<PAGE>
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. 7 /x/
and
Registration Statement Under the Investment Company Act of 1940 /x/
Amendment No. 8 /x/
-------------------
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)
-------------------
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)
----------------
- --- 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)
X
- --- on April 30, 1999 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.
-------------------
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
<PAGE>
BERKELEY FUNDS
BERKELEY CALIFORNIA TAX EXEMPT FUND
BERKELEY GOVERNMENT 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 Class A Shares of Berkeley California
Tax Exempt Fund
- Part A: Prospectus for Class S Shares of Berkeley California
Tax Exempt Fund
- Part A: Prospectus for Institutional Class Shares of Berkeley
California Tax Exempt Fund
- Part A: Prospectus for Class A Shares of Berkeley Government
Fund
- Part A: Prospectus for Class S Shares of Berkeley Government
Fund
- Part A: Prospectus for Institutional Class Shares of Berkeley
Government Fund
- Part B: Statement of Additional Information for Berkeley
California Tax Exempt Fund and Berkeley Government Fund
Combined
- Part C: Other Information
- Signature Page
<PAGE>
BERKELEY FUNDS
CLASS A SHARES OF BERKELEY CALIFORNIA
TAX EXEMPT FUND
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
BERKELEY CALIFORNIA TAX EXEMPT FUND
CLASS A
PROSPECTUS DATED APRIL 30, 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.
Mutual fund shares and other securities are not bank deposits, nor are
they obligations of, or guaranteed by City National Bank. Mutual fund
shares and other securities are not FDIC insured. Investing in mutual
funds and other securities involves risks, including loss of
principal.
1
<PAGE>
TABLE OF CONTENTS
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Our goal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
How we plan to achieve our goal . . . . . . . . . . . . . . . . . . . . 4
Types of securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Classes of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risks of investing in our Fund. . . . . . . . . . . . . . . . . . . . . 5
Past performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Understanding expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Account policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Understanding earnings and taxes . . . . . . . . . . . . . . . . . . . . . .10
How to buy and sell shares . . . . . . . . . . . . . . . . . . . . . . . . .11
Buying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
For more information . . . . . . . . . . . . . . . . . . . . . . . .back cover
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.
2
<PAGE>
OVERVIEW
OUR GOAL
The Fund is a tax-exempt money market fund that seeks to preserve your
principal and maintain a high degree of liquidity while providing
current income that is exempt from federal, and to the extent
possible, California personal income tax. Also, the Fund seeks to
maintain a $1.00 per share net asset value. The goals 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 California
municipal money market securities. We invest at least 80% of the
Fund's net assets in municipal money market securities that pay
interest that is expected to be exempt from federal and California
income tax. The securities must have maturities of no more than 397
days and, in our opinion, present minimal credit risk.
TYPES OF SECURITIES
The fund invests primarily in money market instruments including:
- High-quality municipal bonds, notes and commercial paper.
High-quality bonds are those rated within the two highest grades by
rating agencies such as Standard & Poors (I.E. rated at least AA);
- Securities that pay interest which is not a preference item for
purposes of federal alternative minimum tax;
- Municipal obligations that pay interest which is expected to be exempt
from California personal income taxes;
Please review the SAI for more detailed descriptions of these securities.
CLASSES OF SHARES
This Prospectus offers Class A shares of the Fund. The Fund also
offers other classes of shares, which are subject to the same
expenses, except they may be subject to different distribution,
shareholder servicing and/or transfer agent costs.
3
<PAGE>
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.
CALIFORNIA RISK FACTORS. The Fund may be subject to greater risks
than other tax-exempt money market funds that are diversified across
issuers located in a number of states. Because the Fund concentrates
its investments in California municipal securities, the Fund is
vulnerable to changes in California's economy that may lessen the
ability of California municipal bond issuers to pay interest and
principal on their bonds.
TAXES. Although the Fund's objective is to provide income exempt from
federal and California state personal income taxes, some of its income
may be subject to the alternative minimum tax.
THE EFFECT OF INTEREST RATES. A money market fund's yield is affected
by interest rate changes. When rates decline, the fund's yield may
tend to be somewhat higher than prevailing market rates. When rates
rise, the fund's yield may tend to be somewhat lower.
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, although not guaranteed, that their systems
will be adapted in time to avoid serious problems. We do not expect
Year 2000 conversion costs to have a material impact on the Fund
because these costs are borne primarily by the Fund's vendors and
service providers, and not directly by the Fund.
4
<PAGE>
PAST PERFORMANCE
The Fund is a new series of the Trust and has recently commenced
operations. Therefore, no past performance information is available.
If you would like to know the current seven-day yield, call:
1-888-889-0799.
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 (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
<TABLE>
<S> <C>
Management Fee 0.27%
Distribution/Service (12b-1) Fee 0.50%
Other Expenses
Shareholder Servicing Fee 0.25%
Other Fund Expenses (estimated) 0.05%
------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES (ESTIMATED) 1.07%
</TABLE>
The "Management Fee" is an annual fee, payable monthly out of the Fund's
net assets.
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 0.78%. Any fee reductions or
reimbursements may be repaid to the investment manager within 3 years
after they occur. The investment manager may, however, choose to
waive them if the Fund cannot repay them and stay below the 0.78%
limit for that year. The fee waiver and reimbursement arrangement
cannot be terminated by the Fund, but may be terminated by the
investment manager.
5
<PAGE>
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. The example should not be
considered a representation of past or future expenses or performance.
Based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$109 $340
</TABLE>
6
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT MANAGER
City National Bank ("CNB") is the Fund's investment manager. As
investment manager, CNB provides the Fund with investment management
services, including the selection, appointment, and supervision of the
sub-adviser to the Fund. CNB may, in the future, and after having
secured the necessary SEC approval, change the sub-adviser to the Fund
according to certain procedures without soliciting shareholders'
approval.
CNB, founded in the early 1950's, is a federally chartered commercial
bank with approximately $6.4 billion in assets as of December 31, 1998.
It is a wholly-owned subsidiary of City National Corporation ("CNC"), a
New York Stock Exchange listed company. CNB's address is 400 North
Roxbury Drive, Beverly Hills, California 90210.
SUB-ADVISER
Weiss, Peck & Greer, L.L.C. ("WP&G") currently serves as the Fund's
sub-adviser pursuant to a sub-advisory agreement between the investment
manager and WP&G. Under the sub-advisory agreement, WP&G provides
investment advisory and portfolio management services to the Fund. WP&G
is located at One New York Plaza, New York, New York 10004. WP&G has
been in the investment management business since 1970, and engages in
investment management, venture capital management and management buyouts.
Since its founding, WP&G has been active in managing portfolios of tax
exempt securities WP&G has assets under management totaling approximately
$16 billion as of _____________.
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
SEI Investments Mutual Funds Services serves as administrator and fund
accountant to the Fund. SEI Investments Fund Management ("SEI") serves
as transfer agent for the Fund. Both companies are located at Oaks,
Pennsylvania 19456 and can be reached at 1-800-342-5734.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") serves as the
Fund's distributor pursuant to a distribution agreement with the Fund..
The Distributor is located at Oaks, Pennsylvania, 19456 and can be
reached at 1-888-889-0799.
7
<PAGE>
ACCOUNT POLICIES
HOW WE PRICE SHARES. Shares are priced at net asset value (NAV) which
is expected to remain constant at $1.00. 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,
usually by 2:00 p.m. Eastern time. Shares are not priced on any day
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.
8
<PAGE>
UNDERSTANDING EARNINGS AND TAXES
DECLARING AND PAYING DIVIDENDS. Dividends are declared each day the NAV
is calculated. Dividends and net capital gains (if any) normally are
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.
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 the Fund in writing.
- You may receive dividends by mail, but only if you instruct the Fund
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 the Distributor at
1-888-889-0799.
TAX CONSIDERATIONS. The Fund intends to distribute substantially all of
its net investment income (including net short-term capital gain) to
shareholders. If, at the close of each quarter of its taxable year, at
least 50% of the value of the Fund's total assets consists of
obligations the interest on which is excludable from gross income, the
Fund may pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends are excludable from a shareholder's gross
income for federal income tax purposes, but may have certain collateral
federal tax consequences including alternative minimum tax consequences.
The Fund also intends to qualify to pay dividends to shareholders that
are exempt from California personal income tax ("California
exempt-interest dividends") . The Fund will qualify to pay California
exempt-interest dividends if (1) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of the Fund's total
assets consists of obligations the interest on which would be exempt
from California personal income tax if the obligations were held by an
individual ("California Tax Exempt Obligations") and (2) the Fund
continues to qualify as a regulated investment company. The Fund will
notify its shareholders of the amount of exempt-interest dividends each
year.
You will be notified at least annually about the tax consequences of
distributions made each year. BE SURE TO CONSULT YOUR 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%.
9
<PAGE>
HOW TO BUY AND SELL SHARES
Here are the details you should know about buying and selling shares:
HOW TO PLACE AN ORDER. You may place an order with:
- an approved broker-dealer; or
- any other approved financial institution.
ORDERING THROUGH A BROKER-DEALER OR FINANCIAL INSTITUTION. If you have
problems with your order, you must resolve those problems directly with
the entity with whom you are dealing. Other financial institutions may
offer different services and charge additional fees.
WHEN ORDERS WILL BE COMPLETED. You may have to transmit or purchase or
exchange requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows the
financial institution time to process your request and transmit it to
the Fund. For more information about how to purchase or exchange fund
shares through your financial institution, you should contact your
financial institution directly.
If SEI receives your purchase order, through your financial institution
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 SEI
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 bring it above the minimum balance. If, after 30 days, the
account balance remains below the minimum, your shares may be sold and
your account closed without your consent. The proceeds will be mailed
to you, through your financial institution.
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.
WIRING FEE. The financial institution placing your order may charge its own
wiring fees.
OTHER REDEMPTION OPTIONS. Under conditions where cash redemptions are
detrimental to the Fund and its shareholders, we reserve the right to
make redemptions in
10
<PAGE>
readily marketable securities other than cash. Please see the SAI for a
more detailed discussion.
BUYING SHARES
FIRST TIME PURCHASES. You will have to follow your financial
institution's procedures for transacting with the Fund. Contact your
financial institution for more information.
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. You payment may be delayed by us or your
financial institution, if you buy shares by check and sell them before
your check clears - we will not send your proceeds until we have
received payment from the initial purchase. This delay may take up to
12 days from the date of your purchase. (You can avoid this delay by
purchasing shares by wire.)
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.
CONFIRMING AUTHENTICITY. SEI 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 SEI reserve the right to refuse an order if we cannot
reasonably confirm the authenticity of the instructions.
LIABILITY. We or SEI may be liable for losses from unauthorized or
fraudulent orders only if reasonable steps are not taken to verify an
order's authenticity.
11
<PAGE>
FOR MORE INFORMATION
BERKELEY CALIFORNIA TAX EXEMPT 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
(when available), please contact:
SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456
1-888-889-0799
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
12
<PAGE>
BERKELEY FUNDS
CLASS S SHARES OF BERKELEY CALIFORNIA
TAX EXEMPT FUND
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
BERKELEY CALIFORNIA TAX EXEMPT FUND
CLASS S
PROSPECTUS DATED APRIL 30, 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.
Mutual fund shares and other securities are not bank deposits, nor are
they obligations of, or guaranteed by City National Bank. Mutual fund
shares and other securities are not FDIC insured. Investing in mutual
funds and other securities involves risks, including possible loss of
principal.
1
<PAGE>
TABLE OF CONTENTS
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Our goal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
How we plan to achieve our goal . . . . . . . . . . . . . . . . . . . . 4
Types of securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Classes of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risks of investing in our Fund. . . . . . . . . . . . . . . . . . . . . 5
Past performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Understanding expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Account policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Understanding earnings and taxes . . . . . . . . . . . . . . . . . . . . . .10
How to buy and sell shares . . . . . . . . . . . . . . . . . . . . . . . . .11
Buying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
For more information . . . . . . . . . . . . . . . . . . . . . . . .back cover
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.
2
<PAGE>
OVERVIEW
OUR GOAL
The Fund is a tax-exempt money market fund that seeks to preserve your
principal and maintain a high degree of liquidity while providing
current income that is exempt from federal, and to the extent
possible, California personal income tax. Also, the Fund seeks to
maintain a $1.00 per share net asset value. The goals 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 California
municipal money market securities. We invest at least 80% of the
Fund's net assets in municipal money market securities that pay
interest that is expected to be exempt from federal and California
income tax. The securities must have maturities of no more than 397
days and, in our opinion, present minimal credit risk.
TYPES OF SECURITIES
The fund invests primarily in money market instruments including:
- High-quality municipal bonds, notes and tax-exempt commercial paper.
High-quality bonds are those rated within the two highest grades by
rating agencies such as Standard & Poors (I.E. rated at least AA);
- Securities that pay interest which is not a preference item for
purposes of federal alternative minimum tax;
- Municipal obligations that pay interest which is expected to be exempt
from California personal income taxes;
Please review the SAI for more detailed descriptions of these securities.
CLASSES OF SHARES
This Prospectus offers Class S shares of the Fund. The Fund also
offers other classes of shares, which are subject to the same
expenses, except they may be subject to different distribution,
shareholder servicing and/or transfer agent costs.
3
<PAGE>
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.
CALIFORNIA RISK FACTORS. The Fund may be subject to greater risks
than other tax-exempt money market funds that are diversified across
issuers located in a number of states. Because the Fund concentrates
its investments in California municipal securities, the Fund is
vulnerable to changes in California's economy that may lessen the
ability of California municipal bond issuers to pay interest and
principal on their bonds.
TAXES. Although the Fund's objective is to provide income exempt from
federal and California state personal income taxes, some of its income
may be subject to the alternative minimum tax.
THE EFFECT OF INTEREST RATES. A money market fund's yield is affected
by interest rate changes. When rates decline, the fund's yield may
tend to be somewhat higher than prevailing market rates. When rates
rise, the fund's yield may tend to be somewhat lower.
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, although not guaranteed, that their systems
will be adapted in time to avoid serious problems. We do not expect
Year 2000 conversion costs to have a material impact on the Fund
because these costs are borne primarily by the Fund's vendors and
service providers, and not directly by the Fund.
4
<PAGE>
PAST PERFORMANCE
The Fund is a new series of the Trust and has recently commenced
operations. Therefore, no past performance information is available.
If you would like to know the current seven-day yield, call:
1-888-889-0799.
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 (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
<TABLE>
<S> <C>
Management Fee 0.27%
Distribution/Service (12b-1) Fee 0.50%
Other Expenses
Shareholder Servicing Fee 0.25%
Other Fund Expenses (estimated) 0.05%
------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES (ESTIMATED) 1.07%
</TABLE>
The "Management Fee" is an annual fee, payable monthly out of the Fund's
net assets.
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 0.98%. Any fee reductions or
reimbursements may be repaid to the investment manager within 3 years
after they occur. The investment manager may, however, choose to
waive them if the Fund cannot repay them and stay below the 0.98%
limit for that year. The fee waiver and reimbursement arrangement
cannot be terminated by the Fund, but may be terminated by the
investment manager.
5
<PAGE>
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. The example should
not be considered a representation of past or future expenses or
performance.
Based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$109 $340
</TABLE>
6
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT MANAGER
City National Bank ("CNB") is the Fund's investment manager. As
investment manager, CNB provides the Fund with investment management
services, including the selection, appointment, and supervision of the
sub-adviser to the Fund. CNB may, in the future, and after having
secured the necessary SEC approval, change the sub-adviser to the Fund
according to certain procedures without soliciting shareholders'
approval.
CNB, founded in the early 1950's, is a federally chartered commercial
bank with approximately $6.4 billion in assets as of December 31,
1998. It is a wholly-owned subsidiary of City National Corporation
("CNC"), a New York Stock Exchange listed company. CNB's address is
400 North Roxbury Drive, Beverly Hills, California 90210.
SUB-ADVISER
Weiss, Peck & Greer, L.L.C. ("WP&G") currently serves as the Fund's
sub-adviser pursuant to a sub-advisory agreement between the
investment manager and WP&G. Under the sub-advisory agreement, WP&G
provides investment advisory and portfolio management services to the
Fund. WP&G is located at One New York Plaza, New York, New York
10004. WP&G has been in the investment management business since
1970, and engages in investment management, venture capital management
and management buyouts. Since its founding, WP&G has been active in
managing portfolios of tax exempt securities. WP&G has assets under
management totaling approximately $16 billion as of _____________.
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
SEI Investments Mutual Funds Services serves as administrator and fund
accountant to the Fund. SEI Investments Fund Management ("SEI")
serves as transfer agent for the Fund. Both companies are located at
Oaks, Pennsylvania 19456 and can be reached at 1-800-342-5734.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") serves as the
Fund's distributor pursuant to a distribution agreement with the
Fund.. The Distributor is located at Oaks, Pennsylvania, 19456 and
can be reached at 1-888-889-0799.
7
<PAGE>
ACCOUNT POLICIES
HOW WE PRICE SHARES. Shares are priced at net asset value (NAV) which
is expected to remain constant at $1.00. 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,
usually by 2:00 p.m. Eastern time. Shares are not priced on any day
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.
8
<PAGE>
UNDERSTANDING EARNINGS AND TAXES
DECLARING AND PAYING DIVIDENDS. Dividends are declared each day the
NAV is calculated. Dividends and net capital gains (if any) normally
are 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.
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 the Fund in writing.
- You may receive dividends by mail, but only if you instruct the Fund
in writing 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 the Distributor at 1-888-889-0799.
TAX CONSIDERATIONS. The Fund intends to distribute substantially all
of its net investment income (including net short-term capital gain)
to shareholders. If, at the close of each quarter of its taxable
year, at least 50% of the value of the Fund's total assets consists of
obligations the interest on which is excludable from gross income, the
Fund may pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends are excludable from a shareholder's gross
income for federal income tax purposes, but may have certain
collateral federal tax consequences including alternative minimum tax
consequences.
The Fund also intends to qualify to pay dividends to shareholders that
are exempt from California personal income tax ("California exempt-
interest dividends"). The Fund will qualify to pay California exempt-
interest dividends if (1) at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's total assets
consists of obligations the interest on which would be exempt from
California personal income tax if the obligations were held by an
individual ("California Tax Exempt Obligations") and (2) the Fund
continues to qualify as a regulated investment company. The Fund will
notify its shareholders of the amount of exempt-interest dividends
each year.
You will be notified at least annually about the tax consequences of
distributions made each year. BE SURE TO CONSULT YOUR 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%.
9
<PAGE>
HOW TO BUY AND SELL SHARES
Here are the details you should know about buying and selling shares:
HOW TO PLACE AN ORDER. You may place an order with:
- an approved broker-dealer; or
- any other approved financial institution.
ORDERING THROUGH A BROKER-DEALER OR FINANCIAL INSTITUTION. If you
have problems with your order, you must resolve those problems
directly with the entity with whom you are dealing. Other financial
institutions may offer different services and charge additional fees.
WHEN ORDERS WILL BE COMPLETED. You may have to transmit or purchase
or exchange requests to your financial institution at an earlier time
for your transaction to become effective that day. This allows the
financial institution time to process your request and transmit it to
the Fund. For more information about how to purchase or exchange fund
shares through your financial institution, you should contact your
financial institution directly.
If SEI receives your purchase order, through your financial
institution 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 SEI 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 bring it above the minimum balance. If, after 30
days, the account balance remains below the minimum, your shares may
be sold and your account closed without your consent. The proceeds
will be mailed to you, through your financial institution.
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.
WIRING FEE. The financial institution placing your order may charge
its own wiring fees.
OTHER REDEMPTION OPTIONS. Under conditions where cash redemptions are
detrimental to the Fund and its shareholders, we reserve the right to
make redemptions in
10
<PAGE>
readily marketable securities other than cash. Please see the SAI for a
more detailed discussion.
BUYING SHARES
FIRST TIME PURCHASES. You will have to follow your financial
institution's procedures for transacting with the Fund. Contact your
financial institution for more information.
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. You payment may be delayed by us or your
financial institution, if you buy shares by check and sell them before
your check clears - we will not send your proceeds until we have
received payment from the initial purchase. This delay may take up to
12 days from the date of your purchase. (You can avoid this delay by
purchasing shares by wire.)
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.
CONFIRMING AUTHENTICITY. SEI 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 SEI reserve the right to refuse an order if we cannot
reasonably confirm the authenticity of the instructions.
LIABILITY. We or SEI may be liable for losses from unauthorized or
fraudulent orders only if reasonable steps are not taken to verify an
order's authenticity.
11
<PAGE>
FOR MORE INFORMATION
BERKELEY CALIFORNIA TAX EXEMPT 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 (when available), please contact:
SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456
1-888-889-0799
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
12
<PAGE>
BERKELEY FUNDS
INSTITUTIONAL CLASS SHARES OF BERKELEY CALIFORNIA
TAX EXEMPT FUND
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
BERKELEY CALIFORNIA TAX EXEMPT FUND
INSTITUTIONAL CLASS
PROSPECTUS DATED APRIL 30, 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.
Mutual fund shares and other securities are not bank deposits, nor are they
obligations of, or guaranteed by City National Bank. Mutual fund shares
and other securities are not FDIC insured. Investing in mutual funds and
other securities involves risks, including loss of principal.
1
<PAGE>
TABLE OF CONTENTS
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Our goal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
How we plan to achieve our goal . . . . . . . . . . . . . . . . . . . . 4
Types of securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Classes of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risks of investing in our Fund. . . . . . . . . . . . . . . . . . . . . 5
Past performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Understanding expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Account policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Understanding earnings and taxes . . . . . . . . . . . . . . . . . . . . . .10
How to buy and sell shares . . . . . . . . . . . . . . . . . . . . . . . . .11
Opening an account. . . . . . . . . . . . . . . . . . . . . . . . . . .12
Buying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
For more information . . . . . . . . . . . . . . . . . . . . . . . .back cover
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.
2
<PAGE>
OVERVIEW
OUR GOAL
The Fund is a tax-exempt money market fund that seeks to preserve your
principal and maintain a high degree of liquidity while providing
current income that is exempt from federal, and to the extent
possible, California personal income tax. Also, the Fund seeks to
maintain a $1.00 per share net asset value. The goals 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 California
municipal money market securities. We invest at least 80% of the
Fund's net assets in municipal money market securities that pay
interest that is expected to be exempt from federal and California
income tax. The securities must have maturities of no more than 397
days and, in our opinion, present minimal credit risk.
TYPES OF SECURITIES
The fund invests primarily in money market instruments including:
- High-quality municipal bonds, notes and tax-exempt commercial paper.
High-quality bonds are those rated within the two highest grades by
rating agencies such as Standard & Poors (I.E. rated at least AA);
- Securities that pay interest which is not a preference item for
purposes of federal alternative minimum tax;
- Municipal obligations that pay interest which is expected to be exempt
from California personal income taxes;
Please review the SAI for more detailed descriptions of these
securities.
CLASSES OF SHARES
This Prospectus offers Institutional Class shares of the Fund. The
Fund also offers other classes of shares, which are subject to the
same expenses, except they may be subject to different distribution,
shareholder servicing and/or transfer agent costs.
3
<PAGE>
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.
CALIFORNIA RISK FACTORS. The Fund may be subject to greater risks
than other tax-exempt money market funds that are diversified across
issuers located in a number of states. Because the Fund concentrates
its investments in California municipal securities, the Fund is
vulnerable to changes in California's economy that may lessen the
ability of California municipal bond issuers to pay interest and
principal on their bonds.
TAXES. Although the Fund's objective is to provide income exempt from
federal and California state personal income taxes, some of its income
may be subject to the alternative minimum tax.
THE EFFECT OF INTEREST RATES. A money market fund's yield is affected
by interest rate changes. When rates decline, the fund's yield may
tend to be somewhat higher than prevailing market rates. When rates
rise, the fund's yield may tend to be somewhat lower.
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, although not guaranteed, that their systems
will be adapted in time to avoid serious problems. We do not expect
Year 2000 conversion costs to have a material impact on the Fund
because these costs are borne primarily by the Fund's vendors and
service providers, and not directly by the Fund.
4
<PAGE>
PAST PERFORMANCE
The Fund is a new series of the Trust and has recently commenced
operations. Therefore, no past performance information is available.
If you would like to know the current seven-day yield, call:
1-888-889-0799.
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 (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
<TABLE>
<S> <C>
Management Fee 0.27%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses
Shareholder Servicing Fee 0.25%
Other Fund Expenses (estimated) 0.05%
------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES (ESTIMATED) 0.57%
</TABLE>
The "Management Fee" is an annual fee, payable monthly out of the Fund's
net assets.
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 0.55%. Any fee reductions or
reimbursements may be repaid to the investment manager within 3 years
after they occur. The investment manager may, however, choose to
waive them if the Fund cannot repay them and stay below the 0.55%
limit for that year. The fee waiver and reimbursement arrangement
cannot be terminated by the Fund, but may be terminated by the
investment manager.
5
<PAGE>
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. The example should
not be considered a representation of past or future expenses or
performance.
Based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$58 $182
</TABLE>
6
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT MANAGER
City National Bank ("CNB") is the Fund's investment manager. As
investment manager, CNB provides the Fund with investment management
services, including the selection, appointment, and supervision of the
sub-adviser to the Fund. CNB may, in the future, and after having
secured the necessary SEC approval, change the sub-adviser to the Fund
according to certain procedures without soliciting shareholders'
approval.
CNB, founded in the early 1950's, is a federally chartered commercial
bank with approximately $6.4 billion in assets as of December 31,
1998. It is a wholly-owned subsidiary of City National Corporation
("CNC"), a New York Stock Exchange listed company. CNB's address is
400 North Roxbury Drive, Beverly Hills, California 90210.
SUB-ADVISER
Weiss, Peck & Greer, L.L.C. ("WP&G") currently serves as the Fund's
sub-adviser pursuant to a sub-advisory agreement between the
investment manager and WP&G. Under the sub-advisory agreement, WP&G
provides investment advisory and portfolio management services to the
Fund. WP&G is located at One New York Plaza, New York, New York
10004. WP&G has been in the investment management business since
1970, and engages in investment management, venture capital management
and management buyouts. Since its founding, WP&G has been active in
managing portfolios of tax exempt securities. WP&G has assets under
management totaling approximately $16 billion as of _____________.
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
SEI Investments Mutual Funds Services serves as administrator and fund
accountant to the Fund. SEI Investments Fund Management ("SEI")
serves as transfer agent for the Fund. Both companies are located at
Oaks, Pennsylvania 19456 and can be reached at 1-800-342-5734.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") serves as the
Fund's distributor pursuant to a distribution agreement with the
Fund. The Distributor is located at Oaks, Pennsylvania, 19456 and
can be reached at 1-888-889-0799.
7
<PAGE>
ACCOUNT POLICIES
HOW WE PRICE SHARES. Shares are priced at net asset value (NAV) which
is expected to remain constant at $1.00. 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,
usually by 2:00 p.m. Eastern time. Shares are not priced on any day
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.
8
<PAGE>
UNDERSTANDING EARNINGS AND TAXES
DECLARING AND PAYING DIVIDENDS. Dividends are declared each day the
NAV is calculated. Dividends and net capital gains (if any) normally
are 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.
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 the Fund in writing.
- You may receive dividends by mail, but only if you instruct the Fund
in writing 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 the Distributor at
1-888-889-0799.
TAX CONSIDERATIONS. The Fund intends to distribute substantially all
of its net investment income (including net short-term capital gain)
to shareholders. If, at the close of each quarter of its taxable
year, at least 50% of the value of the Fund's total assets consists of
obligations the interest on which is excludable from gross income, the
Fund may pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends are excludable from a shareholder's gross
income for federal income tax purposes, but may have certain
collateral federal tax consequences including alternative minimum tax
consequences.
The Fund also intends to qualify to pay dividends to shareholders that
are exempt from California personal income tax ("California
exempt-interest dividends") . The Fund will qualify to pay California
exempt-interest dividends if (1) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of the Fund's total
assets consists of obligations the interest on which would be exempt
from California personal income tax if the obligations were held by an
individual ("California Tax Exempt Obligations") and (2) the Fund
continues to qualify as a regulated investment company. The Fund will
notify its shareholders of the amount of exempt-interest dividends
each year.
You will be notified at least annually about the tax consequences of
distributions made each year. BE SURE TO CONSULT YOUR 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%.
9
<PAGE>
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, SEI;
- 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 SEI, 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 SEI 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
SEI 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 bring it above the minimum balance. If,
after 30 days, the account balance 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 SEI charges a $12 fee for wiring proceeds. The financial
institution placing your order may charge its own wiring fees.
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.
10
<PAGE>
OPENING AN ACCOUNT
To open an account, complete and sign an account application and mail
it to:
Berkeley California Tax Exempt Fund
c/o SEI Investments Distribution
Oaks, Pennsylvania 19456
ADDITIONAL REQUIREMENTS. If additional information is required, your
application will be considered incomplete until SEI 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 California Tax Exempt Fund"
and an application. After that, you may place orders by wiring or
mailing money to SEI.
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 SEI at 1-888-889-0799 to buy shares by wire. Wires
must be received by SEI through the Federal Reserve Wire system before
it closes (generally, 4:00 p.m. Eastern time) or SEI will not be able
to process your order that day.
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 SEI receives your sell order in proper form. Once
a check is mailed, the sale is irrevocable and may not be modified or
canceled.
11
<PAGE>
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 SEI 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 SEI 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.
BY TELEPHONE. Call SEI 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. SEI 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 SEI reserve the right to refuse an order if we cannot
reasonably confirm the authenticity of the instructions.
LIABILITY. We or SEI may be liable for losses from unauthorized or
fraudulent orders only if reasonable steps are not taken to verify an
order's authenticity.
12
<PAGE>
FOR MORE INFORMATION
BERKELEY CALIFORNIA TAX EXEMPT 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 (when available), please contact:
SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456
1-888-889-0799
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
13
<PAGE>
BERKELEY FUNDS
CLASS A SHARES OF BERKELEY GOVERNMENT FUND
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE
BERKELEY GOVERNMENT FUND
CLASS A
PROSPECTUS DATED APRIL 30, 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.
Mutual fund shares and other securities are not bank deposits, nor are
they obligations of, or guaranteed by City National Bank. Mutual fund
shares and other securities are not FDIC insured. Investing in mutual
funds and other securities involves risks, including loss of
principal.
<PAGE>
TABLE OF CONTENTS
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Our goal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
How we plan to achieve our goal . . . . . . . . . . . . . . . . . . . .4
Types of securities . . . . . . . . . . . . . . . . . . . . . . . . . .4
Classes of shares . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Risks of investing in our Fund. . . . . . . . . . . . . . . . . . . . .5
Past performance. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Understanding expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Fee table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Fee example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Account policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Understanding earnings and taxes . . . . . . . . . . . . . . . . . . . . . .9
How to buy and sell shares . . . . . . . . . . . . . . . . . . . . . . . . 10
Buying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
For more information . . . . . . . . . . . . . . . . . . . . . . . back cover
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.
2
<PAGE>
OVERVIEW
OUR GOAL
The Fund is a money market fund that seeks to preserve your principal
and maintain a high degree of liquidity while providing current
income. Also, the Fund seeks to maintain a $1.00 per share net asset
value. The goals 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 U.S.
government bonds and notes. The securities must have maturities of no
more than 397 days and, in our opinion, present minimal credit risk.
DIVERSIFICATION. The Berkeley Government 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 money market instruments including:
- High-quality bonds and notes rated within the two highest grades by
rating agencies such as Standard & Poors (I.E. rated at least AA);
- U.S. Treasury Obligations;
- Obligations issued or guaranteed as to principal and interest by the
agencies or instrumentalities of the U.S. Government; and
- Repurchase agreements involving these obligations.
Please review the SAI for more detailed descriptions of these
securities.
CLASSES OF SHARES
This Prospectus offers Class A shares of the Fund. The Fund also
offers classes of shares, which are subject to the same expenses,
except they may be subject to different distribution, shareholder
servicing and/or transfer agent costs.
3
<PAGE>
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 may
tend to be somewhat higher than prevailing market rates. When rates
rise, the fund's yield may tend to be somewhat lower.
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.
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, although not guaranteed, that their systems
will be adapted in time to avoid serious problems. We do not expect
Year 2000 conversion costs to have a material impact on the Fund
because these costs are borne primarily by the Fund's vendors and
service providers, and not directly by the Fund.
PAST PERFORMANCE
The Fund is a new series of the Trust and has recently commenced
operations. Therefore, no past performance information is available.
If you would like to know the current seven-day yield, call:
1-888-889-0799.
4
<PAGE>
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 (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
<TABLE>
<S> <C>
Management Fee 0.26%
Distribution/Service (12b-1) Fee 0.50%
Other Expenses
Shareholder Servicing Fee 0.25%
Other Fund Expenses (estimated) 0.12%
-------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES (ESTIMATED) 1.13%
</TABLE>
The "Management Fee" is an annual fee, payable monthly out of the
Fund's net assets.
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 0.85%. Any fee reductions or
reimbursements may be repaid to the investment manager within 3 years
after they occur. The investment manager may, however, choose to
waive them if the Fund cannot repay them and stay below the 0.85%
limit for that year. The fee waiver and reimbursement arrangement
cannot be terminated by the Fund, but may be terminated by the
investment manager.
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. The example should
not be considered a representation of past or future expenses or
performance.
Based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$115 $358
</TABLE>
5
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT MANAGER
City National Bank ("CNB") is the Fund's investment manager. As
investment manager, CNB provides the Fund with investment management
services, including the selection, appointment, and supervision of the
sub-adviser to the Fund. CNB may, in the future, and after having
secured the necessary SEC approval, change the sub-adviser to the Fund
according to certain procedures without soliciting shareholders'
approval.
CNB, founded in the early 1950's, is a federally chartered commercial
bank with approximately $6.4 billion in assets as of December 31,
1998. It is a wholly-owned subsidiary of City National Corporation
("CNC"), a New York Stock Exchange listed company. CNB's address is
400 North Roxbury Drive, Beverly Hills, California 90210.
SUB-ADVISER
Wellington Management Company, LLP ("Wellington") currently serves as
the Fund's sub-adviser pursuant to a sub-advisory agreement between
the investment manager and Wellington. Under the sub-advisory
agreement, Wellington provides investment advisory and portfolio
management services to the Fund. Wellington is located at 75 State
Street, Boston, Massachusetts 02109. Wellington and its predecessor
organizations have provided investment advisory service to investment
companies since 1928 and to investment counseling clients since 1960.
As of March 31, 1998, Wellington had discretionary management
authority with respect to approximately $193.9 billion in assets.
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
SEI Investments Mutual Funds Services serves as administrator and fund
accountant to the Fund. SEI Investments Fund Management ("SEI")
serves as transfer agent for the Fund. Both companies are located at
Oaks, Pennsylvania 19456 and can be reached at 1-800-342-5734.
DISTRIBUTOR
Sei Investments Distribution Co. (the "Distributor") serves as the
Fund's distributor pursuant to a distribution agreement with the
Fund.. The Distributor is located at Oaks, Pennsylvania, 19456 and
can be reached at 1-888-889-0799.
6
<PAGE>
ACCOUNT POLICIES
HOW WE PRICE SHARES. Shares are priced at net asset value (NAV) which
is expected to remain constant at $1.00. 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,
usually by 2:00 p.m. Eastern time. Shares are not priced on any day
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.
7
<PAGE>
UNDERSTANDING EARNINGS AND TAXES
DECLARING AND PAYING DIVIDENDS. Dividends are declared each day the
NAV is calculated. Dividends and net capital gains (if any) normally
are 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.
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 the Fund in writing.
- You may receive dividends by mail, but only if you the Fund in writing
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 the Distributor at
1-888-889-0799.
TAX CONSIDERATIONS. The Fund intends to distribute substantially all
of its net investment income (including net short-term capital gain)
to shareholders. If, at the close of each quarter of its taxable
year, at least 50% of the value of the Fund's total assets consists of
obligations the interest on which is excludable from gross income, the
Fund may pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends are excludable from a shareholder's gross
income for federal income tax purposes, but may have certain
collateral federal tax consequences including alternative minimum tax
consequences.
You will be notified at least annually about the tax consequences of
distributions made each year. BE SURE TO CONSULT YOUR 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%.
8
<PAGE>
HOW TO BUY AND SELL SHARES
Here are the details you should know about buying and selling shares:
HOW TO PLACE AN ORDER. You may place an order with:
- an approved broker-dealer; or
- any other approved financial institution.
ORDERING THROUGH A BROKER-DEALER OR FINANCIAL INSTITUTION. If you
have problems with your order, you must resolve those problems
directly with the entity with whom you are dealing. Other financial
institutions may offer different services and charge additional fees.
WHEN ORDERS WILL BE COMPLETED. You may have to transmit or purchase
or exchange requests to your financial institution at an earlier time
for your transaction to become effective that day. This allows the
financial institution time to process your request and transmit it to
the Fund. For more information about how to purchase or exchange fund
shares through your financial institution, you should contact your
financial institution directly.
If SEI receives your purchase order, through your financial
institution 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 SEI 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 bring it above the minimum balance. If,
after 30 days, the account balance remains below the minimum, your
shares may be sold and your account closed without your consent. The
proceeds will be mailed to you, through your financial institution.
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.
WIRING FEE. The financial institution placing your order may charge
its own wiring fees.
OTHER REDEMPTION OPTIONS. Under conditions where cash redemptions are
detrimental to the Fund and its shareholders, we reserve the right to
make redemptions in
9
<PAGE>
readily marketable securities other than cash. Please see the SAI for a
more detailed discussion.
BUYING SHARES
FIRST TIME PURCHASES. You will have to follow your financial
institution's procedures for transacting with the Fund. Contact your
financial institution for more information.
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. You payment may be delayed by us or your
financial institution, if you buy shares by check and sell them before
your check clears - we will not send your proceeds until we have
received payment from the initial purchase. This delay may take up to
12 days from the date of your purchase. (You can avoid this delay by
purchasing shares by wire.)
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.
CONFIRMING AUTHENTICITY. SEI 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 SEI reserve the right to refuse an order if we cannot
reasonably confirm the authenticity of the instructions.
LIABILITY. We or SEI may be liable for losses from unauthorized or
fraudulent orders only if reasonable steps are not taken to verify an
order's authenticity.
10
<PAGE>
FOR MORE INFORMATION
BERKELEY GOVERNMENT 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 (when available), please contact:
SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456
1-888-889-0799
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
11
<PAGE>
BERKELEY FUNDS
CLASS S SHARES OF BERKELEY GOVERNMENT FUND
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
BERKELEY GOVERNMENT FUND
CLASS S
PROSPECTUS DATED APRIL 30, 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.
Mutual fund shares and other securities are not bank deposits, nor are
they obligations of, or guaranteed by City National Bank. Mutual fund
shares and other securities are not FDIC insured. Investing in mutual
funds and other securities involves risks, including loss of
principal.
1
<PAGE>
TABLE OF CONTENTS
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Our goal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
How we plan to achieve our goal . . . . . . . . . . . . . . . . . . . . 4
Types of securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Classes of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risks of investing in our Fund. . . . . . . . . . . . . . . . . . . . . 5
Past performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Understanding expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Account policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Understanding earnings and taxes . . . . . . . . . . . . . . . . . . . . . . 9
How to buy and sell shares . . . . . . . . . . . . . . . . . . . . . . . . .10
Buying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
For more information . . . . . . . . . . . . . . . . . . . . . . . .back cover
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.
2
<PAGE>
OVERVIEW
OUR GOAL
The Fund is a money market fund that seeks to preserve your principal
and maintain a high degree of liquidity while providing current income.
Also, the Fund seeks to maintain a $1.00 per share net asset value. The
goals 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 U.S.
government bonds and notes. The securities must have maturities of no
more than 397 days and, in our opinion, present minimal credit risk.
DIVERSIFICATION. The Berkeley Government 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 money market instruments including:
- High-quality bonds and notes rated within the two highest grades by
rating agencies such as Standard & Poors (I.E. rated at least AA);
- U.S. Treasury Obligations;
- Obligations issued or guaranteed as to principal and interest by the
agencies or instrumentalities of the U.S. Government; and
- Repurchase agreements involving these obligations.
Please review the SAI for more detailed descriptions of these securities.
CLASSES OF SHARES
This Prospectus offers Class S shares of the Fund. The Fund also offers
classes of shares, which are subject to the same expenses, except they
may be subject to different distribution, shareholder servicing and/or
transfer agent costs.
3
<PAGE>
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 may tend
to be somewhat higher than prevailing market rates. When rates rise,
the fund's yield may tend to be somewhat lower.
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.
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, although not guaranteed, that their systems will be adapted in time
to avoid serious problems. We do not expect Year 2000 conversion costs
to have a material impact on the Fund because these costs are borne
primarily by the Fund's vendors and service providers, and not directly
by the Fund.
PAST PERFORMANCE
The Fund is a new series of the Trust and has recently commenced
operations. Therefore, no past performance information is available.
If you would like to know the current seven-day yield, call:
1-888-889-0799.
4
<PAGE>
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 (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
<TABLE>
<S> <C>
Management Fee 0.26%
Distribution/Service (12b-1) Fee 0.50%
Other Expenses
Shareholder Servicing Fee 0.25%
Other Fund Expenses (estimated) 0.12%
-------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES (ESTIMATED) 1.13%
</TABLE>
The "Management Fee" is an annual fee, payable monthly out of the Fund's
net assets.
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 1.05%. Any fee reductions or
reimbursements may be repaid to the investment manager within 3 years
after they occur. The investment manager may, however, choose to waive
them if the Fund cannot repay them and stay below the 1.05% limit for
that year. The fee waiver and reimbursement arrangement cannot be
terminated by the Fund, but may be terminated by the investment manager.
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. The example should not be
considered a representation of past or future expenses or performance.
Based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$115 $358
</TABLE>
7
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT MANAGER
City National Bank ("CNB") is the Fund's investment manager. As
investment manager, CNB provides the Fund with investment management
services, including the selection, appointment, and supervision of the
sub-adviser to the Fund. CNB may, in the future, and after having
secured the necessary SEC approval, change the sub-adviser to the Fund
according to certain procedures without soliciting shareholders'
approval.
CNB, founded in the early 1950's, is a federally chartered commercial
bank with approximately $6.4 billion in assets as of December 31, 1998.
It is a wholly-owned subsidiary of City National Corporation ("CNC"), a
New York Stock Exchange listed company. CNB's address is 400 North
Roxbury Drive, Beverly Hills, California 90210.
SUB-ADVISER
Wellington Management Company, LLP ("Wellington") currently serves as
the Fund's sub-adviser pursuant to a sub-advisory agreement between the
investment manager and Wellington. Under the sub-advisory agreement,
Wellington provides investment advisory and portfolio management
services to the Fund. Wellington is located at 75 State Street, Boston,
Massachusetts 02109. Wellington and its predecessor organizations have
provided investment advisory service to investment companies since 1928
and to investment counseling clients since 1960. As of March 31, 1998,
Wellington had discretionary management authority with respect to
approximately $193.9 billion in assets.
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
SEI Investments Mutual Funds Services serves as administrator and fund
accountant to the Fund. SEI Investments Fund Management ("SEI") serves
as transfer agent for the Fund. Both companies are located at Oaks,
Pennsylvania 19456 and can be reached at 1-800-342-5734.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") serves as the
Fund's distributor pursuant to a distribution agreement with the Fund..
The Distributor is located at Oaks, Pennsylvania, 19456 and can be
reached at 1-888-889-0799.
6
<PAGE>
ACCOUNT POLICIES
HOW WE PRICE SHARES. Shares are priced at net asset value (NAV) which
is expected to remain constant at $1.00. 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,
usually by 2:00 p.m. Eastern time. Shares are not priced on any day
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.
7
<PAGE>
UNDERSTANDING EARNINGS AND TAXES
DECLARING AND PAYING DIVIDENDS. Dividends are declared each day the NAV
is calculated. Dividends and net capital gains (if any) normally are
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.
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 the Fund in writing.
- You may receive dividends by mail, but only if you instruct the Fund
in writing 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 the Distributor at
1-888-889-0799.
TAX CONSIDERATIONS. The Fund intends to distribute substantially all of
its net investment income (including net short-term capital gain) to
shareholders. If, at the close of each quarter of its taxable year, at
least 50% of the value of the Fund's total assets consists of
obligations the interest on which is excludable from gross income, the
Fund may pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends are excludable from a shareholder's gross
income for federal income tax purposes, but may have certain collateral
federal tax consequences including alternative minimum tax consequences.
You will be notified at least annually about the tax consequences of
distributions made each year. BE SURE TO CONSULT YOUR 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%.
8
<PAGE>
HOW TO BUY AND SELL SHARES
Here are the details you should know about buying and selling shares:
HOW TO PLACE AN ORDER. You may place an order with:
- an approved broker-dealer; or
- any other approved financial institution.
ORDERING THROUGH A BROKER-DEALER OR FINANCIAL INSTITUTION. If you have
problems with your order, you must resolve those problems directly with
the entity with whom you are dealing. Other financial institutions may
offer different services and charge additional fees.
WHEN ORDERS WILL BE COMPLETED. You may have to transmit or purchase or
exchange requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows the
financial institution time to process your request and transmit it to
the Fund. For more information about how to purchase or exchange fund
shares through your financial institution, you should contact your
financial institution directly.
If SEI receives your purchase order, through your financial institution
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 SEI
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 bring it above the minimum balance. If, after 30 days, the
account balance remains below the minimum, your shares may be sold and
your account closed without your consent. The proceeds will be mailed
to you, through your financial institution.
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.
WIRING FEE. The financial institution placing your order may charge its
own wiring fees.
OTHER REDEMPTION OPTIONS. Under conditions where cash redemptions are
detrimental to the Fund and its shareholders, we reserve the right to
make redemptions in
9
<PAGE>
readily marketable securities other than cash. Please see the SAI for a
more detailed discussion.
BUYING SHARES
FIRST TIME PURCHASES. You will have to follow your financial
institution's procedures for transacting with the Fund. Contact your
financial institution for more information.
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. You payment may be delayed by us or your
financial institution, if you buy shares by check and sell them before
your check clears - we will not send your proceeds until we have
received payment from the initial purchase. This delay may take up to
12 days from the date of your purchase. (You can avoid this delay by
purchasing shares by wire.)
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.
CONFIRMING AUTHENTICITY. SEI 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 SEI reserve the right to refuse an order if we cannot
reasonably confirm the authenticity of the instructions.
LIABILITY. We or SEI may be liable for losses from unauthorized or
fraudulent orders only if reasonable steps are not taken to verify an
order's authenticity.
10
<PAGE>
FOR MORE INFORMATION
BERKELEY GOVERNMENT 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
(when available), please contact:
SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456
1-888-889-0799
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
11
<PAGE>
BERKELEY FUNDS
INSTITUTIONAL CLASS SHARES OF BERKELEY GOVERNMENT FUND
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
BERKELEY GOVERNMENT FUND
INSTITUTIONAL CLASS
PROSPECTUS DATED APRIL 30, 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.
Mutual fund shares and other securities are not bank deposits, nor are
they obligations of, or guaranteed by City National Bank. Mutual fund
shares and other securities are not FDIC insured. Investing in mutual
funds and other securities involves risks, including loss of
principal.
<PAGE>
TABLE OF CONTENTS
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Our goal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
How we plan to achieve our goal . . . . . . . . . . . . . . . . . . . . 4
Types of securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Classes of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risks of investing in our Fund. . . . . . . . . . . . . . . . . . . . . 5
Past performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Understanding expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Account policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Understanding earnings and taxes . . . . . . . . . . . . . . . . . . . . . . 9
How to buy and sell shares . . . . . . . . . . . . . . . . . . . . . . . . .10
Opening an account. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Buying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
For more information . . . . . . . . . . . . . . . . . . . . . . . .back cover
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.
2
<PAGE>
OVERVIEW
OUR GOAL
The Fund is a money market fund that seeks to preserve your principal
and maintain a high degree of liquidity while providing current income.
Also, the Fund seeks to maintain a $1.00 per share net asset value. The
goals 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 U.S.
government bonds and notes. The securities must have maturities of no
more than 397 days and, in our opinion, present minimal credit risk.
DIVERSIFICATION. The Berkeley Government 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 money market instruments including:
- High-quality bonds and notes rated within the two highest grades by
rating agencies such as Standard & Poors (I.E. rated at least AA);
- U.S. Treasury Obligations;
- Obligations issued or guaranteed as to principal and interest by the
agencies or instrumentalities of the U.S. Government; and
- Repurchase agreements involving these obligations.
Please review the SAI for more detailed descriptions of these securities.
CLASSES OF SHARES
This Prospectus offers Institutional Class shares of the Fund. The Fund
also offers classes of shares, which are subject to the same expenses,
except they may be subject to different distribution, shareholder
servicing and/or transfer agent costs.
3
<PAGE>
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 may tend
to be somewhat higher than prevailing market rates. When rates rise,
the fund's yield may tend to be somewhat lower.
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.
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, although not guaranteed, that their systems will be adapted in time
to avoid serious problems. We do not expect Year 2000 conversion costs
to have a material impact on the Fund because these costs are borne
primarily by the Fund's vendors and service providers, and not directly
by the Fund.
PAST PERFORMANCE
The Fund is a new series of the Trust and has recently commenced
operations. Therefore, no past performance information is available.
If you would like to know the current seven-day yield, call:
1-888-889-0799.
4
<PAGE>
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 (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
<TABLE>
<S> <C>
Management Fee 0.26%
Distribution/Service (12b-1) Fee 0.00%
Other Expenses
Shareholder Servicing Fee 0.25%
Other Fund Expenses (estimated) 0.12%
-----------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES (ESTIMATED) 0.63%
</TABLE>
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. The example should not be
considered a representation of past or future expenses or performance.
Based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$64 $201
</TABLE>
5
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT MANAGER
City National Bank ("CNB") is the Fund's investment manager. As
investment manager, CNB provides the Fund with investment management
services, including the selection, appointment, and supervision of the
sub-adviser to the Fund. CNB may, in the future, and after having
secured the necessary SEC approval, change the sub-adviser to the Fund
according to certain procedures without soliciting shareholders'
approval.
CNB, founded in the early 1950's, is a federally chartered commercial
bank with approximately $6.4 billion in assets as of December 31, 1998.
It is a wholly-owned subsidiary of City National Corporation ("CNC"), a
New York Stock Exchange listed company. CNB's address is 400 North
Roxbury Drive, Beverly Hills, California 90210.
SUB-ADVISER
Wellington Management Company, LLP ("Wellington") currently serves as
the Fund's sub-adviser pursuant to a sub-advisory agreement between the
investment manager and Wellington. Under the sub-advisory agreement,
Wellington provides investment advisory and portfolio management
services to the Fund. Wellington is located at 75 State Street, Boston,
Massachusetts 02109. Wellington and its predecessor organizations have
provided investment advisory service to investment companies since 1928
and to investment counseling clients since 1960. As of March 31, 1998,
Wellington had discretionary management authority with respect to
approximately $193.9 billion in assets.
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
SEI Investments Mutual Funds Services serves as administrator and fund
accountant to the Fund. SEI Investments Fund Management ("SEI") serves
as transfer agent for the Fund. Both companies are located at Oaks,
Pennsylvania 19456 and can be reached at 1-800-342-5734.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor") serves as the
Fund's distributor pursuant to a distribution agreement with the Fund.
The Distributor is located at Oaks, Pennsylvania, 19456 and can be
reached at 1-888-889-0799.
6
<PAGE>
ACCOUNT POLICIES
HOW WE PRICE SHARES. Shares are priced at net asset value (NAV) which
is expected to remain constant at $1.00. 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,
usually by 2:00 p.m. Eastern time. Shares are not priced on any day
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.
7
<PAGE>
UNDERSTANDING EARNINGS AND TAXES
DECLARING AND PAYING DIVIDENDS. Dividends are declared each day the NAV
is calculated. Dividends and net capital gains (if any) normally are
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.
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 the Fund in writing.
- You may receive dividends by mail, but only if you instruct the Fund
in writing 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 the Distributor at
1-888-889-0799.
TAX CONSIDERATIONS. The Fund intends to distribute substantially all of
its net investment income (including net short-term capital gain) to
shareholders. If, at the close of each quarter of its taxable year, at
least 50% of the value of the Fund's total assets consists of
obligations the interest on which is excludable from gross income, the
Fund may pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends are excludable from a shareholder's gross
income for federal income tax purposes, but may have certain collateral
federal tax consequences including alternative minimum tax consequences.
You will be notified at least annually about the tax consequences of
distributions made each year. BE SURE TO CONSULT YOUR 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%.
8
<PAGE>
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, SEI;
- 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 SEI, 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 SEI 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 SEI
receives a properly completed order with full payment.
PURCHASE MINIMUMS. [check this]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. [check this] 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 bring it above the minimum balance. If,
after 30 days, the account balance 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. [Check this] We do not charge a fee for buying shares by
wire, although SEI charges a $12 fee for wiring proceeds. The financial
institution placing your order may charge its own wiring fees.
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.
9
<PAGE>
OPENING AN ACCOUNT
To open an account, complete and sign an account application and mail
it to:
Berkeley Government Fund
c/o SEI Investments Distribution
Oaks, Pennsylvania 19456
ADDITIONAL REQUIREMENTS. If additional information is required, your
application will be considered incomplete until SEI 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 Government Fund" and an
application. After that, you may place orders by wiring or mailing
money to SEI.
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 SEI at 1-888-889-0799 to buy shares by wire. Wires must
be received by SEI through the Federal Reserve Wire system before it
closes (generally, 4:00 p.m. Eastern time) or SEI will not be able to
process your order that day.
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 SEI receives your sell order in proper form. Once a check is
mailed, the sale is irrevocable and may not be modified or canceled.
10
<PAGE>
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 SEI 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 SEI 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.
BY TELEPHONE. Call SEI 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. SEI 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 SEI reserve the right to refuse an order if we cannot
reasonably confirm the authenticity of the instructions.
LIABILITY. We or SEI 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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FOR MORE INFORMATION
BERKELEY GOVERNMENT 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
(when available), please contact:
SEI Investments Distribution Co.,
Oaks, Pennsylvania 19456
1-888-889-0799
INFORMATION ABOUT THE FUND MAY BE REVIEWED AND COPIED:
- 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
12
<PAGE>
Part B
Statement of Additional Information
for
Berkeley California Tax Exempt Fund
and
Berkeley Government Fund
Combined
<PAGE>
SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
STATEMENT OF ADDITIONAL INFORMATION SUBJECT TO COMPLETION
Part B
STATEMENT OF ADDITIONAL INFORMATION
BERKELEY FUNDS
Berkeley Government Fund
Berkeley California Tax Exempt Fund
650 California Street, Suite 2800
San Francisco, CA 94108
April 30, 1999
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with each of the Prospectuses dated April 30, 1999, which may be
amended from time to time, for the Berkeley Government Fund and the Berkeley
California Tax Exempt Fund (each a "Fund"). The Funds are diversified
investment portfolios of the Berkeley Funds (the "Trust"), an open-end,
management investment company. The Trust was formerly called "Berkeley Capital
Management Funds."
Prospectuses may be obtained without charge by writing the Trust's Distributor,
SEI Investments Distribution Co., Oaks, PA 19456, or by calling 1-800-342-5734.
<PAGE>
TABLE OF CONTENTS
INVESTMENT TECHNIQUES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
RISK CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
MANAGEMENT OF THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . .12
PORTFOLIO TRANSACTIONS AND TURNOVER. . . . . . . . . . . . . . . . . . . . .15
DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . .16
Share Price Calculation. . . . . . . . . . . . . . . . . . . . . . . . . . .20
Yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Shareholder Service Agreements . . . . . . . . . . . . . . . . . . . . . . .22
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . . . .24
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Appendix- Ratings of Investment Securities . . . . . . . . . . . . . .Appendix
ii
<PAGE>
INVESTMENT TECHNIQUES
CALIFORNIA TAX EXEMPT FUND
The Fund's investment objective is to preserve principal value and maintain a
high degree of liquidity while providing current income exempt from federal and,
to the extent possible, California state personal income taxes. There can be no
assurance that the Fund will achieve its investment objective.
It is a fundamental policy of the Fund to invest, under normal conditions, at
least 80% of its net assets in municipal securities that produce interest that,
in the opinion of bond counsel, is exempt from federal income tax, and the Fund
will invest, under normal conditions, at least 80% of its net assets in
securities the interest on which is not a preference item for purposes of the
federal alternative minimum tax. Under normal conditions, at least 65% of the
Fund's assets will be invested in municipal obligations the interest on which is
exempt from California state personal income tax. These constitute municipal
obligations of the state of California and its political subdivisions of
municipal authorities and municipal obligations issued by territories or
possessions of the United States. The Fund may invest, under normal conditions,
up to 20% of its net assets in (1) municipal securities the interest on which is
a preference item for purposes of the federal alternative minimum tax (although
the Fund has no present intention of investing in such securities) and (2)
taxable investments. In addition, for temporary defensive purposes when Weiss,
Peck & Greer, L.L.C., the Fund's investment sub-adviser (the "Sub-Adviser" or
"WPG"),determines that market conditions warrant, the Fund may invest up to 100%
of its assets in municipal obligations of states other than California or
taxable money market securities.
The Adviser or Sub-Adviser will not invest more than 25% of the Fund's assets in
municipal securities the interest on which is derived from revenues of similar
type projects. This restriction does not apply to municipal securities in any of
the following categories: public housing authorities; general obligations of
states and localities; state and local housing finance authorities or municipal
utilities systems.
There can be no assurance that the Fund will be able to achieve its investment
objective, or that the Fund will be able to maintain a constant $1.00 net asset
value per share.
GOVERNMENT FUND
The Fund's investment objective is to preserve principal value and maintain a
high degree of liquidity. There can be no assurance that the Fund will achieve
its investment objective.
It is a fundamental policy of the Fund to invest, under normal conditions, in
(1) high-quality bonds and notes rated within the two highest grades by rating
agencies such as Standard & Poors (I.E. rated at least AA); (2) U.S. Treasury
Obligations; (3) Obligations issued or guaranteed as to principal and interest
by the agencies or instrumentalities of the U.S. Government; and (4) Repurchase
agreements involving these obligations.
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There can be no assurance that the Fund will be able to achieve its investment
objective, or that the Fund will be able to maintain a constant $1.00 net asset
value per share.
PERMITTED INVESTMENTS
BANK NOTES. The Funds may invest in bank notes, which are unsecured promissory
notes representing debt obligations that are issued by banks in large
denominations.
BANKERS' ACCEPTANCES. The Funds may invest in Bankers' acceptances. Bankers'
acceptances are bills of exchange or time drafts drawn on and accepted by a
commercial bank. Bankers' acceptances are issued by corporations to finance the
shipment and storage of goods. Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT. The Funds may invest in certificates of deposit.
Certificates of deposit is an interest-bearing instrument with a specific
maturity. They are issued by banks and savings and loan institutions in exchange
for the deposit of funds and normally can be traded in the secondary market
prior to maturity. Certificates of deposit with penalties for early withdrawal
will be considered illiquid.
COMMERCIAL PAPER. The Funds may invest in commercial paper. Commercial paper
is a term used to describe unsecured short-term promissory notes issued by
banks, municipalities, corporations and other entities. Maturities on these
issues vary from one to 270 days.
EURODOLLAR CERTIFICATES OF DEPOSIT AND FOREIGN SECURITIES. The Berkeley
Government Fund may invest in 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.
FIXED INCOME SECURITIES. The Funds may invest in fixed income securities.
Fixed income securities are debt obligations issued by corporations,
municipalities and other borrowers. The market value of the Fund's fixed income
investments will change in response to interest rate changes and other factors.
During periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Changes by recognized rating
agencies in the rating of any fixed income security and in the ability of an
issuer to make payments of interest and principal
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<PAGE>
also affect the value of these investments. Changes in the value of portfolio
securities will not necessarily affect cash income derived from these
securities, but will affect a Fund's net asset value.
FUTURES AND OPTIONS ON FUTURES. The Funds may engage in futures and options on
futures. Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price. An option on a futures contract
give the purchaser the right, in exchange for a premium, to assume a position in
a futures contract at a specified exercise price during the term of the option.
The Fund may use futures contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held or expected to be
acquired or be disposed of, to minimize fluctuations in foreign currencies, or
to gain exposure to a particular market or instrument. The Fund will minimize
the risk that it will be unable to close out a futures contract by only entering
into futures contracts that are traded on national futures exchanges.
An index futures contract is a bilateral agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the bond index value at the close of trading
of the contract and the price at which the futures contract is originally
struck. No physical delivery of the bonds comprising the index is made:
generally contracts are closed out prior to the expiration date of the contract.
In order to avoid leveraging and related risks, when the Fund invests in futures
contracts, it will cover its position by depositing an amount of cash or liquid
securities equal to the market value of the futures positions held, less margin
deposits, in a segregated account and that amount will be marked to market on a
daily basis.
The Fund may enter into futures contracts and options on futures contracts
traded on an exchange regulated by the Commodities Futures Trading Commission
("CFTC"), so long as, to the extent that such transactions are not for "bona
fide hedging purposes," the aggregate initial margin and premiums on such
positions (excluding the amount by which such options are in the money) do not
exceed 5% of the Fund's net assets.
There are risks associated with these activities, including the following:(1)
the success of a hedging strategy may depend on an ability to predict
movements in the prices of individual securities, fluctuations in markets and
movements in interest rates, (2) there may be an imperfect or no correlation
between the changes in market value of the securities held by the Fund and
the prices of futures and options on futures, (3) there may not be a liquid
secondary market for a futures contract or option, (4) trading restrictions
or limitations may be imposed by an exchange and (5) government regulations
may restrict trading in futures contracts and options on futures.
The Fund may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and securities prices. Some strategies
reduce the Fund's exposure to price fluctuations, while others tend to increase
its market exposure. Futures and options on futures can be volatile instruments
and involve certain risks that could negatively impact the Fund's return. No
price is paid upon entering into futures contracts. Instead, the Fund would be
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, would be made on a daily basis as the value of the future position
varies (a process known as "market to market"). The margin is in the nature of
performance bond or good-faith deposit on a futures contract.
3
<PAGE>
INVESTMENT COMPANY SHARES. The Funds may invest in shares of other investment
companies, to the extent permitted by applicable law and subject to certain
restrictions set forth in this Statement of Additional Information. These
investment companies typically incur fees that are separate from those fees
incurred directly by a Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Fund
expenses. Under applicable regulations, a Fund is prohibited from acquiring the
securities of another investment company if, as a result of such acquisition:
(1) the Fund owns more than 3% of the total voting stock of the other company;
(2) securities issued by any one investment company represent more than 5% of
the Fund's total assets; or (3) securities (other than treasury stock) issued by
all investment companies represent more than 10% of the total assets of the
Fund.
MUNICIPAL SECURITIES. The Berkeley California Tax Exempt Fund may invest in
municipal securities. Municipal Securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by there venues of a project or facility,
tolls from a toll bridge, for example. Certificates of participation represent
an interest in an underlying obligation or commitment such as an obligation
issued in connection with a leasing arrangement. The payment of principal and
interest on private activity and industrial development bonds generally is
dependent solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
Municipal notes include general obligation notes, tax anticipation notes,
revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include general obligation bonds,
revenue or special obligation bonds, private activity and industrial development
bonds and participation interests in municipal bonds.
MUNICIPAL LEASES. The Berkeley California Tax Exempt Fund may invest in
municipal leases. The Fund may invest in instruments, or participations in
instruments, issued in connection with lease obligations or installment purchase
contract obligations of municipalities ("municipal lease obligations"). Although
municipal lease obligations do not constitute general obligations of the issuing
municipality, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate funds for, and make the payments due under
the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose in the relevant years. Municipal lease
obligations are a relatively new form of financing, and the market for such
obligations is still developing. Municipal leases will be treated as liquid only
if they satisfy criteria set forth in guidelines established by the Board of
Trustees, and there can be no assurance that a market will exist or continue to
exist for any municipal lease obligation.
MUNICIPAL NOTES. The Berkeley California Tax Exempt Fund may invest in
municipal notes. Municipal notes consist of general obligation notes, tax
anticipation notes (notes sold to finance
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<PAGE>
working capital needs of the issuer in anticipation of receiving taxes on a
future date), revenue anticipation notes (notes sold to provide needed cash
prior receipt of expected non-tax revenues from a specific source), bond
anticipation notes, tax and revenue anticipation notes, certificates of
indebtedness, demand notes, and construction loan notes. The maturities of the
instruments at the time of issue will generally range from three months to one
year.
MUNICIPAL BONDS. The Berkeley California Tax Exempt Fund may invest in
municipal securities. Municipal bonds are debt obligations issued to obtain
funds for various public purposes. The Fund may purchase private activity or
industrial development bonds if the interest paid is exempt from federal income
tax. These bonds are issued by or on behalf of public authorities to raise money
to finance various privately-owned or -operated facilities for business and
manufacturing, housing, sports, and pollution control. These bonds are also used
to finance public facilities such as airports, mass transit systems, ports,
parking or sewage or solid waste disposal facilities, as well as certain other
categories. The payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and the pledge, if any, of real and personal property so financed as security
for such payment.
REPURCHASE AGREEMENTS. The Funds may engage in repurchase agreements.
Repurchase agreements are agreements under which securities are acquired from a
securities dealer or bank subject to resale on an agreed upon date and at an
agreed upon price which includes principal and interest. Each Fund or its agent
will have actual or constructive possession of the securities held as collateral
for the repurchase agreement. Each Fund bears a risk of loss in the event the
other party defaults on its obligations and the Fund is delayed or prevented
from exercising its right to dispose of the collateral securities, or if the
Fund realizes a loss on the sale of the collateral securities. The Adviser or
Sub-Advisers will enter into repurchase agreements on behalf of a Fund only with
financial institutions deemed to present minimal risk of bankruptcy during the
term of the agreement based on guidelines established and periodically reviewed
by the Board of Trustees. These guidelines currently permit the Funds to enter
into repurchase agreements only with approved banks and primary securities
dealers, as recognized by the Federal Reserve Bank of New York, which have
minimum net capital of $100 million, or with a member bank of the Federal
Reserve System. Repurchase agreements are considered to be loans collateralized
by the underlying security. Repurchase agreements entered into by the Funds will
provide that the underlying security at all times shall have a value at least
equal to 102% of the price stated in the agreement. This underlying security
will be marked to market daily. The Adviser or Sub-Advisers will monitor
compliance with this requirement. Under all repurchase agreements entered into
by the Funds, the Custodian or its agent must take possession of the underlying
collateral. However, if the seller defaults, the Funds could realize a loss on
the sale of the underlying security to the extent the proceeds of the sale are
less than the resale price. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, the Funds may incur delays and
costs in selling the security and may suffer a loss of principal and interest if
the Funds are treated as unsecured creditors.
STANDBY COMMITMENTS AND PUT TRANSACTIONS. The Berkeley California Tax Exempt
Fund may invest in standby commitments and put transactions. The Fund reserve
the right to engage in put transactions. The Adviser and Sub-Adviser have the
authority to purchase securities at a price which would result in a yield to
maturity lower than that generally offered by the seller at the time of purchase
when the Fund can simultaneously acquire the right to sell the securities back
to the seller, the issuer, or a third party (the "writer") at an agreed-upon
price at any time during a stated period or on a certain date. Such a right is
generally denoted as a "standby commitment" or a "put." The purpose of engaging
in transactions involving puts is to maintain flexibility and
5
<PAGE>
liquidity to permit the Fund to meet redemptions and remain as fully invested as
possible in municipal securities. The right to put the securities depends on the
writer's ability to pay for the securities at the time the put is exercised. The
Fund would limit their put transactions to institutions which the Adviser or
Sub-Adviser believes present minimum credit risks, and the Adviser or
Sub-Adviser would use its best efforts to initially determine and continue to
monitor the financial strength of the sellers of the options by evaluating their
financial statements and such other information as is available in the
marketplace. It may, however, be difficult to monitor the financial strength of
the writers because adequate current financial information may not be available.
In the event that any writer is unable to honor a put for financial reasons, the
Fund would be a general creditor (I.E., on a parity with all other unsecured
creditors) of the writer. Furthermore, particular provisions of the contract
between the Fund and the writer may excuse the writer from repurchasing the
securities; for example, a change in the published rating of the underlying
securities or any similar event that has an adverse effect on the issuer's
credit or a provision in the contract that the put will not be exercised except
in certain special cases, for example, to maintain portfolio liquidity. The
Fund could, however, at any time sell the underlying portfolio security in the
open market or wait until the portfolio security matures, at which time it
should realize the full par value of the security.
The securities purchased subject to a put, may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund. Sale
of the securities to third parties or lapse of time with the put unexercised may
terminate the right to put the securities. Prior to the expiration of any put
option, the Fund could seek to negotiate terms for the extension of such an
option. If such a renewal cannot be negotiated on terms satisfactory to the
Fund, the Fund could, of course, sell the security. The maturity of the
underlying security will generally be different from that of the put.
TAX-EXEMPT COMMERCIAL PAPER. The Funds may invest in 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.
TIME DEPOSITS. The Funds may invest in time deposits. Time deposits are
non-negotiable receipts issued by a bank in exchange for the deposit of funds.
Like a certificate of deposit, it earns a specified rate of interest over a
definite period of time; however, it cannot be traded in the secondary market.
Time deposits with a withdrawal penalty are considered to be illiquid
securities.
U.S. GOVERNMENT AGENCY OBLIGATIONS. The Funds may invest in U.S. agency
obligations. Various agencies of the U.S. Government, issue obligations,
including, the Export Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit Bank, Federal Housing Administration, GNMA,
Maritime Administration, Small Business Administration, and The Tennessee Valley
Authority. The Funds may purchase securities guaranteed by GNMA which represent
participation in Veterans Administration and Federal Housing Administration
backed mortgage pools. Obligations of instrumentalities of the U.S. Government
include securities issued by, among others, Federal Home Loan Banks, HLMC,
Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae and the U.S.
Postal Service. Some of these securities are supported by the full faith and
credit of the U.S. Treasury (E.G., GNMA), others are supported by the right of
the issuer to borrow from the Treasury. Guarantees of principal by agencies or
instrumentalities of the U.S. Government may be a guarantee of payment at the
maturity of the
6
<PAGE>
obligation so that in the event of a default prior to maturity there might not
be a market and thus no means of realizing the value of the obligation prior to
maturity.
VARIABLE AND FLOATING RATE INSTRUMENTS. The Funds may invest in variable and
floating rate instruments. Certain of the obligations purchased by the Funds
may carry variable or floating rates of interest and may involve a conditional
or unconditional demand feature. Such obligations may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices. The
interest rates on these securities may be reset daily, weekly, quarterly or at
some other interval, and may have a floor or ceiling on interest rate changes.
There is a risk that the current interest rate on such obligations may not
accurately reflect existing market interest rates. A demand instrument with a
demand notice period exceeding seven days may be considered illiquid if there is
no secondary market for such security.
WHEN-ISSUED SECURITIES. The Funds may invest in when-issued securities. These
securities involve the purchase of debt obligations on a when-issued basis, in
which case delivery and payment normally take place within 45 days after the
date of commitment to purchase. These securities are subject to market
fluctuation due to changes in market interest rates, and it is possible that the
market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed. Delivery of
and payment for these securities may occur a month or more after the date of the
purchase commitment. Each Fund will maintain with the custodian a separate
account with liquid securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities is fixed as of the
purchase date, and no interest accrues to the Fund before settlement. Although a
Fund generally purchases securities on a when-issued or forward commitment basis
with the intention of actually acquiring securities for its portfolio, a Fund
may dispose of a when-issued security or forward commitment prior to settlement
if the Adviser or Sub-Adviser deems it appropriate to do so.
The Funds will only make commitments to purchase obligations on a when-issued
basis with the intention of actually acquiring the securities, but may sell
them before the settlement date. The when-issued securities are subject to
market fluctuation, and no interest accrues to the purchaser during this
period. The payment obligation and the interest rate that will be received on
the securities are each fixed at the time the purchaser enters into the
commitment. Purchasing obligations on a when-issued basis is a form of
leveraging and can involve a risk that the yields available in the market
when the delivery takes place may actually be higher than those obtained in
the transaction itself. In that case there could be an unrealized loss at the
time of delivery.
BORROWING POLICY. The Funds 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 Funds 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 a 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.
7
<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 FUNDS. THE FUNDS 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 a 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 Funds will invest no more than 10%
of 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
8
<PAGE>
order to meet redemption requests without immediately selling any
portfolio securities. A Fund will not borrow for leverage purposes or
purchase securities or make investments while borrowings are
outstanding. Any borrowings by a Fund will not be collateralized. If
for any reason the current value of the total assets of a Fund falls
below an 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.
(15) Invest in interests or leases in oil, gas or other mineral exploration
or development programs.
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 Funds will only purchase securities that the Adviser or Sub-Advisers have
determined, according to procedures approved by the Board and factors set forth
in Rule 2a-7 under the 1940 Act, 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
there quisite NRSROs for short-term debt obligations with respect to a
class of short-term debt obligations (or any security
9
<PAGE>
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 Adviser, 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 Adviser, pursuant to guidelines adopted by the
Trust's Board of Trustees, to be of comparable quality to such a security, that
is a security 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.
Each 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.
RISK CONSIDERATIONS
GENERAL RISKS TO CONSIDER
A 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 a Fund. The market value of the obligations in a 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, a Fund's yield will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a 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 a 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 a 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, a Fund will invest in securities which the
Adviser or Sub-Adviser 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
10
<PAGE>
enable the Adviser or Sub-Adviser to minimize the credit risk with respect to
the securities in a Fund's portfolio, but there can be no absolute assurance
that the Adviser will be successful in this regard. If issuer defaults
nevertheless occur respecting a sufficiently large portion of a Fund's
portfolio, a Fund may be unable to maintain a stable net asset value of $1.00
per share.
A 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.
CALIFORNIA TAX EXEMPT FUND - SPECIFIC RISKS
The ability of issuers to pay interest on, and repay principal of, California
municipal securities ("California Municipal Securities") may be affected by (1)
amendments to the California Constitution and related statutes that limit the
taxing and spending authority of California government entities, and related
civil actions, (2) a wide variety of California laws and regulations, and (3)
the general financial condition of the State of California.
There could be economic, business or political developments which might
affect all Municipal Securities of a similar type. To the extent that a
significant portion of the Fund's assets are invested in Municipal
Securities payable from revenues on similar projects, the Fund will be
subject to the risks presented by such projects to a greater extent than it
would be if the Fund's assets were not so invested. Moreover, in seeking to
attain its investment objective the Fund may invest all or any part of its
assets in Municipal Securities that are industrial development bonds.
CALIFORNIA RISK FACTORS. Under normal conditions, the Fund will be fully
invested in obligations which produce income exempt from federal income tax and
California state income tax. Accordingly, the Fund will have considerable
investments in California municipal obligations. As a result, the Fund will be
more susceptible to factors which adversely affect issuers of California
obligations than a mutual fund which does not have as great a concentration in
California municipal obligations.
An investment in the Fund will be affected by the many factors that affect the
financial condition of the State of California. For example, financial
difficulties of the State, its counties, municipalities and school districts
that hinder efforts to borrow and credit ratings are factors which may affect
the Fund.
The Fund's concentration in California municipal bonds may expose
shareholders to additional risks. In particular, the Fund will be vulnerable
to any development in California's economy that may weaken or jeopardize the
ability of California municipal-bond issuers to pay interest and principal on
their bonds. Although the Fund's objective is to provide income exempt from
federal and California State personal income taxes, some of its income may be
subject to the alternative minimum tax.
ADDITIONAL CONSIDERATIONS. With respect to Municipal Securities issued by the
State of California and its political subdivisions the Trust cannot predict what
legislation, if any, may be
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<PAGE>
proposed in the California State Legislature as regards the California State
personal income tax status of interest on such obligations, or which proposals,
if any, might be enacted. Such proposals, if enacted, might materially adversely
affect the availability of California Municipal Securities for investment by the
Portfolios and the value of the Portfolios' investments.
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 Adviser are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PRINCIPAL OCCUPATION FOR THE
THE TRUST PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cindee Beechwood* 43 Trustee, Assistant Group Financial Controller, London
Treasurer and Pacific Group Limited and Controller, Berkeley
Principal Capital Management (1992-present); Financial
Financial Operations Principal and Chief Financial Officer,
Officer Berkeley International Securities
(1997-present)
Bryan W. Brown 53 Trustee Financial and technological systems consultant
950 Hayman Place (1992-present); formerly, Chief Financial Officer,
Los Altos, CA 94024 Bailard, Biehl & Kaiser, Inc. (1980-1992)
William R. Sweet 61 Trustee Retired; formerly, Executive Vice President, The
81 Tiburon Road Bank of California (1985-1996)
Tiburon, CA 94920
Barnett Teich 74 Trustee Retired; formerly consultant (1987-1989);
78280 Willowrich Drive Prior thereto, First Vice President, Lehman
Palm Desert, CA 92211 Management Co., Inc. (1958-1986)
Danell J. Doty* 35 Vice President Vice President of Operations, Berkeley Capital
and Secretary Management (1995-present) and Operations Manager,
Berkeley International Securities (1991-present)
Joseph C. Neuberger* 36 Assistant Vice President and Manager of Fund Administration
615 East Michigan St., Secretary and Compliance, Firstar Mutual Fund Services, LLC
Milwaukee, WI 53202 (1994-present); formerly, Manager, Arthur Andersen
LLP (1984-1994)
12
<PAGE>
Dana L. Armour* 30 Assistant Trust Officer and Compliance Administrator,
615 East Michigan St. Secretary Firstar Mutual Fund Services, LLC (1992-present)
Milwaukee, WI 53202
</TABLE>
*These individuals are interested persons of the Trust as defined in Section
2(a)(19) of the 1940 Act.
The address of each individual listed above, unless otherwise indicated, is 650
California Street, Suite 2800, San Francisco, California 94108.
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION REGISTRANT AND FUND
NAME, POSITION FROM REGISTRANT COMPLEX PAID TO DIRECTORS
- ------------------------------------------------------------------------------
<S> <C> <C>
Cindee Beechwood None None
Trustee
Barnett Teich $4,000 $4,000
Trustee
Bryan W. Brown $4,000 $4,000
Trustee
William R. Sweet $4,000 $4,000
Trustee
</TABLE>
(1) Estimated for current fiscal year.
INVESTMENT ADVISER
The Trust and City National Bank ("CNB" or the "Adviser") have entered into an
Investment Management Agreement (the "Agreement"). The Agreement provides that
the Adviser shall not be liable for any error of judgement or mistake of law or
for any loss suffered by the Trust in connection with the matters to which the
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Manager in the performance of its duties
or from reckless disregard of its duties and obligations thereunder.
The continuance of the Agreement with respect to each Fund must be specifically
approved at least annually (i) by the vote of a majority of the Trustees or by
the vote of a majority of the outstanding voting securities of that Fund, and
(ii) by the vote of a majority of the Trustees of the Trust who are not parties
to the Agreement or an "interested person" (as that term is defined in the 1940
Act) of any party thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Agreement is terminable, without penalty, at any
time as to any Fund by the Trustees of the Trust, by a vote of a majority of the
outstanding shares of that Fund or by the
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<PAGE>
Adviser on not less than 30 days' nor more than 60 days' written notice. This
Agreement shall not be assignable by either party without the written consent of
the other party.
The Adviser provides the Fund with investment management services, including the
selection, appointment, and supervision of the sub-adviser to the Fund. CNB may,
in the future, and after having secured the necessary SEC approval, change the
sub-adviser to the Fund according to certain procedures without soliciting
shareholders' approval.
CNB, founded in the early 1950's, is a federally chartered commercial bank with
approximately $6.4 billion in assets as of December 31, 1998. It is a
wholly-owned subsidiary of City National Corporation ("CNC"), a New York Stick
Exchange listed company. CNB's address is 400 North Roxbury Drive, Beverly
Hills, California 90210.
The Adviser is obligated under the Advisory Agreement to pay the excess of a
Fund's operating expenses as disclosed in the applicable Prospectuses. If
operating expenses of any Fund exceed limitations established by certain states,
the Adviser will pay such excess. The Adviser will not be required to bear
expenses of any Fund to an extent which would result in the Fund's inability to
qualify as a regulated investment company under provisions of the Internal
Revenue Code. The term "expenses" is defined in such laws or regulations, and
generally excludes brokerage commissions, distribution expenses, taxes, interest
and extraordinary expenses.
SUB-ADVISER TO THE BERKELEY GOVERNMENT FUND
The Trust and Wellington Management Company, LLP (the "Sub-Adviser" or "WMC")
have entered into a sub-advisory agreement (the "Sub-Advisory Agreement,"). WMC
serves as investment adviser to the Government Fund. The Sub-Advisory Agreement
provides that the Sub-Adviser shall not be protected against any liability to
the Trust or its shareholders by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from the
reckless disregard of its obligations or duties thereunder.
The continuance of the Sub-Advisory Agreement with respect to the Berkeley
Government Fund after the first two (2) years of the agreement must be
specifically approved at least annually (i) by the vote of a majority of the
outstanding shares of that Fund or by the Trustees, and (ii) by the vote of a
majority of the Trustees who are not parties to such Sub-Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Sub-Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to the Fund,
by a majority of the outstanding shares of that Fund, on not less than 30 days'
nor more than 60 days' written notice to the Sub-Adviser, or by the Sub-Adviser
on 90 days' written notice to the Trust.
The Sub-Adviser is entitled to a fee for its investment advisory services, which
is accrued daily and paid monthly at the following annual rates: .075% of the
combined daily net assets of the Berkeley Government Fund up to $500 million and
.02% of such net assets in excess of $500 million. WMC may voluntarily waive
portions of its fees, although such waiver is not expected to affect any Fund's
total operating expenses, due to the nature of the Adviser's fee waivers. WMC
may terminate its waiver at any time.
14
<PAGE>
SUB-ADVISER TO THE CALIFORNIA TAX EXEMPT FUND
The Trust and Weiss, Peck & Greer, L.L.C., ("the "Sub-Adviser" or Weiss Peck")
have entered into a sub-advisory agreement (the "Sub-Advisory Agreement"). The
Sub-Advisory Agreement provides that each Adviser or Sub-Adviser shall not be
protected against any liability to the Trust or its shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
Weiss Peck serves as an investment adviser to the California Tax Exempt Fund.
Weiss Peck invests the assets of the Fund, and continuously reviews, supervises
and administers the investment program of the Fund. Weiss Peck is a limited
liability company founded as a limited partnership in 1970, and engages in
investment management, venture capital management and management buyouts. Weiss
Peck has been active since its founding in managing portfolios of tax exempt
securities. As of August 31, 1998, total assets under management were
approximately $15 billion. The principal business address of Weiss Peck is One
New York Plaza, New York, New York 10004.
The continuance of the Sub-Advisory Agreement after the first two (2) years must
be specifically approved at least annually (i) by the vote of a majority of the
outstanding shares of that Fund or by the Trustees, and (ii) by the vote of a
majority of the Trustees who are not parties to such Sub-Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Sub-Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to a Fund, by
a majority of the outstanding shares of that Fund, on not less than 30 days' nor
more than 60 days' written notice to the Sub-Adviser, or by the Sub-Adviser on
90 days' written notice to the Trust.
LEGAL COUNSEL
The validity of the shares of beneficial interest offered hereby will be passed
upon by Paul, Hastings, Janofsy & Walker LLP, 345 California Street, Suite 2900,
San Francisco, California 94104.
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to: pursue the objective of
the Funds 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 Funds depending upon
management's ability correctly to time and execute them.
15
<PAGE>
The Adviser or Sub-Advisers, in effecting purchases and sales of portfolio
securities for the account of the Funds, seeks to obtain best price and
execution. Subject to the supervision of the Board of Trustees, the Adviser or
Sub-Advisers generally selects broker-dealers for the Funds 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 Adviser or Sub-Adviser 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 Adviser or
Sub-Advisor 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 each Fund are reached independently from those for
other accounts managed by the Adviser or Sub-Adviser. Such other accounts may
also make investments in instruments or securities at the same time as the
Funds. On occasions when the Adviser or Sub-Adviser determines the purchase or
sale of a security to be in the best interest of the Fund as well as of other
clients, the Adviser or Sub-Adviser, 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 Adviser or Sub-Adviser in the manner it considers to be the most
equitable under the circumstances and consistent with its fiduciary obligations
to the Funds and to its other participating clients. In some cases this
procedure may affect the size or price of the position obtainable for the Funds.
PORTFOLIO TURNOVER
Because securities with maturities of less than one year are excluded from
required portfolio turnover rate calculations, each Fund's portfolio turnover
rate for reporting purposes is expected to be zero.
DISTRIBUTION AND TAXES
DISTRIBUTIONS
On each day that each 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
16
<PAGE>
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 Funds will pay shareholders who redeem all of their shares all dividends
accrued to the time of the redemption within seven days after the redemption.
Each 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 each 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 Funds 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 Funds of liability for federal
income taxes to the extent the Funds' earnings are distributed. By following
this policy, the Funds expect 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 Funds' 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 Funds' 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, within
the meaning of the Code, and that are engaged in the same, similar or related
trades or businesses. If a 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
17
<PAGE>
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 a 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 a 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. A 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 Funds do not expect to realize any significant amount of long-term capital
gain. However, any distributions by the Funds of long-term capital gain will be
taxable to the shareholders as long-term capital gain, regardless of how long a
shareholder has held Fund shares.
A Fund may engage in investment techniques that may alter the timing and
character of a Fund's income. A Fund may be restricted in its use of these
techniques by rules relating to its qualification as a regulated investment
company.
A 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 an
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. Each Fund intends to
take the position that it is the owner of any securities with respect to which
it also holds a put option.
Each 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, 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
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<PAGE>
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 a 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 Funds and their 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).
CALIFORNIA INCOME TAX
The Berkeley California Tax Exempt Fund intends to qualify to pay dividends to
shareholders that are exempt from California personal income tax ("California
exempt-interest dividends"). The Fund will qualify to pay California
exempt-interest dividends if (1) at the close of each quarter of the Fund's
taxable year, at least 50 percent of the value of the Fund's total assets
consists of obligations the interest on which would be exempt from California
personal income tax if the obligations were held by an individual ("California
Tax Exempt Obligations") and (2) the Fund continues to qualify as a regulated
investment company.
If the Fund qualifies to pay California exempt-interest dividends, dividends
distributed to shareholders will be considered California exempt-interest
dividends if they meet certain requirements. The Fund will notify its
shareholders of the amount of exempt-interest dividends each year.
Corporations subject to California franchise tax that invest in the Fund may not
be entitled to exclude California exempt-interest dividends from income.
Dividend distributions that do not qualify for treatment as California
exempt-interest dividends (including those dividend distributions to
shareholders taxable as long-term capital gains for federal income tax purposes)
will be taxable to shareholders at ordinary income tax rates for California
personal income tax purposes to the extent of the Fund's earnings and profits.
Interest on indebtedness incurred or continued by a shareholder in connection
with the purchase of shares of the Fund will not be deductible for California
personal income tax purposes if the Fund distributes California exempt-interest
dividends.
The foregoing is a general, abbreviated summary of certain of the provisions of
the California Revenue and Taxation Code presently in effect as they directly
govern the taxation of Shareholders subject to California personal income tax.
These provisions are subject to change by legislative or administrative action,
and any such change may be retroactive with respect to Fund transactions.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning California tax matters.
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<PAGE>
The Fund intends to continue paying what the IRS calls "exempt-interest
dividends" to shareholders by maintaining, as of the close of each quarter of
their taxable year, at least 50% of the value of their assets in municipal
bonds. If the Fund satisfy this requirement, any distributions paid to
shareholders from their net investment income will be exempt from federal
income, to the extent that they derive their net investment income from
interest on municipal bonds. Any distributions paid from other sources of net
investment income, such as market discounts on certain municipal bonds, will
be treated as ordinary income by the IRS.
SHARE PRICE CALCULATION
The Funds value 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 Funds' 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 a 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
If you would like to know the current seven-day yield of the Funds, you may call
1-800-342-5734. The historical performance of the Funds may be shown in the
form of yield and effective yield. These measures of performance are described
below.
20
<PAGE>
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.
TAX EXEMPT YIELD
A tax equivalent yield demonstrates the taxable yield necessary to produce an
after-tax yield equivalent to that of a fund that invests in tax-exempt
obligations. The tax equivalent yield for the California Tax-Exempt Fund is
computed by dividing that portion of the current yield (or effective yield)
of the Fund that is tax exempt by one minus a stated income tax rate and
adding the quotient to that portion (if any) of the yield of the Fund that is
not tax exempt.
DISTRIBUTION PLANS
The Trust has adopted a Distribution Plan (the "Plan") for the Class A and Class
S Classes of each Fund in accordance with Rule 12b-1 under the 1940 Act, which
regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the distribution of its shares. In this
regard, the Board of Trustees has determined that the Plans are in the best
interests of the shareholders. Continuance of the Plans must be approved
annually by a majority of the Trustees of the Trust and by a majority of the
Trustees who are not "interested persons" of the Trust as that term is defined
in the 1940 Act, and who have no direct or indirect financial interest in the
operation of a Plan or in any agreements related thereto ("Qualified Trustees").
The Plans may not be amended to increase materially the amount that may be spent
thereunder without approval by a majority of the outstanding shares of the Fund
or class affected. All material amendments of the Plans will require approval by
a majority of the Trustees of the Trust and of the Qualified Trustees.
The Plan adopted by Class A and Class S shareholders provides that the Trust
will pay the Distributor a fee of up to .50% of the average daily net assets of
a Portfolio's Class S shares that the Distributor can use to compensate
broker-dealers and service providers, including affiliates of the Distributor,
that provide distribution-related services to Class S shareholders or to their
customers who beneficially own Class A and Class S shares.
Payments may be made under the Class A and Class S Plans for distribution
services, including reviewing of purchase and redemption orders, assisting in
processing purchase, exchange and redemption requests from customers, providing
certain shareholder communications requested by
21
<PAGE>
the Distributor, forwarding sales literature and advertisements provided by the
Distributor, and arranging for bank wires.
Except to the extent that the Adviser and/or Sub-Adviser benefitted through
increased fees from an increase in the net assets of the Trust which may have
resulted in part from the expenditures, no interested person of the Trust nor
any Trustee of the Trust who is not an interested person of the Trust has or had
a direct or indirect financial interest in the operation of any of the
distribution plans or related agreements.
Although banking laws and regulations prohibit banks from distributing shares of
open-end investment companies such as the Trust, according to an opinion issued
to the staff of the SEC by the Office of the Comptroller of the Currency,
financial institutions are not prohibited from acting in other capacities for
investment companies, such as providing shareholder services. Should future
legislative, judicial or administrative action prohibit or restrict the
activities of financial institutions in connection with providing shareholder
services, the Trust may be required to alter materially or discontinue its
arrangements with such financial institutions.
SHAREHOLDER SERVICE AGREEMENTS
The Adviser has entered into a Shareholder Services Agreement with the Trust on
behalf of the Fund. Pursuant to the Shareholder Services Agreement, the Adviser
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 Adviser a fee of up to 0.25%
of the Fund's average daily net assets on an annual basis, payable monthly. The
Adviser will pay certain banks, trust companies, broker-dealers, and other
institutions (each a "Participating Organization") out of the fees the Adviser
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 Adviser 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 Adviser 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 Adviser, a Participating Organization, or their
nominees; and providing such other information and assistance to shareholders as
may be reasonably requested by such shareholders.
The Adviser may also enter into agreements with Participating Organizations that
process substantial volumes of purchases and redemptions of shares of the Funds
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
22
<PAGE>
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 for
distribution under federal and state securities laws; and membership dues in the
Investment Company Institute and, or other industry association membership dues.
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 three series - the Funds described in this Statement of
additional Information and the Berkeley Money Market Fund, which has its own
Statement of Additional Information. 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
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<PAGE>
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.
PURCHASE AND REDEMPTION OF SHARES
The Funds' 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 Adviser
including, without limitation, for employees or affiliates of the Adviser or
investors who are, or are related to or affiliated with, clients of the Adviser.
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
24
<PAGE>
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 Prospectuses of the Funds 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 Prospectuses.
Certain portions of the Registration Statement have been omitted from the
Prospectuses 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 Prospectuses 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 Prospectuses and this Statement of Additional Information
form a part, each such statement being qualified in all respects by such
reference.
FINANCIAL STATEMENTS
There are no audited financial statements for the Funds because the Funds have
been in operation for less than one year.
25
<PAGE>
APPENDIX - RATINGS OF INVESTMENT SECURITIES
I. 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.
II. 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.
26
<PAGE>
III. 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.
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.
27
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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 for Money Market Fund(1)
(ii) Amendment to Investment Management Agreement for Money
Market Fund(1)
(iii) Investment Management Agreement for California Tax Exempt
Fund and Government Fund(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)(i) Opinion and Consent of Counsel for Money Market Fund(1)
(ii) Opinion and Consent of Counsel for California Tax Exempt
Fund and Government Fund(2)
(j) Consent of Independent Accountants -- Not Applicable
(k) Financial Statements Omitted from Item 23 -- Not Applicable
(l) Subscription Agreement(1)
(m) Rule 12b-1 Plan(2)
(n) Financial Data Schedule is incorporated by reference to Form
N-SAR filed for the period ended October 31, 1998.
(o) Multiple Class Plan(2)
- --------------
(1) Previously filed as an exhibit to Registrant's Registration Statement
(File Nos. 333-16093 and 811-7923) and incorporated herein by reference.
(2) To be filed by post-effective amendment.
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 11th day of February,
1999.
BERKELEY FUNDS
By: /s/ Cindee Beechwood*
-----------------------------
Cindee Beechwood, 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/ Cindee Beechwood*
- ----------------------------- Chairman, President, February 11, 1999
Cindee Beechwood Principal Financial Officer
/s/ Bryan W. Brown*
- ----------------------------- Trustee February 11, 1999
Bryan W. Brown
/s/ William R. Sweet*
- ----------------------------- Trustee February 11, 1999
William R. Sweet
/s/ Barnett Teich*
- ----------------------------- Trustee February 11, 1999
Barnett Teich
* By: /s/ Mitchell E. Nichter
- -----------------------------
Mitchell E. Nichter, pursuant to power of attorney previously filed.
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