COMMONWEALTH SHAREHOLDER SERVICES, INC.
1500 FOREST AVENUE, SUITE 223 * P.O. BOX 8687 * RICHMOND, VA 23229
(804) 285-8211 * (800) 527-9500 * FAX (804) 285-8251
FILED VIA EDGAR
May 3, 1999
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Reference: Monument Series Fund, Inc.
File Number 333-26223
Filed Pursuant to Rule 497 (c)
Gentlemen:
Transmitted herewith for electronic filing on behalf of Monument Series
Fund, Inc., please find enclosed, pursuant to Rule 497 (c) under the Securities
Act of 1933, as amended, a copy of the Prospectus and Statement of Additional
Information of the Funds dated May 1, 1999.
Should you have any questions regarding the filing of such documents, please
call Beth-ann Roth at (202) 261-3338.
Sincerely,
/s/ John Pasco, III
John Pasco, III
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MONUMENT FUNDS GROUP, INC.
MONUMENT SERIES FUND, INC.
1500 Forest Avenue, Suite 111
Richmond, Virginia 23229
MONUMENT INTERNET FUND
MONUMENT MEDICAL SCIENCES FUND
MONUMENT WASHINGTON AGGRESSIVE GROWTH FUND
PROSPECTUS DATED May 1, 1999
This Prospectus describes the Monument Internet Fund, Monument Medical Sciences
Fund and the Monument Washington 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").
MONUMENT INTERNET FUND seeks to maximize long-term appreciation of capital by
investing primarily in a non-diversified portfolio of Internet company equity
securities.
MONUMENT MEDICAL SCIENCES FUND seeks to maximize long-term appreciation of
capital by investing primarily in a non-diversified portfolio of equity
securities of medical sciences companies.
MONUMENT WASHINGTON AGGRESSIVE GROWTH FUND seeks to maximize long-term
appreciation of capital by investing primarily in a non-diversified portfolio of
equity securities of Washington area companies with market capitalization of
less than $2 billion at the time of purchase.
The U.S. Securities and Exchange Commission has not approved or disapproved
these securities or passed on the accuracy or completeness of this Prospectus.
It is a criminal offense to suggest otherwise.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION PAGE
- ----------- ----
The Funds........................................................ 4
Investment Objectives............................................ 4
Monument Internet Fund........................................ 4
Monument Medical Sciences Fund................................ 4
Monument Washington Aggressive Growth Fund.................... 4
Principal Investment Strategies.................................. 4
Internet Fund................................................. 4
Medical Sciences Fund......................................... 4
Aggressive Growth Fund........................................ 4
Temporary Defensive Positions.................................... 5
Specific Risk Considerations..................................... 5
Internet Fund.................................................. 5
Medical Sciences Fund.......................................... 5
Aggressive Growth Fund......................................... 5
General Risk Considerations...................................... 5
Small Companies................................................ 5
Technology and Research Companies.............................. 6
Diversification................................................ 6
Table of Fees and Expenses....................................... 7
Shareholder Fees.............................................. 7
Annual Fund Operating Expenses................................ 7
The Company...................................................... 8
The Advisor................................................... 8
The Distributor............................................... 8
Portfolio Manager............................................. 8
Shareholder Information.......................................... 8
Principal Underwriter......................................... 8
Buying Fund Shares............................................... 8
Share Transactions............................................ 8
Minimum Investments........................................... 8
By Mail....................................................... 8
By Wire....................................................... 9
Public Offering Price......................................... 9
When Shares are Priced........................................ 9
Net Asset Value............................................... 9
Distribution Arrangements........................................ 9
Rule 12b-1 Fees............................................... 9
Right of Accumulation......................................... 9
Waiver of Sales Charges....................................... 10
General....................................................... 10
Redeeming Fund Shares............................................ 10
Exchanging Fund Shares........................................... 10
Exchange Price................................................ 10
<PAGE>
Description Page
- ----------- ----
Minimum Account................................................ 10
Exchange Restriction........................................... 11
Modification or Termination.................................... 11
Small Account Redemptions...................................... 11
Redemption Price............................................... 11
Redemption Proceeds............................................ 11
Redemptions in Kind............................................ 11
Dividends and Distributions....................................... 11
Tax Considerations................................................ 12
The Funds...................................................... 12
Shareholders................................................... 12
Tax Information................................................ 12
Year 2000...................................................... 12
Services To Help You Manage Your Account.......................... 12
Automatic Investment Plan...................................... 12
Telephone Transactions......................................... 12
Statements and Reports......................................... 13
Proper Form....................................................... 13
Written Instructions........................................... 13
Signature Guarantees........................................... 13
Share Certificates................................................ 13
Retirement Plan Accounts.......................................... 13
Financial Highlights Information.................................. 14
Monument Washington Aggressive Growth Fund..................... 14
Monument Medical Sciences Fund
(formerly Monument Washington Regional Growth Fund)........... 15
<PAGE>
THE FUNDS
The following discussion describes the investment objectives, principal
strategies and risks of each Fund. Investment objectives are fundamental
policies which can not be changed without the approval of a majority of that
Fund's outstanding shares. Investment policies and restrictions are not
fundamental, and therefore, unless otherwise required by law, can be changed by
the Company's Board of Directors without shareholder approval. As with any
mutual fund, there can be no guarantee that investment objectives will be met.
INVESTMENT OBJECTIVES
MONUMENT INTERNET FUND ("Internet Fund"). The Internet Fund's investment
objective is to maximize long-term appreciation of capital.
MONUMENT MEDICAL SCIENCES FUND ("Medical Sciences Fund;" formerly Monument
Washington Regional Growth Fund). The Medical Sciences Fund's investment
objective is to maximize long-term
appreciation of capital.
MONUMENT WASHINGTON AGGRESSIVE GROWTH FUND ("Aggressive Growth Fund;" formerly
Monument Washington Regional Aggressive Growth Fund). The Aggressive Growth
Fund's investment objective is to maximize long-term appreciation of capital.
PRINCIPAL INVESTMENT STRATEGIES
INTERNET FUND. The Fund seeks to achieve its objective by
investing, under normal conditions, at least 80% of its total assets in equity
securities of companies principally engaged in Internet or Internet-related
businesses. A company is considered principally engaged in an Internet, Intranet
or Internet-related business if at least 50% of its assets, gross income, or net
profits are committed to, or derived from, the research, design, development,
manufacturing, or distribution of products, processes or services for use with
Internet or Intranet related businesses.
The Internet is a global matrix of computers and computer networks connected by
a high-speed infrastructure, which allows users to communicate quickly, and
easily with each other. An Intranet is the application of Internet tools and
concepts to a company's internal network. Currently, the most popular
application on the Internet is the World Wide Web ("WWW"), a
graphic-user-interface which allows information sharing and data transfer. Other
Internet applications include e-mail, Intranet, extranet, and electronic
commerce. Currently, development is occurring in such areas as infrastructure
deployment, Internet access, content provision, data security, and electronic
commerce.
When selecting investments for the Internet Fund, Monument Advisors (the
"Investment Advisor") will seek to identify Internet companies that are
developing new or innovative products, services, or processes that will lead to
a future growth in earnings. Such companies are likely to be relatively
unseasoned companies. These companies generally will have no established history
of paying dividends, and any dividend income is likely to be incidental.
MEDICAL SCIENCES FUND. The Fund seeks to achieve its objective by investing,
under normal circumstances, primarily (i.e., at least 80% of its total assets)
in equity securities of companies principally engaged in research, development,
production and distribution of medical products and services. Companies in these
fields include, but are not limited to, pharmaceutical firms; companies that
design, manufacture or sell medical supplies, equipment and support services;
and companies engaged in medical, diagnostic, biochemical and biotechnological
research and development.
When selecting investments for the Fund, the Investment Advisor will seek to
identify medical sciences companies that it believes are likely to benefit from
new or innovative products, services or processes that can enhance the
companies' prospects for future earnings growth. Some of these companies may
not have an established history of revenue or earnings at the time of purchase.
Dividend income, if any, is likely to be incidental.
AGGRESSIVE GROWTH FUND. The Fund seeks to achieve its objective by investing at
least 80% of its total assets in equity securities of Washington area companies
with market capitalization of less than $2 billion at the time of purchase.
When selecting investments for the Aggressive Growth Fund, the Investment
Advisor will seek to identify Washington area companies that are developing new
or innovative products, services, or processes that will lead to a future
growth in earnings. Such companies are likely to be relatively unseasoned
companies involved in new and emerging industries. These companies generally
will have no established history of paying dividends, and any dividend income is
likely to be incidental.
Although the Aggressive Growth Fund's emphasis will be on companies with smaller
market capitalization, 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 as newer companies. The securities
of these smaller companies may be listed on national securities exchanges or
traded in the OTC market.
TEMPORARY DEFENSIVE POSITIONS
For temporary defensive purposes, each Fund may make investments that are
inconsistent with its principal investment strategies in attempting to respond
to adverse market, economic, political or other conditions. If that occurs, the
Fund may not achieve its investment objective.
SPECIFIC RISK CONSIDERATIONS
INTERNET FUND. The Internet Fund will invest primarily in companies engaged in
Internet and Intranet related activities. The value of such companies is
particularly vulnerable to rapidly changing technology, extensive government
regulation and relatively high risks of obsolescence caused by scientific and
technological advances. The Internet Fund may involve significantly greater
risks and therefore may experience greater volatility. The Internet Fund may
involve significantly greater risks and therefore may experience greater
volatility than a mutual fund that diversifies its investments across many
industries or does not primarily invest in Internet related companies. The
Internet Fund is nondiversified, and may also invest in small companies and
technology and research companies, the risks of which are described below under
"General Risk Considerations."
MEDICAL SCIENCES FUND. The special risks of the Medical Sciences Fund are that
the economic prospects of health sciences companies can dramatically fluctuate
due to changes in the regulatory and competitive environment. A substantial
portion of health services and research are funded or subsidized by the
government, and so changes in government policy at the federal or state level
may affect the demand for health care products or services, and the continuation
or success of research and development efforts. Regulatory approvals often
entail lengthy application and testing procedures and are generally required
before new drugs and certain medical devices may be introduced. Medical sciences
companies face lawsuits related to product liability and other issues. Also,
many products and services provided by medical science companies require
substantial capital investment and are subject to rapid obsolescence. The
Medical Sciences Fund is nondiversified, and may also invest in small companies
and technology and research companies, the risks of which are described below
under "General Risk Considerations."
AGGRESSIVE GROWTH FUND. Because the Aggressive Growth Fund intends to invest
primarily in Washington area companies, changes in the economic, political,
regulatory, and business environment in the Washington area are likely to have a
greater impact on the Fund than on mutual funds with investments that are not
geographically focused. The Aggressive Growth Fund is nondiversified, and may
also invest in small companies and technology and research companies, the risks
of which are described below under "General Risk Considerations."
GENERAL RISK CONSIDERATIONS
SMALL COMPANIES. Each of the Funds may invest in companies with small market
capitalization (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 are also
characterized by the following: (1) they may lack depth of management; (2) 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 (3) 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. Thus, 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
following:
(1) the less certain growth prospects of smaller companies; (2) the lower degree
of liquidity in the markets for such stocks; and (3) 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 Aggressive Growth and Internet Fund
shares to be more volatile than the shares of a mutual fund (such as the Medical
Sciences Fund) that invests primarily in larger company stocks.
TECHNOLOGY AND RESEARCH COMPANIES. Consistent with its investment objective,
each of the Funds expects to invest a portion of its assets in securities of
companies involved in biological technologies, computing technologies, or
communication technologies (collectively, "technology sectors"), and companies
related to these industries. Typically, these companies' products or services
compete on a global, rather than a predominately domestic or regional basis. The
technology sectors historically have been volatile and securities of companies
in these sectors may be subject to abrupt or erratic price movements. Advisors
will seek to reduce such risks through extensive research, and emphasis on more
globally-competitive companies. In addition, because these companies compete
globally, the securities of these companies may be subject to fluctuations in
value due to the effect of changes in the relative values of currencies on such
companies' businesses. The history of these markets reflect both decreases and
increases in worldwide currency valuations, and these may reoccur unpredictably
in the future.
DIVERSIFICATION. The Funds are non-diversified under the Investment Company Act
of 1940 ("1940 Act"), which means that there is no restriction under the 1940
Act on how much these Funds may invest in the securities of any one issuer.
Accordingly, each Fund may be more susceptible than a diversified mutual fund to
the effects of adverse economic, political or regulatory developments affecting
a single issuer or industry sector in which these Funds may maintain
investments.
TABLE OF FEES AND EXPENSES
The following table is designed to help you understand the fees and expenses
that you may pay, both directly and indirectly, by investing in the Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
MEDICAL AGGRESSIVE
SCIENCES FUND GROWTH FUND INTERNET FUND
- ---------------------------------------------------------------------
Maximum Sales
Charge 4.75%(1) 4.75%(1) 4.75%(1)
(Load)(1)
Maximum Deferred
Sales Charge None None None
Maximum Sales
Charge Imposed on
Reinvested Income
Dividends and None None None
Distributions
Redemption Fees None None None
Exchange None None None
Fee
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets as a percentage of average net
assets)
Advisory Fee 1.00% 1.00% 1.00%
Distribution (12b-1) 0.50% 0.50% 0.50%
Fees(2)
Other Expenses 49.57% 56.75%(4) 0.40%(3)
------- -------- --------
Total Annual Fund
Operating Expenses 51.07% 56.75%(4) 1.90%(3)
Fee Waiver and/or
Expense Reimbursement 49.17%(4) 56.35%(4) ---
-------- -------- --------
Net Expenses 1.90% 1.90% 1.90%
(1) As a percentage of offering price. Reduced rates apply to purchase
payments over $50,000. See "Buying Fund Shares-Public Offering Price"
and "Buying Fund Shares-Rights of Accumulation."
(2) Each Fund has approved a Plan of Distribution Pursuant to Rule 12b-1
providing for the payment of a maximum distribution fee, equal to 0.50% of
its average daily net assets, to Monument Distributors, Inc., the
principal underwriter for each Fund. See "Rule 12b-1 Plan." 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) Internet Fund expenses are based on estimated amounts for the current
fiscal year.
(4) The Advisor has contractually agreed to waive its fees and pay expenses to
maintain total operating expenses to 1.90% of average daily net assets
through May 1, 2001.
EXAMPLE. This example assumes that you invest $10,000 in a Fund for the time
periods indicated then redeem all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Internet Fund $659 $1,044 $1,453 $2,592
Medical Sciences $659 $1,044 $1,453 $2,592
Fund*
Aggressive Growth $659 $1,044 $1,453 $2,592
Fund*
* These costs are net of advisor fee waivers and reimbursements to maintain
total operating expenses to 1.90%. Absent this commitment, your costs would be:
Medical Sciences Fund $4,219 $7,327 $8,231 $8,585
Aggressive Growth Fund $4,546 $7,339 $7,949 $8,116
The above examples assume payment of the maximum initial sales charge of 4.75%
at the time of purchase. The sales charge varies depending upon the amount of
Fund shares that an investor purchases. Accordingly, your actual expenses may
vary.
THE COMPANY
The Company is a Maryland corporation organized on April 7, 1997. It is
registered with the SEC as a open-end management investment company. The
Company's authorized capital consists of 2 billion shares of common stock with
a par value of $0.001 per share. The Company currently offers, on a continuous
basis, three series of common stock, namely, the Medical Sciences Fund,
the Aggressive Growth Fund and the Internet Fund, each of which is currently
authorized to issue up to 250 million shares. The Company may offer additional
series in the future.
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 "Investment Advisory and Other Services"
in the SAI.
Monument Advisors, located at 7920 Norfolk Avenue, Suite 500, Bethesda, Maryland
20814, is a wholly-owned subsidiary of The Monument Group, Inc., which in turn
is principally owned and controlled by David A. Kugler, President of Advisors,
and President of the Company. David A. Kugler is an affiliate of the Company and
Monument Advisors. Monument Advisors is a recently organized company that also
manages the portfolio investments of qualified individuals, retirement plans,
and trusts. As of May 1, 1999, Advisors managed or supervised in excess of $40
million in assets.
In the interest of limiting expenses of the Medical Sciences and Aggressive
Growth Funds, Monument Advisors has entered into an expense limitation agreement
with the Company. Pursuant to the agreement, Monument Advisors has agreed to
waive or limit its fees and to assume other expenses so that the total annual
operating expenses of the Funds covered by the agreement are limited to 1.90%.
The limit does not apply to interest, taxes, brokerage commissions, other
expenditures capitalized in accordance with generally accepted accounting
principles, other extraordinary expenses not incurred in the ordinary course of
business, and amounts payable pursuant to a plan adopted in accordance with Rule
12b-1 under the 1940 Act.
THE DISTRIBUTOR. Monument Distributors, Inc., ("Monument Distributors" or
"Distributors") an affiliate of Monument Advisors, serves as each Fund's
principal underwriter.
PORTFOLIO MANAGER. Alexander C. Cheung, C.F.A., serves as the portfolio
manager for each of the Funds. Mr. Cheung has nine years investment management
experience and has been employed by Advisors since August 1997. Previously, Mr.
Cheung served as Managing Director of Lion Rock Capital Management, Inc., and as
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.
SHAREHOLDER INFORMATION
PRINCIPAL UNDERWRITER. Monument Distributors, located at 7920 Norfolk
Avenue, Suite 500, Bethesda, Maryland 20814, is a wholly-owned subsidiary of The
Monument Group, Inc. and an affiliate of Monument Advisors, and serves as the
principal underwriter of each Fund. David A. Kugler and Peter L. Smith are
affiliates of the Company and Monument Distributors. Mr. Smith serves as Vice
President and Assistant Secretary of the Company.
BUYING FUND SHARES
SHARE TRANSACTIONS. You can purchase and redeem Fund shares, or exchange
shares of one Fund for those of another, by contacting any broker authorized by
the distributor to sell shares of the Company or by contacting Fund Services,
Inc., the Company's transfer and dividend disbursing agent, (at the address
appearing on the cover page of this Prospectus)or by telephoning 1-888-420-9950.
A sales charge may apply to your purchase. Brokers may charge transaction fees
for the purchase or sale of Fund shares, depending on your arrangement with the
broker.
MINIMUM INVESTMENTS. The minimum initial investment in a Fund is $1000.
Subsequent investments must be at least $250. Under certain circumstances the
Fund may waive the minimum initial investment for purchases by officers,
directors and employees of the Company and its affiliated entities and for
certain related advisory accounts, retirement accounts, custodial accounts for
minors and automatic investment accounts.
BY MAIL. You may buy shares of each Fund by sending a completed application
along with a check drawn on a U.S. bank in U.S. funds, to "Monument Series
Fund," c/o Fund Services, Inc., (at the address set out on the cover page of
this Prospectus). Fund Services, Inc. is the Company's transfer and dividend
disbursing agent. See "Proper Form."
Third party checks are not accepted for the 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 further instructions.
Please remember to return your completed and signed application to the
address set out on the cover page of this Prospectus. See "Proper Form."
PUBLIC OFFERING PRICE. When you buy shares of a Fund, you will receive the
public offering price per share as determined after your order is received in
proper form, as defined below under the section entitled "Proper Form". Each
Fund's public offering price per share is equal to the Fund's net asset value
per share plus a sales charge, described below, paid to Distributors.
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. EST. If you
purchase your shares through a broker, the Fund will be deemed to have received
your order when the order is accepted as being in proper form by the broker.
However, your broker must receive your request before the close of the regular
trading on the Exchange to receive that day's net asset value ("NAV").
NET ASSET VALUE. Each Fund's share price is equal to the NAV per share of the
Fund. Each Fund calculates its NAV per share by valuing and totaling its assets,
subtracting any liabilities, and dividing the remainder, called net assets, by
the number of Fund shares outstanding. The value of each Fund's portfolio
securities is generally based on market quotes if they are readily available. If
they are not readily available, Advisors will determine their market value in
accordance with procedures adopted by the Board. For information on how the
Funds value their assets, see "Valuation of Fund Shares" in the SAI.
DISTRIBUTION ARRANGEMENTS
Sales Charge as a
Percentage of Amount Paid To
-------------------- Dealers as a
Amount of Purchase at the Offering Net Amount Percentage of
Public Offering Price Price Invested Offering Price
- --------------------- ----- -------- --------------
$50,000 or less 4.75% 4.99% 4.00%
Over $50,000 through $100,000 3.50% 3.63% 3.00%
Over $100,000 through $500,000 2.50% 2.56% 2.25%
Over $500,000 through $1,000,000 2.50% 2.56% 2.25%
Above $1,000,000 0.25% 0.25% 0.25%
RULE 12-b 1 FEES. The Board of Directors has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). Pursuant to the Plan,
each Fund may finance any activity or expense that is intended primarily to
result in the sale of 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. Pursuant to the Plan, each Fund may finance any
activity or expense that is intended primarily to result in the sale of its
shares .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. Because these fees are paid out of the Company's
assets on an on-going basis, over time these fees will increase the cost of your
investment and may cost more than paying other types of sales charges.
RIGHT OF ACCUMULATION. You may reduce the sales charge by combining the amount
invested in a Fund with certain previous purchases of shares of any Monument
Fund. Your shares in a Fund previously purchased will be taken into account on a
combined basis at the current net asset value per share of a Fund in order to
establish the aggregate investment amount to be used in determining the
applicable sales charge. Only previous purchases of Fund shares that are still
held in the Fund and that were sold subject to the sales charge 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 your payment and request to combine purchases,
please specify your account number.
WAIVER OF SALES CHARGES. No sales charge shall apply to:
(1) reinvestment of income dividends and capital gain distributions;
(2) exchanges of one Fund's shares for those of another Fund;
(3) 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, and employees (including immediate family members) of
broker-dealer distributing Fund shares;
(4) purchases of Fund shares by Distributors for its own investment account
for investment purposes only;
(5) a "qualified institutional buyer," as that 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, and small business
investment companies;
(6) a charitable organization, as defined in Section 501(c)(3) of the Internal
Revenue Code ("Code"), as well as other charitable trusts and endowments,
investing $50,000 or more;
(7) 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;
(8) investment advisors or financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; and clients of those
investment advisors or financial planners who place trades for their own
accounts if the accounts are linked to the master account of the
investment advisor or financial planner on the books and records of the
broker or agent;
(9) retirement and deferred compensation plans and trusts used to fund those
plans, including, but not limited to, those defined in section 401(a),
403(b) or 457 of the Code and "rabbi trusts"; and,
(10) the purchase of Fund shares, if available, through certain third-party
fund "supermarkets." Some fund supermarkets may offer Fund shares without
a sales charge or with a reduced sales charge. Other fees may be charged
by the service-provider sponsoring the fund supermarket, and transaction
charges may apply to purchases and sales made through a broker-dealer.
Additional information regarding the waivers may be obtained by calling
1-888-420-9950. All account information is subject to acceptance and
verification by Monument Distributors.
GENERAL. The Company reserves the right in its sole discretion to withdraw all
or any part of the offering of shares of any Fund when, in the judgment of the
Fund's management, such withdrawal is in the best interest of the Fund. An order
to purchase shares is not binding on, and may be rejected by, Distributors until
it has been confirmed in writing by Distributors and payment has been received.
REDEEMING FUND SHARES
You can redeem shares of the Funds by submitting your order either through
your authorized broker or by submitting it directly to the Fund, either by
writing to Fund Services, Inc. (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 defined below under the section entitled "Proper Form."
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, as 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 $1,000.
EXCHANGE RESTRICTION. The Fund may restrict exchange of shares that have
been exchanged within the previous 90 days.
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 $1,000 minimum balance requirement ($250 in the case of IRAs, or
other retirement plans and custodial accounts). Each Fund will give you 30 days'
advance written notice and a chance to increase your Fund balance to the minimum
requirement before the Fund redeems your shares.
REDEMPTION PRICE. Your redemption request will be processed based on the
NAV of the applicable Fund's shares as determined after receipt of your order in
proper form.
REDEMPTION PROCEEDS. Redemption proceeds will generally be paid by the next
business day after processing, but in no event later than three business days
after receipt by Fund Services, Inc. of your redemption order in proper form. 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, trading in the markets
that a Fund normally utilizes is restricted, or redemption is otherwise
permitted to be suspended by the SEC.
REDEMPTIONS IN KIND. The Company reserves the right to redeem its shares in
kind. In other words, upon tendering shares of a Fund, you could receive assets
other than cash in return. The Company will, however, pay cash in response to
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.
DIVIDENDS AND DISTRIBUTIONS
The Internet Fund, Medical Sciences Fund and Aggressive Growth Fund currently
intend to declare and pay dividends from net investment income, if any, on an
annual basis. Each Fund currently intends to make distributions of realized
capital gains, if any, on an annual basis. You may reinvest income dividends and
capital gain distributions in additional Fund shares at current net asset value
(i.e., without payment of a sales charge). Each of the Funds declares and pays
income dividends from its net investment income, usually in December. Capital
gains distributions, if any, are also made in December.
Income dividends and capital gain distributions are calculated and distributed
the same way for each Fund. The amount of any income dividends will differ as a
result of the individual investment strategies of each Fund. Income dividend
payments are not guaranteed, are subject to the Board's discretion, and may vary
from time to time. NONE OF THE FUNDS PAY "INTEREST" OR GUARANTEE ANY FIXED RATE
OF RETURN ON AN INVESTMENT IN THEIR SHARES.
Each Fund will automatically 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.
TAX CONSIDERATIONS
Each Fund intends to distribute substantially all of its net investment income
and capital gains to its shareholders. Although the Funds will not be taxed on
amounts they distribute, you may be taxed.
For federal income tax purposes, any income dividend (including short term
capital gains) that you receive from a Fund is generally taxable to you as
ordinary income whether you 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 in the year in which they are paid.
Certain distributions that are declared in October, November or December, but
are paid the following January, are taxable as though you received them on
December 31st of the year in which they are declared.
Redemptions and exchanges of Fund shares are taxable events on which you will
generally realize a capital gain or loss, which will be long-term or short-term,
generally depending upon how long you held the shares.
If you hold shares through a tax-deferred account, such as a retirement plan,
income and gains will not be taxable each year. Instead, the taxable portion of
amounts you hold in a tax-deferred account generally will be subject to tax only
when you receive a distribution from the account.
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.
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S.
federal income tax liability.
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.
YEAR 2000. The Funds' operations depend on the seamless functioning of computer
systems in the financial service industry, including those of Advisors, the
Administrator, the Custodian and the Transfer Agent. Many computer software
systems in use today cannot properly process date-related information after
December 31, 1999 because of the method by which dates are encoded and
calculated. This failure, commonly referred to as the "Year 2000 Issue," could
adversely affect the handling of securities trades, pricing and account
servicing for the Funds. Advisors has made compliance with the Year 2000 Issue a
high priority and is taking steps that it believes are reasonably designed to
address the Year 2000 Issue with respect to its computer systems. Advisors has
also been informed that comparable steps are being taken by the Fund's other
major service providers. Advisors does not currently anticipate that the Year
2000 Issue will have a material impact on its ability to continue to fulfill its
duties as investment adviser.
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.
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. Registered owners must sign any written instructions.
To avoid any delay in processing your transaction, such instructions should
include:
- your name,
- the Fund's name,
- a description of the request,
- for exchanges, the name of the Fund you are exchanging into,
- your account number,
- the dollar amount or number of shares, and
- your daytime or evening telephone number.
SIGNATURE GUARANTEES. For our mutual protection, we require a signature
guarantee in the following situations:
-if you wish to redeem over $50,000 worth of shares,
-if you want redemption proceeds to be paid to someone other than the
registered owners,
-if you want redemption proceeds to be sent to an address other than the
address of record, a preauthorized bank account, or a preauthorized
brokerage firm account,
-if we receive instructions from an agent, not the registered
owners, or
-if 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. The Company
reserves the right to issue share certificates on behalf of each of the Funds at
any time.
RETIREMENT PLAN ACCOUNTS. You may not change distribution options for retirement
plan accounts by telephone. While you may sell or 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.
FINANCIAL HIGHLIGHTS INFORMATION
The financial highlights table is intended to help you understand the Company's
financial performance for the period January 6, 1998 to October 31, 1998.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
or lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
independent public accountants. Deloitte & Touche LLP's report on the Company's
financial statements appears in the Company's Annual Report. The information
should be read in conjunction with the financial statements contained in the
Company's annual report, which is incorporated by reference into the Company's
Statement of Additional Information ("SAI") and is available upon request.
MONUMENT WASHINGTON AGGRESSIVE GROWTH FUND
Financial Highlights
For a Share Outstanding Throughout The Period
- --------------------------------------------------------------------------------
January 6* to
October 31, 1998
------------------
Per Share Operating
Performance
Net asset value,
Beginning of year $10.00
------
Income from investment
Operations-
Net investment income 0.04
Net realized and unrealized
gain (loss) on investments 0.74
----
Total from investment operations 0.78
----
Net asset value, end of year $10.78
======
Total Return 7.80%
Ratios/Supplemental Data
Net assets, end of period (000's) $181
Ratio to average net assets-
Expenses 58.25%
Net investment income .70%
Portfolio turnover rate 88.00%
* Commencement of operations
See Notes to Financial Statements
<PAGE>
MONUMENT MEDICAL SCIENCES FUND
(formerly Monument Washington Regional/ Growth Fund)
Financial Highlights
For a Share Outstanding Throughout The Period
- --------------------------------------------------------------------------------
January 6* to
October 31, 1998
-----------------
Per Share Operating
Performance
Net asset value,
Beginning of year $10.00
------
Income from investment
Operations-
Net investment
income (loss) 0.04
Net realized and
unrealized
gain (loss) on
investments 0.28
------
Total from
investment operations 0.32
------
Net asset value, end
of year $10.32
======
Total Return 3.20%
Ratios/Supplemental
Data
Net assets, end of
period (000's) $214
Ratio to average net assets-
Expenses 51.07%
Net investment income .66%
Portfolio turnover rate 82.00%
* Commencement of operations
See Notes to Financial Statements
<PAGE>
Apart from the Prospectus and the SAI, the Company's registration statement
contains certain additional information that may be of interest to you. You may
obtain that information from the SEC by paying the charges prescribed under its
rules and regulations.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL FUND SHARES IN ANY STATE OR
JURISDICTION IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES REPRESENTATIVE,
DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN THE SAI.
<PAGE>
[Back Cover]
For more information about the Funds, you may wish to refer to the Company's
Statement of Additional Information ("SAI"), dated May 1, 1999, and the
Company's annual or semi-annual report, 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 by writing to "Monument Series Fund," c/o Fund Services,
Inc., 1500 Forest Avenue, Suite 111, Richmond, VA 23229, by calling
1-888-420-9950, or by visiting the Funds' website
(http://www.monumentfunds.com). General inquiries regarding the Funds may also
be directed to the above address or telephone number. Information about the
Company, including the SAI, can be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information about the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website (http://www.sec.gov) that contains reports, the Prospectus,
SAI, material incorporated by reference, and other information regarding the
Company.
<PAGE>
MONUMENT SERIES FUND, INC.
MONUMENT INTERNET FUND
MONUMENT MEDICAL SCIENCES FUND
MONUMENT WASHINGTON AGGRESSIVE GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1999
This Statement of Additional Information ("SAI") is not a Prospectus. It
contains additional information that you should read in conjunction with the
prospectus, dated May 1,1999 ("Prospectus"), for the Monument Series Fund, Inc.
Capitalized terms appearing in this SAI that are not otherwise defined herein
have the same meaning given to them in the Prospectus. You may obtain a copy of
the Prospectus by writing "Monument Series Fund," c/o Fund Services, Inc., 1500
Forest Avenue, Suite 111, Richmond, VA 23229, or by calling 1-888-420-9950.
TABLE OF CONTENTS PAGE
Investment Policies
Potential Risks
Investment Restrictions
Directors and Officers
Committees Established by the Board of Directors
Investment Advisory and Other Services
Principal Holders of Securities
Portfolio Transactions and Brokerage
Further Description of the Company's Shares
Buying, Redeeming, and Exchanging Shares
Valuation of Fund Shares
Additional Information On Distributions and Taxes
Performance Information
Performance Comparisons
Financial Information
THE COMPANY. The Company, a Maryland corporation organized on April 7, 1997, is
an open-end management investment company. Each of its three Funds is
non-diversified. The Company's authorized capital consists of 2 billion shares
of common stock with a par value of $0.001 per share. The Company currently
offers, on a continuous basis, three series of common stock, namely, the Medical
Sciences Fund, the Aggressive Growth Fund and the Internet Fund, each of which
is currently authorized to issue up to 250 million shares. The Company may offer
additional series in the future.
When issued, shares of each Fund are fully-paid, 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.
INVESTMENT POLICIES
The Prospectus describes the fundamental investment objectives and certain
investment policies and restrictions applicable to each Fund. The following is
additional information for your consideration.
ILLIQUID AND RESTRICTED SECURITIES. Each Fund may invest up to 15% of its net
assets in illiquid securities, including repurchase agreements with maturities
in excess of seven days. Subject to this limitation, the Board of Directors has
authorized each Fund to invest in restricted securities where such investment is
consistent with that Fund's investment objective, and has authorized such
securities to be considered liquid to the extent Advisors determines that there
is a liquid institutional or other market for such securities -- for example,
restricted securities that may be freely transferred among qualified
institutional buyers under Rule 144A of the Securities Act of 1933 ("1933 Act"),
and for which a liquid institutional market has developed. The Board of
Directors will review any determination by Advisors to treat a restricted
security as a liquid security on an ongoing basis, including Advisors'
assessment of current trading activity and the availability of reliable price
information. In determining whether a restricted security is properly considered
a liquid security, Advisors and the Board of Directors will take into account
the following factors: (1) the frequency of trades and quotes for the security;
(2) the number of dealers willing to buy or sell the security and the number of
other potential buyers; (3) dealer undertakings to make a market in the
security; (4) 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 (5) other such factors as Advisors may determine to
be relevant.
WRITING CALL OPTIONS. Each Fund may write (sell) covered call options. Covered
call options written by a Fund give the holder the right to buy the underlying
securities from the Fund at a stated exercise price. A call option written by a
Fund is "covered" if the Fund owns the underlying security that is subject to
the call or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if a Fund holds
a call on the same security and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less than the
exercise price of the call written or (b) is greater than the exercise price of
the call written if the difference is maintained by the Fund in cash and high
grade debt securities in a segregated account with its custodian bank.
The premium paid by the buyer of an option will reflect, among other things, the
relationship of the exercise price to the market price, the volatility of the
underlying security, the remaining term of the option, the existing supply and
demand, and the 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
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 who wishes to terminate his or her 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 also 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. Effecting a closing
purchase transaction will also 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 on the OTC market to the same extent that it
intends to engage in exchange traded options. Just as with exchange traded
options, OTC call options give the holder the right to buy an underlying
security from an option writer at a stated exercise price. However, OTC options
differ from exchange traded options in certain material respects.
OTC options are arranged directly with dealers and not, as is the case with
exchange traded options, through 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. Since OTC options
are available for a greater variety of securities and in a wider range of
expiration dates and exercise prices, the writer of an OTC option is paid the
premium in advance by the dealer.
There can be no assurance that a continuously 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 whom the Fund
originally wrote the option.
FUTURES CONTRACTS. Each Fund may buy and sell stock index futures contracts
traded on domestic stock 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
contracts, 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. Such assets may
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.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements.
Repurchase agreements allow a Fund to acquire ownership of a debt security which
the seller agrees (at the time of the sale) to repurchase at a mutually agreed
upon time and price. The security's yield during the Fund's holding period is
thus predetermined.
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 a contract.
Successful use of futures contracts depends upon Advisors' ability to correctly
predict movements in 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 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 sanctions or restrictions. These
trading and positions limits will not have an adverse impact on a Fund's
strategies for hedging its securities.
REPURCHASE AGREEMENTS. Although each Fund will enter into repurchase agreements
only with institutions that Advisors believes present minimal credit risks, 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: (1) a possible decline in the value
of the underlying security while the Fund seeks to enforce its rights thereto;
(2) possible subnormal levels of income and lack of access to income during this
period; (3) a possible loss on the sale of the underlying collateral; and (4)
the expense 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. It is possible, however,
that the market price of the security underlying a warrant will not exceed the
exercise price of the warrant before the expiration date. Consequently, the
purchaser of a warrant risks the loss of the entire purchase price. Price
movements in the security underlying a warrant are generally not as great as the
warrant's price movements. Therefore, the price of a warrant tends to be more
volatile 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. These restrictions may not be changed for any given Fund without the
approval of the lesser of (1) more than 50% of the outstanding voting securities
of the Fund or (2) 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. Thus, the investment
restrictions of one Fund may be changed without affecting those of the another
Fund. Under the restrictions, each Fund MAY NOT:
1. issue senior securities, except to the extent permitted by the 1940 Act,
including permitted borrowings;
2. make loans, except for collateralized loans of portfolio securities in an
amount not exceeding 33 1/3% of the Fund's total assets (at the time of the
most recent loan). This limitation does not apply to purchases of debt
securities or to repurchase agreements;
3. borrow money, except for temporary or emergency purposes in an amount not
exceeding 33 1/3% of the Fund's total assets (including the amount borrowed)
less liabilities (other than borrowings). No Fund will purchase securities
when its borrowings exceed 5% of its total assets;
4. invest more than 25% of the Fund's total assets (at the time of the most
recent investment) in any single industry, except in the case of the Internet
Fund and the Medical Sciences Fund. This limitation does not apply to
investments in obligations of the U.S. 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 herefrom;
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 (1) more than 3% of the
issuer's outstanding voting stock, (2) more than 5% of the Fund's total
assets, and (3) 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 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 more than 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.
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
reinvest the proceeds whenever Advisors deems such action prudent from the
viewpoint of a Fund's investment objective. A Fund's annual portfolio turnover
rate may vary significantly from year to year. A higher rate of portfolio
turnover may result in higher transaction costs, including brokerage
commissions. Also, to the extent that higher portfolio turnover results in a
higher rate of net realized capital gains to a Fund, the portion of a Fund's
distributions constituting taxable capital gains may increase. Monument Advisors
does not expect the annual portfolio turnover rates for a Fund to exceed 120%.
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 also elects the officers of the Company, who are
responsible for administering day-to-day operations. Affiliations for the
Officers and Board of Directors (including 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 (*).
Positions Held Principal Occupations
Name, Address and Age with the Company During the Past Five
Years
- ---------------------------------------------------------------------
*David A. Kugler (39) Director, President President and
7920 Norfolk Avenue, and Treasurer, Director, The
Suite 500, Bethesda, 1997-Present; Monument Group, Inc.
MD 20814 President and Bethesda, MD 20814 (a
Director, The holding company);
Monument Funds 1997-Present; Account
Group, Inc. (a Vice President, Paine
holding company), Webber, Inc.,
1997-Present; 1994-1997; Financial
President and Consultant, Merrill
Director, Monument Lynch & Co.,
Advisors, Ltd; 1990-1994.
1997-Present
President and
Director, Monument
Distributors, Inc.,
Peter L. Smith (67) Vice President and Special Investigator
7920 Norfolk Avenue, Assistant Secretary (Senior Examiner)
Suite 500, Bethesda, National Association
MD 20814 of Securities Dealers
Regulation District
10 (New York
City),1997-1998;
Senior Staff
Accountant, Office of
Compliance
Inspections and
Examinations, U.S.
Securities and
Exchange Commission,
Washington, D.C.,
1974-1997.
Francine F. Carb (41) Director President,
421 Woodland Circle Markitects, Inc.
Radnor, PA 19087-4640 (marketing
consulting); 1994-Present;
President, Francine Carb &
Associates (marketing consulting),
1992-1994.
Victor Dates (60) Director Adjunct Professor,
2107 Carter Dale Road Coppin State College,
Baltimore, MD 21209 1998-Present;
Assistant Professor,
Howard University,
1988-1998.
George DeBakey (48) Director Director of
19 Blue Hosta Way International
Rockville, MD 20850 Operations at ESI
International,
Inc.1998-Present;
Instructor at
American University,
1992-1998.
G. Frederic White, III Director, Secretary Management Consultant
(45) (small business
3107 Albemarle Road management
Wilmington, DE 19808 consulting),
1985-1997; Business
Manager, Trinity
Episcopal Parish,
1997-Present.
Rhonda Wiles-Roberson, Director Sr. Vice President,
J.D (46), 1227 Boucher Institutional Funding
Avenue, Annapolis, MD 21403 & Business
Development, Hispanic
Radio Network, Inc.,
1998 - Present;
Principal, RWR Consults
(business advisors),
1995-Present; General Counsel,
NAPWA Services, Inc.
(pharmaceutical company),
1993-1995;
Associate General
Counsel, Calvert
Group, Ltd. (sponsor
of investment
companies) 1990-1993.
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 a fee of $2,000 annually, plus an
additional fee of $500 per day for attendance at any meeting of the Board of
Directors or one of its committees (including any meeting held by telephonic
conference). Directors also receive reimbursement for any expenses incurred in
attending board and committee meetings. The Board of Directors generally meets
quarterly.
In addition, those Directors and officers of the Company who are also
shareholders of The Monument Group, Inc., the parent company of Advisors and
Distributors, may also 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:
AUDIT COMMITTEE: The Audit Committee assists the Board of Directors in
fulfilling its responsibilities for the Company's accounting and financial
reporting practices, and acts as a liaison 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: The Executive Committee may exercise its powers during
those intervals between meetings of the full Board of Directors. The Executive
Committee possesses all of the powers of the Board of Directors in the
management of the Company except as to those matters that specifically require
action by the Board of Directors. Directors Kugler and Wiles-Roberson are
members of the Executive Committee.
PRICING AND INVESTMENT COMMITTEE: The Pricing and Investment Committee
determines in good faith a fair value for any of the Company's portfolio
investments that do not have a readily available market quotation or sales
price. The Committee then presents such valuations and the basis therefor at the
next meeting of the Board of Directors for their good faith confirmation or
change. Director Kugler is a member of the Pricing and Investment Committee.
Alexander Cheung, an employee of Monument Advisors, is also a member of the
Pricing and Investment Committee.
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 the
following services to each Fund: (1) furnishing an investment program ((a)
determining what investments a Fund should purchase, hold, sell, or exchange;
(b) 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; (c) 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 (including the reasons for
such decisions, the extent to which it 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);
(d) 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 reports to the Company regarding brokerage business placed by
Advisors; (e) 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; (4) 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; (5) assisting the Custodian with the valuation of the
securities of each Fund, and in calculating the net asset value of each Fund;
(6) 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; (7)
providing assistance to the Company with respect to the development,
implementation, maintenance, and monitoring of a compliance program; and (8)
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 for both the Medical Sciences Fund and the Aggressive
Growth Fund was approved by the Board of Directors on October 27, 1997. The
Advisory Agreement for the Internet Fund was approved by the Board of Directors
on June 30, 1998. Each agreement was subsequently approved by the initial
shareholder of each Fund, following his investment of each Fund's initial
capitalization. The Advisory Agreements will remain in effect for two years from
the date of their execution and will continue in effect from year to year as
long as its continuance is specifically approved at least annually by a vote of
the Board of Directors (on behalf of each Fund) or by a vote of the holders of a
majority of each Fund's outstanding voting securities (as defined by the 1940
Act). In either case, the vote must be cast by a majority of Board members who
are not interested persons or Advisors of the Company (other than as members of
the Board of Directors). Voting must occur in person at a meeting specifically
called for that purpose. The Advisory Agreement may be terminated without
penalty at any time by the Board of Directors or Advisors. With respect to an
individual Fund, the Advisory Agreement may be terminated by a vote of a
majority of the Fund's shareholders. Termination either occurs on 60 days
written notice, or automatically in the event of an assignment of the agreement,
as defined in the 1940 Act.
PRINCIPAL HOLDERS OF SECURITIES
As of April 9, 1999, Samuel M. Hunn of 7909 Hermitage Road, Richmond, Virginia,
23228, has controlled the Medical Sciences Fund by virtue of his ownership of
54.51% of its shares. Mr. Hunn also owns 4.882% of the Aggressive Growth Fund.
As of April 9, 1999, Mr. David A. Kugler of 9616 Glencrest Lane, Kensington,
Maryland 20895 has had beneficial ownership of 6.466% of the Medical Sciences
Fund and 7.615 % of the Aggressive Growth Fund. As of that date, Mr. Kugler has
also owned, of record, 2.386 % of the shares of the Medical Sciences Fund, and
2.810% of the shares of the Aggressive Growth Fund. The remainder of Mr.
Kugler's beneficial ownership of the shares of each Fund (4.080 % of the shares
of the Medical Sciences Fund, and 4.805% of the shares of the Aggressive Growth
Fund) was due to his ownership interests in Monument Distributors, Inc.
As of April 9, 1999, Herbert Klein, III, of 1081 Carriage Hills Parkway,
Annapolis, Maryland, had beneficial ownership of 5.005% of the shares of the
Medical Sciences Fund and 5.891% of the shares of the Aggressive Growth Fund.
As of April 9, 1999, Monument Distributors, Inc., which Mr. Kugler is the
controlling shareholder, located at 7920 Norfolk Avenue, Suite 500, Bethesda,
Maryland 20814, owned, 4.295% of the shares of the Medical Sciences Fund and
5.058% of the shares of the Aggressive Growth Fund.
In addition to the foregoing, as of April 9, 1999, had varying percentages of
ownership (both of record and beneficial) of shares of the Aggressive Growth
Fund: (1) Florence Cheung 430 Jean Way, King of Prussia, Pennsylvania, 19406,
10.922%; (2) Frederick Siewers, Jr. 606 Chandler Circle, Richmond, Virginia,
23229, 5.341%; (3) Ron Miller Associates, Inc. Profit Sharing Plan and Trust
10500 Rockville Pike #501, Rockville, Maryland, 20852, 5.593%; and (4) Malvin
Stern and Karen Olsen 18 Bucks Meadow Lane, Newtown, Pennsylvania, 18940, 5.483%
(shares held jointly).
As of April 9, 1999, the Company's directors and officers, as a group, had
beneficial ownership of 11.215% of the shares of the Medical Sciences Fund,
11.241% of the shares of the Aggressive Growth Fund and less than 1% of the
Internet Fund.
INVESTMENT ADVISOR. Monument Advisors, located at 7920 Norfolk Avenue, Suite
500, Bethesda, Maryland 20814, is a wholly-owned subsidiary of The Monument
Group, Inc., which in turn is principally owned and controlled by David A.
Kugler, President of Advisors, and President of the Company. David A. Kugler is
an affiliate of the Company and Monument Advisors. Monument Advisors is a
recently organized company that also manages the portfolio investments of
qualified individuals, retirement plans, and trusts. As of January 31, 1999,
Advisors managed or supervised in excess of $20 million in assets.
Pursuant to the Advisory Agreement with the Company, Advisors receives a monthly
fee from each Fund. This fee is calculated as an annualized rate of 1.00% of the
monthly average net assets of each Fund through $50 million; 0.75% of the
monthly average net assets between $50 and $100 million; and 0.625% of the
monthly average net assets exceeding $100 million.
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 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.
PRINCIPAL UNDERWRITER. Monument Distributors, located at 7920 Norfolk Avenue,
Suite 500, Bethesda, Maryland 20814, is a wholly-owned subsidiary of The
Monument Group, Inc. Monument Advisors, and serves as the principal underwriter
of each Fund. David A. Kugler is an affiliate of the Company and Monument
Distributors.
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. On
October 27, 1997, the Distribution Agreement (dated November 27, 1997) was
approved as to each Fund by the Board of Directors. The Distribution Agreement
is in effect for two years from the date of its execution and will continue to
be in effect thereafter if approved 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. In either case, votes must be cast by a majority
of Board 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).
Votes must also be cast in person at a meeting called specifically 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 distributing the Company's shares,
including advertising expenses and the cost of printing sales materials and
prospectuses. 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 commission for the sale of
each Fund's shares (in the amount set forth, and as described, in the
Prospectus).
PLAN OF DISTRIBUTION. The Board of Directors has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1 Plan").
RULE 12b-1 PLAN. The Board of Directors, on behalf of the Medical Sciences Fund
and the Washington Regional Aggressive Growth Fund, unanimously approved a Plan
of Distribution pursuant to Rule 12b-1 ("Plan") on October 27, 1997. A Plan of
Distribution was approved on behalf of the Internet Fund on June 30, 1998.
Pursuant to these Distribution Plans, 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. The Board of Directors adopted the
Distribution Plan in hopes of increasing the sale of each Fund's shares lowering
overall Fund expenses through economies of scale. The Plan is in effect for an
initial one year period, and will remain in effect provided that the Board of
Directors (including a majority of Rule 12b-1 Directors described below)
approves its continuance by votes cast in person at an annual meeting called for
that purpose. 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 related agreements.
Pursuant to the Plan, each Fund may finance any activity or expense that is
intended primarily to result in the sale of 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: (1) compensation for expenses (including overhead and telephone
expenses) incurred by employees of Distributors who engage in the distribution
of the shares of each Fund; (2) printing and mailing of prospectuses, statements
of additional information, and periodic reports to prospective shareholders of
each Fund; (3) expenses relating to the development, preparation, printing, and
mailing of advertisements, sales literature, and other promotional materials
describing and/or relating to each Fund; (4) 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; (5)
expenses of holding seminars and sales meetings designed to promote the
distribution of the shares of each Fund; (6) expenses of obtaining information
and providing explanations to prospective shareholders of each Fund regarding
its investment objectives and policies and other information pertaining to it,
including its performance; (7) expenses of training sales personnel offering and
selling each Fund's shares; and (8) expenses of personal services and/or
maintenance of shareholder accounts with respect to the shares of each Fund.
A majority of Rule 12b-1 Directors must approve material amendments 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. With respect to each individual, the Plan may be terminated at any
time by a majority of Rule 12b-1 Directors or by a majority of the outstanding
voting securities of that Fund.
CUSTODIAN, ACCOUNTING AGENT AND TRANSFER AGENT. Star Bank, N.A. located at 425
Walnut Street, Cincinnati, Ohio 45202, Star Bank, N.A. acts as custodian of the
assets of each Fund, including securities and 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. Commonwealth Fund
Accounting, Inc., 1500 Forest Avenue, Suite 111, Richmond, VA 23229, serves as
an investment accounting agent for each Fund's portfolio securities and other
assets. Fund Services, Inc., 1500 Forest Avenue, Suite 111, Richmond, VA 23229,
serves as the transfer agent and dividend dispersing agent for each Fund.
FUND ADMINISTRATION. Pursuant to an Administrative Services Agreement with the
Company dated October 20, 1998 (the "Administrative Agreement"), Commonwealth
Shareholder Services, Inc. ("CSS"), 1500 Forest Avenue, Suite 223, Richmond,
Virginia 23229 serves as administrator of the Fund and supervises all aspects of
the operation of the Fund except those performed by the Investment Advisor.
CSS
provides certain administrative services and facilities for the Fund, including
preparing and maintaining certain books, records, and monitoring compliance with
state and federal regulatory requirements. As administrator, CSS receives an
assets-based administrative fee, computed daily and paid monthly, at the annual
rate of 0.20% subject to a minimum amount of $18,000 per year for a period of
two years from the date of the Administrative Agreement. CSS receives an hourly
rate, plus certain out-of-pocket expenses, for shareholder servicing and state
securities law matters.
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.
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 extent of the security market, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of any commission.
In the allocation of brokerage business used to purchase securities for a Fund,
Advisors may give preference to those broker-dealers who provide brokerage,
research, or other services to Advisors as long as there is no sacrifice in
obtaining best execution. Such services may include the following: (1) 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); (2) analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio
strategy, and performance of accounts; and (3) various functions incidental to
effecting securities transactions, such as clearance and settlement. Research
generated by broker-dealers who execute transactions on behalf of the Company
may be useful to Advisors in rendering investment management services to other
clients (including affiliates of Advisors). 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 may be used by Advisors in providing investment
advice to all its clients (including affiliates of Advisors), not all of it 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 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. The next advisory fee payable to Advisors will be reduced
by the cash amount received by Advisors, less any costs and expenses incurred in
connection with the tender. Securities of the same issuer may be purchased,
held, or sold at the same time by the Company for any 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,
Advisors 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 customers,
including the Company. In some instances, this procedure may impact the price
and size of the position obtainable for the Company.
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, may also 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.
FURTHER DESCRIPTION OF THE COMPANY'S SHARES
VOTING RIGHTS. According to the Company's By-Laws, and under Maryland law, an
annual shareholder meeting need not be held in any year in which Directors must
be elected (as dictated by the 1940 Act). On any matter submitted to the
shareholders, each shareholder is entitled to one vote per share (with
proportionate voting for fractional shares) regardless of the relative NAV of
the Fund's shares. On matters affecting one Fund differently from the another
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. In other words, holders of more
than 50% of the shares elect 100% of the Board of Directors, while the holders
of less than 50% of the shares may not elect any person as a Director.
Shareholders of a particular Fund may have the power to elect all of the
Company's Directors if 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
determines. This may occur daily, or with such frequency as the Board of
Directors determines by resolution. Dividends and distributions may be paid to
shareholders of a particular Fund from the income and capital gains, accrued or
realized, attributable to the assets belonging to that Fund, after the Board of
Directors provides for the Fund's actual and accrued liabilities. All dividends
and distributions on shares of a particular series or class will be distributed
pro rata to the shareholders in proportion to the number of shares held by them
on 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 shareholders of Fund through 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) any of a Fund's assets that are in excess of its liabilities. The
shareholders of one Fund will therefore not be entitled to any distribution upon
liquidation of another Fund. The assets distributed to the shareholders of a
Fund will be in proportion to the number of shares of that Fund held by each
shareholder as recorded on the Company books. The liquidation of any particular
Fund in which there are outstanding shares 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, non-assessable, have no pre-emptive or subscription rights, and
are fully transferable (the Board of Directors may, however, 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 allow a shareholder the option
of exchanging his or her shares for shares of the another Fund in accordance
with such requirements and procedures as the Board of Directors may establish.
BUYING, REDEEMING, AND EXCHANGING SHARES
ADDITIONAL INFORMATION ON BUYING SHARES. The Company currently offers shares of
the Funds through advertisements and mailings. In the future, shares will be
offered on 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. Brokers through which you buy shares may
designate intermediaries to accept orders on behalf of the Funds.
REINVESTMENT DATE. Fund shares acquired through the reinvestment of dividends
will be purchased at the Fund's net asset value, as 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, will pay in cash (by check) all requests for redemption by
any shareholder of record of a Fund. The amount is limited, 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. If redemption requests exceed these
amounts, the Board of Directors reserves the right to make payments in whole or
in part using securities or other assets of a Fund (if there is an emergency, or
if a cash payment 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 as
a result of 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.
ADDITIONAL INFORMATION ON EXCHANGING SHARES. If you request the exchange of the
total value of your account from one Fund to another, we will reinvest any
declared but unpaid income dividends and capital gain distributions in the new
Fund at its 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 sell their shares of a Fund under the
exchange privilege, within a short period, the Fund may have to sell portfolio
securities that it would otherwise have held, thus incurring additional
transactional costs. Increased use of the exchange privilege may also result in
periodic large inflows of money. If this occurs, it is each Fund's general
policy to initially invest 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 also delay issuing shares 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 per sons 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.
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.
VALUATION OF FUND SHARES
For the purpose of determining the aggregate net assets of a Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System (for
which market quotations are readily available) are valued at the last quoted
sale price of the day, or if there is no such reported sale, at the mean between
the closing bid and asked prices on that day. Over-the-counter portfolio
securities (other than securities reported on the NASDAQ National Market System)
are valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Portfolio securities that are
traded both on 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.
In most cases, 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 values used in computing the net asset
value of each Fund is determined as of those times. Occasionally, events which
affect the values of these securities occur between the times they are
determined and the scheduled close of the Exchange and are therefore not
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.
Securities for which market quotations are readily available are valued at the
current market price, which may be obtained from a pricing service. In this
case, the security's is based on a variety of factors including recent trades,
institutional size trading in similar types of securities (considering yield,
risk, and maturity) and/or developments related to specific issues. Securities
and other assets for which market prices are not readily available are valued at
fair value as determined by procedures approved by the Board of Directors. With
the Board's approval, 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 in the form of dividends,
interest, and other investment-derived income. The total income, less
expenses incurred in the Fund's operation, 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 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 be made annually in December, and reflect any net
short-term and net long-term capital gains realized by the Fund as of October
31 of the current fiscal year as well as any undistributed capital gains from
the prior fiscal year. Each Fund may make more than one capital gain
distribution in any year or adjust the timing of these distributions for
operational or other reasons.
TAXES. Tax Status of the Funds. Each Fund intends to be taxed as a regulated
investment company under Subchapter M of the Code. Accordingly, each Fund must,
among other things, (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to certain securities
loans, and gains from the sale or other disposition of stock, securities or
foreign currencies, or other income derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
value of the Fund's total assets is represented by cash and cash items, U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the value of the Fund's total assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its total assets is invested in the securities of any
one issuer (other than U.S. Government securities and the securities of other
regulated investment companies).
As a regulated investment company, a Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if
at least 90% of the Fund's investment company taxable income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses) for the taxable year is
distributed. Each Fund intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, a Fund must distribute during each calendar year
an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending on October 31 of
the calendar year, and (3) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, each Fund intends to make distributions in accordance with the
calendar year distribution requirement.
A distribution will be treated as paid on December 31 of a calendar year if it
is declared by a Fund in October, November or December of that year with a
record date in such a month and paid by the Fund during January of the following
year. Such a distribution will be taxable to shareholders in the calendar year
in which the distribution is declared, rather than the calendar year in which it
is received.
Distributions. Distributions of investment company taxable income are taxable to
a U.S. shareholder as ordinary income, whether paid in cash or shares. Dividends
paid by a Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received by the Fund from U.S. corporations, may,
subject to limitation, be eligible for the dividends received deduction.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
The excess of net long-term capital gains over net short-term capital losses
realized, distributed and properly designated by a Fund, whether paid in cash or
reinvested in Fund shares, will generally be taxable to shareholders as
long-term gain, regardless of how long a shareholder has held Fund shares. Net
capital gains from assets held for one year or less will be taxed as ordinary
income.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by a Fund, such distribution generally will be taxable
even though it represents a return of invested capital. Investors should be
careful to consider the tax implications of buying shares of a Fund just prior
to a distribution. The price of shares purchased at this time will include the
amount of the forthcoming distribution, but the distribution will generally be
taxable to the shareholder.
Dispositions. Upon a redemption, sale or exchange of shares of a Fund, a
shareholder will realize a taxable gain or loss depending upon his or her basis
in the shares. A gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder's hands, and the rate of tax will
depend upon the shareholder's holding period for the shares. Any loss realized
on a redemption, sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of dividends) within a
period of 61 days, beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case the basis of the shares acquired will be
adjusted to reflect the disallowed loss. If a shareholder holds Fund shares for
six months or less and during that period receives a distribution taxable to the
shareholder as long-term capital gain, any loss realized on the sale of such
shares during such six-month period would be a long-term loss to the extent of
such distribution.
If, within 90 days after purchasing Fund shares with a sales charge, a
shareholder exchanges the shares and acquires new shares at a reduced (or
without any) sales charge pursuant to a right acquired with the original shares,
then the shareholder may not take the original sales charge into account in
determining the shareholder's gain or loss on the disposition of the shares.
Gain or loss will generally be determined by excluding all or a portion of the
sales charge from the shareholder's tax basis in the exchanged shares, and the
amount excluded will be treated as an amount paid for the new shares.
Backup Withholding. A Fund generally will be required to withhold federal income
tax at a rate of 31% ("backup withholding") from dividends paid (other than
exempt-interest dividends), capital gain distributions, and redemption proceeds
to shareholders if (1) the shareholder fails to furnish the Fund with the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the shareholder or the Fund that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Any amounts withheld may be credited against the shareholder's
federal income tax liability.
Other Taxation. Distributions may be subject to additional state, local and
foreign taxes, depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above, including the likelihood that ordinary income dividends
to them would be subject to withholding of U.S. tax at a rate of 30% (or a lower
treaty rate, if applicable).
Options, Futures and Forward Contracts. Any regulated futures contracts and
certain options (namely, nonequity options and dealer equity options) in which a
Fund may invest may be "section 1256 contracts." Gains (or losses) on these
contracts generally are considered to be 60% long-term and 40% short-term
capital gains or losses. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and on certain other dates prescribed in the Code) are
"marked to market" with the result that unrealized gains or losses are treated
as though they were realized.
Transactions in options, futures and forward contracts undertaken by a Fund may
result in "straddles" for federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by a Fund, and losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized. In
addition, certain carrying charges (including interest expense) associated with
positions in a straddle may be required to be capitalized rather than deducted
currently. Certain elections that a Fund may make with respect to its straddle
positions may also affect the amount, character and timing of the recognition of
gains or losses from the affected positions.
Because only a few regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to a Fund are not entirely
clear. The straddle rules may increase the amount of short-term capital gain
realized by a Fund, which is taxed as ordinary income when distributed to
shareholders. Because application of the straddle rules may affect the character
of gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.
Constructive Sales. Under certain circumstances, a Fund may recognize gain from
a constructive sale of an "appreciated financial position" it holds if it enters
into a short sale, forward contract or other transaction that substantially
reduces the risk of loss with respect to the appreciated position. In that
event, the Fund would be treated as if it had sold and immediately repurchased
the property and would be taxed on any gain (but not loss) from the constructive
sale. The character of gain from a constructive sale would depend upon the
Fund's holding period in the property. Loss from a constructive sale would be
recognized when the property was subsequently disposed of, and its character
would depend on the Fund's holding period and the application of various loss
deferral provisions of the Code. Constructive sale treatment does not apply to
transactions closed in the 90-day period ending with the 30th day after the
close of the taxable year, if certain conditions are met.
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(l+T) = ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment
made at the beginning of the one-, five-, ten-year or shorter
period shown
Average annual total return calculations reflect the deduction of a 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 do not reflect the deduction for the Rule 12b-1 fee
until such charge is actually assessed. Each Fund may also show average annual
total return calculations.
CUMULATIVE TOTAL RETURN. Each Fund may also quote its cumulative total return in
advertisements and sales literature. Each Fund computes cumulative total return
in a manner similar to that used 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. The Funds calculate cumulative total
return 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 also reflect the deduction of a 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 do 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 performance to that of
other investments, indices, performance rankings, averages and other information
prepared by recognized mutual fund statistical services. 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.
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.
FINANCIAL INFORMATION
Financial Highlights, Statements and Reports of Independent Accountants. You can
receive free copies of reports, request other information and discuss your
questions about the Funds by contacting the Funds directly at:
The Monument Funds Group, Inc.
7920 Norfolk Avenue, Suite 500
Bethesda, Maryland 20814
The books of each Fund will be audited at least once each year by Deloitte &
Touche LLP, of Princeton, New Jersey.
The Fund's audited financial statements and notes thereto for the year ended
October 31, 1998 and the unqualified report of Deloitte & Touche LLP, on such
financial statements (the "Report") are incorporated by reference in this SAI
and are included in the Fund's 1998 annual report to shareholders (the "Annual
Report"). A copy of the Annual Report accompanies this SAI and an investor may
obtain a copy of the Annual Report free of charge by writing to the Fund or
calling (888) 520-8637.
