COMMONWEALTH SHAREHOLDER SERVICES, INC.
1500 FOREST AVENUE, SUITE 223 * P.O. BOX 8687 * RICHMOND, VA. 23229
(804) 285-8211 (800) 527-9500 FAX (804) 285-8251
November 18, 1998
VIA EDGAR
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Monument Series Fund, Inc.
File Number 333-26223
Filed Pursuant to Rule 497(c)
Gentlemen:
Transmitted herewith for electronic filing on behalf of Monument Series
Fund, Inc. (the "Funds"), please find enclosed, pursuant to Rule 497(c) under
the Securities Act of 1933, as amended, a copy of the Prospectus and Statement
of Additional Information of the Fund dated November 4, 1998 for the Monument
Washington Regional Growth Fund, Monument Washington Regional Aggressive Growth
Fund and Monument Internet Fund.
Should you have any questions, regarding the filing of such documents,
please call the undersigned.
Sincerely,
/s/ John Pasco, III
John Pasco, III
[MONUMENT FUNDS GROUP, INC. LOGO]
MONUMENT SERIES FUND, INC.
MONUMENT WASHINGTON REGIONAL GROWTH FUND
MONUMENT WASHINGTON REGIONAL AGGRESSIVE GROWTH FUND
MONUMENT INTERNET FUND
PROSPECTUS DATED NOVEMBER 4, 1998
This Prospectus describes the Monument Washington Regional Growth Fund, the
Monument Washington Regional Aggressive Growth Fund and the Monument Internet
Fund (each, a "Fund"; collectively, the "Funds"). Each Fund represents a
separate series of shares of common stock of the Monument Series Fund, Inc. (the
"Company"), a newly organized mutual fund.
MONUMENT WASHINGTON REGIONAL GROWTH FUND ("GROWTH FUND") seeks to maximize
long-term appreciation of capital, by investing primarily in a non-diversified
portfolio of equity securities of Washington regional area companies with market
capitalizations of $2 billion or more at the time of purchase.
MONUMENT WASHINGTON REGIONAL AGGRESSIVE GROWTH FUND ("AGGRESSIVE GROWTH
FUND") seeks to maximize long-term appreciation of capital, by investing
primarily in a non-diversified portfolio of equity securities of Washington
regional area companies with market capitalizations of less than $2 billion at
the time of purchase.
As used herein, the phrase "Washington regional area companies" includes
companies that are organized or headquartered in, have a major place of business
in, and/or derive 50% of their revenues or operating earnings from, Washington,
D.C., Maryland or Virginia.
MONUMENT INTERNET FUND ("INTERNET FUND") seeks to maximize long term
appreciation of capital, by investing primarily in a non-diversified portfolio
of equity securities of "Internet companies."
As used herein, a company is considered an "Internet company" if at least
50% of its assets, gross income or net profits are committed to, or derived
from, the research, design, development, manufacturing, or distribution of
products, processes or services for use with Internet or Intranet related
businesses.
This Prospectus sets forth concisely the information about the Company that
you should know before investing. Please read it and retain it for future
reference. For more information about the Funds, you may wish to refer to the
Company's Statement of Additional Information ("SAI"), dated November 4, 1998,
which is on file with the Securities and Exchange Commission ("SEC") and
incorporated herein by reference. You can obtain a free copy of the SAI upon
request by writing to "Monument Series Fund," c/o Fund Services, Inc., at 1500
Forest Avenue, Suite 111, Richmond, VA 23229, or by calling 1-888-420-9950. You
may also direct inquiries regarding the Funds to the same address or telephone
number.
The SEC maintains a web cite (http://www.sec.gov) that contains the SAI,
material incorporated by reference, and other information regarding registrants
that file electronically with the SEC.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE COMPANY'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE FUNDS' SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE IS NO GUARANTEE THAT THE
FUNDS WILL ACHIEVE THEIR INVESTMENT OBJECTIVES. SHARES OF THE FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
DESCRIPTION PAGE
----------- ----
<S> <C>
Table of Fees and Expenses.................................. 3
Summary..................................................... 4
Performance................................................. 4
The Funds................................................... 5
Investment Objectives and Programs........................ 5
Investment Policies and Restrictions...................... 7
Special Risk Considerations................................. 10
Management.................................................. 12
Tax Considerations.......................................... 14
Dividends and Distributions................................. 14
Buying, Redeeming, and Exchanging Shares.................... 15
Buying Fund Shares........................................ 15
Redeeming Fund Shares..................................... 16
Exchanging Fund Shares.................................... 17
Rule 12b-1 Plan........................................... 17
Proper Form............................................... 18
Services to Help You Manage Your Account.................... 19
General Information......................................... 19
</TABLE>
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TABLE OF FEES AND EXPENSES
The following table is designed to help you understand the various fees and
expenses that you may bear, both directly and indirectly, by investing in the
Funds.
<TABLE>
<CAPTION>
AGGRESSIVE
GROWTH INTERNET
SHAREHOLDER TRANSACTION EXPENSES GROWTH FUND FUND FUND
-------------------------------- ----------- ---------- --------
<S> <C> <C> <C>
Maximum Sales Charge (as a percentage of offering
price)(1).................................................. 4.75%(1) 4.75%(1) 4.75%(1)
Maximum Sales Charge Imposed on Reinvested Income
Dividends and Distributions............................... None None None
Redemption Fees............................................. None None None
Exchange Fee................................................ None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fee................................................ 1.00% 1.00% 1.00%
12b-1 Fees(2)............................................... None(2) None(2) .50%
Other Expenses(3)........................................... 0.40%(3) 0.40%(3) 0.40%(3)
----- ----- -----
Total Fund Operating Expenses(3)............................ 1.40%(3) 1.40%(3) 1.90%(3)
</TABLE>
- ------------------------
(1) Reduced rates apply to purchase payments over $50,000. See "Buying Fund
Shares-Public Offering Price" and "Buying Fund Shares-Rights of
Accumulation."
(2) Each Fund has approved a Plan of Distribution Pursuant to Rule 12b-1
providing for the payment of a maximum distribution fee, equal to 0.50% of
its average daily net assets, to Monument Distributors, Inc., the principal
underwriter for each Fund. See "Rule 12b-1 Plan." With respect to the Growth
Fund and the Aggressive Growth Fund, Distributors has agreed to waive the
distribution fee for through December 31, 1998. Long-term investors may pay
more than the economic equivalent of the maximum front end sales charges
permitted by the National Association of Securities Dealers.
(3) Other expenses for each Fund are based on estimated amounts for the current
fiscal year.
In the interest of limiting the expenses of the Funds, the Adviser has
voluntarily agreed to waive its advisory fees and reimburse certain expenses to
the extent necessary to keep total operating expenses to 1.90% for each Fund
subject to possible reimbursement by the Funds if such reimbursement can be
achieved without causing the annual expense ratio of a Fund to exceed the amount
of the relevant expense limitation. This arrangement, which may be terminated at
any time without notice, can decrease the Fund's expenses and boost its
performance.
EXAMPLES. You would pay the following expenses on a $1,000 investment in
shares of a Fund, assuming (a) a 5% annual return and (b) redemption at the end
of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Growth Fund..................................... $62 $90
Aggressive Growth Fund.......................... $62 $90
Internet Fund................................... $62 $90
</TABLE>
The above examples assume payment of the maximum initial sales charge of
4.75% at the time of purchase. The sales charge varies depending upon the amount
of Fund shares that an investor purchases. Accordingly, your actual expenses may
vary.
THE ABOVE EXAMPLES ARE NOT REPRESENTATIVE OF A PARTICULAR FUND'S ACTUAL OR
FUTURE EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE EXAMPLES ASSUME REINVESTMENT OF ALL INCOME DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS AND A CONSTANT LEVEL OF TOTAL FUND OPERATING EXPENSES FOR EACH
YEAR.
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SUMMARY
THE COMPANY. The Company is registered with the SEC as an open-end
management investment company. The Company currently offers shares of three
Funds, each with distinct investment objectives and investment strategies. See
"The Funds."
THE ADVISOR. Monument Advisors, Ltd. ("Monument Advisors" or "Advisors")
serves as each Fund's investment advisor and provides overall management of the
Company's business affairs. See "Management."
THE DISTRIBUTOR. Monument Distributors, Inc. ("Monument Distributors" or
"Distributors") an affiliate of Monument Advisors, serves as each Fund's
principal underwriter. See "Buying, Redeeming, and Exchanging Shares."
SHARE TRANSACTIONS. You can purchase and redeem Fund shares, or exchange
shares of one Fund for those of another, by contacting any broker authorized by
the distributor to sell shares of the Company or by contacting Fund Services,
Inc., the Company's transfer and dividend disbursing agent, at the address set
out on the cover page of this Prospectus or by telephoning 1-888-420-9950. A
sales charge may apply to your purchase. See "Buying, Redeeming, and Exchanging
Shares."
Initial investments in a Fund must be at least $2500 and additional
investments must be at least $250. Lower minimums apply to initial investments
made through tax-qualified retirement plans, and subsequent investments made
through accounts established with an Automatic Investment Plan. See "Buying Fund
Shares-Minimum Investments."
SUITABILITY FOR INVESTORS. Before investing in a Fund, you should consider
whether the Fund suits your financial objectives. You may wish to consider such
factors as the amount of your purchases, the length of time you expect to hold
Fund shares, and the risk that the value of any mutual fund may decline. You may
also want to consider the risks of investing in a non-diversified mutual fund
that is geographically focused (Growth Fund and Aggressive Growth Fund), or
single industry focused (Internet Fund), with a newly organized investment
adviser, and whether you desire dividend income. You should not rely on the
Funds for short-term financial needs or for short-term investment in the stock
market. The Funds are intended to be part of a well-balanced, comprehensive
investment program. See "Special Risk Considerations."
DISTRIBUTIONS. The Growth Fund, Aggressive Growth Fund and Internet Fund
currently intend to declare and pay dividends from net investment income, if
any, on an annual basis. Each Fund currently intends to make distributions of
realized capital gains, if any, on an annual basis. You may reinvest income
dividends and capital gain distributions that you receive in additional Fund
shares at current net asset value (i.e., without payment of a sales charge). See
"Dividends and Distributions" and "Tax Considerations."
PERFORMANCE
Each Fund may, from time to time, include quotations of its total return in
advertisements, sales literature, and shareholder reports. The TOTAL RETURN of a
Fund refers to the percentage change in value of a hypothetical investment in
the Fund, including the deduction of a proportional share of Fund expenses, and
assuming the reinvestment of all income dividends and capital gain distributions
during the periods shown.
CUMULATIVE TOTAL RETURN reflects the total change in value of an investment
in a Fund over a specified period, including, for example, periods of one, five,
and ten years, or the period since the Fund's inception through a stated ending
date.
AVERAGE ANNUAL TOTAL RETURN is the constant rate of return that would
produce the cumulative total return over a specified period, if compounded
annually. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN A FUND'S
RETURN, YOU SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL
YEAR-BY-YEAR RESULTS. Average annual total return figures are calculated
according to a formula prescribed by the SEC.
To illustrate the components of overall performance, a Fund may separate
its cumulative and average annual total return information into income results
and capital gain or loss. To illustrate the effect of various sales charge
assumptions, a Fund may present its performance information without including
the effect of
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one or more sales charges, which tends to elevate a
Fund's total return figures as presented. Additionally, Monument Advisors may,
from time to time, assume and reimburse certain expenses of a Fund, thereby
increasing that Fund's total return.
Each Fund may compare its performance in advertisements, sales literature,
and shareholder reports to widely recognized indices and to other mutual funds.
See "Performance Information" in the SAI for more details.
The performance of each Fund will vary from time to time, depending on
variables such as economic and market conditions, and, to a lesser degree, Fund
operating expenses. Accordingly, past results are not necessarily indicative of
future results. Your investment in a Fund is not insured or guaranteed. You
should consider these factors before making an investment in a Fund.
THE FUNDS
This section describes the investment objectives, and investment policies
and restrictions, of each Fund. Each Fund's investment objective is a
fundamental policy, which means that it can not be changed without the approval
of a majority of that Fund's outstanding shares (within the meaning of the
Investment Company Act of 1940 ("1940 Act")). Each Fund's investment policies
and restrictions are not fundamental, which means that, unless otherwise
required by law, they can be changed by the Company's Board of Directors ("Board
of Directors" or "Directors") without shareholder approval. As with any mutual
fund, there can be no assurance that a Fund will meet its investment objective.
INVESTMENT OBJECTIVES AND PROGRAMS
MONUMENT WASHINGTON REGIONAL GROWTH FUND. The Fund's investment objective
is to maximize long-term appreciation of capital. The Fund seeks to achieve its
objective by investing, under normal circumstances, primarily (i.e., at least
65% of its total assets) in equity securities of Washington regional area
companies with market capitalizations of $2 billion or more at the time of
purchase. Equity securities include
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common stocks, preferred stocks, warrants, and securities convertible into or
exchangeable for common stocks ("convertible securities").
When selecting investments for the Fund, Advisors will seek to identify
Washington regional area companies that it believes possess characteristics that
will lead to long-term appreciation of capital. These characteristics may
include, without limitation, the following: a history of consistent earnings
growth, leading or dominant market position in a growing industry, products or
services that are in high or growing demand, and experienced and successful
management. Although the stocks in which the Fund may invest may sometimes pay
dividends, Advisors does not expect dividend income to be a primary criterion
for selection.
Although the Fund's emphasis will be on well-established companies, the
Fund also may invest in smaller companies of the type in which the Aggressive
Growth Fund may invest, although it will not invest in an issuer that has less
than three years continuous operation, including the operations of any
predecessor companies, if it would cause more than 5% of the Fund's total assets
to be invested in such issues. The securities of these smaller companies
generally will be listed on national securities exchanges or traded in the
over-the-counter securities market ("OTC market").
For temporary defensive purposes, Advisors may invest up to 100% of the
Fund's assets in high quality, short-term debt instruments, repurchase
agreements, cash and cash equivalents. In addition, the Fund may, from time to
time, invest a portion of its assets in cash or debt securities when Advisors
deems such positions advisable in light of economic or market conditions. See
"Investment Policies and Restrictions" for further information on the types of
investments that the Fund may make.
WASHINGTON REGIONAL AGGRESSIVE GROWTH FUND. The Fund's investment objective
is to maximize long-term appreciation of capital. The Fund seeks to achieve its
objective by investing, under normal circumstances, primarily (i.e., at least
65% of its total assets) in equity securities of Washington regional area
companies with market capitalizations of less than $2 billion at the time of
purchase.
When selecting investments for the Fund, Advisors will seek to identify
Washington regional area companies that it believes are likely to benefit from
new or innovative products, services or processes that are likely to enhance the
companies' prospects for future growth in earnings. Companies with these
characteristics are likely to be relatively unseasoned companies in new and
emerging industries. These companies generally will have no established history
of paying dividends, and dividend income, if any, is likely to be incidental.
Although the Aggressive Growth Fund's emphasis will be on companies with
smaller market capitalizations than the companies in which Growth Fund will
primarily invest, the Fund intends to seek out growth companies suitable for the
Fund without regard to market capitalization. Accordingly, the Fund may invest
in well-established companies as well. The securities of these smaller companies
may be listed on national securities exchanges or traded in the OTC market.
For temporary defensive purposes, Advisors may invest up to 100% of the
Fund's assets in high quality, short-term debt instruments, repurchase
agreements, cash and cash equivalents. In addition, the Fund may, from time to
time, invest a portion of its assets in cash or debt securities when Advisors
deems such positions advisable in light of economic or market conditions. See
"Investment Policies and Restrictions" for further information on the types of
investments that the Fund may make.
Because of its more aggressive investment program, you can expect this Fund
to be significantly more volatile than the Growth Fund.
MONUMENT INTERNET FUND. The Fund's investment objective is to maximize
long-term appreciation of capital. The Fund seeks to achieve its objective by
investing, under normal circumstances, primarily (i.e., at least 65% of its
total assets) in equity securities of companies principally engaged in Internet
or Internet related businesses. A company is considered principally engaged in
an Internet or Internet related business if at least 50% of its assets, gross
income or net profits are committed to, or derived from, the research, design,
development, manufacturing, or distribution of products,
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processes or services for use with Internet or Intranet related businesses.
The Internet is a global matrix of computers and computer networks
interconnected through a high speed communication infrastructure to communicate
with each other and permit users to share information and transfer data quickly
and easily. Currently, the most popular application in the Internet is the World
Wide Web, "WWW", which is a graphic-user-interface which allows communication
and information sharing on the Internet. Other applications currently include
e-mail, intranet, extranet and electronic commerce. Some particularly active
areas include infrastructure deployment, internet access, content provision,
data security and electronic commerce. An Intranet is the application of
Internet tools and concepts to a company's internal network.
When selecting investments for the Fund, Advisors will seek to identify
Internet companies that it believes are likely to benefit from new or innovative
products, services or processes that are likely to enhance the companies'
prospects for future growth in earnings. Companies with these characteristics
are likely to be relatively unseasoned companies. These companies generally will
have no established history of paying dividends, and dividend income, if any, is
likely to be incidental.
For temporary defensive purposes, Advisors may invest up to 100% of the
Fund's assets in high quality, short-term debt instruments, repurchase
agreements, cash and cash equivalents. In addition, the Fund may, from time to
time, invest a portion of its assets in cash or debt securities when Advisors
deems such positions advisable in light of economic or market conditions. See
"Investment Policies and Restrictions" for further information on the types of
investments that the Fund may make.
INVESTMENT POLICIES AND RESTRICTIONS
In pursuit of its investment objective, each Fund may invest in a variety
of securities and employ a variety of investment practices that comprise the
Fund's investment policies. The section below describes some of the types of
securities and investment practices that Monument Advisors may use in its
day-to-day management of each Fund's assets. The section below also describes
certain restrictions applicable to each Fund's investments. See "Investment
Policies" and "Investment Restrictions" in the SAI for more information.
U.S. GOVERNMENT SECURITIES. Each Fund may invest in U.S. Government
securities, including, among other securities, U.S. Treasury obligations such as
Treasury Bills (maturities of one year or less) or Treasury Notes (maturities of
less than three years). The market value of U.S. Government securities will
fluctuate with changes in interest rate levels. Thus, if interest rates increase
from the time the security was purchased, the market value of the security will
decrease. Conversely, if interest rates decrease, the market value of the
security will increase.
OPTIONS. Each Fund may write (sell) covered call options, including those
that trade in the OTC market, to increase its return (through the receipt of
premiums) or to provide a partial hedge against declines in the market value of
its portfolio securities. No Fund will engage in such transactions for
speculative purposes. A call option gives the purchaser the right, and obligates
the writer to sell, in return for a premium paid, a particular security at a
predetermined or "exercise" price during the period of the option. A call option
is "covered" if the writer owns the underlying security that is the subject of
the call option. Each Fund may write covered call options on securities
comprising no more than 25% of the value of each Fund's net assets at the time
of any writing. The writing of call options is subject to risks, including the
risk that the Fund will not be able to participate in any appreciation in the
value of the securities above the exercise price. See "Investment Policies" in
the SAI for more information.
Each Fund may also purchase and write (sell) listed call options provided
that the value of the call options outstanding at any time will not exceed 5% of
the Fund's net assets.
Each Fund may buy put options on common stock that it owns or may acquire
through the conversion or exchange of other securities to protect against a
decline in the market value of the underlying security or to protect the
unrealized gain in an appreciated security in its portfolio without actually
selling the security. A put
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option gives the holder the right to sell the underlying security at the option
exercise price at any time during the option period. The Fund may pay for a put
either separately or by paying a higher price for securities which are purchased
subject to a put, thus increasing the cost of the securities and reducing the
yield otherwise available from the same securities.
Each Fund may buy call and put options on stock indices in order to hedge
against the risk of market or industry-wide stock price fluctuations. Call and
put options on stock indices are similar to options on securities except that,
rather than the right to buy or sell particular securities at a specified price,
options on a stock index give the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the underlying stock index
is greater than (or less than, in the case of puts) the exercise price of the
option. This amount of cash is equal to the difference between the closing price
of the index and the exercise price of the option, expressed in dollars
multiplied by a specified number. Thus, unlike options on individual securities,
all settlements are in cash, and gain or loss depends on price movements in the
stock market generally (or in a particular industry or segment of the market)
rather than price movements in individual securities.
Transactions in options are generally considered "derivative securities."
The Fund's investment in options will be for portfolio hedging purposes in an
effort to stabilize principal fluctuations in seeking to achieve the Fund's
investment objective and not for speculation.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities. Illiquid securities are securities for which there is no
ready market, which inhibits the ability to sell them and obtain their full
market value, or which are legally restricted as to their resale by the Fund.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. Each Fund may
purchase securities on a "when-issued" basis, that is, delivery of and payment
for the securities is not fixed at the date of purchase, but is set after the
securities are issued (normally within forty-five days after the date of the
transaction). Each Fund also may purchase or sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the commitment. A Fund will only make commitments to purchase
when-issued or delayed delivery securities with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if Monument Advisors deems it advisable.
FOREIGN INVESTMENTS. Each Fund may invest in securities of foreign issuers
or securities which are principally traded in foreign markets ("foreign
securities"). When foreign investments are made, Advisors will attempt to take
advantage of differences between economic trends and the performance of
securities markets in various countries to maximize investment performance. In
most instances, foreign investments will be made in companies principally based
in developed countries.
Investments in foreign securities may be made through the purchase of
individual securities on recognized exchanges and developed over-the-counter
markets or through American Depository Receipts ("ADRs") covering such
securities.
To attempt to reduce exposure to currency fluctuations, each Fund may trade
in forward foreign currency exchange contracts (forward contracts), currency
futures contracts and options thereon and securities indexed to foreign
securities.
CONVERTIBLE SECURITIES. Each Fund may invest in bonds, notes, debentures,
preferred stocks and other securities that are convertible or that carry the
right to buy a certain amount of common stock of the same or a different issuer
within a specified period of time. A convertible security provides a
fixed-income stream and the opportunity, through its conversion feature, to
participate in the capital appreciation resulting from a market price advance in
its underlying stock. As with a non-convertible fixed-income security, a
convertible security tends to increase in market value when interest rates
decline and decrease in value when interest rates rise. Like a common stock, the
value of a convertible security also tends to increase as the market value of
the underlying stock rises, and it tends to decrease as the market value of the
underlying stock declines. Because its value can be influenced by both interest
rate and
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market movements, a convertible security generally is not as sensitive to
interest rates as a similar fixed-income security, nor is it as sensitive to
changes in share price as its underlying stock.
Each Fund may also invest in enhanced convertible securities. These include
but are not limited to: Preferred Equity Redemption Cumulative Stocks ("PERCS"),
ACES (Automatically Convertible Equity Securities), PEPS (Participating Equity
Preferred Stock), PRIDES (Preferred Redeemable Increased Dividend Equity
Securities), SAILS (Stock Appreciation Income Linked Securities), TECONS (Term
Convertible Notes), QICS (Quarterly Income Cumulative Securities), and DECS
(Dividend Enhanced Convertible Securities). ACES, PEPS, PRIDES, SAILS, TECONS,
QICS, and DECS each: is issued by the company, the common stock of which will be
received in the event the convertible preferred stock is converted: seek to
provide the investor with high current income with some prospect of future
capital appreciation; is typically issued with three to four-year maturities;
typically have some built-in call protection for the first two to three years;
provide investors the right to convert them into shares of common stock at a
present conversion ratio or hold them until maturity; and upon maturity will
automatically convert to either cash or a specified number of shares of common
stock. PERCS may have a capital appreciation limit, and are generally not
convertible into cash.
There may be additional types of convertible securities not specifically
referred to herein which may be similar to those described above in which the
Funds may invest, consistent with each Fund's investment objective and policies.
An investment in an enhanced convertible security may involve additional
risks to the Funds. A Fund may have difficulty disposing of such securities
because there may be a thin trading market for a particular security at any
given time. Reduced liquidity may have an adverse impact on market price and the
Fund's ability to dispose of particular securities, when necessary, to meet the
Fund's liquidity needs or in response to a specific economic event, such as the
deterioration in the creditworthiness of an issuer. Reduced liquidity in the
secondary market for certain securities may also make it more difficult for the
Fund to obtain market quotations based on actual trades for purposes of valuing
the Fund's portfolio. The Fund, however, intends to acquire liquid securities,
though there can be no assurances that this will be achieved.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities
to qualified securities dealers or other institutional investors, provided that
such loans do not exceed 10% of the value of the Fund's total assets at the time
of the most recent loan. The borrower must deposit with the Fund's custodian
collateral with an initial market value of at least 102% of the initial market
value of the securities loaned, including any accrued interest, with the value
of the collateral and loaned securities marked-to-market daily to maintain
collateral coverage of at least 100%. This collateral may consist of cash,
securities issued by the U.S. Government, its agencies or instrumentalities, or
irrevocable letters of credit. The lending of securities is a common practice in
the securities industry. The Funds may engage in security loan arrangements with
the primary objective of increasing the Fund's income either through investing
the cash collateral in short-term interest bearing obligations or by receiving a
loan premium from the borrower. Under the securities loan agreement, as utilized
by the Funds, the Funds continue to be entitled to all dividends or interest on
any loaned securities. As with any extension of credit, there are risks of delay
in recovery and loss of rights in the collateral should the borrower of the
security fail financially.
STOCK INDEX FUTURES CONTRACTS. Each Fund may enter into stock index futures
contracts. No Fund has a current intention of entering into a futures contract
if it would result in the obligations underlying all such instruments exceeding
5% of net assets.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements. No
Fund has a current intention of entering into a repurchase agreement if it would
result in the obligations underlying all such instruments exceeding 5% of net
assets.
WARRANTS. Each Fund may invest in warrants. No Fund has a current
intention of investing in excess of 5% of its net assets, valued at the lower of
cost or market, in warrants.
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BORROWING. Each Fund may borrow money to meet redemption requests and for
other temporary or emergency purposes in an amount not exceeding 33 1/3% of its
total assets, including the amount borrowed (less liabilities other than
borrowings). While borrowings exceed 5% of a Fund's total assets, the Fund will
not make any additional investments.
OTHER INVESTMENT POLICIES AND RESTRICTIONS. The Funds have adopted a number
of additional investment restrictions that limit their activities to some
extent. Some of these restrictions may only be changed with shareholder
approval. For a list of these restrictions and more information about the Funds'
investment policies, see "Investment Policies" and "Investment Restrictions" in
the SAI.
PORTFOLIO TURNOVER. There are no limitations on the length of time that a
Fund must hold a portfolio security. A Fund may sell a portfolio security, and
will reinvest the proceeds, whenever Advisors deems such action prudent from the
viewpoint of a Fund's investment objective. A Fund's annual portfolio turnover
rate may vary significantly from year to year. A higher rate of portfolio
turnover may result in higher transaction costs, including brokerage
commissions. Also, to the extent that higher portfolio turnover results in a
higher rate of net realized capital gains to a Fund, the portion of a Fund's
distributions constituting taxable capital gains may increase. Monument Advisors
does not expect the annual portfolio turnover rates for a Fund to exceed 120%.
SPECIAL RISK CONSIDERATIONS
When you own shares of a Fund, you not only have the ability to participate
in potential increases in share value, you also bear the risk that the value of
the Fund's shares may decline. This section discusses some of the special risks
associated with an investment in the Funds.
WASHINGTON REGIONAL AREA COMPANIES. Because the Growth Fund and the
Aggressive Growth Fund intend to invest primarily in Washington regional area
companies, changes in the economic, political, regulatory, and business
environment in the Washington regional area are likely to have a greater impact
on these Funds than on mutual funds whose investments are not likewise
geographically focused.
SMALL COMPANIES. The Aggressive Growth Fund, Internet Fund, and, to a
lesser extent, the Growth Fund, may invest in companies with small market
capitalizations (i.e., less than $500 million) or companies that have relatively
small revenues, limited product lines, and a small share of the market for their
products or services (collectively, "small companies"). Small companies may lack
depth of management, they may be unable to internally generate funds necessary
for growth or potential development or to generate such funds through external
financing on favorable terms, and they may be developing or marketing new
products or services for which markets are not yet established and may never
become established. Due to these and other factors, small companies may suffer
significant losses, as well as realize substantial growth. Securities of small
companies present greater risks than securities of larger, more established
companies.
Historically, stocks of small companies have been more volatile than stocks
of larger companies and are, therefore, more speculative than investments in
larger companies. Among the reasons for the greater price volatility are the
less certain growth prospects of smaller companies, the lower degree of
liquidity in the markets for such stocks, and the greater sensitivity of small
companies to changing economic conditions. Besides exhibiting greater
volatility, small company stocks may, to a degree, fluctuate independently of
larger company stocks. Small company stocks may decline in price as large
company stocks rise, or rise in price as large company stocks decline. You
should therefore expect that the value of the Aggressive Growth Fund and the
Internet Fund's shares to be more volatile than the shares of a mutual fund,
such as the Growth Fund, that invests primarily in larger company stocks.
INTERNET COMPANIES. The Internet Fund will invest primarily in companies
engaged in Internet and Intranet related activities. The value of such companies
is particularly vulnerable to rapidly changing technology, extensive government
regulation and relatively high risks of obsolescence caused by scientific and
technological advances. The Fund may involve significantly greater risks and
therefore may experience greater vola-
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tility than a mutual fund that does not concentrate its
investments in one industry
TECHNOLOGY AND RESEARCH COMPANIES AND CURRENCY RISK. Consistent with its
investment objective, each of the Funds expects to invest a portion of its
assets in securities of companies involved in biological technologies, computing
technologies, or communication technologies (collectively, "technology
sectors"), and companies related to these industries. Typically, these
companies' products or services compete on a global, rather than a predominately
domestic or regional basis. The technology sectors historically have been
volatile and securities of companies in these sectors may be subject to abrupt
or erratic price movements. Advisors will seek to reduce such risks through
extensive research, and emphasis on more globally-competitive companies. In
addition, because these companies compete globally, the securities of these
companies may be subject to fluctuations in value due to the effect of changes
in the relative values of currencies on such companies' businesses. The history
of these markets reflect both decreases and increases in worldwide currency
valuations, and these may reoccur unpredictably in the future.
CONVERTIBLE SECURITIES. The Advisor believes that convertible securities
generally have less potential for gain or loss than common stocks. In general, a
convertible security performs more like a stock when the underlying stock's
price is high (because it is assumed it will be converted into the stock) and
more like a bond when the underlying stock's price is low (because it is assumed
that it will mature without being converted). Each convertible security offers a
different combination of upside potential and downside risk. Securities that are
convertible other than at the option of the holder generally do not limit the
potential for loss to the same extent as securities convertible at the option of
the holder.
Because convertible securities have both an equity and a fixed-income
component, the value of the fund's investments varies in response to many
factors. The equity component makes the value of convertible securities subject
to the activities of individual companies, and general market and economic
conditions. The fixed-income component causes fluctuations based on changes in
interest rates and in the credit quality of the issuer. In addition, convertible
securities are often lower-quality securities.
DERIVATIVES. A fund's risk is mostly dependent on the types of securities
it purchases and its investment techniques. Each Fund is authorized to use
options, futures and forward foreign currency exchange contracts, which are
types of derivative instruments. Derivative instruments are instruments that
derive their value from a different underlying security, index or financial
indicator. The use of derivative instruments exposes the Fund to additional
risks and transaction costs. Risks inherent in the use of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager anticipates; (2)
imperfect correlation between the price of derivative instruments and movements
in the prices of the securities, interest rates or currencies being hedged; (3)
the fact that skills needed to use these strategies are different than those
needed to select portfolio securities; (4) inability to close out certain hedged
positions to avoid adverse tax consequences; (5) the possible absence of a
liquid secondary market for any particular instrument and possible
exchange-imposed price fluctuation limits, either of which may make it difficult
or impossible to close out a position when desired; (6) leverage risk, that is,
the risk that adverse price movements in an instrument can result in a loss
substantially greater than the Fund's initial investment in that instrument (in
some cases, the potential loss is unlimited); and (7) particularly in the case
of privately-negotiated instruments, the risk that the counterparty will not
perform its obligations, which could leave the Fund worse off than if it had not
entered into the position.
ILLIQUID SECURITIES. To the extent that the Fund invests in illiquid
securities, the Fund risks not being able to sell securities at the time and the
price that it would like. The Fund may therefore have to lower the price, sell
substitute securities or forego an investment opportunity, each of which might
adversely affect the Fund.
FOREIGN INVESTMENTS. There are certain risks and costs involved in
investing in securities of companies and governments of foreign nations. These
risks may involve more risk than investing in a U.S. fund for
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<PAGE>
the following reasons: (1) there may be less public information available about
foreign companies than is available about U.S. companies; (2) foreign companies
are not generally subject to the uniform accounting, auditing and financial
reporting standards and practices applicable to U.S. companies; (3) foreign
markets have less volume than U.S. markets, and the securities of some foreign
companies are less liquid and more volatile than the securities of comparable
U.S. companies; (4) there may be less government regulation of stock exchanges,
brokers, listed companies and banks in foreign countries than in the United
States; (5) the Fund may incur fees on currency exchanges when it changes
investments from one country to another; (6) the Fund's foreign investments
could be affected by expropriation, confiscatory taxation, nationalization of
bank deposits, establishment of exchange controls, political or social
instability or diplomatic developments; (7) fluctuations in foreign exchange
rates will affect the value of the Fund's portfolio securities, the value of
dividends and interest earned, gains and loses realized on the sale of
securities, net investment income and unrealized appreciation or depreciation of
investments; and (8) possible imposition of dividend or interest withholding by
a foreign country.
DIVERSIFICATION. The Funds are non-diversified under the 1940 Act, which
means that there is no restriction under the 1940 Act on how much these Funds
may invest in the securities of any one issuer. However, to qualify for tax
treatment as a regulated investment company under the Internal Revenue Code
("Code"), the Funds intend to comply, as of the end of each taxable quarter,
with certain diversification requirements imposed by the Code. Pursuant to these
requirements, each of these Funds will, among other things, limit its
investments in the securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies) to no more
than 25% of the value of the Fund's total assets. In addition, the Funds, with
respect to 50% of their total assets, will limit their investments in the
securities of any issuer to 5% of the Fund's total assets, and will not purchase
more than 10% of the outstanding voting securities of any one issuer.
Nevertheless, as a general matter, the Funds may be more susceptible than a
diversified mutual fund to the effects of adverse economic, political or
regulatory developments affecting a single issuer or industry sector in which
these Funds may maintain investments.
EXPERIENCE. Monument Advisors is a newly organized investment adviser
managing the portfolio investments of qualified individuals, retirement plans,
and trusts. Monument Advisors had no previous experience in advising a mutual
fund, prior to advising the Funds. David A. Kugler, President of the Company,
and Alexander C. Cheung, an employee of Monument Advisors and portfolio manager
of the Growth Fund, the Aggressive Growth Fund and the Internet Fund, have
served, respectively, as financial consultant to individual investors and
investment adviser to certain managed accounts.
YEAR 2000. The Funds' operations depend on the seamless functioning of
computer systems in the financial service industry, including those of Advisors,
the Administrator, the Custodian and the Transfer Agent. Many computer software
systems in use today cannot properly process date-related information after
December 31, 1999 because of the method by which dates are encoded and
calculated. This failure, commonly referred to as the "Year 2000 Issue," could
adversely affect the handling of securities trades, pricing and account
servicing for the Funds. Advisors has made compliance with the Year 2000 Issue a
high priority and is taking steps that it believes are reasonably designed to
address the Year 2000 Issue with respect to its computer systems. Advisors has
also been informed that comparable steps are being taken by the Fund's other
major service providers. Advisors does not currently anticipate that the Year
2000 Issue will have a material impact on its ability to continue to fulfill its
duties as investment adviser.
MANAGEMENT
BOARD OF DIRECTORS. The Board of Directors is responsible for managing
each Fund's business affairs.
INVESTMENT ADVISOR. Monument Advisors serves as the investment advisor to
each Fund pursuant to an investment advisory agreement, dated October 30, 1997
("Advisory Agreement"). Subject to the supervision of the Board of Directors,
Advisors is responsible
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under the Advisory Agreement for selecting and managing each Fund's portfolio
investments in accordance with each Fund's investment objective, policies and
restrictions. Advisors also is responsible for placing orders for the purchase
and sale of each Fund's investments with broker-dealers selected by Advisors. In
addition, pursuant to the Advisory Agreement, Advisors provides overall
management of the Company's business affairs. Under the Advisory Agreement,
Advisors has, among other things, agreed to render regular reports to the Board
of Directors regarding its investment decisions and brokerage allocation
practices for each Fund , to assist each Fund's custodian in valuing portfolio
securities and computing each Fund's net asset value, and to furnish each Fund
with the assistance, cooperation, and information necessary for the Fund to meet
various legal requirements regarding registration and reporting. See "Investment
Advisory and Other Services" in the SAI for further information.
Monument Advisors, located at 8377 Cherry Lane, Laurel, Maryland
20707-4831, is a wholly-owned subsidiary of The Monument Group, Inc., which in
turn is principally owned and controlled by David A. Kugler, President of
Advisors, and President of the Company. David A. Kugler is an affiliate of the
Company and Monument Advisors. Monument Advisors is a newly organized company
that also manages the portfolio investments of qualified individuals, retirement
plans, and trusts. As of July 1, 1998, Advisors managed or supervised
approximately $20 million in assets.
For its services, Advisors receives, pursuant to the Advisory Agreement, a
monthly fee from each Fund equal to an annualized rate of 1.00% of the monthly
average net assets of such Fund through $50 million in net assets; 0.75% of the
monthly average net assets of such Fund greater than $50 million through $100
million in net assets; and 0.625% of the average monthly net assets exceeding
$100 million in net assets.
PORTFOLIO MANAGERS. Alexander C. Cheung, C.F.A., serves as the portfolio
manager for each of the Funds. Mr. Cheung has managed each Fund since its
inception. Mr. Cheung has eight years investment management experience and has
been with Advisors since August 1997. Prior to that, Mr. Cheung was Managing
Director of Lion Rock Capital Management, Inc., and, prior to that, a portfolio
manager at Anchor Asset Management, Inc. Before joining Anchor Asset Management,
Inc., Mr. Cheung worked as an investment counselor at W.H. Newbold's Sons & Co.
CODE OF ETHICS. The Company, Monument Advisors and Monument Distributors
have adopted a joint Code of Ethics relating to the personal investment
activities of certain affiliated persons of each company (collectively, "Access
Persons"). Under the terms of the Code of Ethics, Access Persons may invest in
securities for their own accounts (including securities that may be held or
purchased by a Fund), but may do so only in accordance with certain restrictions
and procedures set out in the Code of Ethics. The Code of Ethics has been
drafted with a view towards meeting the standards suggested in 1994 by the
Investment Company Institute's Advisory Group on Personal Trading.
PORTFOLIO BROKERAGE. In accordance with policies established by the Board
of Directors, Monument Advisors may take into account sales of shares of the
Funds in selecting broker-dealers to effect portfolio transactions on behalf of
the Funds. For a discussion of Monument Advisors' brokerage allocation policies
and practices, see "Portfolio Transactions and Brokerage" in the SAI.
FUND EXPENSES. Each Fund will bear certain expenses attributable to it,
including the following: (a) advisory fees; (b) fees and expenses of independent
auditors and independent legal counsel retained by the Company; (c) brokerage
commissions for transactions in portfolio investments and similar fees and
charges for the acquisition, disposition, lending or borrowing of such portfolio
investments; (d) fees and expenses of the transfer agent and administrator,
custodian and any depository appointed for the safekeeping of its cash,
portfolio securities and other property; (e) all taxes, including issuance and
transfer taxes, and corporate fees payable by the Fund to federal, state or
other governmental agencies; (f) interest payable on the Fund's borrowings; (g)
extraordinary or non-recurring expenses, such as legal claims and liabilities
and litigation costs and indemnification payments by the Fund in connection
therewith; (h) all expenses of shareholders and Board of Directors meetings
(exclusive of compensation and
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travel expenses of those Directors and employees of the Company who are
"interested persons" of the Company within the meaning of the 1940 Act, but
including compensation and travel expenses of those Directors who are not
"interested persons" of the Company within the meaning of the 1940 Act); (i)
fees and expenses involved in the preparation of all reports as required by
federal or state law or regulations; (j) fees and expenses involved in
registering or otherwise qualifying (by notice filing or otherwise) the Fund's
shares with the SEC and various states and other jurisdictions, and maintaining
such registrations or qualifications; (k) the expense of preparing, setting in
type, printing in quantity, and distributing to then-current shareholders such
materials as prospectuses, statements of additional information, and supplements
thereto, as well as periodic reports to shareholders, communications, and proxy
materials (including proxy statements and proxy cards) relating to the Fund, and
the processing, including tabulation, of the results of proxy solicitations; (l)
the expense of furnishing or causing to be furnished to each shareholder
statements of account, including the expense of mailing; (m) membership or
association dues for the Investment Company Institute or similar organizations;
(n) postage; and (o) the cost of the fidelity bond required by 1940 Act Rule
17g-1 and any errors and omissions insurance or other liability insurance
covering the Company and/or its officers, Directors and employees.
TAX CONSIDERATIONS
THE FUNDS. Each Fund intends to qualify for special tax treatment afforded
to regulated investment companies under the Code. To establish and continue its
qualification, each Fund intends to diversify its assets as the Code requires.
Each Fund also intends to distribute substantially all of its net investment
income and capital gains to its shareholders to avoid federal income tax on the
income and gains so distributed.
SHAREHOLDERS. For federal income tax purposes, any income dividend that you
receive from the Funds, as well as any net short term capital gain distribution,
is generally taxable to you as ordinary income whether you have elected to
receive it in cash or in additional shares.
Distributions of net long-term capital gains are generally taxable to you
as long-term capital gains, regardless of how long you have owned your Fund
shares and regardless of whether you have elected to receive such distributions
in cash or in additional shares.
Dividends and certain interest income earned from foreign securities by the
Fund may be subject to foreign withholding or other taxes. The Fund may be
permitted to pass on to its shareholders the right to a credit or deduction for
income or other tax credits earned from foreign investments and will do so if
possible. These deductions or credits may be subject to tax law limitations.
Generally, distributions are taxable to you for the year in which they are paid.
In addition, certain distributions that are declared and payable in October,
November or December, but which, for operational purposes, are paid the
following January, are taxable as though they were paid by December 31 of the
year in which they are declared.
Redemptions and exchanges of Fund shares are taxable events on which you
may realize a gain or loss.
TAX INFORMATION. The Funds will advise you promptly, after the close of
each calendar year, of the tax status for federal income tax purposes of all
income dividends and capital gain distributions paid for such year.
The foregoing is only a general discussion of applicable federal income tax
provisions. For further information, see "Additional Information on
Distributions and Taxes" in the SAI. YOU SHOULD CONSULT WITH YOUR OWN TAX
ADVISER ABOUT YOUR PARTICULAR TAX SITUATION.
DIVIDENDS AND DISTRIBUTIONS
Each of the Funds declares and pays income dividends from its net
investment income, usually December. Each Fund distributes capital gains, if
any, annually, usually in December.
Income dividends and capital gain distributions are calculated and
distributed the same way for each Fund. The amount of any income dividends per
share will differ, however, due to the individual investment strategies of the
Funds. Income dividend payments are not guaranteed, are subject to the Board's
discretion, and may vary from time to time. NONE OF THE FUNDS PAY
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<PAGE>
"INTEREST" OR GUARANTEE ANY FIXED RATE OF RETURN
ON AN INVESTMENT IN THEIR SHARES.
Each Fund will reinvest any income dividends and capital gains
distributions in additional shares of the Fund unless you select another option
on your application. You may change your distribution option at any time by
notifying us by mail or phone, as directed on the cover page of this Prospectus.
Please allow at least seven days prior to the record date for us to process the
new option.
BUYING, REDEEMING, AND EXCHANGING SHARES
PRINCIPAL UNDERWRITER. Monument Distributors, located at 8377 Cherry Lane,
Laurel, Maryland 20707-4831, serves as the principal underwriter of each Fund,
is a wholly-owned subsidiary of The Monument Group, Inc. Monument Advisors,
David A. Kugler is an affiliate of the Company and Monument Distributors.
BUYING FUND SHARES
BY BROKER. You can buy Fund shares from any broker authorized by the
Distributor.
BY MAIL. You can buy shares of each Fund by sending a completed
application, along with a check, drawn on a U.S. bank in U.S. funds, to
"Monument Series Fund," c/o Fund Services, Inc., at the address set out on the
cover page of this Prospectus. Fund Services, Inc. is the Company's transfer and
dividend disbursing agent. See "Proper Form."
Third party checks are not accepted for purchase of Fund shares.
BY WIRE. You may also wire payments for Fund shares to the wire bank
account for the appropriate Fund. Before wiring funds, please call
1-888-420-9950 to advise the Fund of your investment and to receive instructions
as to how and where to wire your investment. Please remember to return your
completed and signed application to the address set out on the cover page of
this Prospectus. See "Proper Form."
MINIMUM INVESTMENTS. The minimum initial investment in a Fund is $2500.
Subsequent investments must be at least $250. The minimum initial and subsequent
investments are $500 and $200, respectively, when purchasing through a
tax-qualified retirement plan. The minimum initial and subsequent investments
are $2500 and $100, respectively, when purchasing through an Automatic
Investment Plan.
PUBLIC OFFERING PRICE. When you buy shares of a Fund, you will receive the
public offering price per share next determined after your order is received.
Each Fund's public offering price per share is equal to the Fund's net asset
value per share plus a sale charge, described below, paid to Distributors.
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF AMOUNT PAID TO
--------------------- DEALERS AS A
AMOUNT OF PURCHASE AT THE OFFERING NET AMOUNT PERCENTAGE
PUBLIC OFFERING PRICE PRICE INVESTED OF OFFERING PRICE
- ------------------------- -------- ---------- -----------------
<S> <C> <C> <C>
$50,000 or less 4.75% 4.99% 4.00%
Over $50,000 through
$100,000 3.50% 3.63% 3.00
Over $100,000 through
$500,000 2.50% 2.56% 2.25
Over $500,000 through
$1,000,000 2.50% 2.56% 2.25
Above $1,000,000 0.25% 0.25% 0.25
</TABLE>
RIGHT OF ACCUMULATION. You may reduce the sales charge by combining the
amount invested in a Fund with certain previous purchases of shares of any
Monument Fund. Your shares in a Fund previously purchased will be taken into
account on a combined basis at the current net asset value per share of a Fund
in order to establish the aggregate investment amount to be used in determining
the applicable sales charge. Only previous purchases of Fund shares that were
sold subject to the sales charge that are still held in the Fund will be
included in the calculation. To take advantage of this privilege, you must give
notice at the time you place your initial order and subsequent orders that you
wish to combine purchases. When you send payment along with your request to
combine purchases, please specify your account number.
WHEN SHARES ARE PRICED. Each Fund is open for business each day the New
York Stock Exchange ("Exchange") is open. Each Fund determines its share price
as of the close of regular trading on the Exchange, generally 4:00 p.m. New York
time. It is expected that the Exchange will be closed during the next twelve
months on Saturdays and Sundays and on the observed holidays of New Year's Day,
Martin Luther King Day,
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President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, plus on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
NET ASSET VALUE. Each Fund's share price is equal to the net asset value
("NAV") per share of the Fund. Each Fund calculates its NAV per share by valuing
and totaling its assets, subtracting any liabilities, and dividing the
remainder, called net assets, by the number of Fund shares outstanding. The
value of each Fund's portfolio securities is generally based on market quotes if
they are readily available. If they are not readily available, Advisors will
determine their market value in accordance with procedures adopted by the Board.
For information on how the Funds value their assets, see "Valuation of Fund
Shares" in the SAI.
WAIVER OF SALES CHARGES. No sales charge shall apply to:
(1) reinvestment of income dividends and capital gain distributions;
(2) exchanges of Fund shares for those of another Fund;
(3) redemptions by a Fund when an account falls below the minimum required
account size;
(4) purchases of Fund shares made by current or former Directors, officers, or
employees of the Company, Advisors, Monument Distributors, The Monument
Funds Group, Inc. or The Monument Group, Inc., and by members of their
immediate families;
(5) purchases of Fund shares by Distributors for its own investment account for
investment purposes only;
(6) a "qualified institutional buyer," as such term is defined under Rule 144A
of the Securities Act of 1933, including, but not limited to, insurance
companies, investment companies registered under the 1940 Act, business
development companies registered under the 1940 Act, small business
investment companies, plans established by a state for the benefit of its
employees, employee benefit plans within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, trust funds, organizations
described in Section 501(c)(3) of the Internal Revenue Code ("Code"),
investment advisers registered under the Investment Advisors Act of 1940,
and dealers registered pursuant to Section 15 of the Securities Exchange
Act of 1934, that comply with the minimum investment and other requirements
as set forth in Rule 144A;
(7) a tax qualified plan, including a plan under Sections 401(a), 401(k),
403(a), and 403(b)(7) of the Code, and tax favored plan, including a plan
under Section 457 of the Code;
(8) a charitable organization, as defined in Section 501(c)(3) of the Code, as
well as other charitable trusts and endowments, investing $50,000 or more;
(9) a charitable remainder trust, under Section 664 of the Code, or a life
income pool, established for the benefit of a charitable organization as
defined in Section 501(c)(3) of the Code; and
(10) investment advisers registered under the Advisers Act and broker-dealers
registered under the Exchange Act purchasing securities for their own
accounts.
Additional information regarding the waivers may be obtained by calling
1-888-420-9950. All account information is subject to acceptance and
verification by Monument Distributors.
GENERAL. The Company reserves the right in its sole discretion to withdraw
all or any part of the offering of shares of any Fund when, in the judgment of
the Fund's management, such withdrawal is in the best interest of the Fund. An
order to purchase shares is not binding on, and may be rejected by, Distributors
until it has been confirmed in writing by Distributors and payment has been
received.
REDEEMING FUND SHARES
You can redeem shares of the Funds by submitting your order in proper form
through your authorized broker or directly to the Fund either in writing to Fund
Services, Inc. at the address set out on the cover page of
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<PAGE>
this Prospectus, or by telephoning 1-888-420-9950. See "Proper Form."
EXCHANGING FUND SHARES
You can exchange shares of one fund for those of the other fund, under the
Company's exchange privilege ("Exchange Privilege"), by submitting your order in
proper form, as explained under "Redeeming Fund Shares."
EXCHANGE PRICE. Your exchange request will be processed based on the NAV of
the Fund shares to be exchanged, and the Fund shares to be bought, next
determined after receipt of your order in proper form.
Exchanges are taxable transactions. See "Additional Information on
Distributions and Taxes" in the SAI.
MINIMUM ACCOUNT. The minimum amount permitted for each exchange between
existing accounts in the Funds is $250. The minimum amount permitted for an
exchange that establishes a new Fund account is $2500.
EXCHANGE RESTRICTION. You may not exchange shares that have previously
been exchanged for a period of 90 days from the date of exchange.
MODIFICATION OR TERMINATION. Excessive trading can adversely impact Fund
performance and shareholders. Therefore, the Company reserves the right to
temporarily or permanently modify or terminate the Exchange Privilege. The
Company also reserves the right to refuse exchange requests by any person or
group if, in the Company's judgment, either Fund would be unable to invest the
money effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected. The Company further reserves
the right to restrict or refuse an exchange request if the Company has received
or anticipates simultaneous orders affecting significant portions of either
Fund's assets or detects a pattern of exchange requests that coincides with a
"market timing" strategy. Although the Company will attempt to give you prior
notice when reasonable to do so, the Company may modify or terminate the
Exchange Privilege at any time.
SMALL ACCOUNT REDEMPTIONS. Due to the relatively high cost of maintaining
accounts with smaller holdings, each Fund reserves the right to redeem your
shares if, as a result of redemptions, the value of your account drops below
each Fund's $500 minimum balance requirement ($250 in the case of IRAs, or other
retirement plans and custodial accounts). Each Fund will give you 30 days'
advance written notice and a chance to increase your Fund balance to the minimum
requirement before the Fund redeems your shares.
REDEMPTION PRICE. Your redemption request will be processed based on the
NAV of the applicable Fund's shares next determined after receipt of your order
in proper form.
REDEMPTION PROCEEDS. Redemption proceeds will generally be paid by the next
business day after processing, but in no event later than three business days
after receipt by Fund Services, Inc. of your redemption order in proper form,
subject to the following. If you are redeeming shares that you just purchased
and paid for by personal check, the mailing of your redemption proceeds may be
delayed for up to ten (10) calendar days to allow your check to clear (this
holding period does not apply to cashier's, certified, or treasurer's checks).
Additionally, the Company, on behalf of each Fund, may suspend the right of
redemption or postpone the date of payment during any period that the Exchange
is closed, or trading in the markets that a Fund normally utilizes is
restricted, or during any period that redemption is otherwise permitted to be
suspended by the SEC.
REDEMPTIONS IN KIND. The Company reserves the right to redeem its shares in
kind, which means that upon tendering shares of a Fund, you could receive assets
other than cash in return. Nevertheless, the Company has committed 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 $250,000 from a Fund or one percent of the net asset value of a Fund at the
beginning of such period. See "Buying, Redeeming, and Exchanging Shares" in the
SAI for more information.
RULE 12B-1 PLAN
The Board of Directors has adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act ("Rule 12b-1 Plan"). Pursuant to the Plan, each Fund
may finance any activity or expense that is intended
17
<PAGE>
primarily to result in the sale its shares. Under the Plan, each Fund may pay a
fee ("12b-1 fee") to Distributors up to a maximum of 0.50%, on an annualized
basis, of its average daily net assets. The Company may pay the 12b-1 fee for
activities and expenses borne in the past in connection with its shares as to
which no 12b-1 fee was paid because of the maximum limitation.
The activities and expenses financed by the 12b-1 fee may include, but are
not limited to: (a) compensation to and expenses, including overhead and
telephone expenses, of employees of Distributors who engage in the distribution
of the shares of each Fund; (b) printing and mailing of prospectuses, statements
of additional information, and periodic reports to prospective shareholders of
each Fund; (c) expenses relating to the development, preparation, printing, and
mailing of advertisements, sales literature, and other promotional materials
describing and/or relating to each Fund; (d) compensation to financial
intermediaries and broker-dealers to pay or reimburse them for their services or
expenses in connection with the distribution of the shares of each Fund; (e)
expenses of holding seminars and sales meetings designed to promote the
distribution of the shares of each Fund; (f) expenses of obtaining information
and providing explanations to prospective shareholders of each Fund regarding
its investment objectives and policies and other information pertaining to it,
including its performance; (g) expenses of training sales personnel offering and
selling each Fund's shares; and (h) expenses of personal services and/or
maintenance of shareholder accounts with respect to the shares of each Fund.
With respect to the Growth Fund and the Aggressive Growth Fund, Distributors has
advised the Company that it intends to waive the 12b-1 fee for each Fund's first
year of operations. See "Rule 12b-1 Plan" in the SAI.
PROPER FORM
Your order to buy shares is in proper form when your completed and signed
shareholder application and check or wire payment is received. Your written
request to sell or exchange shares is in proper form when written instructions
signed by all registered owners, with a signature guarantee if necessary is
received.
WRITTEN INSTRUCTIONS. All registered owners must sign any written
instructions. To avoid any delay in processing your transaction, such
instructions should include:
- your name,
- the Fund's name,
- a description of the request,
- for exchanges, the name of the Fund you are exchanging into,
- your account number,
- the dollar amount or number of shares, and
- your daytime or evening telephone number.
SIGNATURE GUARANTEES. For our mutual protection, we require a signature
guarantee in the following situations:
- you wish to redeem over $50,000 worth of shares,
- you want redemption proceeds to be paid to someone other than the
registered owners,
- you want redemption proceeds to be sent to an address other than the
address of record, preauthorized bank account, or preauthorized brokerage
firm account,
- we receive instructions from an agent, not the registered owners, or
- we believe a signature guarantee would protect us against potential
claims based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You can
obtain a signature guarantee from certain banks, brokers or other eligible
guarantors. YOU SHOULD VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR
PRIOR TO SIGNING. A NOTARIZED SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES. We do not issue share certificates. This eliminates
the costly problem of replacing lost, stolen or destroyed certificates.
RETIREMENT PLAN ACCOUNTS. You may not sell shares or change distribution
options on retirement plan accounts by telephone. While you may exchange shares
18
<PAGE>
by phone, certain restrictions may be imposed on other retirement plans. To
obtain any required forms or more information about distribution or transfer
procedures, please call 1-888-420-9950.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN. Our automatic investment plan offers a
convenient way to invest in the Funds. Under the plan, you can automatically
transfer money from your checking account to the Fund(s) each month to buy
additional shares. If you are interested in this plan, please refer to the
automatic investment plan application. The value of the Funds' shares will
fluctuate and the systematic investment plan will not assure a profit or protect
against a loss. You may discontinue the plan at any time by notifying us by mail
or phone.
TELEPHONE TRANSACTIONS. You may redeem shares of a Fund, or exchange shares
of one Fund for that of another Fund, by telephone. Please refer to the sections
of this Prospectus that discuss the transaction you would like to make, or call
1-888-420-9950. We may only be liable for losses resulting from unauthorized
telephone transactions if we do not follow reasonable procedures designed to
verify the identity of the caller. When you call, we will request personal or
other identifying information, and may also record calls. For your protection,
we may delay a transaction or not implement one if we are not reasonably
satisfied that telephone instructions are genuine. If this occurs, we will not
be liable for any loss. If our lines are busy or you are otherwise unable to
reach us by phone, you may wish to send written instructions to us, as described
elsewhere in this Prospectus. If you are unable to execute a transaction by
telephone, we will not be liable for any loss.
STATEMENTS AND REPORTS. You will receive transaction confirmations and
account statements on a regular basis. Confirmations and account statements will
reflect transactions in your account, including additional purchases and
reinvestments of income dividends and capital gain distributions. PLEASE VERIFY
THE ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM. You will also receive
semi-annual financial reports for each Fund in which you have invested. To
reduce Fund expenses, we attempt to identify related shareholders within a
household and send only one copy of a report. Please call 1-888-420-9950 if you
would like an additional free copy of the Funds' financial reports.
GENERAL INFORMATION
THE COMPANY. The Company, a Maryland corporation organized on April 7,
1997, is an open-end management investment company. Each of its three Funds is
non-diversified. The Company's authorized capital consists of 2 billion shares
of common stock with a par value of $0.001 per share. The Company currently
offers, on a continuous basis, three series of common stock, namely, the Growth
Fund, the Aggressive Growth Fund and the Internet Fund, each of which is
currently authorized to issue up to 250 million shares. The Company may offer
additional series in the future.
Shares of each Fund, when issued, are fully-paid and non-assessable and
have equal rights as to redemption and participation in income dividends,
earnings, and assets remaining in liquidation. Shareholders have no preemptive
or conversion rights. As of September 20, 1998, S. M. Hunn, Jr. of Richmond,
Virginia may be deemed to be a control person of the Growth Fund as a result of
ownership of more than 25% of the Fund's outstanding shares.
VOTING. Shares of each Fund have equal voting rights, except that
shareholders of each Fund will vote separately on matters affecting only that
Fund. Fractional shares have proportionately the same rights as do full shares.
The voting rights of each Fund's shares are non-cumulative, which means that the
holders of more than 50% of the shares of the Funds voting for the election of
Directors have the ability to elect all of the Directors, with the result that
the holders of the remaining voting shares will not be able to elect any
Director.
The Company does not intend to hold annual shareholder meetings, though it
may, from time to time, hold special meetings of Fund shareholders, as required
by applicable law. The Board of Directors, in its discretion, as well as the
holders of at least 10% of the outstanding shares of a Fund, also may call a
shareholders meeting. The federal securities laws require that the Funds help
you communicate with other shareholders in
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<PAGE>
connection with the election or removal of members of
the Board.
CUSTODIAN, ACCOUNTING AGENT AND TRANSFER AGENT. Star Bank, N.A. located at
425 Walnut Street, Cincinnati, Ohio 45202, serves as custodian for each Fund's
portfolio securities and other assets. Commonwealth Fund Accounting, Inc., 1500
Forest Avenue, Suite 111, Richmond, VA 23229, serves as an investment accounting
agent for each Fund's portfolio securities and other assets. Fund Services,
Inc., 1500 Forest Avenue, Suite 111, Richmond, VA 23229, serves as the transfer
agent and dividend dispersing agent for each Fund.
OTHER INFORMATION. This Prospectus does not report any financial
information or performance results for the Funds, which only recently commenced
operations. Statements of assets and liabilities of the Company is located in
the SAI. In the future, financial statements and performance results of the
Funds will appear in this Prospectus and the SAI. Additional information about
the performance of the Funds will appear in the Company's annual report to
shareholders, which the Company will provide free of charge.
Apart from the Prospectus and the SAI, the Company's registration statement
contains certain additional information that may be of interest to you. You may
obtain that information from the SEC by paying the charges prescribed under its
rules and regulations.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL FUND SHARES IN ANY STATE OR
JURISDICTION IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES REPRESENTATIVE,
DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN THE SAI.
20
<PAGE>
MONUMENT SERIES FUND, INC.
MONUMENT WASHINGTON REGIONAL GROWTH FUND
MONUMENT WASHINGTON REGIONAL AGGRESSIVE GROWTH FUND
MONUMENT INTERNET FUND
STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 4, 1998
This Statement of Additional Information ("SAI") is not a Prospectus. It
contains additional information that you should read in conjunction with the
prospectus, dated November 4,1998 ("Prospectus"), for the Monument Series Fund,
Inc. Capitalized terms appearing in this SAI that are not otherwise defined
herein have the same meaning given to them in the Prospectus. You may obtain a
copy of the Prospectus by writing "Monument Series Fund," c/o Fund Services,
Inc., 1500 Forest Avenue, Suite 111, Richmond, VA 23229, or by calling
1-888-420-9950.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Investment Policies...........................................................
Potential Risks...............................................................
Investment Restrictions.......................................................
Directors and Officers........................................................
Investment Advisory and Other Services........................................
Portfolio Transactions and Brokerage..........................................
Buying, Redeeming, and Exchanging Shares......................................
Principal Holders of Securities...............................................
Valuation of Fund Shares......................................................
Additional Information On Distributions and Taxes.............................
Further Description of the Company's Shares...................................
The Company's Principal Underwriter...........................................
Performance Information.......................................................
Financial Statements..........................................................
Appendix A: Performance Comparisons...........................................
</TABLE>
<PAGE>
INVESTMENT POLICIES
The Prospectus describes the fundamental investment objectives and certain
investment policies and restrictions applicable to each Fund. The following is
additional information for your consideration.
ILLIQUID AND RESTRICTED SECURITIES. Each Fund may invest up to 15% of its net
assets in illiquid securities, including repurchase agreements with maturities
in excess of seven days. Subject to this limitation, the Board of Directors has
authorized each Fund to invest in restricted securities where such investment is
consistent with that Fund's investment objective, and has authorized such
securities to be considered liquid to the extent Advisors determines that there
is a liquid institutional or other market for such securities -- for example,
restricted securities that may be freely transferred among qualified
institutional buyers under Rule 144A of the Securities Act of 1933 ("1933 Act"),
and for which a liquid institutional market has developed. The Board of
Directors will review any determination by Advisors to treat a restricted
security as a liquid security on an ongoing basis, including Advisors'
assessment of current trading activity and the availability of reliable price
information. In determining whether a restricted security is properly considered
a liquid security, Advisors and the Board of Directors will take into account
the following factors: (a) the frequency of trades and quotes for the security;
(b) the number of dealers willing to buy or sell the security and the number of
other potential buyers; (c) dealer undertakings to make a market in the
security; (d) the nature of the security and marketplace trades, including the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer; and (e) such other factors as Advisors may determine to
be relevant to such determination.
WRITING CALL OPTIONS. Each Fund may write (sell) covered call options. Covered
call options written by a Fund give the holder the right to buy the underlying
securities from the Fund at a stated exercise price. A call option written by a
Fund is "covered" if the Fund owns the underlying security that is subject to
the call or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if a Fund holds
a call on the same security and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less than the
exercise price of the call written or (b) is greater than the exercise price of
the call written if the difference is maintained by the Fund in cash and high
grade debt securities in a segregated account with its custodian bank.
The premium paid by the buyer of an option will reflect, among other things, the
relationship of the exercise price to the market price and volatility of the
underlying security, the remaining term of the option, supply and demand and
interest rates.
The writer of a call option may have no control over when the underlying
securities must be sold because the writer may be assigned an exercise notice at
any time prior to the termination of the
2
<PAGE>
obligation. Whether or not an option expires unexercised, the writer retains the
amount of the premium. This amount, of course, may, in the case of a covered
call option, be offset by a decline in the market value of the underlying
security during the option period. If a call option is exercised, the writer
experiences a profit or loss from the sale of the underlying security.
The writer of an option that wishes to terminate its obligation may effect a
"closing purchase transaction," by buying an option of the same series as the
option previously written. The effect of the purchase is that the writer's
position will be canceled by the clearing corporation. However, a writer may not
effect a closing purchase transaction after being notified of the exercise of an
option. There is no guarantee that a Fund will be able to effect a closing
purchase transaction for the options it has written.
Effecting a closing purchase transaction in the case of a written call option
will permit a Fund to write another call option on the underlying security with
either a different exercise price, expiration date or both. Also, effecting a
closing purchase transaction will permit the Fund to use cash or proceeds from
the concurrent sale of any securities subject to the option to make other
investments. If a Fund desires to sell a particular security from its portfolio
on which it has written a call option, it will effect a closing purchase
transaction before or at the same time as the sale of the security.
A Fund will realize a profit from a closing purchase transaction if the price of
the transaction is less than the premium received from writing the option. A
Fund will realize a loss from a closing purchase transaction if the price of the
transaction is more than the premium received from writing the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in part by
appreciation of the underlying security owned by a Fund.
WRITING COVERED OVER-THE-COUNTER ("OTC") OPTIONS. A Fund may write ("sell")
covered call options that trade in the OTC market to the same extent that it
will engage in exchange traded options. Just as with exchange traded options,
OTC call options give the holder the right to buy an underlying security from an
option writer at a stated exercise price. However, OTC options differ from
exchange traded options in certain material respects.
OTC options are arranged directly with dealers and not, as is the case with
exchange traded options, with a clearing corporation. Thus, there is a risk of
non-performance by the dealer. Because there is no exchange, pricing is
typically done by reference to information from market makers. However, OTC
options are available for a greater variety of securities, and in a wider range
of expiration dates and exercise prices, than exchange traded options, and the
writer of an OTC option is paid the premium in advance by the dealer.
There can be no assurance that a continuous liquid secondary market will exist
for any particular option at any specific time. When a Fund writes an OTC
option, it generally can close out that
3
<PAGE>
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote the option.
FUTURES CONTRACTS. Each Fund may buy and sell stock index futures contracts
traded on domestic stick exchanges to hedge the value of its portfolio against
changes in market conditions. A stock index futures contract is an agreement
between two parties to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock index value at
the close of the last trading day of the contract and the price at which the
futures contract is originally struck. A stock index futures contract does not
involve the physical delivery of the underlying stocks in the index. Although
stock index futures contracts call for the actual taking or delivery of cash, in
most cases, each Fund expects to liquidate its stock index futures positions
through offsetting transactions, which may result in a gain or a loss, before
cash settlement is required.
A Fund will incur brokerage fees when it purchases and sells stock index futures
contract, and, at the time a Fund purchases or sells a stock index futures
contract, it must make a good faith deposit known as the "initial margin."
Thereafter, a Fund may need to make subsequent deposits, known as "variation
margin," to reflect changes in the level of the stock index. A Fund may buy or
sell a stock index futures contract so long as the sum of the amount of margin
deposits on open positions with respect to all stock index futures contracts
does not exceed 5% of the Fund's net assets.
To the extent a Fund enters into a stock index futures contract, it will
maintain with its custodian bank, to the extent required by the rules of the
SEC, assets in a segregated account to cover its obligations with respect to
such contract, which will consist of cash, cash equivalents or high quality debt
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contract and the aggregate value of the
initial and variation margin payments made by the Fund with respect to such
futures contracts.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements. A
repurchase agreement is an instrument under which the Fund acquires ownership of
a debt security and the seller agrees, at the time of the sale, to repurchase
the obligation at a mutually agreed upon time and price, thereby determining the
yield during the Fund's holding period.
WARRANTS. Each Fund may invest in warrants. A warrant is a security that gives
the holder the right, but not the obligation, to purchase a given number of
shares of a particular company at a fixed price within a certain period of time.
Warrants generally trade in the open market and may be sold rather than
exercised.
4
<PAGE>
POTENTIAL RISKS
OPTIONS AND FUTURES. Although each Fund may write covered call options and
purchase and sell stock index futures contracts to hedge against declines in
market value of its portfolio securities, the use of these instruments involves
certain risks. As the writer of covered call options, a Fund receives a premium,
but loses any opportunity to profit from an increase in the market price of the
underlying securities above the exercise price during the option period. A Fund
also retains the risk of loss if the price of the security declines, though the
premium received may partially offset such loss.
Although stock index futures contracts may be useful in hedging against adverse
changes in the value of a Fund's portfolio securities, they are derivative
instruments that are subject to a number of risks. During certain market
conditions, purchases and sales of stock index futures contracts may not
completely offset a decline or rise in the value of a Fund's Portfolio. In the
futures markets, it may not always be possible to execute a buy or sell order at
the desired price, or to close out an open position due to market conditions,
limits on open positions and/or daily price fluctuations. Changes in the market
value of a Fund's portfolio may differ substantially from the changes
anticipated by the Fund when it established its hedged positions, and
unanticipated price movements in a futures contract may result in a loss
substantially greater than a Fund's initial investment in such contract.
Successful use of futures contracts depends upon Advisors' ability to predict
correctly movements in the direction of the securities markets generally or of a
particular segment of a securities market. No assurance can be given that
Advisors' judgment in this respect will be correct.
The CFTC and the various exchanges have established limits referred to as
"speculative position limits" on the maximum net long or net short position that
any person may hold or control in a particular futures contract. Trading limits
are imposed on the maximum number of contracts that any person may trade on a
particular trading day. An exchange may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions or
restrictions. Each Fund does not believe that these trading and positions limits
will have an adverse impact on its strategies for hedging its securities.
REPURCHASE AGREEMENTS. Although each Fund will enter into repurchase agreements
only with institutions that Advisors believes present minimal credit risk, it is
conceivable that a repurchase agreement issuer could seek relief under
bankruptcy laws or otherwise default on its obligations under its repurchase
agreement. In that event, a Fund could experience both delays in liquidating the
underlying securities and losses, including: (a) a possible decline in the value
of the underlying security during the period while the Fund seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of access to
income during this period; (c) a possible loss on the sale of the underlying
collateral; and (d) expenses of enforcing its rights.
WARRANTS. The purchaser of a warrant expects the market price of the
security underlying the warrant to exceed the purchase price of the warrant
plus the exercise price of the warrant, thus
5
<PAGE>
yielding a profit. Of course, it is possible that the market price of the
security underlying a warrant won't exceed the exercise price of the warrant
before the expiration date of the warrant. Consequently, the purchaser of a
warrant risks the loss of the entire purchase price of the warrant.
Additionally, price movements in the security underlying a warrant are generally
magnified in the price movements of the warrant. Therefore, the price of a
warrant tends to be more volatile than, and may not correlate exactly to, the
price of its underlying security.
INVESTMENT RESTRICTIONS
The Company has adopted the following restrictions as fundamental policies for
each Fund as stated. These restrictions are fundamental policies of the Fund and
may not be changed for any given Fund without the approval of the lesser of (i)
more than 50% of the outstanding voting securities of the Fund or (ii) 67% or
more of the voting securities present at a shareholder meeting of the Fund if
more than 50% of the outstanding voting securities of the Fund are represented
at the meeting in person or by proxy. The investment restrictions of one Fund
thus may be changed without affecting those of the other Fund. Under the
restrictions, each Fund MAY NOT:
1. issue senior securities, except to the extent permitted by the 1940
Act, including permitted borrowings;
2. make loans, except for collateralized loans of portfolio securities in
an amount not exceeding 33 1/3% of the Fund's total assets (at the time
of the most recent loan). This limitation does not apply to purchases
of debt securities or to repurchase agreements;
3. borrow money, except for temporary or emergency purposes in an amount not
exceeding 33 1/3% of the Fund's total assets (including the amount
borrowed) less liabilities (other than borrowings). No Fund will purchase
securities when its borrowings exceed 5% of its total assets;
4. invest more than 25% of the Fund's total assets (at the time of the
most recent investment) in any single industry. This limitation does
not apply to investments in obligations of the US. Government or any of
its agencies or instrumentalities;
5. act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed to
be an underwriter for purposes of the 1933 Act;
6. invest in securities for the purpose of exercising management or control
of the issuer, except that each Fund may purchase securities of other
investment companies to the extent permitted by the 1940 Act, regulations
thereunder, or exemptions therefrom;
6
<PAGE>
7. purchase or sell commodity contracts, except that each Fund may, as
appropriate and consistent with its investment objectives and policies,
enter into financial futures contracts, options on such futures contracts,
forward foreign currency exchange contracts, forward commitments, and
repurchase agreements;
8. effect short sales, unless at the time the Fund owns securities
equivalent in kind and amount to those sold;
9. purchase or sell real estate or any interest therein, except that each
Fund may, as appropriate and consistent with its investment objectives and
policies, invest in securities of corporate and governmental entities
secured by real estate or marketable interests therein, or securities of
issuers that engage in real estate operations or interests therein, and
may hold and sell real estate acquired as a result of ownership of such
securities; or
10. invest in the securities of other investment companies, except
that each Fund may acquire securities of another investment company
pursuant to a plan of reorganization, merger, consolidation or
acquisition, or except where the Fund would not own, immediately after
the acquisition, securities of other investment companies which exceed
in the aggregate (i) more than 3% of the issuer's outstanding voting
stock, (ii) more than 5% of the Fund's total assets, and (iii) together
with the securities of all other investment companies held by the Fund,
exceed, in the aggregate, more than 10% of the Fund's total assets, or
except as otherwise permitted by the 1940 Act and the regulations
thereunder or exemptions therefrom.
In addition to these fundamental policies, it is the present policy of each Fund
(which may be changed without the shareholder approval) not to pledge, mortgage
or hypothecate its assets as security for loans, nor to engage in joint or joint
and several trading accounts in securities, except that it may participate in
joint repurchase arrangements, or invest its short-term cash in shares of a
money market mutual fund (pursuant to the terms of any order, and any conditions
therein, issued by the SEC permitting such investments). It is also the present
policy of each Fund not to invest in excess of 5% of its net assets, valued at
the lower of cost or market, in warrants, nor more than 2% of its net assets in
warrants not listed on either the New York or American Stock Exchange.
7
<PAGE>
DIRECTORS AND OFFICERS
The Board of Directors has the responsibility for the overall management of the
Company, including general supervision and review of its investment activities.
The Board of Directors, in turn, elects the officers of the Company who are
responsible for administering the Company's day-to-day operations. The
affiliations of the officers and Board of Directors members and their principal
occupations for the past five years are shown below. Members of the Board of
Directors who are considered "interested persons" of the Company under the 1940
Act are indicated by an asterisk (*).
<TABLE>
<CAPTION>
Principal Occupations
Name, Address, and Age Positions Held with the Company During the Past Five Years
- ---------------------- ------------------------------- --------------------------
<S> <C> <C>
*David A. Kugler (38) Director, President and Treasurer President and Director, The Monument
8377 Cherry Lane Group, Inc. (a holding company),
Laurel, MD 20707 1997-Present; President and Director,
The Monument Funds Group, Inc. (a
holding company), 1997-Present;
President and Director, Monument
Advisors, Ltd; 1997-Present President
and Director, Monument Distributors,
Inc., 1997-Present; Account Vice
President, Paine Webber, Inc.,
1994-1997; Financial Consultant,
Merrill Lynch & Co., 1990-1994
Francine F. Carb (40) Director President, Markitects, Inc. (marketing
421 Woodland Circle consulting), 1994-Present; President,
Radnor, PA 19087-4640 Francine Carb & Associates (marketing
consulting), 1992-1994
Victor Dates (60) Director Adjunct Professor, Coppin State
2107 Carter Dale Road College, 1998-Present; Assistant
Baltimore, MD 21209 Professor, Howard University,
1988-1998.
</TABLE>
8
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<TABLE>
<CAPTION>
Principal Occupations
Name, Address, and Age Positions Held with the Company During the Past Five Years
- ---------------------- ------------------------------- --------------------------
<S> <C> <C>
George DeBakey (48) Director Director, International Operations,
53303 Marlyn Drive International ESPA, 1998-Present;
Bethesda, MD 20816 Instructor at American University,
1992-1998.
G. Frederic White, III Director Management Consultant (small business
(45) management consulting), 1985-1997;
3107 Albemarle Road Business Manager, Trinity Episcopal
Wilmington, DE 19808 Parish, 1997-Present; Private Investor
Rhonda Wiles-Roberson, J.D Director Principal, RWR Consults (business
(46) advisors), 1995-Present; General
623 Sonata Way Counsel, NAPWA Services, Inc.
Silver Spring, MD 20901 (pharmaceutical company), 1993-1995;
General Counsel, Calvert Group
(sponsor of investment companies),
1990-1993
</TABLE>
Directors and officers of the Company who are affiliated with Advisors and/or
Distributors receive no remuneration from the Company. Each Director who is not
an interested person of the Company receives as compensation for serving on the
Board of Directors an annual fee of $2,000 plus a fee of $500 per day for
attendance at any meeting of the Board of Directors or committee established by
the Board of Directors, including any meeting held by telephonic conference. The
Directors also receive reimbursement for their expenses incurred in attending
any meeting of the Board of Directors or committee established by the Board of
Directors. The Board of Directors generally meets quarterly.
Additionally, certain Directors and officers of the Company who are shareholders
of The Monument Group, Inc., the parent company of Advisors and Distributors,
may be deemed to receive indirect remuneration by virtue of their indirect
interests in Advisors and Distributors, respectively.
Director White provided business consultation services to Monument Advisors on
two limited projects in 1997 for compensation totaling less than $1,500.
COMMITTEES ESTABLISHED BY THE BOARD OF DIRECTORS.
The Company has an Audit Committee, an Executive Committee, a Pricing and
Investment Committee, and a Nominating Committee. The duties of these four
Committees and their present membership are as follows:
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AUDIT COMMITTEE: The Audit Committee assists the Board of Directors in
fulfilling its responsibilities for the Company's accounting and financial
reporting practices, and provides a channel of communication between the Board
of Directors and Deloitte & Touche LLP, the Company's independent public
accountant. Directors Carb, Dates, DeBakey, White and Wiles-Roberson are members
of the Audit Committee.
EXECUTIVE COMMITTEE: During intervals between meetings of the Board of
Directors, the Executive Committee possesses and may exercise all of the powers
of the Board of Directors in the management of the Company except as to those
matters that specifically require action by the Board of Directors. Directors
Kugler and Wiles-Roberson are members of the Executive Committee.
PRICING AND INVESTMENT COMMITTEE: During intervals between meetings of the Board
of Directors, the Pricing and Investment Committee determines or establishes in
good faith a fair value for any portfolio investment of the Company not having a
readily available market quotation or sales price, and presents to the full
Board of Directors such valuations and the basis therefore at the next meeting
held by the Board of Directors for their good faith confirmation or change.
Director Kugler is a member of the Pricing and Investment Committee. In addition
to Mr. Kugler, Alexander Cheung is also a member of the Pricing and Investment
Committee. Mr. Cheung is an employee of Monument Advisors.
NOMINATING COMMITTEE: The Nominating Committee nominates candidates for
election to the Board of Directors, whether such candidates be interested or
non-interested persons of the Company. Directors Carb, Dates, DeBakey,
White, and Wiles-Roberson are members of the Nominating Committee.
INVESTMENT ADVISORY AND OTHER SERVICES
ADVISORY AGREEMENT. Pursuant to the Advisory Agreement, Advisors provides
certain services to each Fund. The services provided by Advisors include: (a)
furnishing an investment program by determining what investments a Fund should
purchase, hold, sell, or exchange; determining the manner in which to exercise
any voting rights, rights to consent to corporate action, or other rights
pertaining to a Fund's investment securities; and rendering regular reports to
the Company regarding the decisions that it has made with respect to the
investment of the assets of each Fund and the purchase and sale of its
investment securities, the reasons for such decisions, the extent to which is
has implemented such decisions, and the manner in which it has exercised any
voting rights, rights to consent to corporate action, or other rights pertaining
to a Fund's investment securities; (b) placing orders for the execution of each
Fund's securities transactions, in accordance with any applicable directions
from the Board of Directors, and rendering certain
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reports to the Company regarding brokerage business placed by Advisors; (c)
using its best efforts to recapture all available tender offer solicitation fees
in connection with tenders of the securities of any Fund, and any similar
payments; (d) advising the Board of Directors of any fees or payments of
whatever type that it may be possible for Advisors or an affiliate thereof to
receive in connection with the purchase or sale of investment securities for any
Fund; (e) assisting the Custodian with the valuation of the securities of each
Fund, and in calculating the net asset value of each Fund; (f) providing
assistance to the Company with respect to the Company's registration statement,
regulatory reports, periodic reports to shareholders and other documents
(including tax returns), required by applicable law; (g) providing assistance to
the Company with respect to the development, implementation, maintenance, and
monitoring of a compliance program; and (h) furnishing, at its own expense,
adequate facilities and personnel for the Directors and officers of the Company
to manage the Company's affairs.
Under the Advisory Agreement, the advisory fee for each Fund is payable at the
end of each calendar month, determined by applying the annual rates, as set out
in the Prospectus, to the average daily net assets of each Fund.
The Advisory Agreement was approved, with regard to the Washington Regional
Growth Fund and the Washington Regional Aggressive Growth Fund, on October 27,
1997 and with regard to the Internet Fund on June 30, 1998, by the Board of
Directors, and was subsequently approved by the initial shareholder of each
Fund, following his investment of the initial capitalization of each Fund. The
Advisory Agreement will remain in effect for two years from the date of its
execution, with respect to each Fund and will continue in effect from year to
year thereafter for each Fund as long as its continuance is specifically
approved at least annually by a vote of the Board of Directors (on behalf of
such Fund) or by a vote of the holders of a majority of such Fund's outstanding
voting securities (as defined by the 1940 Act), and in either event, by a
majority vote of the Board of Directors members who are not interested persons
of Advisors or the Company (other than as members of the Board of Directors),
cast in person at a meeting called for the purpose of voting on such approval.
The Advisory Agreement may be terminated without penalty at any time by the
Board of Directors, Advisors, or with respect to any Fund, by a vote of a
majority of that Fund's shareholders, in each case on 60 days' written notice,
and will automatically terminate in the event of its assignment, as defined in
the 1940 Act.
CUSTODIAN. Star Bank, N.A. acts as custodian of the securities and other
assets of each Fund, and for cash received in connection with the purchase of
Fund shares. The custodian does not participate in decisions relating to the
purchase and sale of portfolio securities.
INDEPENDENT PUBLIC ACCOUNTANT. Deloitte & Touche LLP, located at University
Square, 117 Campus Drive, Princeton, New Jersey 08540, serves as the
Company's independent public accountant.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
Advisors, pursuant to the Advisory Agreement, and subject to the general control
of the Board of Directors, places all orders for the purchase and sale of
securities of each Fund. In executing portfolio transactions and selecting
brokers and dealers, it is the Company's policy to seek the best combination of
price and execution ("best execution") available. Advisors will consider such
factors as it deems relevant, including the breadth of the market in the
security, the financial condition and execution capability of the broker-dealer,
and the reasonableness of the commission, if any, for the specific transaction
or on a continuing basis.
Advisors is authorized to pay brokerage commissions, on behalf of each Fund, in
an amount in excess of that which another broker might have charged that Fund,
in recognition of certain brokerage and research services provided by that
broker. More specifically, in the allocation of brokerage business used to
purchase securities for a Fund, Advisors may give preference to those
broker-dealers who provide brokerage and research or other services to Advisors
as long as there is no sacrifice in obtaining best execution. Such services may
include, for example: advice concerning the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or the purchasers or sellers of securities; analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy, and performance of accounts; and various functions
incidental to effecting securities transactions, such as clearance and
settlement. The receipt of research from broker-dealers that execute
transactions on behalf of the Company may be useful to Advisors in rendering
investment management services to other clients (including affiliates of
Advisors), and conversely, such research provided by broker-dealers who have
executed transaction orders on behalf of other clients may be useful to Advisors
in carrying out its obligations to the Company. While such research is available
to and may be used by Advisors in providing investment advice to all its clients
(including affiliates of Advisors), not all of such research may be used by
Advisors for the benefit of the Company. Such research and services will be in
addition to and not in lieu of research and services provided by Advisors, and
the expenses of Advisors will not necessarily be reduced by the receipt of such
supplemental research.
When portfolio transactions are executed on a securities exchange, the amount of
commission paid by a Fund is negotiated between Advisors and the broker
executing the transaction. Advisors will ordinarily place orders to buy and sell
over-the-counter securities on a principal rather than agency basis with a
principal market maker unless, in the opinion of Advisors, a better price and
execution can otherwise be obtained. Purchases of portfolio securities from
underwriters will include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers will include a spread between the bid
and ask price. Occasionally, securities may be purchased directly from the
issuer, which does not involve the payment of commissions.
Monument Advisors may sometimes receive certain fees when a Fund tenders
portfolio securities pursuant to a tender offer solicitation. As a means of
recapturing brokerage for the benefit of such Fund, any portfolio securities
tendered by the Fund will be tendered through Advisors if it
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is legally permissible to do so. In turn, the next advisory fee payable to
Advisors will be reduced by the amount of any fees received by Advisors in cash,
less any costs and expenses incurred in connection with the tender.
Securities of the same issuer may be purchased, held, or sold at the same time
by the Company for both of its Funds, or by other accounts or companies for
which Advisors provides investment advice (including affiliates of Advisors). On
occasions when Advisors deems the purchase or sale of a security to be in the
best interest of the Company, as well as Advisors' other clients, Advisors, to
the extent permitted by applicable laws and regulations, may aggregate such
securities to be sold or purchased for the Company with those to be sold or
purchased for other customers in order to obtain best execution and lower
brokerage commissions, if any. In such event, Advisor will allocate the
securities so purchased or sold, as well as the expenses incurred in the
transaction, in the manner it considers to be most equitable and consistent with
its fiduciary obligations to all such customers, including the Company. In some
instances, this procedure may impact the price and size of the position
obtainable for the Company.
BUYING, REDEEMING, AND EXCHANGING SHARES
ADDITIONAL INFORMATION ON BUYING SHARES. The Company continuously offers shares
of the Funds through advertisements, mailings and, in the future, the Internet.
When you buy shares, if you submit a check or a draft that is returned unpaid to
the Company we may impose a $50 charge against your account for each returned
item.
REINVESTMENT DATE. Fund shares acquired through the reinvestment of dividends
will be purchased at the Fund's net asset value determined on the business day
following the dividend record date (sometimes known as the "ex-dividend date").
The processing date for the reinvestment of dividends may vary and does not
affect the amount or value of the shares acquired.
ADDITIONAL INFORMATION ON REDEEMING SHARES: REDEMPTIONS IN KIND. The Company, on
behalf of the Funds, has committed itself to pay in cash (by check) all requests
for redemption by any shareholder of record of a Fund, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of a Fund's net assets at the beginning of the 90-day period. This commitment is
irrevocable without the prior permission of the SEC. In the case of redemption
requests in excess of these amounts, the Board of Directors reserves the right
to make payments in whole or in part in securities or other assets of a Fund, in
case of an emergency, or if the payment of such a redemption in cash would be
detrimental to the existing shareholders of the Fund. In these circumstances,
the securities distributed would be valued at the price used to compute the
Fund's net assets and you may incur brokerage fees in converting the securities
to cash. The Company does not intend to redeem illiquid securities in kind. If
this happens, however, you may not be able to recover your investment in a
timely manner.
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ADDITIONAL INFORMATION ON EXCHANGING SHARES. If you request the exchange of the
total value of your account from one Fund to another Fund, we will reinvest any
declared but unpaid income dividends and capital gain distributions in the new
Fund at the Fund's net asset value. Backup withholding and information reporting
may apply. Information regarding the possible tax consequences of an exchange
appears in the tax section in this SAI.
If a substantial number of shareholders should, within a short period, sell
their shares of a Fund under the exchange privilege, the Fund might have to sell
portfolio securities that it might otherwise hold and would incur the additional
costs related to such transactions. On the other hand, increased use of the
exchange privilege may result in periodic large inflows of money. If large
inflows of money occur, it is each Fund's general policy to initially invest
this money in short-term, interest-bearing money market instruments. However, if
Advisors believes that attractive investment opportunities, consistent with a
Fund's investment objective and policies, exist immediately, then it will invest
such money in portfolio securities in as orderly a manner as is possible.
The proceeds from the sale of shares of each Fund may not be available until the
third business day following the sale. The Fund you are seeking to exchange into
may delay issuing shares pursuant to an exchange until that third business day.
The sale of Fund shares to complete an exchange will be effected at net asset
value of the Fund next computed after your request for exchange is received in
proper form. See "Buying, Redeeming, and Exchanging Shares" in the Prospectus.
ADDITIONAL INFORMATION ON SALES CHARGES. As described in the Prospectus, the
offering price of each Fund's shares is based on that Fund's NAV per share, plus
an initial sales charge that is paid to Monument Distributors. See "Public
Offering Price," "Redemption Price," and "Net Asset Value" in the Prospectus.
Initial sales charges do not apply to certain classes of persons or
transactions, as described in "Waiver of Sales Charges" in the Prospectus. The
reason for the waiver of sales charges in these situations is that they do not
involve the same level of expenses that are associated with the sale of Fund
shares to the general public. In addition, as shown in the table under "Public
Offering Price" in the Prospectus, initial sales charges decline as the amount
of Fund shares purchased increases to reflect certain economies of scale in the
selling effort associated with larger purchases.
GENERAL INFORMATION. We will consider dividend and capital gain distribution
checks that the U.S. Postal Service returns marked "unable to forward" as a
request by you to change your dividend option to reinvest all distributions. We
will reinvest the proceeds in additional shares at the net asset value of the
applicable Fund(s) until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct, from your account, the costs of our
efforts to find you. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
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All checks, drafts, wires and any other available payment mediums that you use
buy or sell shares of a Fund must be denominated in U.S. dollars. We may, in our
sole discretion, either (a) reject any order to buy or sell shares denominated
in any other currency or (b) honor the transaction or make adjustments to your
account for the transaction as of a date and with a foreign currency exchange
factor determined by the drawee bank.
PRINCIPAL HOLDERS OF SECURITIES
As of October 30, 1998 Samuel M. Hunn, whose address is 7909 Hermitage Road,
Richmond, Virginia, 23228, controlled the Growth Fund by virtue of his ownership
of 50.532% of the shares of the Fund. Mr. Hunn also owns 5.169% of the
Aggressive Growth Fund.
As of October 30, 1998 Mr. David A. Kugler of 9616 Glencrest Lane, Kensington,
Maryland had beneficial ownership of 8.057% of the Aggressive Growth Fund and
10.633% of the Growth Fund. As of such date, Mr. Kugler owned of record 6.5915%
of the shares of the Growth Fund, and 2.974% of the shares of the Aggressive
Growth Fund. The remainder of Mr. Kugler's beneficial ownership of the shares of
each Fund (4.1135% of the shares of the Growth Fund, and 5.083% of the shares of
the Aggressive Growth Fund, respectively), were due to his ownership interests
in The Monument Group, Inc.
As of October 30, 1998, Herbert Klein, III, whose address is 1081 Carriage Hills
Parkway, Annapolis, Maryland, beneficially owned 7.2795% of the shares of the
Growth Fund, and 14.3947% of the shares of the Aggressive Growth Fund,
respectively. As of such date, Mr. Klein owned of record 7.063% of the shares of
the Growth Fund, and 14.127% of the shares of the Aggressive Growth Fund. The
remainder of Mr. Klein's beneficial ownership of the shares of each Fund
(0.2165% of the shares of the Growth Fund, and 0.2677% of the shares of the
Aggressive Growth Fund, respectively) were due to his ownership interests in The
Monument Group, Inc.
As of October 30, 1998, The Monument Group, Inc., located at 8377 Cherry Lane,
Laurel, Maryland 20707, owned of record 4.3 3% of the shares of the Growth Fund,
and 5.354% of the shares of the Aggressive Growth Fund. As of such date,
ownership interests in The Monument Group, Inc. were held exclusively by Mr.
Kugler and Mr. Klein, respectively.
In addition to the foregoing, the following individuals owned of record and
beneficially, as of October 30, 1998, the following percentages of the shares of
the Aggressive Growth Fund (addresses supplied): Florence Cheung (430 Jean Way,
King of Prussia, Pennsylvania, 19406), 11.562%; Frederick Siewers, Jr. (606
Chandler Circle, Richmond, Virginia, 23229), 5.169%; Michael Siewers (4613 Park
Avenue, Richmond, Virginia, 23226), 5.654%; Ron Miller Associates, Inc. Profit
Sharing Plan and Trust (10500 Rockville Pike #501, Rockville, Maryland, 20852),
5.921%; Malvin Stern and Karen Olsen (18 Bucks Meadow Lane, Newtown,
Pennsylvania, 18940), 5.804% (shares held jointly).
As of October 30, 1998 the Company's Directors and officers, as a group,
beneficially owned 13.9765% of the shares of the Growth Fund, and 11.329% of the
shares of the Aggressive Growth Fund, respectively.
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VALUATION OF FUND SHARES
For the purpose of determining the aggregate net assets of a Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, at the mean between the
closing bid and asked prices on that day. Over-the-counter portfolio securities
(other than securities reported on the NASDAQ National Market System) are valued
at the mean between the last bid and asked prices based upon quotes furnished by
market makers for such securities. Portfolio securities that are traded both in
the over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market as determined by Advisors. Exchange
listed convertible debt securities are valued at the mean between the last bid
and asked prices obtained from broker-dealers or a comparable alternative, such
as Bloomberg or Telerate.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
a Fund is its last sale price on the relevant exchange prior to the time when
assets are valued. Lacking any sales that day or if the last sale price is
outside the bid and asked prices, options are valued within the range of the
current closing bid and asked prices if the valuation is believed to fairly
reflect the contract's market value.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times before
the scheduled close of the Exchange. The value of these securities used in
computing the net asset value of each Fund is determined as of such times.
Occasionally, events affecting the values of these securities may occur between
the times at which they are determined and the scheduled close of the Exchange
that will not be reflected in the computation of the net asset value of a Fund.
If events materially affecting the values of these securities occur during this
period, the securities will be valued at their fair value as determined in good
faith by the Board of Directors.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors
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including recent trades, institutional size trading in similar types of
securities (considering yield, risk and maturity) and/or developments related to
specific issues. Securities and other assets for which market prices are not
readily available are valued at fair value as determined following procedures
approved by the Board of Directors. With the approval of the Board of Directors,
a Fund may utilize a pricing service to perform any of the above described
functions.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. You may receive two types of distributions from a Fund:
1. Income dividends. Each Fund receives income generally in the form of
dividends, interest and other income derived from its investments. This
income, less the expenses incurred in the Fund's operations, is its net
investment income from which income dividends may be distributed. Thus, the
amount of dividends paid per share may vary with each distribution.
2. Capital gain distributions. The Funds may derive capital gains or losses in
connection with sales or other dispositions of their portfolio securities.
Distributions by a Fund derived from net short-term and net long-term capital
gains (after taking into account any capital loss carry forward or
post-October loss deferral) may generally be made once a year in December to
reflect any net short-term and net long-term capital gains realized by the
Fund as of October 31 of the current fiscal year and any undistributed
capital gains from the prior fiscal year. Each Fund may make more than one
distribution derived from net short-term and net long-term capital gains in
any year or adjust the timing of these distributions for operational or other
reasons.
TAXES. As stated in the Prospectus, each Fund has elected to be treated as a
regulated investment company under Subchapter M of the Code. The Board of
Directors reserves the right not to maintain the qualification of a Fund as a
regulated investment company if it determines this course of action to be
beneficial to shareholders. In that case, that Fund will be subject to federal
and possibly state corporate taxes on its taxable income and gains. In either
case, distributions to shareholders will be taxable to the extent of the Fund's
available earnings and profits.
Subject to the limitations discussed below, all or a portion of the income
dividends paid by a Fund may be treated by corporate shareholders as qualifying
dividends for purposes of the dividends received deduction under federal income
tax law. If the aggregate qualifying dividends received by a Fund (generally,
dividends from U.S. domestic corporations, the stock in which is not
debt-financed by the Fund and is held for at least a minimum holding period) is
less than 100% of its distributable income, then the amount of the Fund's income
dividends paid to corporate shareholders which may be designated as eligible for
such deduction will be an amount that does not exceed the aggregate qualifying
dividends received by the Fund for the taxable year. The amount or percentage of
income qualifying for the corporate dividends-received
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deduction will be declared by each Fund annually in the Company's annual report
to shareholders.
Corporate shareholders should note that income dividends and distributions paid
by a Fund from sources other than the qualifying dividends it receives will not
qualify for the dividends-received deduction. For example, any interest income
and net short-term capital gain (in excess of any net long-term capital loss or
capital loss carryover) included in investment company taxable income and
distributed by a Fund as a dividend will not qualify for the dividends-received
deduction. Corporate shareholders should also note that availability of the
corporate dividends-received deduction is subject to certain restrictions. For
example, the deduction is eliminated unless Fund shares have been held (or
deemed held) for more than 45 days in a substantially unhedged manner. The
dividends-received deduction also may be reduced to the extent interest paid or
accrued by a corporate shareholder is directly attributable to its investment in
shares of a Fund. Corporate shareholders whose investment in a Fund is "debt
financed" for these tax purposes should consult with their tax advisors
concerning the availability of the dividends-received deduction. The entire
income dividend and capital gain distribution, including the portion which is
treated as a deduction, is includable in the tax base on which the alternative
minimum tax is computed and may also result in a reduction in the shareholder's
tax basis in its Fund shares, under certain circumstances, if the shares have
been held for less than two years.
The Code requires each Fund to distribute at least 98% of its taxable ordinary
income earned during the calendar year and at least 98% of its capital gain net
income earned during the 12 month period ending October 31 of each year (in
addition to amounts from the prior year that were neither distributed nor taxed
to the Fund) to you by December 31 of each year in order to avoid the imposition
of a federal excise tax. Under these rules, certain capital gain distributions
that are declared in October, November or December but that, for operational
reasons, may not be paid to you until the following January, will be treated for
tax purposes as if paid by the Fund and received by you on December 31 of the
calendar year in which they are declared. Each Fund intends as a matter of
policy to declare such capital gain distributions, if any, in December and to
pay these capital gain distributions in December or January to avoid the
imposition of this tax, but does not guarantee that its capital gain
distributions will be sufficient to avoid any or all federal excise taxes.
Redemptions of a Fund's shares and exchanges of shares of one Fund for those of
the other Fund are taxable transactions for federal and state income tax
purposes. For most shareholders, gain or loss will be recognized in an amount
equal to the difference between the shareholder's basis in the shares and the
amount realized from the transaction, subject to the rules described below. If
such shares are a capital asset in the hands of the shareholder, gain or loss
will be capital gain or loss and will be long-term for federal income tax
purposes if the shares have been held for more than one year.
All or a portion of a loss realized upon a redemption of shares of a Fund will
be disallowed to the extent that other shares of the Fund are purchased (through
reinvestment of income dividends, capital gain distributions or otherwise)
within 30 days before or after such redemption. Any loss
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disallowed under these rules will be added to the tax basis of the shares
repurchased. All or a portion of the sales charge incurred in buying shares of a
Fund will not be included in the federal tax basis of any of such shares sold or
exchanged within 90 days of their purchase (for purposes of determining gain or
loss with respect to such shares) if the sales proceeds are reinvested in
another Fund of the Company and a sales charge which would otherwise apply to
the reinvestment is reduced or eliminated. Any portion of such sales charge
excluded from the tax basis of the shares sold will be added to the tax basis of
the shares acquired in the reinvestment. You should consult with your tax
advisor concerning the tax rules applicable to the redemption or exchange of a
Fund's shares.
A Fund's investment in options and futures contracts, including any stock
options, stock index options, stock index futures and options on stock index
futures are subject to many complex and special tax rules. For example, OTC
options on debt securities and equity options, including options on stock and on
narrow-based stock indexes, will be subject to tax under Section 1234 of the
Code, generally producing a long-term or short-term capital gain or loss upon
exercise, lapse, or closing out of the option or sale of the underlying stock or
security. By contrast, a Fund's treatment of certain other options, futures and
forward contracts entered into by the Fund is generally governed by Section 1256
of the Code. These "Section 1256" positions generally include listed options on
debt securities, options on broad-based stock indexes, options on securities
indexes, options on futures contracts, regulated futures contracts and certain
foreign currency contracts and options thereon.
Absent a tax election to the contrary, each Section 1256 position held by a Fund
will be marked-to-market (i.e., treated as if it were sold for fair market
value) on the last business day of the Fund's fiscal year, and all gain or loss
associated with fiscal year transactions and mark-to-market positions at fiscal
year end (except certain foreign currency gain or loss covered by Section 988 of
the Code) will generally be treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss. The effect of Section 1256 mark-to-market
rules may be to accelerate income or to convert what otherwise would have been
long-term capital gains into short-term capital gains or short-term capital
losses into long-term capital losses within a Fund. The acceleration of income
on Section 1256 positions may require a Fund to accrue taxable income without
the corresponding receipt of cash. In order to generate cash to satisfy the
distribution requirements of the Code, a Fund may be required to dispose of
portfolio securities that it otherwise would have continued to hold or to use
cash flows from other sources such as the sale of its shares. In these ways, any
or all of these rules may affect the amount, character and timing of income
distributed to you by a Fund.
When a Fund holds an option or other contract that substantially diminishes the
Fund's risk of loss with respect to another position of the Fund (as might occur
in some hedging transactions), this combination of positions could be treated as
a straddle for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of Fund securities and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles (i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position) which may reduce or
eliminate the operation of these straddle rules.
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In order for each Fund to qualify as a regulated investment company, at least
90% of each Fund's annual gross income must consist of dividends, interest and
certain other types of qualifying income. Foreign exchange gains derived by a
Fund with respect to the Fund's business of investing in stock or securities, or
options or futures with respect to such stock or securities is qualifying income
for purposes of this 90% limitation.
The Funds may be subject to foreign withholding taxes or other foreign taxes on
income (possibly including, in some cases, capital gains) on certain of its
foreign investments, which will reduce the yield on or return from those
investments. In any year in which a Fund qualifies, it may make an election that
would permit certain of its shareholders to take a credit or a deduction for
their shares of qualified foreign taxes paid by the Fund. Each shareholder would
then include in gross income (in addition to dividends actually received) his or
her share of the amount of qualified foreign taxes paid by the Fund. If this
election is made, the Fund will notify its shareholders annually as to their
share of the amount of qualified foreign taxes paid and the foreign source
income of the Fund.
FURTHER DESCRIPTION OF THE COMPANY'S SHARES
VOTING RIGHTS. Under the Company's By-Laws and in accordance with applicable
Maryland law, no annual meeting of shareholders is required in any year in which
the election of Directors is not required to be acted upon under the 1940 Act.
On any matter submitted to the shareholders, the holder of each Fund share is
entitled to one vote per share (with proportionate voting for fractional shares)
regardless of the relative NAV of the Fund's shares. However, on matters
affecting one Fund differently from the other Fund, a separate vote of the
shareholders of that Fund is required. Shareholders of a Fund are not entitled
to vote on any matter that does not affect that Fund. Shares do not have
cumulative voting rights, which means the holders of more than 50% of the shares
voting for the election of Directors can elect 100% of the Board of Directors,
and the holders of less than 50% of the shares voting for the election of
Directors will not be able to elect any person as a Director. Shareholders of a
particular Fund might have the power to elect all of the Company's Directors
because that Fund has a majority of the total outstanding shares of the Company.
DIVIDEND RIGHTS. Income dividends and capital gain distributions on shares of a
particular Fund may be paid with such frequency as the Board of Directors may
determine, which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted with such frequency as the Board of Directors may determine.
Such dividends and distributions may be paid to the holders of shares of a
particular Fund, from such of the income and capital gains, accrued or realized,
attributable to the assets belonging to that Fund, as the Board of Directors may
determine, after providing for actual and accrued liabilities belonging to that
Fund. All such dividends and distributions on shares of a particular series or
class will be distributed pro rata to the holders of that Fund in proportion to
the number of shares of that Fund held by such holders at the date and
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time of record established for the payment of such dividends or distributions.
The Board of Directors may declare and distribute a stock dividend to holders of
shares of a Fund by the distribution of shares of another Fund.
LIQUIDATION RIGHTS. In the event of the liquidation of a Fund, the shareholders
of that Fund will be entitled to receive, when and as declared by the Board of
Directors, the excess of the assets belonging to that Fund over the liabilities
belonging to that Fund. The holders of shares of a Fund will not be entitled
thereby to any distribution upon liquidation of any other Fund. The assets that
may be distributed to the shareholders of a Fund will be distributed among such
shareholders in proportion to the number of shares of that Fund held by each
such shareholder and recorded on the books of the Company. The liquidation of
any particular Fund in which there are shares then outstanding may be authorized
by an instrument in writing signed by a majority of the Directors then in
office, subject to the affirmative vote of "a majority of the outstanding voting
securities" of that Fund, as the quoted phrase is defined in the 1940 Act.
PRE-EMPTIVE, CONVERSION AND TRANSFER RIGHTS. When issued, each Fund's shares are
fully paid and nonassessable, have no pre-emptive or subscription rights, and
are fully transferable (the Board of Directors may, however, from time to time,
adopt lawful rules and regulations with reference to the method of transfer).
Subject to the 1940 Act, the Board of Directors has the authority to provide
that the holders of shares of a Fund will have the right to convert or exchange
such shares for or into shares of the other Fund in accordance with such
requirements and procedures as the Board of Directors may establish.
THE COMPANY'S PRINCIPAL UNDERWRITER
Pursuant to a distribution agreement ("Distribution Agreement"), Monument
Distributors has agreed to use its best efforts as principal underwriter to
promote the sale of each Fund's shares in a continuous public offering. The
Distribution Agreement, dated November 27, 1997 was approved, with regard to
each Fund, on October 27, 1997, by the Board of Directors. The Distribution
Agreement will continue in effect for two years from the date of its execution
and thereafter, but only so long as its continuance is specifically approved at
least annually by a vote of the Board of Directors or by a vote of the holders
of a majority of the Company's outstanding voting securities, and in either
event by a majority vote of the Board of Directors members who are not parties
to the Distribution Agreement or interested persons of any such party (other
than as members of the Board of Directors), cast in person at a meeting called
for that purpose. The Distribution Agreement terminates automatically in the
event of its assignment and may be terminated by either party on 60 days'
written notice.
Monument Distributors pays the expenses of the distribution of the Company's
shares, including advertising expenses and the costs of printing sales material
and prospectuses used to offer shares to the public. The Company pays the
expenses of preparing and printing amendments to its
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registration statements and prospectuses (other than those necessitated by the
activities of Monument Distributors) and of sending prospectuses to existing
shareholders.
For its services, Monument Distributors receives a sales commission on the sale
of the shares of each Fund in the amount set forth, and as described, in the
Prospectus.
RULE 12b-1 PLAN. The Board of Directors, on behalf of the Washington Regional
Growth Fund and the Washington Regional Aggressive Growth Fund, unanimously
approved a Plan of Distribution pursuant to Rule 12b-1 ("Plan") on October 27,
1997 and on behalf of the Internet Fund on June 30, 1998, pursuant to which
Monument Distributors is entitled to receive a 12b-1 fee for certain activities
and expenses that are intended to result in the sale of Fund shares. See "Rule
12b-1 Plan" in the Prospectus for a description of these activities and expenses
and the maximum 12b-1 fee payable under the Plan ("Rule 12b-1 fee"). As
described in the Prospectus, with respect to the Growth Fund and the Aggressive
Growth Fund, Monument Distributors has agreed to voluntarily waive the Rule
12b-1 fee for the first year of operations of each Fund.
In adopting the Plan, the Board of Directors concluded that the increased sales
of Fund shares that may result from the Plan are reasonably likely to benefit
each Fund and its shareholders, over time, by lowering overall Fund expenses per
share through economies of scale. The Plan is in effect for an initial one year
period, and will remain continuously in effect thereafter, provided that the
Board of Directors, including a majority of Rule 12b-1 Directors (described
below) annually approves its continuance by votes cast at an in person meeting
called for the purpose of voting on the Plan. Rule 12b-1 Directors include those
Directors who are not interested persons of the Company and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related thereto.
A majority of the Rule 12b-1 Directors must approve any material amendment to
the Plan. In addition, the amount payable by a Fund under the Plan may not
materially increase without the approval of a majority of the outstanding voting
securities of that Fund. The Plan may be terminated at any time, with respect to
a Fund, by a majority of the Rule 12b-1 Directors or by a majority of the
outstanding voting securities of that Fund.
PERFORMANCE INFORMATION
From time to time, each Fund may state its average annual and cumulative total
returns in advertisements and sales literature. SUCH PERFORMANCE DOES NOT
REPRESENT THE ACTUAL EXPERIENCE OF ANY PARTICULAR INVESTOR, AND IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS.
AVERAGE ANNUAL TOTAL RETURN. Each Fund computes its average annual total
return according to the following formula prescribed by the SEC:
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n
P(l+T) = ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 investment made at the beginning of the
one-, five-, ten-year or shorter period shown
Average annual total return calculations will reflect the deduction of the
maximum front-end sales charge from the hypothetical initial $1,000 purchase,
and the reinvestment of income dividends and capital gain distributions at net
asset value. The calculations will not reflect the deduction for the Rule 12b-1
fee until such charge is actually assessed. Each Fund also may show average
annual total return calculations.
CUMULATIVE TOTAL RETURN. Each Fund also may quote its cumulative total return in
advertisements and sales literature. Each Fund will compute cumulative total
return in a manner similar to average annual total return, except that it will
not annualize the results. The SEC has not prescribed a standard formula for
computing cumulative total return. Cumulative total return is calculated
according to the following formula:
C = (ERV/P) -1
Where:
P = a hypothetical initial investment of $1,000
C = cumulative total return
ERV = ending redeemable value of a hypothetical
$1,000 investment made at the beginning of the
one-, five-, ten-year or shorter period shown
Cumulative total return calculations will reflect the deduction of the maximum
front-end sales charge from the hypothetical initial $1,000 purchase, and the
reinvestment of income dividends and capital gain distributions at net asset
value. The calculations will not reflect the deduction for the Rule 12b-1 fee
until such charge is actually assessed.
OTHER PERFORMANCE QUOTATIONS. Each Fund may, from time to time, quote average
annual and cumulative total returns using different assumptions about applicable
sales charges.
VOLATILITY. Occasionally, a Fund may include in advertisements and sales
literature statistics that show the volatility or risk of an investment in
the Fund, as compared to a market index. One measure of volatility is beta. Beta
is the volatility of a Fund relative to the total market, as
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represented by an index considered representative of the types of securities in
which the Fund invests. A beta of more than 1.00 indicates volatility greater
than the market and a beta of less than 1.00 indicates volatility less than the
market. Another measure of volatility or risk is standard deviation. Standard
deviation measures the variability of net asset value or total return of a Fund
around an average over a specified period of time. The greater the standard
deviation, the greater the assumed risk in achieving performance.
PERFORMANCE COMPARISONS. To help you better evaluate how an investment in a Fund
may satisfy your investment objectives, advertisements and sales materials about
a Fund may discuss certain measures of performance as reported by various
financial publications. These materials also may compare a Fund's performance to
that of other investments, indices, and averages. See the Appendix for examples
of the types of performance comparisons that a Fund may make.
FINANCIAL STATEMENTS
Following are (1) the Schedules of Investments for the Monument Series Fund,
Inc. as of May 31, 1998, (2) the Statements of Assets and Liabilities as of May
31, 1998, (3) the Statements of Operations as of May 31, 1998, (4) the
Statements of Changes in Net Assets as of May 31, 1998, (5) the Financial
Highlights as of May 31, 1998 and (6) the Notes to the Financial Statements.
These financial statements do not include the Internet Fund which did not
commence operations until October 5, 1998.
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APPENDIX
PERFORMANCE COMPARISONS
Each Fund may compare its performance to the various averages, indices,
and investments listed below. In addition, advertisements and sales literature
for each Fund may discuss certain performance information set out in the various
financial publications listed below.
1. Dow Jones Composite Average or its component averages - an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks (Dow Jones Utilities Average),
and 20 transportation company stocks. Comparisons of performance
assume reinvestment of dividends.
2. Standard & Poor's 500 Stock Index or its component indices - an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks, and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.
3. The New York Stock Exchange composite or component indices - an
unmanaged index of all industrial, utilities, transportation, and finance stocks
listed on the New York Stock Exchange.
4. Wilshire 5000 Equity Index - represents the return on the market value
of all common equity securities for which daily pricing is available.
Comparisons of performance assume reinvestment of dividends.
5. Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income
Fund Performance Analysis - measure of total return and average current yield
for the mutual fund industry and ranks individual mutual fund performance over
specified time periods, assuming reinvestment of all distributions, exclusive of
any applicable sales charges.
6. CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
- - analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
7. Mutual Fund Source Book, published by Morningstar, Inc. - analyzes
price, yield, risk, and total return for equity Fund.
8. Value Line Index - an unmanaged index which follows the stock of
approximately 1,700 companies.
9. Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics a statistical measure of change, over time, in the
price of goods and services in major expenditure groups.
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10. Historical data supplied by the research departments of First
Boston Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Lehman Brothers and Bloomberg L.P.
11. Financial publications: The Wall Street Journal, Business Week,
Changing Times, Financial World, Forbes, Fortune, and Money magazines provide
performance statistics over specified time periods.
12. Russell 3000 Index - composed of 3,000 large U.S. companies by
market capitalization, representing approximately 98% of the U.S. equity
market. The average market capitalization (as of May 1995) is $1.74 billion.
13. Russell 2000 Small Stock Index - consists of the smallest 2,000
companies in the Russell 3000 Index, representing approximately 11% of the
Russell 3000 total market capitalization. The average market capitalization (as
of May 1995) is $288 million.
14. Stocks, Bonds, Bills, and Inflation, published by lbbotson Associates
- - historical measure of yield, price, and total return for common and small
company stock, long-term government bonds, Treasury bills, and inflation.
15. Morningstar - information published by Morningstar, Inc., including
Morningstar proprietary mutual fund ratings. The ratings reflect Morningstar's
assessment of the historical risk adjusted performance of a fund over specified
time periods relative to other funds within its class.
Advertisements also may compare a Fund's performance to the return on
certificate of deposits ("CDs") or other investments. You should be aware,
however, that an investment in a Fund involves the risk of fluctuation of
principal value, a risk generally not present in an investment in a CD issued by
a bank. For example, as the general level of interest rates rise, the value of a
Fund's fixed-income investments, if any, as well as the value of its shares that
are based upon the value of such portfolio investments, can be expected to
decrease. Conversely, when interest rates decrease, the value of a Fund's shares
can be expected to increase. CDs are frequently insured by an agency of the U.S.
Government. An investment in a Fund is not insured by any federal, state or
private entity.
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