Filed under paragraph (c) of Rule 497
under the Securities Act of 1933, per
transmittal letter.
File No. 333-26223
[THE MONUMENT FUNDS GROUP, INC. GRAPHIC]
MONUMENT SERIES FUND, INC.
MONUMENT WASHINGTON REGIONAL GROWTH FUND
MONUMENT WASHINGTON REGIONAL AGGRESSIVE GROWTH FUND
PROSPECTUS DATED JANUARY 2, 1998
This Prospectus describes the Monument Washington Regional Growth Fund and the
Monument Washington Regional Aggressive Growth 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.
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 January 2, 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 National Financial Data
Services, Inc. ("NFDS"), at P.O. Box 419332, Kansas City, MO 64141-6332 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.
<PAGE>
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.
[COVER PAGE]
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Description Page
----------- ----
<S> <C>
Table of Fees and Expenses................................................ 3
Summary................................................................... 4
Performance............................................................... 5
The Funds................................................................. 6
Investment Objectives and Programs..................................... 6
Investment Policies and Restrictions................................... 7
Special Risk Considerations............................................... 10
Management................................................................ 11
Tax Considerations........................................................ 14
Dividends and Distributions............................................... 14
Buying, Redeeming, and Exchanging Shares.................................. 15
Buying Fund Shares..................................................... 15
Redeeming Fund Shares.................................................. 18
Exchanging Fund Shares................................................. 18
Rule 12b-1 Plan........................................................ 19
Proper Form............................................................ 20
Services to Help You Manage Your Account.................................. 21
General Information....................................................... 22
</TABLE>
2
<PAGE>
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 Fund Growth Fund
Shareholder Transaction Expenses ------------ -----------
--------------------------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price)(1)......................... 1.50% (1) 1.50% (1)
Maximum Sales Charge Imposed on Reinvested
Income Dividends and Distributions........................ None None
Redemption Fees............................................. None None
Exchange Fee................................................ None None
Annual Fund Operating Expenses
---------------------------------------
(as a percentage of average net assets)
Advisory Fee................................................ 1.00% 1.00%
12b-1 Fees (2).............................................. None (2) None (2)
Other Expenses (3).......................................... 0.40% (3) 0.40% (3)
----- -----
Total Fund Operating Expenses (3)............................ 1.40% (3) 1.40% (3)
-----------------------
<FN>
(1) Reduced rates apply to purchase payments over $50,000. See "Public
Offering Price" and "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." Distributors has agreed to
waive the distribution fee for the next 12 months. 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.
</FN>
</TABLE>
3
<PAGE>
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 29.14 59.64
Aggressive Growth Fund 29.14 59.64
</TABLE>
The above examples assume payment of the maximum initial sales charge of 1.50%
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.
SUMMARY
THE COMPANY. The Company is registered with the SEC as an open-end management
investment company. The Company currently offers shares of two 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 NFDS, the agent of the
Company's transfer and dividend disbursing agent, State Street Bank and Trust
Company ("State Street"), 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
4
<PAGE>
through accounts established with an Automatic Investment Plan. See "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, the risk that the value of any mutual fund may decline, the
risks of investing in a geographically focused, non-diversified mutual 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. Each Fund currently intends 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 charge assumptions,
a Fund may present its performance information without including the effect of
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.
5
<PAGE>
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 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
6
<PAGE>
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 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. 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
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. 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.
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 Advisors may use in its day-to-day
management of each Fund's assets. The section below also describes certain
7
<PAGE>
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.
WRITING COVERED CALL 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. Neither 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.
ILLIQUID SECURITIES. Although each Fund may invest up to 15% of its net assets
in illiquid securities, each Fund presently intends to invest only up to 5% of
its net assets in such securities.
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 Advisors deems it advisable.
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
8
<PAGE>
interest rate and 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.
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. Neither 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. Neither
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. Neither 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.
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
9
<PAGE>
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. Advisors does
not expect the annual portfolio turnover rates for either 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 each Fund intends 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 the Funds than on mutual funds
whose investments are not likewise geographically focused.
SMALL COMPANIES. The Aggressive Growth 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'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.
TECHNOLOGY AND RESEARCH COMPANIES AND CURRENCY RISK. Consistent with its
investment objective, each Fund expects to invest a portion of its assets in
securities of companies involved in biological technologies, computing
10
<PAGE>
technologies, and 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.
DIVERSIFICATION. Each Fund is non-diversified under the 1940 Act, which means
that there is no restriction under the 1940 Act on how much each Fund may
invest in the securities of any one issuer. However, to qualify for tax
treatment as a regulated investment company under the Internal Revenue Code
("Code"), each Fund intends to comply, as of the end of each taxable quarter,
with certain diversification requirements imposed by the Code. Pursuant to
these requirements, each Fund 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, each Fund, with respect to 50%
of its total assets, will limit its investments in the securities of any
issuer to 5% of the Fund's total assets, and will not purchase more than 10%
of the outstanding voting securities of any one issuer. Nevertheless, as a
general matter, the 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 the 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 each Fund, have served, respectively, as financial consultant to
individual investors and investment adviser to certain management accounts.
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 under the Advisory Agreement for selecting and
managing each Fund's portfolio investments in accordance with each Fund's
11
<PAGE>
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 and Herbert Klein, III are each
affiliates 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 August, 1997, Advisors
managed approximately $15 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 both the Growth Fund and the Aggressive Growth Fund, and is
primarily responsible for the portfolios of both 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.
ADMINISTRATOR. State Street Bank and Trust Company ("State Street") has agreed
to provide certain administrative services to each Fund pursuant to an
administration agreement, dated October 31, 1997 ("Administration Agreement").
Among other things, State Street has agreed to oversee various matters for
each Fund, including the determination of net asset values by each Fund's
custodian, the maintenance of books and records by each Fund's custodian, and
the payment of fees to each Fund's investment adviser, custodian, and transfer
and dividend disbursing agent. State Street also has agreed to assist with the
preparation of each Fund's income tax returns; prepare periodic reports to
shareholders, proxy materials, and other shareholder communications; prepare
certain regulatory and other reports as may be requested by the Board of
Directors; make reports and recommendations to the Board of Directors
concerning the performance and fees paid to certain third party service
providers; assist each Fund's investment advisor with respect to various
12
<PAGE>
compliance matters; perform certain blue sky services; prepare amendments to
the Company's registration statement; and prepare agenda and background
materials for Board of Directors meetings. For its services under the
Administration Agreement, State Street receives from each Fund a monthly fee
equal to an annualized rate of 0.10% of the Fund's average daily net assets or
an annual fee of $85,000, whichever is greater.
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, 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 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 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
13
<PAGE>
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 realized 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.
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 Fund declares and pays income dividends from its net investment income,
usually in August and December, and distributes capital gains, if any,
annually, usually in December. Income dividends and capital gain distributions
14
<PAGE>
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. NEITHER FUND PAYS "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, which serves as the principal underwriter of each
Fund, is a wholly-owned subsidiary of The Monument Group, Inc. Monument
Advisors, David A. Kugler and Herbert Klein, III are each affiliates of the
Company and Monument Distributors. Monument Distributors, as of the date of
this Prospectus, does not offer Fund shares through broker-dealers, but may
begin doing so at any time.
BUYING FUND SHARES
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 NFDS, at the address set out on the cover page of this Prospectus.
NFDS is the agent of the Company's transfer and dividend disbursing agent,
State Street. 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."
15
<PAGE>
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 $250, 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
Percentage
Amount of Purchase at the Offering Net Amount of Offering
Public Offering Price Price Invested Price
------------------------- -------- ---------- --------------
<S> <C> <C> <C>
$50,000 or less 1.50% 1.52% None
Over $50,000 through $100,000 1.00% 1.01% None
Over $100,000 through $1,000,000 0.50% 0.51% None
Above $1,000,000 0.25% 0.25% None
</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 either 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, 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
16
<PAGE>
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.
17
<PAGE>
REDEEMING FUND SHARES
You can redeem shares of the Funds by submitting your order in proper form
either in writing to NFDS at the address set out on the cover page of 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
18
<PAGE>
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 NFDS 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 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
19
<PAGE>
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. 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:
o your name,
o the Fund's name,
o a description of the request,
o for exchanges, the name of the Fund you are exchanging into,
o your account number,
o the dollar amount or number of shares, and
o your daytime or evening telephone number.
SIGNATURE GUARANTEES. For our mutual protection, we require a signature
guarantee in the following situations:
o you wish to redeem over $50,000 worth of shares,
o you want redemption proceeds to be paid to someone other
than the registered owners,
o you want redemption proceeds to be sent to an address other
than the address of record, preauthorized bank account, or
preauthorized brokerage firm account,
o we receive instructions from an agent, not the registered
owners, or
o 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.
20
<PAGE>
RETIREMENT PLAN ACCOUNTS. You may not sell shares or change distribution
options on retirement plan accounts by telephone. While you may exchange
shares 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.
21
<PAGE>
GENERAL INFORMATION
THE COMPANY. The Company, a Maryland corporation organized on April 7, 1997,
is an open-end management investment company, whose Funds are 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, two series of common stock, namely, the Growth Fund and the
Aggressive Growth 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 December 12, 1997, David A Kugler may be deemed to be
a control person of each Fund as a result of his beneficial ownership of more
than 25% of each 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 connection with the
election or removal of members of the Board.
CUSTODIAN AND TRANSFER AGENT. Investors Fiduciary Trust Company, a subsidiary
of State Street located at 127 West 10th Street, Kansas City, MO 64105, serves
as custodian and an investment accounting agent for each Fund's portfolio
securities and other assets. State Street, 225 Franklin Street, Boston, MA
02110, serves as the transfer agent and dividend dispersing agent for each
Fund. State Street is affiliated with NFDS.
LEGAL COUNSEL. Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised
the Company on certain federal securities law matters.
OTHER INFORMATION. This Prospectus does not report any financial information
or performance results for the Funds, which only recently commenced
operations. Audited statements of assets and liabilities of the Company, and
the report of the Company's independent auditors thereon, are 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
22
<PAGE>
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.
23
<PAGE>
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.
[THE MONUMENT FUNDS GROUP, INC. GRAPHIC]
[GRAPHIC OF WASHINGTON MONUMENT]
P.O. Box 5009
8377 Cherry Lane
Laurel, MD 20726
301.604.1626
888.520.8637
FAX 301.604.2119
www.monumentadvisors.com
[BACK COVER PAGE]
<PAGE>
MONUMENT SERIES FUND, INC.
MONUMENT WASHINGTON REGIONAL GROWTH FUND
MONUMENT WASHINGTON REGIONAL AGGRESSIVE GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 2, 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 January 2, 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 NFDS,
at P.O. Box 419332, Kansas City, MO 64141-6332, or by calling 1-888-420-9950.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Investment Policies....................................................... 2
Potential Risks........................................................... 6
Investment Restrictions................................................... 7
Directors and Officers.................................................... 9
Investment Advisory and Other Services.................................... 11
Portfolio Transactions and Brokerage...................................... 13
Buying, Redeeming, and Exchanging Shares.................................. 14
Principal Holders of Securities........................................... 16
Valuation of Fund Shares.................................................. 17
Additional Information On Distributions and Taxes......................... 18
Further Description of the Company's Shares............................... 21
The Company's Principal Underwriter....................................... 22
Performance Information................................................... 23
Financial Statements...................................................... 25
Appendix A: Performance Comparisons....................................... 26
</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 does not presently intend to
invest more than 5% 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.
ENHANCED CONVERTIBLE SECURITIES. Each Fund may invest in convertible preferred
stocks that offer enhanced yield features, such as Preferred Equity Redemption
Cumulative Stocks ("PERCS"), which provide an investor with the opportunity to
earn higher dividend income than is available on a company's common stock.
PERCS are preferred stocks that generally feature a mandatory conversion date,
as well as a capital appreciation limit that is usually expressed in terms of
a stated price. Most PERCS expire three years from the date of issue, at which
time they are convertible into common stock of the issuer. PERCS are generally
not convertible into cash at maturity. Under a typical arrangement, after
three years PERCS convert into one share of the issuer's common stock if the
issuer's common stock is trading at a price below that set by the capital
appreciation limit, and into less than one full share if the issuer's common
stock is trading at a price above that set by the capital appreciation limit.
The amount of that fractional share of common stock is determined by dividing
the price set by the capital appreciation limit by the market price of the
issuer's common stock. PERCS can be called at any time prior to maturity, and
hence do not provide call protection. If called early, however, the issuer
must pay a call premium over the market price to the investor. This call
premium declines at a preset rate daily, up to the maturity date.
2
<PAGE>
Each Fund also may invest in other classes of enhanced convertible securities.
These include but are not limited to 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 all have the
following features: they are issued by a company, the common stock of which
will be received in the event the convertible preferred stock is converted;
unlike PERCS, they do not have a capital appreciation limit; they seek to
provide the investor with high current income with some prospect of future
capital appreciation; they are typically issued with three or four-year
maturities; they typically have some built-in call protection for the first
two to three years; investors have the right to convert them into shares of
common stock at a preset conversion ratio or hold them until maturity, and
upon maturity they will necessarily convert into either cash or a specified
number of shares of common stock.
Similarly, there may be enhanced convertible debt obligations issued by an
operating company, whose common stock is to be acquired in the event the
security is converted, or by a different issuer, such as an investment bank.
These securities may be identified by names such as ELKS (Equity Linked
Securities) or similar names. Typically they share most of the salient
characteristics of an enhanced convertible preferred stock but will be ranked
as senior or subordinated debt in the issuer's corporate structure according
to the terms of the debt indenture. Each Fund also may invest in additional
types of convertible securities that are not specifically referred to herein
but which are similar to those described, so long as such investment is
consistent with the Fund's investment objective, and investment policies and
restrictions.
An investment in an enhanced convertible security or any other security may
involve certain risks to a Fund. 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 that Fund's liquidity needs or in response to a specific
economic event, such as the deterioration in the credit worthiness of an
issuer. Reduced liquidity in the secondary market for certain securities also
may make it more difficult for a Fund to obtain market quotations based on
actual trades for purposes of valuing the Fund's portfolio. There can be no
assurance that a liquid secondary market for these securities will exist when
Advisors determines to dispose of a Fund's investment in such securities.
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
3
<PAGE>
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 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.
4
<PAGE>
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 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.
5
<PAGE>
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.
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
6
<PAGE>
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 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;
7
<PAGE>
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;
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.
8
<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>
Positions Held With Principal Occupations
Name, Address, and Age the Company During The Past Five Years
---------------------- -------------------- -----------------------------
<S> <C> <C>
*David A. Kugler (37) Director, President and President and Director, The
8377 Cherry Lane Treasurer Monument Group, Inc. (a holding
Laurel, MD 20707 company), 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
*Herbert Klein, III (39) Director, Vice President Director and Principal, The
8377 Cherry Lane and Secretary Monument Group, Inc.,
Laurel, MD 20707 1997-Present; Consultant, The
Highland Group (firm
specializing in operational
aspects of mergers and
acquisitions), 1997; Managing
Associate, Coopers & Lybrand
L.L.P., Management Consulting
Services, 1994-1997; Andersen
Consulting L.L.P., Arthur
Andersen & Co., S.C., Systems
Integration Practice,
1988-1994.
Francine F. Carb (39) Director President, Markitects, Inc.
421 Woodland Circle (marketing consulting),
Radnor, PA 19087-4640 1994-Present; President,
Francine Carb & Associates
(marketing consulting),
1992-1994
Victor Dates (60) Director Assistant Professor, Howard
2107 Carter Dale Road University, 1988-Present
Baltimore, MD 21209
9
<PAGE>
George DeBakey (48) Director Instructor at American University,
53303 Marlyn Drive 1992-Present; Private Investor.
Bethesda, MD 20816
G. Frederic White, III (44) Director Management Consultant (small
3107 Albemarle Road business management consulting),
Wilmington, DE 19808 1985-1997; Business Manager,
Trinity Episcopal Parish,
1997-Present; Private Investor
Rhonda Wiles-Roberson, J.D (45) Director Principal, RWR Consults
623 Sonata Way (business advisors),
Silver Spring, MD 20901 1995-Present; Asssociate
General Counsel, NAPWA
Services, Inc. (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:
10
<PAGE>
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, Klein, 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. Directors Kugler and Klein are members of the
Pricing and Investment Committee. In addition to Mr. Kugler and Mr. Klein, E.
Frederick Bair, Alexander Cheung, and Sheila Twible are also members of the
Pricing and Investment Committee. Mr. Bair and Mr. Cheung are employees of
Monument Advisors. Ms. Twible is an employee of State Street, the
Administrator, and Transfer and Service Agent, of the Company.
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
11
<PAGE>
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 each Fund, on October 27,
1997, 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. Investors Fiduciary Trust Company 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. Their accounting services include rendering a
report on the financial statements of the Company.
12
<PAGE>
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 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
13
<PAGE>
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.
14
<PAGE>
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.
15
<PAGE>
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 December 12, 1997, David A. Kugler, whose address is 810 E. Belvedere
Avenue, Baltimore, Maryland 21212, was presumed to control both the Growth
Fund, and Aggressive Growth Fund, by virtue of his beneficial ownership of the
shares of each Fund, of 26.87% and 27.41%, respectively. As of such date, Mr.
Kugler owned of record 9.90% of the shares of the Growth Fund, and 10.10% of
the shares of the Aggressive Growth Fund. The remainder of Mr. Kugler's
beneficial ownership of the shares of each Fund (16.97% of the shares of the
Growth Fund, and 17.31% of the shares of the Aggressive Growth Fund,
respectively), were due to his ownership interests in The Monument Group, Inc.
As of December 12, 1997, Herbert Klein, III, whose address is 15708 Blossom
Lane, North Potomac, Maryland 20878, beneficially owned 20.65% of the shares
of the Growth Fund, and 21.07% of the shares of the Aggressive Growth Fund,
respectively. As of such date, Mr. Klein owned of record 19.80% of the shares
of the Growth Fund, and 20.20% of the shares of the Aggressive Growth Fund.
The remainder of Mr. Klein's beneficial ownership of the shares of each Fund
(0.85% of the shares of the Growth Fund, and 0.87% of the shares of the
Aggressive Growth Fund, respectively) were due to his ownership interests in
The Monument Group, Inc.
As of December 12, 1997, The Monument Group, Inc., located at 8377 Cherry
Lane, Laurel, Maryland 20707, owned of record 17.82% of the shares of the
Growth Fund, and 18.18% 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 December 12, 1997, the following percentages of the shares
of the Growth Fund (addresses supplied): John C. Siewers II (109 Seneca Road,
Richmond, Virginia 23226), 19.80%; and G. Frederic White, III (3107 Albemarle
Road, Wilmington, Delaware 19808), 5.94%.
In addition to the foregoing, the following individuals owned of record and
beneficially, as of December 12, 1997, the following percentages of the shares
of the Aggressive Growth Fund (addresses supplied): Heather and Thomas Young
(2645 International Drive, TH-16, McLean, Virginia 22102), 15.15% (shares
owned jointly); Janine and Jeff Coyle (13226 Shady Ridge Lane, Fairfax,
Virginia 22033), 10.10% (shares owned jointly); George DeBakey (53303 Marlyne
Drive, Bethesda, Maryland 20816), 5.05%; John H. Vivadelli (5632 Langdon
Court, Richmond, Virginia 23225), 5.05%; and Richard E. and Sarah H. Collier
16
<PAGE>
(9310 Walhala Point, Richmond, Virginia 23236), 5.05% (shares owned jointly).
As of December 12, 1997, the Company's Directors and officers, as a group,
beneficially owned 65.34% of the shares of the Growth Fund, and 59.59% of the
shares of the Aggressive Growth Fund, respectively.
VALUATION OF FUND SHARES
eFor 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 including recent trades, institutional size
trading in similar types of securities (considering yield, risk and maturity)
17
<PAGE>
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
deduction will be declared by each Fund annually in the Company's annual
report to shareholders.
18
<PAGE>
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 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
19
<PAGE>
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.
20
<PAGE>
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.
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 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
21
<PAGE>
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 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. On October 27, 1997, the Board of Directors, on behalf of
each Fund, unanimously approved a Plan of Distribution pursuant to Rule 12b-1
("Plan"), 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, Monument
22
<PAGE>
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:
n
P(1+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
23
<PAGE>
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 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
24
<PAGE>
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
The Company's audited Statements of Assets and Liabilities, dated December 12,
1997, showing the initial capital received by each Fund, and the report
thereon of Deloitte & Touche LLP, the Company's independent public accountant,
are set out on the pages that follow the attached Appendix.
25
<PAGE>
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.
26
<PAGE>
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.
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Monument Series Fund:
We have audited the accompanying statements of assets and liabilities of the
Monument Washington Regional Growth Fund and Monument Washington Regional
Aggressive Growth Fund of the Monument Series Fund (the "Fund") as of December
12, 1997. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of assets and
liabilities are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
statements of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall statement of assets and liabilities
presentation. We believe that our audits of the statements of assets and
liabilities provides a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Monument Washington Regional Growth Fund and Monument Washington Regional
Aggressive Growth Fund of the Monument Series Fund as of December 12, 1997 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 19, 1997
<PAGE>
MONUMENT SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 12, 1997
<TABLE>
<CAPTION>
Monument Monument Washington
Washington Regional Aggressive
Regional Growth Growth Fund
Fund
<S> <C> <C>
Cash $50,500 $49,500
Deferred Organization Expenses 92,676 92,676
------- -------
Total Assets 143,176 142,176
======= =======
Due to Monument Advisors, Inc. 92,676 92,676
------- -------
Net Assets $50,500 $49,500
======= =======
Shares outstanding 5,050 4,950
Net asset value per share $10 $10
Par value per share $.001 $.001
Shares authorized 250,000,000 250,000,000
</TABLE>
The accompanying notes are an integral part of the statements of assets and
liabilities.
<PAGE>
MONUMENT SERIES FUND, INC.
NOTES TO STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 12, 1997
NOTE 1 : ORGANIZATION
Monument Series Fund (the "Fund") is an open-end investment company
established under the laws of Maryland by Articles of Incorporation dated
April 7, 1997. The Fund currently consists of the Monument Washington Regional
Growth Fund and Monument Washington Regional Aggressive Growth Fund (each a
"Fund"; collectively the "Funds"). The Funds have had no operations other then
those related to organizational matters and the sale and issuance of initial
shares (5,050 for the Regional Growth Fund and 4,950 for the Regional
Aggressive Growth Fund) to shareholders. All organizational expenses incurred
or to be incurred in connection with the organization and initial registration
of the Funds were paid by Monument Advisors, Inc. However, the Funds will
reimburse the investment advisor for such costs. Organizational expenses of
$185,352 will be deferred and amortized on a straight-line basis over a period
of sixty months from the date the Funds commence operations. The Funds have
agreed with the investment advisor that if any of the initial shares of the
Funds are redeemed during the amortization period, the Funds will reduce the
redemption proceeds for the then unamortized organizational expenses in the
same ratio as the number of redeemed shares bears to the number of initial
shares at the time of such redemption.
NOTE 2: INVESTMENT ADVISORY AGREEMENT
Under the Investment Advisory Agreement, the Funds pay Monument Advisors,
Inc., a related party, a fee for services based on the each Fund's average
daily net assets which is calculated daily and payable monthly. See
"Management" in the Prospectus for additional information concerning the
agreement.
NOTE 3: INCOME TAXES
Each Fund intends to qualify as a regulated investment company under the
requirements of the Internal Revenue Code and intends to distribute
substantially all of its taxable income. As such, the Funds do not expect to
be subject to federal income or excise taxes.
NOTE 4: PLAN OF DISTRIBUTION (RULE 12B-1 PLAN)
On October 27, 1997, the Board of Directors, on behalf of each Fund,
unanimously approved a Plan of Distribution pursuant to Rule 12b-1, pursuant
to which Monument Distributors, Inc., a related party, is entitled to receive
a 12b-1 fee for certain activities and expenses that are intended to result in
the sale of Fund shares. Monument Distributors, Inc. has agreed to voluntarily
waive the Rule 12b-1 fee for the first year of operations for each Fund.