust companies, broker-dealers, and other institutions (each
a "Participating Organization") out of the fees the Investment Manager
receives from the Fund under the Shareholder Services Agreement to the extent
that the Participating Organization performs shareholder servicing functions
for the Fund with respect to shares of the Fund owned from time to time by
customers of the Participating Organization. In certain cases, the
Investment Manager may also pay a fee, out of its own resources and not out
of the service fee payable under the Shareholder Services Agreement, to a
Participating Organization for providing other administrative services to its
customers who invest in the Fund.
Pursuant to the Shareholder Services Agreement, the Investment Manager will
provide or arrange with a Participating Organization for the provision of the
following shareholder services: responding to shareholder inquiries;
processing purchases and redemptions of the Fund's shares, including
reinvestment of dividends; assisting shareholders in changing dividend
options, account designations, and addresses; transmitting proxy statements,
annual reports, prospectuses, and other correspondence from the Fund to
shareholders (including, upon request, copies, but not originals, of regular
correspondence, confirmations, or regular statements of account) where such
shareholders hold shares of the Fund registered in the name of the Investment
Manager, a Participating Organization, or their nominees; and providing such
other information and assistance to shareholders as may be reasonably
requested by such shareholders.
The Investment Manager may also enter into agreements with Participating
Organizations that process substantial volumes of purchases and redemptions
of shares of the Fund for their customers. Under these arrangements, the
Transfer Agent will ordinarily maintain an omnibus account for a
Participating Organization and the Participating Organization will maintain
sub-accounts for its customers for whom it processes purchases and
redemptions of shares. A Participating Organization may charge its customers
a fee, as agreed upon by the Participating Organization and the customer, for
the services it provides. Customers of participating Organizations should
read the Fund's Prospectus in conjunction with the service agreement and
other literature describing the services and related fees provided by the
Participating Organization to its customers prior to any purchase of shares.
EXPENSES
The Trust pays the expenses of its operations, including: the fees and
expenses of independent accountants, counsel and the custodian; the cost of
reports and notices to shareholders; the cost of calculating net asset value;
registration fees; the fees and expenses of qualifying the Trust and its
shares
13
<PAGE>
for distribution under federal and state securities laws; and membership dues
in the Investment Company Institute and, or other industry association
membership dues.
PRINCIPAL UNDERWRITER
Pursuant to an Underwriting Agreement, Berkeley International Securities
Corporation (the "Principal Underwriter") is the principal underwriter for
shares of the Trust and is the Trust's agent for the purpose of the
continuous offering of the Fund's shares. The Principal Underwriter is an
affiliate of the Investment Manager. The Fund pays the cost for the
prospectuses and shareholder reports to be prepared and delivered to existing
shareholders. The Principal Underwriter pays such costs when the described
materials are used in connection with the offering of shares to prospective
investors and for supplementary sales literature and advertising. The
Principal Underwriter receives no fee under the Underwriting Agreement.
Terms of continuation, termination, and assignment under the Underwriting
Agreement are identical to those described above with respect to the
Investment Management Agreement.
TRANSFER AGENT AND SHAREHOLDER SERVICES
Pursuant to a Transfer Agent and Shareholder Services Agreement, Firstar
Mutual Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 (the
"Transfer Agent") serves as shareholder services agent and transfer agent for
the Fund. The Transfer Agent provides information and services to the Fund's
shareholders which include reporting share ownership, sales, and dividend
activity (and associated tax consequences), responding to daily inquiries,
and effecting the transfer of Fund shares. It furnishes such office space
and equipment, telephone facilities, personnel, and informational literature
distribution as is necessary or appropriate in providing shareholder and
transfer agency information and services.
CUSTODIAN AND FUND ACCOUNTANT
Pursuant to a Custodian Agreement, Firstar Bank Milwaukee, N. A., the Fund's
custodian (the "Custodian"), also serves as the Custodian of the Fund's
assets. Under the terms of the Custodian Agreement, the Custodian holds and
administers the securities and cash in the Fund's portfolio.
Pursuant to a Fund Accounting Servicing Agreement, Firstar Mutual Fund
Services, LLC also provides fund accounting services to the Trust and the
Fund.
INDEPENDENT ACCOUNTANTS AND REPORTS TO SHAREHOLDERS
The Trust's independent accountants, PricewaterhouseCoopers LLP, audit and
report on the annual financial statements of the Fund and review the Fund's
federal income tax return. PricewaterhouseCoopers LLP may also perform other
professional accounting, auditing, tax, and advisory services when engaged to
do so by the Trust. Shareholders will be sent audited annual and unaudited
semi-annual financial statements. The address of PricewaterhouseCoopers LLP
is 100 East Wisconsin Avenue, Suite 1500, Milwaukee, Wisconsin 53202.
LEGAL COUNSEL
The validity of the shares of beneficial interest offered hereby will be
passed upon by Paul, Hastings, Janofsky & Walker LLP, 345 California Street,
San Francisco, California 94104.
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PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to: pursue the objective of
the Fund in relation to movements in the general level of interest rates;
invest money obtained from the sale of Fund shares; reinvest proceeds from
maturing portfolio securities; and meet redemptions of Fund shares.
Portfolio transactions may increase or decrease the yield of the Fund
depending upon management's ability correctly to time and execute them.
The Investment Manager, in effecting purchases and sales of portfolio
securities for the account of the Fund, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the
Investment Manager generally selects broker-dealers for the Fund primarily on
the basis of the quality and reliability of services provided, including
execution capability and financial responsibility.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the
services of broker-dealers that provide it with investment information and
other research resources. Such resources may also be used by the Investment
Manager when providing advisory services to other investment advisory
clients, including other mutual funds.
The Trust expects that purchases and sales of portfolio securities will
usually be principal transactions. Securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities.
Purchases from underwriters will include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers serving as market
makers will include the spread between the bid and asked prices.
Investment decisions for the Fund are reached independently from those for
other accounts managed by the Investment Manager. Such other accounts may
also make investments in instruments or securities at the same time as the
Fund. On occasions when the Investment Manager determines the purchase or
sale of a security to be in the best interest of the Fund as well as of other
clients, the Investment Manager, to the extent permitted by applicable laws
and regulations, may aggregate the securities to be so purchased or sold in
an attempt to obtain the most favorable price or lower brokerage commissions
and the most efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Investment Manager in the manner it
considers to be the most equitable under the circumstances and consistent
with its fiduciary obligations to the Fund and to its other participating
clients. In some cases this procedure may affect the size or price of the
position obtainable for the Fund.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded from
required portfolio turnover rate calculations, the Fund's portfolio turnover
rate for reporting purposes is expected to be zero.
15
<PAGE>
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
On each day that the Fund's net asset value per share is determined (each a
"Business Day"), the Fund's net investment income will be declared as of the
close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time) as a dividend to shareholders of record as of the last calculation of
net asset value prior to the declaration and to shareholders investing on
that day subject to the following conditions: (1) receipt of the purchase
order by the Transfer Agent before 1:30 p.m. Eastern time; and (2) payment in
immediately available funds wired to the Transfer Agent by the close of
business the same day. Purchases made by check will begin receiving dividends
on the Business Day the Transfer Agent receives the check if the check is
received by 1:30 p.m. Eastern time, or on the following Business Day if the
check is received after 1:30 p.m. Eastern time. Shareholders will receive
dividends in additional shares unless they elect to receive cash. Dividends
will normally be reinvested monthly in full and fractional shares of the Fund
at the net asset value on the last Business Day of each month. If cash
payment is requested, checks will normally be mailed on the Business Day
following the dividend reinvestment date. The Fund will pay shareholders who
redeem all of their shares all dividends accrued to the time of the
redemption within seven days after the redemption.
The Fund calculates its dividends based on its daily net investment income.
For this purpose, the net investment income of the Fund consists of: (1)
accrued interest income, plus or minus amortized discount or premium, less
(2) accrued expenses allocated to the Fund. If the Fund realizes any capital
gains, they will be distributed at least once during the year as determined
by the Board of Trustees. Any realized capital losses to the extent not
offset by realized capital gains will be carried forward up to eight years.
It is not anticipated that the Fund will realize any long-term capital gains.
Expenses of the Trust are accrued daily. Should the net asset value of the
Fund deviate significantly from market value, the Board of Trustees could
decide to value the investments at market value, and any unrealized gains and
losses could affect the amount of the Fund's distributions.
FEDERAL INCOME TAXES
It is the policy of the Fund to qualify for taxation, and to elect to be
taxed, as a "regulated investment company" by meeting the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
In order to so qualify, the Fund will distribute each year substantially all
of its investment company taxable income (if any), its net exempt-interest
income (if any), and its net capital gains (if any), and will seek to meet
certain other requirements. Such qualification relieves the Fund of
liability for federal income taxes to the extent the Fund's earnings are
distributed. By following this policy, the Fund expects to eliminate or
reduce to a nominal amount the federal income tax to which it is subject.
In order to qualify as a regulated investment company, the Fund must, among
other things, annually (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stocks, securities, foreign currencies or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in stocks, securities or
currencies and (2) diversify its holdings so that at the end of each quarter
of its taxable year (i) at least 50% of the market value of the Fund's total
assets is represented by cash or cash items, U.S. Government securities,
securities of other regulated investment companies and other securities
limited, in respect of any one issuer, to a value not greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its assets is
invested in the securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies) or of two
or more issuers that the Fund controls,
16
<PAGE>
within the meaning of the Code, and that are engaged in the same, similar or
related trades or businesses. If the Fund qualifies as a regulated investment
company, it will not be subject to federal income tax on the part of its net
investment income and net realized capital gains, if any, which it
distributes to shareholders, provided that the Fund meets certain minimum
distribution requirements. To comply with these requirements, the Fund must
distribute annually at least (a) 90% of its "investment company taxable
income" (as that term is defined in the Code) and (b) 90% of the excess of
its (i) tax-exempt interest income over (ii) certain deductions attributable
to that income (with certain exceptions), for its taxable year. The Fund
intends to make sufficient distributions to shareholders to meet these
requirements.
If the Fund fails to distribute in a calendar year (regardless of whether it
has a non-calendar taxable year) at least 98 percent of its (i) ordinary
income for such year; and (ii) capital gain net income for the one-year
period ending on October 31 of that calendar year (or later if the Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a nondeductible 4% excise tax on the
undistributed amounts. The Fund intends generally to make distributions
sufficient to avoid imposition of this excise tax.
Any distributions declared by the Fund in October, November, or December to
shareholders of record during those months and paid during the following
January are treated, for tax purposes, as if they were received by each
shareholder on December 31 of the year declared. The Fund may adjust its
schedule for the reinvestment of distributions for the month of December to
assist in complying with the reporting and minimum distribution requirements
of the Code.
The Fund does not expect to realize any significant amount of long-term
capital gain. However, any distributions by the Fund of long-term capital
gain will be taxable to the shareholders as long-term capital gain,
regardless of how long a shareholder has held the Fund's shares.
The Fund may engage in investment techniques that may alter the timing and
character of the Fund's income. The Fund may be restricted in its use of
these techniques by rules relating to its qualification as a regulated
investment company.
The Fund may invest in some Variable Rate Demand Securities which have a
feature entitling the purchaser to resell the securities at a specified
amount (a "put option"). The Internal Revenue Service (the "IRS") has issued
a revenue ruling to the effect that, under specified circumstances, a
regulated investment company will be the owner of tax-exempt municipal
obligations acquired with a put option. The IRS subsequently announced that
it will not ordinarily issue advance letter ruling as to the identity of the
true owner of property in cases involving the sale of securities (or
participation interests therein) if the purchaser has the right to cause the
security (or participation interest therein) to be purchased by the seller or
a third party. The Fund intends to take the position that it is the owner of
any securities with respect to which it also holds a put option.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends paid to any shareholder (1) who fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) who provides an incorrect taxpayer identification number; (3)
who is subject to withholding for failure to properly report to the IRS all
payments of interest or dividends; or (4) who fails to provide a certified
statement that he or she is not subject to "backup withholding." This
"backup withholding" is not an additional tax and any amounts withheld may be
credited against the shareholder's ultimate U.S. tax liability.
The foregoing discussion relates only to federal income tax law as applicable
to U.S. citizens or residents. Foreign shareholders (i.e., nonresident alien
individuals and foreign corporations,
17
<PAGE>
partnerships, trusts and estates) generally are subject to U.S. withholding
tax at the rate of 30% (or a lower tax treaty rate) on distributions derived
from net investment income and short-term capital gains. Distributions to
foreign shareholders of long-term capital gains and any gains from the sale
or disposition of shares of the Fund generally are not subject to U.S.
taxation, unless the recipient is an individual who meets the Code's
definition of "resident alien." Different tax consequences may result if the
foreign shareholder is engaged in a trade or business within the U.S. In
addition, the tax consequences to a foreign shareholder entitled to claim the
benefits of a tax treaty may be different than those described above.
Distributions by the Fund may also be subject to state, local and foreign
taxes, and their treatment under applicable tax laws may differ from the U.S.
federal income tax treatment.
The information above is only a summary of some of the tax considerations
generally affecting the Fund and its shareholders. No attempt has been made
to discuss individual tax consequences and this discussion should not be
construed as applicable to all shareholders' tax situations. Investors
should consult their own tax advisors to determine the suitability of the
Fund and the applicability of any state, local, or foreign taxation. Paul,
Hastings, Janofsky & Walker LLP has expressed no opinion in respect thereof.
Foreign shareholders should consider, in particular, the possible application
of U.S. withholding taxes on certain taxable distributions from the Fund at
rates up to 30% (subject to reduction under certain income tax treaties).
18
<PAGE>
SHARE PRICE CALCULATION
The Fund values its portfolio instruments at amortized cost, which means they
are valued at their acquisition cost, as adjusted for amortization of premium
or discount, rather than at current market value. Calculations are made to
compare the value of the Fund's investments at amortized cost with market
values. Market valuations are obtained by using actual quotations provided by
market makers, estimates of market value, or values obtained from yield data
relating to classes of money market instruments published by reputable
sources at the bid prices for the instruments. The amortized cost method of
valuation seeks to maintain a stable $1.00 per share net asset value even
where there are fluctuations in interest rates that affect the value of
portfolio instruments. Accordingly, this method of valuation can in certain
circumstances lead to a dilution of a shareholder's interest.
If a deviation of 1/2 of 1% or more were to occur between the net asset value
per share calculated by reference to market values and the Fund's $1.00 per
share net asset value, or if there were any other deviation that the Board of
Trustees of the Trust believed may result in a material dilution or other
unfair results to investors or existing shareholders, the Board of Trustees
is required to cause the Fund to take such action as it deems appropriate to
eliminate or reduce to the extent reasonably practicable such dilution or
unfair results. If the Fund's net asset value per share (computed using
market values) declined, or were expected to decline, below $1.00 (computed
using amortized cost), the Board of Trustees might temporarily reduce or
suspend dividend payments in an effort to maintain the net asset value at
$1.00 per share. As a result of such reduction or suspension of dividends or
other action by the Board of Trustees, an investor would receive less income
during a given period than if such a reduction or suspension had not taken
place. Such action could result in investors receiving no dividends for the
period during which they hold their shares and receiving, upon redemption, a
price per share lower than that which they paid. On the other hand, if the
Fund's net asset value per share (computed using market values) were to
increase, or were anticipated to increase above $1.00 (computed using
amortized cost), the Board of Trustees might supplement dividends in an
effort to maintain the net asset value at $1.00 per share.
YIELD
The historical performance of the Fund may be shown in the form of yield and
effective yield. These measures of performance are described below.
YIELD Yield refers to the net investment income generated by a
hypothetical investment in the Fund over a specific seven-day period. This
net investment income is then annualized, which means that the net investment
income generated during the seven-day period is assumed to be generated in
each seven-day period over an annual period, and is shown as a percentage of
the investment.
EFFECTIVE YIELD Effective yield is calculated similarly, but the net
investment income earned by the investment is assumed to be compounded weekly
when annualized. The effective yield will be slightly higher than the yield
due to this compounding effect.
As of the Fund's fiscal year ended October 31, 1998, the Fund's 7 day yield
was 4.73% and the 7 day effective yield was 4.84%.
19
<PAGE>
GENERAL INFORMATION
The Trust was organized as a business trust under the laws of Delaware on
October 28, 1996 and may issue an unlimited number of shares of beneficial
interest or classes of shares in one or more separate series. Currently, the
Trust offers shares of only one series (the Fund described in this SAI). The
Trust's Board of Trustees may authorize the issuance of shares of additional
series or classes of shares of beneficial interest if it deems it desirable.
The Trust is generally not required to hold shareholder meetings. However, as
provided in its Agreement and Declaration of Trust and its Bylaws,
shareholder meetings may be called by the Trustees for the purpose as may be
prescribed by law, the Agreement and Declaration of Trust, or the Bylaws, or
for the purpose of taking action upon any other matter deemed by the Trustees
to be necessary or desirable including changing fundamental policies,
electing or removing Trustees, or approving or amending an investment
advisory agreement. In addition, a Trustee may be removed by shareholders at
a special meeting called upon written request of shareholders owning in the
aggregate at least 10% of the outstanding shares of the Trust.
Each Trustee serves until the next meeting of shareholders, if any, called
for the purpose of electing trustees and until the election and qualification
of his or her successor or until death, resignation, declaration of
bankruptcy or incompetence by a court of competent jurisdiction, or removal
by a majority vote of the shares entitled to vote (as described below) or of
a majority of the Trustees. In accordance with the 1940 Act (i) the Trust
will hold a shareholder meeting for the election of trustees when less than a
majority of the trustees have been elected by shareholders, and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled
by a vote of the shareholders.
The Agreement and Declaration of Trust provides that one-third of the shares
entitled to vote shall be a quorum for the transaction of business at a
shareholders' meeting, except when a larger quorum is required by applicable
law, by the Bylaws or by the Agreement and Declaration of Trust, and except
that where any provision of law, of the Agreement and Declaration of Trust,
or of the Bylaws permits or requires that (i) holders of any series shall
vote as a series, then a majority of the aggregate number of shares of that
series entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that series; or (ii) holders of any class shall
vote as a class, then a majority of the aggregate number of shares of that
class entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that class. Any lesser number shall be sufficient
for adjournments. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting, without the
necessity of further notice. The Agreement and Declaration of Trust
specifically authorizes the Board of Trustees to terminate the Trust (or any
of its investment portfolios) by notice to the shareholders without
shareholder approval.
For further information, please refer to the registration statement and
exhibits for the Trust on file with the SEC in Washington, D.C. and available
upon payment of a copying fee. The statements in the Prospectus and this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
PRINCIPAL HOLDERS OF SECURITIES
As of November 30, 1998 North American Trust Company, 225 Broadway, San
Diego, California, 92101, as fiduciary for its various clients, was holder of
99.9% of the outstanding shares of the Fund.
20
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
The Fund's minimum initial investment is $100,000 and subsequent investments
of $1,000 or more may be made. These minimum requirements may be changed at
any time and are not applicable to certain types of investors. Exceptions to
the minimum investment requirements may be made at the discretion of the
Investment Manager including, without limitation, for employees or affiliates
of the Investment Manager or investors who are, or are related to or
affiliated with, clients of the Investment Manager. The Fund will accept
investments in cash only in U.S. dollars.
The Trust reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order in-kind
by making payment in readily marketable securities chosen by the Fund and
valued as they are for purposes of computing the Fund's net asset value.
However, the Trust has elected to commit itself to pay in cash all requests
for redemption by any Shareholder of record, limited in amount with respect
to each Shareholder during any 90-day period to the lesser of: (i) $250,000,
or (ii) one percent of the net asset value of the Fund at the beginning of
such period. If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities into cash.
To minimize administrative costs, share certificates will not be issued.
Records of share ownership are maintained by the Transfer Agent.
Investors should remember that it may be difficult to complete transactions
by telephone during periods of drastic economic or market changes, when phone
lines may become busy with calls from other investors. If you want to buy or
sell shares but have trouble reaching the Fund by telephone, you may want to
use another method for completing a transaction, even though an alternative
procedure may mean that completing your transaction may take a longer period
of time.
The Fund may be required to withhold federal income tax at a rate of 31%
(backup withholding) from dividend payments, distributions, and redemption
proceeds if a shareholder fails to furnish the Fund with his/her certified
social security or tax identification number. The shareholder also must
certify that the number is correct and that he/she is not subject to backup
withholding. The certification is included as part of the share purchase
application form. If the shareholder does not have a social security number,
he/she should indicate on the purchase form that an application to obtain the
number is pending. The Fund is required to withhold taxes if a number is not
delivered to the Fund within seven days.
OTHER INFORMATION
The Prospectus of the Fund and this Statement of Additional Information do
not contain all the information included in the Registration Statement filed
with the SEC under the Securities Act of 1933, as amended, with respect to
the securities offered by the Prospectus.
Certain portions of the Registration Statement have been omitted from the
Prospectus and this Statement of Additional Information pursuant to the rules
and regulations of the SEC. The Registration Statement including the exhibits
filed therewith may be examined at the office of the SEC in Washington, DC
Statements contained in the Prospectus or in this Statement of Additional
Information as to the contents of any contract or other document referred to
are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of
Additional Information form a part, each such statement being qualified in
all respects by such reference.
21
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THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFERING BY
THE TRUST, THE FUND, OR BY THE PRINCIPAL UNDERWRITER IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
FINANCIAL STATEMENTS
Audited financial statements for the period beginning March 23, 1998 through
October 31, 1998 for the Berkeley Money Market Fund, as contained in the
Annual Report to Shareholders of such Fund for the period beginning March 23,
1998 through October 31, 1998 (the "Report") are hereby incorporated by
reference to the Report.
22
<PAGE>
APPENDIX A - RATINGS OF INVESTMENT SECURITIES
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers (or related supporting institutions) of commercial paper with this
rating are considered to have a superior ability to repay short-term
promissory obligations. Issuers (or related supporting institutions) of
securities rated Prime-2 are viewed as having a strong capacity to repay
short-term promissory obligations. This capacity will normally be evidenced
by many of the characteristics of issuers whose commercial paper is rated
Prime-1 but to a lesser degree.
STANDARD & POOR'S CORPORATION
An S&P A-1 commercial paper rating indicates either an overwhelming or
very strong degree of safety regarding timely payment of principal and
interest. Issues determined to possess overwhelming safety characteristics
are denoted A-1+. Capacity for timely payment on commercial paper rated A-2
is strong, but the relative degree of safety is not as high as for issues
designated A-1.
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
MOODY'S INVESTORS SERVICE
Short-term notes and variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing. Obligations
rated MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection
although not as large as those of the top rated securities.
STANDARD & POOR'S CORPORATION
An S&P SP-1 rating indicates that the subject securities' issuer has a
very strong capacity to pay principal and interest. Issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
S&P's determination that an issuer has a satisfactory capacity to pay
principal and interest is denoted by an SP-2 rating.
BONDS
MOODY'S INVESTORS SERVICE
Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or
extraordinarily stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of these
issues. Bonds carrying an Aa designation are deemed to be of high quality by
all standards. Together with Aaa rated bonds, they comprise what are
generally known as high grade bonds. Aa bonds are rated lower than the best
bonds because they may enjoy relatively lower margins of protections,
fluctuations of protective elements may be of greater amplitude or there may
be other factors present which make them appear to be subject to somewhat
greater long-term risks.
A-1
<PAGE>
STANDARD & POOR'S CORPORATION
AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An
AA rating denotes a bond whose issuer has a very strong capacity to pay
interest and repay principal and differs from an AAA rating only in small
degree.
A-2
<PAGE>
PART C
------------------
OTHER INFORMATION
------------------
<PAGE>
BERKELEY FUNDS
F O R M N-1A
PART C. OTHER INFORMATION
Item 23. EXHIBITS.
(a)(i) Agreement and Declaration of Trust(1)
(ii) Amendment to Agreement and Declaration of Trust(1)
(b) By-Laws(1)
(c) Instruments Defining Rights of Security Holder -- Not
Applicable
(d)(i) Investment Management Agreement(1)
(ii) Amendment to Investment Management Agreement(2)
(e) Underwriting Agreement with Berkeley International Securities
Corporation(1)
(f) Bonus, Profit Sharing, Pension and Other Similar Arrangements
-- Not Applicable
(g) Custodian Agreement(1)
Other Material Contracts:
(h)(i) Fund Administration Servicing Agreement(1)
(ii) Fund Accounting Servicing Agreement(1)
(iii)Transfer Agent Agreement(1)
(iv) Shareholder Services Agreement(1)
(i) Opinion and Consent of Counsel(1)
(j) Consent of Independent Accountants(2)
(k) Financial Statements Omitted from Item 23 -- Not Applicable
(l) Subscription Agreement(1)
(m) Rule 12b-1 Plan -- Not Applicable
(n) Financial Data Schedule is incorporated by reference to Form
N-SAR filed for the period ended October 31, 1998.
(o) Multiple Class Plan -- Not Applicable
- --------------
(1) Previously filed as an exhibit to Registrant's Registration Statement
(File Nos. 333-16093 and 811-7923) and incorporated herein by reference.
(2) Filed herewith
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
C-1
<PAGE>
Item 25. INDEMNIFICATION.
Please see Article VI of the Registrant's By-Laws, previously filed as an
Exhibit. Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking:
"Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, 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 trustee, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, 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."
Notwithstanding the provisions contained in the Registrant's By-Laws, in
the absence of authorization by the appropriate court on the merits pursuant to
Sections 4 and 5 of Article VI of said By-Laws, any indemnification under said
Article shall be made by Registrant only if authorized in the manner provided in
either subsection (a) or (b) of Section 6 of said Article VI.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Please see Parts A and B of this Registration Statement for discussion of
the Investment Adviser.
Item 27. PRINCIPAL UNDERWRITERS.
(a) Not Applicable.
C-2
<PAGE>
(b) The following information is furnished with respect to the
officers and directors of Berkeley International Securities
Corporation, the Registrant's principal underwriter:
Name Positions and Offices Positions and Offices
with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Robert A. Cornman General Counsel None
Assistant Secretary
Diane E. Worthington Financial/Operations None
Principal
Wendy J. Beller Director of Compliance Compliance Officer
Danell J. Doty Operations Manager Vice President
and Secretary
Michael J. Mayer Director/Chairman None
Cindee Beechwood Financial and Operations Trustee, Treasurer
Principal Principal Financial Officer
The principal business address of each individual named above is 650
California Street, Suite 2800, San Francisco, California 94108.
(c) Not Applicable.
Item 28. LOCATIONS OF ACCOUNTS AND RECORDS.
The accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are kept by the Registrant at its offices, 650 California Street, Suite 2800,
San Francisco, California 94108. Firstar Trust Company, 615 E. Michigan
Street, Milwaukee, Wisconsin 53202 is the Registrant's transfer agent,
accounting, custodial, and administration records and maintains records
relating to such activities.
Item 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Part A
or Part B of this Registration Statement.
Item 30. UNDERTAKINGS.
(a) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, once such report becomes available, upon request and without
charge.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Post-Effective Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Francisco, the State of California, on the 29th day of December,
1998.
BERKELEY FUNDS
By: /s/ Debra McGinty-Poteet*
-----------------------------
Debra McGinty-Poteet, Chairman,
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below
by the following persons in the capacities and on the dates indicated.
/s/ Debra McGinty-Poteet*
- ----------------------------- Chairman, President December 29, 1998
Debra McGinty-Poteet
/s/ Cindee Beechwood*
- ----------------------------- Trustee, Treasurer, Principal December 29, 1998
Cindee Beechwood Financial Officer
/s/ Bryan W. Brown*
- ----------------------------- Trustee December 29, 1998
Bryan W. Brown
/s/ William R. Sweet*
- ----------------------------- Trustee December 29, 1998
William R. Sweet
/s/ Barnett Teich*
- ----------------------------- Trustee December 29, 1998
Barnett Teich
* By: /s/ Mitchell E. Nichter
- -----------------------------
Mitchell E. Nichter, pursuant to power of attorney previously filed.
C-4
<PAGE>
Amendment to the
----------------
Investment Management Agreement
-------------------------------
This Amendment to the Investment Management Agreement made and effective as
of the 17th day of April, 1998, amending said agreement made and effective as
of the 22nd day of January, 1997, by and between BERKELEY FUNDS, formally
known as Berkeley Capital Management Funds, a Delaware business trust
(hereinafter called the "Trust"), on behalf of each series of the Trust
listed in Appendix A hereto, as such as amended from time to time (each
series hereinafter referred to individually as a "Fund" and collectively as
the "Funds") and BERKELEY CAPITAL MANAGEMENT, a California corporation
(hereinafter called the "Advisor").
WITNESSETH:
8. Investment Advisory and Management Fee.
---------------------------------------
(d) The Advisor voluntarily may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement and may agree
to make payments to limit the expenses which are the responsibility of a Fund
under this Agreement. Any such reduction or payment shall be applicable only
to such specific reduction or payment and shall not constitute an agreement to
reduce any future compensation or reimbursement due to the Advisor hereunder
or to continue future payments. Any such reduction will be agreed upon prior
to accrual of the related expense or fee and will be estimated daily. Any fee
withheld shall be voluntarily reduced and any Fund expense paid by the Advisor
voluntarily or pursuant to an agreed expense limitation shall be reimbursed
by the appropriate Fund to the Advisor in the first, second, or third (or any
combination thereof) fiscal year next succeeding the fiscal year of the
withholding, reduction, or payment to the extent permitted by applicable law
and only if such reimbursements by a Fund (i) are requested by the Investment
Advisor, (ii) are approved by the Trust's Board of Trustees, and (iii) can be
achieved within a Fund's then current expense limits, if any for that
succeeding first, second, or third fiscal year as the case may be; provided
that such reimbursements shall only be paid after a Fund's current expenses of
the fiscal year have been paid and if such reimbursements do not require the
Advisor to waive or reduce its fees hereunder or to pay current Fund expenses.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Agreement to be duly executed and attested by their duly authorized officers
all on the day and year first above written.
BERKELEY FUNDS BERKELEY CAPITAL MANAGEMENT
By: /s/ Cindee Beechwood By: /s/ Michael J. Mayer
------------------------ ------------------------
Cindee Beechwood Michael J. Mayer
Treasurer Chairman
Date: 4-20-98 Date: 4-21-98
----------- -----------
<PAGE>
BERKELEY CAPITAL MANAGEMENT FUNDS
APPENDIX A
to the Investment Management Agreement
The provisions of the Investment Management Agreement between the Trust and
the Manager apply to the following series of the Trust:
1. Berkeley Capital Management Money Market Fund
Dated as of: January 22, 1997.
<PAGE>
Exhibit 99(j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 7 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 11, 1998, relating to the financial
statements and financial highlights appearing in the October 31, 1998 Annual
Report to Shareholders of Berkeley Money Market Fund, which is also
incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants and Reports to
Shareholders" in the Statement of Additional Information.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 29, 1998
