[MONUMENT FUNDS GROUP, INC. LOGO]
MONUMENT SERIES FUND, INC.
MONUMENT INTERNET FUND
MONUMENT MEDICAL SCIENCES FUND
MONUMENT TELECOMMUNICATIONS FUND
Prospectus dated October 1, 1999, revised as of February 9, 2000
This Prospectus describes the Monument Internet Fund, Monument Medical
Sciences Fund and the Monument Telecommunications Fund (each, a "Fund";
collectively, the "Funds"). Each Fund represents a separate series of common
stock of the Monument Series Fund, Inc. (the "Company"). Each series offers
three classes of shares: Class A Shares with a front-end sales charge, Class B
Shares subject to a contingent deferred sales charge, and Class Y Shares for
certain institutional investors. Class A Shares and Class B Shares are offered
by this prospectus. Class Y Shares are offered pursuant to a separate
prospectus, which may be obtained by contacting Monument Series Fund, Inc.
(See "Buying Fund Shares.")
Monument Internet Fund seeks to maximize long-term appreciation of capital
by investing primarily in a nondiversified portfolio of Internet company equity
securities.
Monument Medical Sciences Fund seeks to maximize long-term appreciation of
capital by investing primarily in a nondiversified portfolio of equity
securities of medical sciences companies.
Monument Telecommunications Fund seeks to maximize long-term appreciation
of capital by investing primarily in a nondiversified portfolio of equity
securities of telecommunications companies.
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.
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TABLE OF CONTENTS
The Funds
Investment Objectives
Principal Investment Strategies
Temporary Defensive Positions
Specific Risk Considerations
General Risk Considerations
Table of Fees and Expenses
The Company
Shareholder Information
Buying Fund Shares
Distribution Arrangements
Redeeming Fund Shares
Exchanging Fund Shares
Dividends and Distributions
Tax Considerations
Services To Help You Manage Your Account
Proper Form
Share Certificates
Retirement Plan Accounts
Financial Highlights Information
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THE FUNDS
The following discussion describes the investment objectives, principal
strategies and risks of each Fund. Investment objectives are fundamental
policies and cannot be changed without the approval of a majority of the
relevant Fund's outstanding shares. As with any mutual fund, there can be no
guarantee that investment objectives will be met.
Investment Objectives
Monument Internet Fund. The Internet Fund's investment objective is to
maximize long-term appreciation of capital.
Monument 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 Telecommunications Fund (formerly Monument Washington Aggressive
Growth Fund). The Telecommunications 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 circumstances, 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,
manufacture, 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 of each of the Funds ("Advisors") 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, 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, Advisors 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.
Telecommunications Fund. The Fund seeks to achieve its objective by
investing, under normal circumstances, at least 80% of its total assets in
equity securities of companies engaged in virtually all aspects of
communications services and technologies. These companies may provide network
systems and equipment; serve as public and private carriers, whether land-based,
wireless or satellite, or provide or distribute value-added services or
products.
When selecting investments for the Telecommunications Fund, Advisors will
seek to identify telecommunication companies that it believes are developing 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 or revenue or earnings at the time of purchase. Dividend
income, if any, is likely to be incidental.
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. The Funds may also engage in
transactions that are not part of their principal investment strategies, such as
trading in derivatives, including options, and lending portfolio securities.
These strategies are discussed in the SAI.
SPECIFIC RISK CONSIDERATIONS
Internet Fund. The Internet Fund invests primarily in companies engaged in
Internet and Intranet-related activities. The value of this type of company is
particularly vulnerable to rapidly changing technology, extensive government
regulation and relatively high risks of obsolescence caused by scientific and
technological advances. Therefore, the Internet Fund may experience greater
volatility than funds not subject to these types of risks. 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 economic prospects of health sciences companies
can dramatically fluctuate due to changes in the regulatory and competitive
environment in which these companies operate. A substantial portion of health
services and research is 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."
Telecommunications Fund. The economic prospects of telecommunications
companies can dramatically fluctuate due to regulatory and competitive
environment changes around the world. Most products or services provided by
telecommunications companies require substantial investment and are subject to
competitive obsolescence. Telecommunications companies are particularly subject
to political and currency risks. The Telecommunications Fund is nondiversified,
and may also invest in small 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 Internet, Medical
Sciences, and Telecommunications Fund shares to be more volatile than the shares
of mutual fund investing 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.
Nondiversification; Industry Concentration. The Funds are nondiversified
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. In addition, each Fund may invest more than 25% of
its assets in what may be considered a single industry sector. Accordingly, each
Fund may be more susceptible to the effects of adverse economic, political or
regulatory developments affecting a single issuer or industry sector than funds
that diversify to a greater extent.
Nonprincipal Investment Strategies. Investments in derivatives, such as
options, can significantly increase a Fund's exposure to market risk or credit
risk of the counterparty, as well as improper valuation and imperfect
correlation. The risk in lending portfolio securities, as with other extensions
of secured credit, consist of possible delay in receiving additional collateral,
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
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) Class Class
A B
Maximum Sales Charge (Load)1 5.75% None
Maximum Deferred Sales Charge (Load) None 5.00%2
Maximum Sales Charge (Load) Imposed on Reinvested None 5.00%2
Dividends and Distributions
Redemption Fees None None
Exchange Fees None None
Annual Fund Operating Expenses (expenses that are deducted from fund assets as a
percentage of average net assets)
Medical Telecommunications
Internet Sciences Fund
Fund Fund
----------------------------------------
----------------------------------------
Class Class Class Class Class A Class
A B A B B
Advisory Fee 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.50% 1.00% 0.50% 1.00% 0.50% 1.00%
Other Expenses 1.34% 0.40% 15.31%15.43%35.65% 35.15%
Total Annual Fund Operating 2.84% 2.40% 16.81%17.43%37.15% 37.15%
Expenses
Fee Waivers and/or Expense --- --- 14.91%15.03%35.25% 34.75%
Reimbursements
Net Expenses 2.84% 2.40% 1.90% 2.40% 1.90% 2.40%
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 A 5.00% deferred sales charge (as a percentage of the original purchase price
or redemption price, whichever is lower) will apply to any redemptions made
within the first year. During the second year, redeemed shares will incur a
4.00% sales charge. During years three and four you will pay 3.00%, during year
five 2.00%, and during year six 1.00%. The contingent deferred sales charge is
eliminated after the sixth year.
The Company has approved a Plan of Distribution Pursuant to Rule 12b-1 of
the 1940 Act, providing for the payment of distribution fees to Monument
Distributors, Inc., the principal underwriter for each Fund ("12b-1 Plan). Class
A Shares pay a maximum distribution fee of 0.50% of average daily net assets,
and Class B Shares pay a maximum distribution fee of 1.00% of average daily net
assets. See "Rule 12b-1 Fees." The higher 12b-1 fees borne by Class B Shares may
cause long-term investors to pay more than the economic equivalent of the
maximum front end sales charge permitted by the National Association of
Securities Dealers.
With respect to the Medical Sciences and Telecommunications Funds, the
Advisor has contractually agreed to waive its fees and pay expenses to the
extent necessary to cap Class A Share total operating expenses at 1.90%, and
Class B Share total operating expenses at 2.40% of the Fund's average daily net
assets until May 1, 2001.
Example. This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds with
similar investment objectives. The example assumes that you invest $10,000 in a
class of shares of the 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 operating expenses of the
relevant class remain the same. Although your actual cost may be higher or
lower, based on these assumptions your cost would be:
Medical Telecommunications
Internet Sciences Fund
Fund Fund
----------------------------------------
----------------------------------------
Class Class Class Class Class A Class
A B A B B
1 Year* $ 846 $ 743 $ 757 $ 743 $ 757 $ 743
3 Years 1,404 1,048 3,021 2,882 4,954 4,875
5 Years 1,988 1,481 5,493 5,446 8,004 7,958
10 Years 3,559 2,736 9,529 9,609 10,233 10,246
With respect to Class A Shares, the above examples assume payment of the
maximum initial sales charge of 5.75% 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. With respect to Class B Shares, the
above examples assume payment of the deferred sales charge applicable at the
time of redemption. The ten-year figure takes into account the shares'
conversion to Class A Shares after eight years. For time periods during which
the contractual agreement to waive or reimburse fees is in place, your actual
expenses may be lower.
* The Medical Sciences Fund and Telecommunications Fund costs shown for the
first year reflect the cap imposed by the expense limitation agreement.
Should the advisor continue this contractual agreement for the periods shown
below, your cost would be:
Medical Telecommunications
Sciences Fund
Fund
--------------------------
--------------------------
Class Class Class Class
A B A B
3 Years $1,138 $1,048 $1,138 $1,048
5 Years 1,542 1,481 1,542 1,481
10 Years 2,669 2,736 2,669 2,736
THE COMPANY
The Company. Monument Series Fund, Inc. is a Maryland corporation that
was organized on April 7, 1997. It is registered with the SEC as an open-end
management investment company.
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 Statement of Additional Information ("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 and a
director of both Advisors and the Company. Monument Advisors also manages the
portfolio investments of qualified individuals, retirement plans, and trusts. As
of December 31, 1999, Advisors managed or supervised in excess of $190 million
in assets.
In the interest of limiting expenses of the Medical Sciences and
Telecommunications 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 for Class A and B shares of the Funds
covered by the agreement are limited to 1.90% and 2.40%, respectively. The limit
does not apply to interest, taxes, brokerage commissions, other expenditures
capitalized in accordance with generally accepted accounting principles or other
extraordinary expenses not incurred in the ordinary course of business.
Portfolio Managers. Alexander C. Cheung, CFA, serves as the portfolio
manager for the Internet and Medical Sciences Fund. Mr. Cheung has nine years
of 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.
J. Michael Gallipo, CFA, serves as the portfolio manager of the
Telecommunications Fund. Mr. Gallipo has over four years of investment
experience and joined Advisors in August 1999. Prior to joining Advisors, Mr.
Gallipo was an investment analyst at Van Eck Associates Corp. Mr. Gallipo
also served previously as a compliance analyst for Van Eck and as a legal
assistant for Brown & Wood, LLP.
SHAREHOLDER INFORMATION
Principal Underwriter. Monument Distributors, Inc., 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 Class Alternatives. The Fund offers investors three different
classes of shares. Class A Shares and Class B Shares are offered by this
Prospectus. Class Y Shares are offered by a separate Prospectus. The different
classes of shares represent investments in the same portfolio of securities, but
the classes are subject to different expenses and may have different share
prices. When you buy shares be sure to specify the class of shares in which you
choose to invest. If you do not select a class your money will be invested in
Class A Shares. Because each share class has a different combination of sales
charges, expenses and other features, you should consult your financial advisor
to determine which class best meets your financial objectives. Additional
details about each of the share class alternatives may be found below under
"Distribution Arrangements."
Class A Shares. If you choose to purchase Class A Shares you will pay an
initial sales charge, which will be deducted from the amount you invest.
Class B Shares. If you choose to purchase Class B Shares you will not pay
a sales charge at the time of purchase. However, if you sell your shares within
six years of purchasing them, you will pay a maximum of 5.00% of the redemption
price as a contingent deferred sales charge ("CDSC") according to the schedule
that appears below under "Distribution Arrangements." Class B Shares
automatically convert to Class A Shares eight years after purchase. For
additional information about Class B Share conversions, see "Conversion of Class
B Shares" in the SAI.
Share Transactions. You may 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 1500 Forest
Avenue, Suite 111, Richmond, VA 23229 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 following table provides you with information on
the various investment minimums, sales charges and expenses that apply to each
class. 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 as detailed below under "Waiver of Sales Charges."
Class A Class B
--------------- ----------------
--------------- ----------------
Minimum Initial Investment $1,000 $1,000
Minimum Subsequent Investment $250* $250*
Initial Sales Charge Maximum 5.75% None
with options
for a
reduction or
waiver
CDSC None Maximum 5.00%,
declining over
6 years
Distribution Fee Maximum 0.50% Maximum 1.00%
of Fund's of Fund's
daily net daily net
assets assets
* For automatic investments made at least quarterly, the minimum subsequent
investment is $100.
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 1500 Forest Avenue, Suite
111, Richmond, VA 23229. 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
Fund Services, Inc., 1500 Forest Avenue, Suite 111, Richmond, VA 23229.
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." The
public offering price of Class A Shares is equal to the Fund's net asset value
plus the initial sales charge. The public offering price of Class B Shares is
equal to the respective Fund's net asset value.
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
Class A Shares. Class A Shares are sold at their public offering price,
which is normally the shares NAV plus an initial sales charge. However, if the
cumulative dollar amount of the shares you purchase exceed a certain level, the
initial sales charge may be reduced, as the chart below shows.
Class A Distribution Schedule
Sales Charge Dealer Percentage
Less than $50,000 5.75% 5.00%
$50,000 but less than $100,000 4.50% 3.75%
$100,000 but less than $250,000 3.50% 2.75%
$250,000 but less than $500,000 2.50% 2.00%
$500,000 but less than $1,000,000 2.00% 1.75%
$1,000,000 or more 1.00% 1.00%
After a one-year holding period, broker-dealers will be entitled to receive an
ongoing service fee of 0.25%, payable quarterly.
Class B Shares. Class B Shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
six years of their purchase, you will be subject to a contingent deferred sales
charge ("CDSC"). The CDSC will be based on the lesser of the net asset value of
the redeemed shares at the time of redemption or the original net asset value.
The CDSC is not imposed on the amount of your account value represented by an
increase in net asset value over the initial purchase price. The CDSC is paid to
the Distributor to compensate it for providing distribution-related services to
the Fund in connection with the sale of Class B Shares. The amount of the CDSC
will depend on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
- ------------------------------------------------------------------------
Years after Purchase 1 2 3 4 5 6 7+
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%
- ------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the sales charge,
all purchases are considered made on the first regular business day of the month
in which the purchase was made. In certain instances the CDSC will not apply to
redemptions. For additional information see "Waiver of Contingent Deferred Sales
Charge" in the SAI.
Although purchasers of Class B Shares do not pay an initial sales charge,
dealers executing these transactions receive commissions according to the
schedule below. 12b-1 fees paid by Class B shareholders offset these
commissions. See "TABLE OF FEES AND EXPENSES".
Class B Distribution Schedule
Dealer Percentage
Up to $250,000 4.00%
After a one-year holding period, broker-dealers will be entitled to receive an
ongoing service fee of 0.25%, payable quarterly.
Rule 12-B 1 Fees. The Board of Directors has adopted a Plan of
Distribution pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1 Plan") for
Class A and Class B Shares. Pursuant to the Rule 12b-1 Plans, each Fund may
finance any activity or expense that is intended primarily to result in the sale
of its shares. Each Fund may pay a fee ("Rule 12b-1 fee") to Distributors, on an
annualized basis of its average daily net assets, up to a maximum of 1.00% for
Class B Shares expenses and 0.50% for Class A Shares expenses. Up to 0.25% of
the total Rule 12b-1 fee may be used to pay for certain shareholder services
provided by institutions that have agreements with the Funds' distributor to
provide those services. The Company may pay Rule 12b-1 fees for activities and
expenses borne in the past in connection with the distribution of its shares as
to which no Rule 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. After making an initial purchase in any Monument
Fund series, you may reduce the sales charge applied to any subsequent
purchases. 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 Front-End 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 a
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) institutional 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.
Waiver Of Contingent Deferred Sales Charge. The contingent deferred sales
charge is waived for:
(1) certain post-retirement withdrawals from an IRA or other retirement plan
if you are over 70 1/2;
(2) redemptions by certain eligible 401 (a) and 401(k) plans and certain
retirement plan rollovers;
(3) withdrawals resulting from shareholder death or disability provided that
the redemption is requested within one year of death or disability; and
(4) withdrawals through Systematic Monthly Investment (systematic withdrawal
plan).
Class B shareholders may exchange their Class B shares ("outstanding Class B
shares") for Class B Shares of another Fund ("new Class B shares") on the basis
of the relative net asset value per Class B Share, without the payment of any
CDSC that would otherwise be due upon the redemption of the outstanding Class B
Shares. Class B shareholders of the Fund exercising the exchange privilege will
continue to be subject to the Fund's CDSC schedule (or period) following an
exchange if such schedule is higher (or such period is longer) than the CDSC
schedule (or period) applicable to the new Class B Shares. For purposes of both
the conversion feature and computing the CDSC that may be payable upon the
redemption of the new Class B shares (prior to conversion), the holding period
of the outstanding Class B Shares is "tacked" onto the holding period of the new
Class B Shares. For the CDSC schedule see "Distribution Arrangements" in the
Prospectus.
Additional information regarding the waiver of sales charges 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 1500 Forest Avenue, Suite 111, Richmond, VA
23229, 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.
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, a 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 a 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, less any applicable CDSC.
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 Telecommunications 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 pays "interest" or guarantees any
fixed rate of return on an investment in its 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 the transfer agent by mail at 1500 Forest Avenue, Suite 111,
Richmond, VA, 23229.Please allow at least seven days prior to the record date
for us to process the new option.
TAX CONSIDERATIONS
The Funds. Each Fund intends to qualify for special tax treatment afforded
to regulated investment companies under the Code. To establish and continue its
qualification, each Fund intends to diversify its assets as the Code requires.
Each Fund also intends to distribute substantially all of its net investment
income and capital gains to its shareholders to avoid federal income tax on the
income and gains so distributed.
Shareholders. For federal income tax purposes, any income dividend that
you receive from the Funds, as well as any net short term capital gain
distribution, is generally taxable to you as ordinary income whether you have
elected to receive it in cash or in additional shares.
Distributions of net long-term capital gains are generally taxable to you
as long-term capital gains, regardless of how long you have owned your Fund
shares and regardless of whether you have elected to receive such distributions
in cash or in additional shares.
Dividends and certain interest income earned from foreign securities by
the Fund may be subject to foreign withholding or other taxes. The Fund may be
permitted to pass on to its shareholders the right to a credit or deduction for
income or other tax credits earned from foreign investments and will do so if
possible. These deductions or credits may be subject to tax law limitations.
Generally, distributions are taxable to you for the year in which they are paid.
In addition, certain distributions that are declared and payable in October,
November or December, but which, for operational purposes, are paid the
following January, are taxable as though they were paid by December 31st of the
year in which they are declared.
Redemptions and exchanges of Fund shares are taxable events on which you
may realize a gain or loss.
Tax Information. The Funds will advise you promptly, after the close of
each calendar year, of the tax status for federal income tax purposes of all
income dividends and capital gain distributions paid for such year.
The foregoing is only a general discussion of applicable federal income
tax provisions. For further information, see "Additional Information on
Distributions and Taxes" in the SAI. You should consult with your tax advisor
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 advisor.
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 the
transfer agent by mail.
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:
o your name,
o the Fund's name,
o a description of the request,
o for exchanges, the name of the Fund into which you are exchanging,
o your account number, - the dollar amount or number of shares, and
o your daytime or evening telephone number.
Signature Guarantees. For our mutual protection, we require a signature
guarantee in the following situations:
o if you wish to redeem over $50,000 worth of shares,
o if you want redemption proceeds to be paid to someone other than the
registered owners,
o 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,
o if we receive instructions from an agent, not the registered owners, or
o 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,
1999. 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 for each of the Funds. The report of
Deloitte & Touche LLP on the financial statements of each of the Funds appears
in the Company's Annual Report, which is incorporated by reference into the SAI
and is available upon request. The information that follows should be read in
conjunction with the financial statements contained in the Company's annual
report.
MONUMENT MEDICAL SCIENCES FUND
Financial Highlights
For a Share Outstanding Throughout The Period
- ------------------------------------------------------------------------------
Class A Shares Class B Shares
Year ended Period ended Period ended
October 31, October 31, October 31, *
1999 1998* 1999
------------- ---------------------------
Per Share Operating
Performance
Net asset value, $10.32 $10.00 $16.95
beginning of period
------------- ----------- -------------
Income from investment
operations-
Net investment (0.10) 0.04 (0.01)
income (loss)
Net realized and
unrealized
gain on investments 5.89 0.28 (0.83)
------------- ----------- -------------
Total from investment 5.79 0.32 (0.84)
operations
------------- ----------- -------------
Net asset value, end of $16.11 $10.32 $16.11
period
============= =========== =============
Total Return 56.11% 3.20% *** (4.98%) **
Ratios/Supplemental Data
Net assets, end of $1,401 $214 $25
period (000's)
Ratio to average net
assets-
Expenses 16.73% 51.07% ** 17.43% **
Expenses including 16.81% 17.43% **
soft dollars
Expenses-net 1.87% 0.00% 2.40% **
Net investment income (1.00%) 0.66% ** (1.51%) **
(loss)
Portfolio turnover rate 61.00% 82.00% 61.00%
* Commencement of operations January 6, 1998 for Class A shares and October
12,1999 for Class B shares.
** Annualized
***Not annualized
Average shares method used to calculate the financial highlights for Class B
shares.
MONUMENT TELECOMMUNICATIONS FUND
Financial Highlights
For a Share Outstanding Throughout The Period
- -------------------------------------------------------------------------
Class A Share Class B Share
Year ended Period ended Period ended
October 31, October 31, October 31, *
1999 1998* 1999
------------- --------------------------
Per Share Operating
Performance
Net asset value,
beginning of period $10.78 $10.00 $17.65
------------- ----------- -------------
Income from investment
operations-
Net investment income (0.14) 0.04 (0.02)
(loss)
Net realized and
unrealized
gain on investments 9.33 0.74 2.34
------------- ----------- -------------
Total from investment 9.19 0.78 2.32
operations
------------- ----------- -------------
Net asset value, end of $19.97 $10.78 $19.97
period
============= =========== =============
Total Return 85.24% 7.80% ** 13.17% ***
Ratios/Supplemental Data
Net assets, end of $593 $181 $65
period (000's)
Ratio to average net
assets-
Expenses 37.06% 58.25% ** 37.15% **
Expenses including 37.15% 58.25% ** 37.15% **
soft dollars
Expenses-net 1.84% 0.00% 2.40% **
Net investment income (1.40%) 0.70% ** (1.95%) **
(loss)
Portfolio turnover rate 250.00% 88.00% 250.00%
* Commencement of operations January 6, 1998 for Class A shares and October 9,
1999 for Class B shares.
** Annualized
***Not annualized
Average shares method used to calculate the financial highlights for Class B
shares.
MONUMENT INTERNET FUND
Financial Highlights
For a Share Outstanding Throughout The Period
- -------------------------------------------------------------------
Class A Class B
Shares Shares
Period Period
ended ended
October * October *
31, 1999 31, 1999
------------ ------------
Per Share Operating
Performance
Net asset value,
beginning of period $10.00 $27.09
------------ ------------
Income from investment
operations-
Net investment income (0.58) (0.06)
(loss)
Net realized and
unrealized
gain on investments 20.56 2.92
------------ ------------
Total from investment 19.98 2.86
operations
------------ ------------
Net asset value, end of $29.98 $29.95
period
============ ============
Total Return 185.53% *** 10.55% ***
Ratios/Supplemental Data
Net assets, end of $63,745 $1,552
period (000's)
Ratio to average net
assets
Expenses 2.76% ** 2.40% **
Expenses including 2.84% ** 2.40% **
soft dollars
Net investment gain (2.45%) ** (3.23%) **
(loss)
Portfolio turnover rate 112.00%*** 112.00% ***
*Commencement of operations November 16, 1998 for A shares and October 6, 1999
for B shares.
** Annualized
***Not annualized
Average shares method used to calculate the financial highlights for Class A and
B shares.
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
view that information free of charge at the SEC's public reference room in
Washington, D.C., and you may, with payment of a duplicating fee, order copies
of the information.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL FUND SHARES IN ANY STATE OR
JURISDICTION IN WHICH THE FUNDS ARE NOT AUTHORIZED TO CONDUCT BUSINESS. 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 October 1, 1999 (revised as
of February 7, 2000), and the Company's audited annual and unaudited semi-annual
report, each of which is on file with the Securities and Exchange Commission
("SEC") and incorporated by reference into this Prospectus. You can obtain a
free copy of the SAI by writing to Monument Series Fund, Inc., 7920 Norfolk
Avenue, Suite 500 Bethesda, Maryland 20814, or by calling 202-942-8090. General
inquiries regarding the Funds may also be directed to the above address or
telephone number, and may be found on the Company's website at
http://www.monumentfunds.com. 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 202-942-8090. 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.
[Legend]
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL FUND SHARES IN ANY STATE OR
JURISDICTION IN WHICH THE FUNDS ARE NOT AUTHORIZED TO CONDUCT BUSINESS. 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.
MONUMENT SERIES FUND, INC.
MONUMENT INTERNET FUND
MONUMENT MEDICAL SCIENCES FUND
MONUMENT TELECOMMUNICATIONS FUND
STATEMENT OF ADDITIONAL INFORMATION DATED October 1, 1999
REVISED AS OF February 9, 2000
This Statement of Additional Information ("SAI") is not a Prospectus. It
contains additional information that you should read in conjunction with the
prospectus, dated October 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, Inc. 7920 Norfo1k
Avenue, Suite 500, Bethesda, Maryland 20814, or by calling 1-888-420-9950.
TABLE OF CONTENTS
Investment Policies..........................................2
Potential Risks..............................................7
Investment Restrictions......................................9
Directors and Officers......................................10
Committees Established by the Board of Directors............12
Principal Holders of Securities.............................13
Investment Advisory and Other Services......................13
Portfolio Transactions and Brokerage........................17
Further Description of the Company's Shares.................19
Buying, Redeeming, and Exchanging Shares....................20
Valuation of Fund Shares....................................22
Additional Information On Distributions and Taxes...........23
Performance Information.....................................26
Performance Comparisons.....................................27
Financial Information.......................................29
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. Each
of its three Funds is nondiversified. 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:
the Monument Internet Fund, the Monument Medical Sciences Fund, and the Monument
Telecommunications Fund. Each series is authorized to offer three separate
classes of shares: Class A Shares imposing a front-end sales charge up to a
maximum of 4.75%; Class B Shares charging a load if redeemed within six years of
purchase, and carrying a higher Rule 12b-1 fee than Class A Shares, and Class Y
Shares for certain institutional investors. The Internet Fund is authorized to
issue up to 250 million shares for each class of shares, and the Medical
Sciences and Telecommunications Funds may issue up to 100 million shares for
each class. The Company may offer additional series or classes 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.
DEPOSITARY RECEIPTS. Each of the Funds may invest on a global basis to take
advantage of investment opportunities both within the U.S. and other countries.
The Funds will buy foreign securities indirectly through the use of depositary
receipts. The Funds may invest in sponsored and unsponsored American Depository
Receipts ("ADRs"), and other similar depositary receipts to the extent they are
traded in the U.S. market in U.S. currency. ADRs are issued by an American bank
or trust company and evidence ownership of underlying securities of a foreign
company. The foreign country may withhold taxes on dividends or distributions
paid on the securities underlying ADRs, thereby reducing the dividend or
distribution amount received by shareholders.
Unsponsored ADRs are issued without the participation of the issuer of the
underlying securities. As a result, information concerning the issuer may not be
as current as for sponsored ADRs. Holders of unsponsored ADRs generally bear all
the costs of the ADR facilities. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR.
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.
OPTIONS. The Funds may purchase put and call options and engage in the writing
of covered call options and put options on securities that meet each Fund's
investment criteria, and may employ a variety of other investment techniques,
such as options on futures. The Funds will engage in options transactions only
to hedge existing positions, and not for purposes of speculation or leverage. As
described below, the Funds may write "covered options" on securities in standard
contracts traded on national exchanges, or in individually-negotiated contracted
traded over-the-counter for the purpose of receiving the premiums from options
that expire and to seek net gains from closing purchase transactions with
respect to such options.
BUYING CALL AND PUT OPTIONS. Each Fund may purchase call options. Such
transactions may be entered into in order to limit the risk of a substantial
increase in the market price of the security that the Fund intends to purchase.
Prior to its expiration, a call option may be sold in a closing sale
transaction. Any profit or loss from the sale will depend on whether the amount
received is more or less than the premium paid for the call option plus the
related transaction costs.
Each Fund may purchase put options. By buying a put, the Fund has the right to
sell the security at the exercise price, thus limiting its risk of loss through
a decline in the market value of the security until the put expires. The amount
of any appreciation in the value of the underlying security will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Prior to its expiration, a put option may be sold in a
closing sale transaction and any profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs.
WRITING (SELLING) CALL AND PUT OPTIONS. Each Fund may write covered options on
equity and debt securities and indices. This means that, in the case of call
options, so long as the Fund is obligated as the writer of a call option, it
will own the underlying security subject to the option and, in the case of put
options, it will, through its custodian, deposit and maintain either cash or
securities with a market value equal to or greater than the exercise price of
the option.
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. Each Fund may purchase securities which may be
covered with call options solely on the basis of considerations consistent with
the investment objectives and policies of the Fund. The Fund's turnover may
increase through the exercise of a call option; this will generally occur if the
market value of a "covered" security increases and the Fund has not entered in
to a closing purchase transaction.
As a writer of an option, the Fund receives a premium less a commission, and in
exchange foregoes the opportunity to profit from any increase in the market
value of the security exceeding the call option price. The premium serves to
mitigate the effect of any depreciation in the market value of the security. 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. Exercise of a call option
by the purchaser will cause the Fund to forego future appreciation of the
securities covered by the option. 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.
Thus, during the option period, the writer of a call option gives up the
opportunity for appreciation in the market value of the underlying security or
currency above the exercise price. It retains the risk of loss should the price
of the underlying security or foreign currency decline. Writing call options
also involves risks relating to a Fund's ability to close out options it has
written.
Each Fund may write exchange-traded call options on its securities. Call options
may be written on portfolio securities, securities indices, or foreign
currencies. With respect to securities and foreign currencies, the Fund may
write call and put options on an exchange or over-the-counter. Call options on
portfolio securities will be covered since the Fund will own the underlying
securities. Call options on securities indices will be written only to hedge in
an economically appropriate way portfolio securities that are not otherwise
hedged with options or financial futures contracts and will be "covered" by
identifying the specific portfolio securities being hedged. Options on foreign
currencies will be covered by securities denominated in that currency. Options
on securities indices will be covered by securities that substantially replicate
the movement of the index.
A put option on a security, security index, or foreign currency gives the
purchaser of the option, in return for the premium paid to the writer (seller),
the right to sell the underlying security, index, or foreign currency at the
exercise price at any time during the option period. When the Fund writes a
secured put option, it will gain a profit in the amount of the premium, less a
commission, so long as the price of the underlying security remains above the
exercise price. However, the Fund remains obligated to purchase the underlying
security from the buyer of the put option (usually in the event the price of the
security falls below the exercise price) at any time during the option period.
If the price of the underlying security falls below the exercise price, the Fund
may realize a loss in the amount of the difference between the exercise price
and the sale price of the security, less the premium received. Upon exercise by
the purchaser, the writer of a put option has the obligation to purchase the
underlying security or foreign currency at the exercise price. A put option on a
securities index is similar to a put option on an individual security, except
that the value of the option depends on the weighted value of the group of
securities comprising the index and all settlements are made in cash.
During the option period, the writer of a put option has assumed the risk that
the price of the underlying security or foreign currency will decline below the
exercise price. However, the writer of the put option has retained the
opportunity for an appreciation above the exercise price should the market price
of the underlying security or foreign currency increase. Writing put options
also involves risks relating to a Fund's ability to close out options it has
written.
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 OVER-THE-COUNTER ("OTC") OPTIONS. A Fund may engage in options
transactions 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
options give the holder the right to buy an underlying security from, or sell an
underlying security to, 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.
A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. There can be no assurance that a
continuously liquid secondary market will exist for any particular option at any
specific time. Consequently, a Fund may be able to realize the value of an OTC
option it has purchased only by exercising it or entering into a closing sale
transaction with the dealer that issued it. Similarly, when a Fund writes an OTC
option, it generally can close out that option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which it
originally wrote the option. If a covered call option writer cannot effect a
closing transaction, it cannot sell the underlying security or foreign currency
until the option expires or the option is exercised. Therefore, the writer of a
covered OTC call option may not be able to sell an underlying security even
though it might otherwise be advantageous to do so. Likewise, the writer of a
secured OTC put option may be unable to sell the securities pledged to secure
the put for other investment purposes while it is obligated as a put writer.
Similarly, a purchaser of an OTC put or call option might also find it difficult
to terminate its position on a timely basis in the absence of a secondary
market.
The staff of the Securities and Exchange Commission ("SEC") has been deemed to
have taken the position that purchased OTC options and the assets used to
"cover" written OTC options are illiquid securities. The Funds will adopt
procedures for engaging in OTC options transactions for the purpose of reducing
any potential adverse effect of such transactions on the liquidity of the Fund.
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.
SECURITIES LOANS. All securities loans will be made pursuant to agreements
requiring the loans to be continuously secured by collateral in cash or high
grade debt obligations at least equal at all times to the market value of the
loaned securities. The borrower pays to the Portfolios an amount equal to any
dividends or interest received on loaned securities. The Portfolios retain all
or a portion of the interest received on investment of cash collateral or
receive a fee from the borrower. Lending portfolio securities involves risks of
delay in recovery of the loaned securities or in some cases loss of rights in
the collateral should the borrower fail financially.
Securities loans are made to broker-dealers or institutional investors or other
persons, pursuant to agreements requiring that the loans be continuously secured
by collateral at least equal at all times to the value of the loaned securities
marked to market on a daily basis. The collateral received will consist of cash,
United States Government securities, letters of credit or such other collateral
as may be permitted under a Portfolio's investment program.
While the securities are being loaned, a Portfolio will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities, as
well as interest on the investment of the collateral or a fee from the borrower.
A Portfolio has a right to call each loan and obtain the securities on five
business days' notice or, in connection with securities trading on foreign
markets, within such longer period for purchases and sales of such securities in
such foreign markets. A Portfolio will generally not have the right to vote
securities while they are being loaned, but its Manager or Adviser will call a
loan in anticipation of any important vote. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delay in receiving additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
Loans will only be made to firms deemed by a Portfolio's Adviser to be of good
standing and will not be made unless, in the judgment of the Adviser, the
consideration to be earned from such loans would justify the risk.
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. 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. 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. 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;
5. 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 applicable exemptions;
6. 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;
7. short sales, unless at the time the Fund owns securities
equivalent in kind and amount to those sold;
8. 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
9. 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 operating 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 as asterisk (*).
<PAGE>
Name (Age) Position Principal Occupation During the
Address Held with Past Five Years
Company
- --------------------------------------------------------------------
- --------------------------------------------------------------------
*David A. Kugler Director, President and Director, The
(40) President Monument Group, Inc. (a holding
7920 Norfolk and company); Monument Funds Group,
Avenue Treasurer, Inc. (a mutual funds development
Suite 500 1997 - company); Monument Advisors, Ltd.;
Bethesda, MD present Monument Distributors, Inc.;
20814 Monument Shareholder Services,
Inc., 1997 - present; Account Vice
President, Paine Webber, Inc.,
1994 - 1997; Financial Consultant,
Merrill Lynch & Co., 1990 - 1994.
<PAGE>
Name (Age) Position Principal Occupation During the
Address Held with Past Five Years
Company
Peter L. Smith Vice Senior Vice President and
(68) President Secretary, The Monument Group,
7920 Norfolk and Inc.; Monument Funds Group, Inc.;
Avenue Assistant Monument Advisors, Ltd.; Monument
Suite 500 Secretary Distributors, Inc.; Monument
Bethesda, MD Shareholder Services, Inc., 1998 -
20814 present; Special Investigator
(Senior Examiner), National
Association of Securities Dealers
Regulation, Inc., District 10 (New
York City), 1997 - 1998; Senior
Staff Accountant, Office of
Compliance and Examinations, U.S.
Securities and Exchange
Commission, Washington, D.C., 1974
- 1997.
G. Frederick Director, Business Manager, Trinity
White II (46) Secretary Episcopal Parish, 1997 - present;
3107 Albemarle Management Consultant, Small
Road Business Management, 1985 - 1996.
Wilmington, DE
19808
Francine F. Carb Director President, Markitects, Inc.
(41) (marketing consulting), 1994 -
421 Woodland present; Francine Carb &
Circle Associates (marketing consulting),
Radnor, PA 19087 1992 - 1994.
Victor Dates (62) Director Adjunct Professor, Coppin State
2107 Carter Dale College, 1998 - present; Assistant
Road Professor, Howard University, 1988
Baltimore, MD - 1998.
21209
- ------------------
George DeBakey Director Director, Business Development,
(50) Technolognet.com, 2000 - present;
19 Blue Hosta Way Director of International
Rockville, MD Operations, ESI International,
20850 Inc., 1998 - 1999; Instructor,
American University, 1992 - 1998.
- ------------------
David Gregg III Director Chairman, Gator Broadcasting
(67) (effective Corp., 1986 - present; Managing
2200 Clarendon March 18, Director, Pierce Financial Corp.,
Blvd. 2000) 1984 - present.
Suite 1410
Arlington, VA
22201
- ------------------
Ivan Inerfeld Director
(58) (effective
625 Twin Arch March 18,
Lane 2000)
Bryn Mawr, PA
19010
- ------------------
Rhonda Wiles Director Director of Development, Futures
Roberson, Esq. Industry Institute, 1999 -
(48) present; Senior Vice President,
2001 Institutional Funding and
Pennsylvania Development, Hispanic Radio
Ave., N.W., Network, Inc., 1998 - 1999;
Suite 600 Principal, RWR Consults (Business
Washington, Advisors), 1995 - present;
D.C. 20006 Counsel, NAPWA Services
(pharmaceutical company) 1995;
Associate General Counsel, Calvert
Group, Ltd. (mutual fund sponsor),
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.
PRINCIPAL HOLDERS OF SECURITIES
As of December 31, 1999, Samuel M. Hunn of 7909 Hermitage Road, Richmond,
Virginia, 23228, owned (both record and beneficially) 5.77% of the Medical
Sciences Fund Class A shares.
As of December 31, 1999, U.S. Clearing Corp., 26 Broadway, New York, N.Y. 10004
owned of record: 7.74% of the Medical Sciences Fund Class A Shares; 5.69% of the
Medical Sciences Fund Class B Shares; and 8.85% of the Telecommunications Fund
Class A Shares.
As of December 31, 1999, Lewco Securities Corp, 34 Exchange Place, Jersey City,
N.J. 07311 owned of record 10.12% of the Medical Sciences Class B Shares.
As of December 31, 1999, The Joseph B. Haddad Profit Sharing Plan, Joseph B.
Haddad Trustee, 5901 Patterson Avenue, Richmond, VA 23226 owned of record 6.98%
of the Internet Fund Class B Shares.
As of December 31, 1999; the following owned (both of record and beneficially)
shares of the Telecommunications Fund Class B Shares: Kathy Farr, 2312 Rogers
Avenue, Fort Worth, TX 76109, 6.50%; Largoza Family Living Trust, 3232 So West,
Visalia, CA 93277, 8.14%; William Z. Shulman, 32 Esmond Place, Tenafly, N.J.
07670, 6.01%, George H. Vago, 111 East Kilbourn Avenue, Milwaukee, WI 53202,
5.70%.
As of December 31, 1999, Bear Stearns Securities Corp, 1 Metrotech Center North,
Brooklyn, N.Y. 11201, owned of record 10.49% of the Telecommunications Class B
Shares and 5.12% of the Medical Sciences Fund Class B Shares.
As of December 31, 1999, National Financial Services, Corp. 82 Devonshire Street
Boston, Massachusetts 02109 owned of record 7.79% of the Telecommunications Fund
Class A Shares.
As of December 31, 1999 the Company's directors and officers, as a group, had
beneficial ownership of 1.34% of the shares of the Medical Sciences Fund Class A
Shares, 1.27% of the shares of the Telecommunications Fund Class A Shares and
less than 1% of the Internet Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR. Monument Advisors, LLC, ("Advisor") 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 Advisors. Advisors is a recently organized
company that also manages the portfolio investments of qualified individuals,
retirement plans, and trusts. As of August 31, 1999, Advisors managed or
supervised in excess of $70 million in assets.
Under 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 $10 million; and 0.625% of the
monthly average net assets exceeding $100 million. An Expense Limitation
Agreement is in effect through May 1, 2001, pursuant to which the Advisor has
agreed to waive or reimburse the fund for certain expenses. See the Prospectus
for further detail.
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.
The Advisory Agreement for both the Medical Sciences Fund and the
Telecommunications 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 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") for Class A Shares
and Class B Shares of each Fund.
RULE 12b-1 PLANS. The Board of Directors, on behalf of the Medical Sciences Fund
and the Telecommunications 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. Rule 12b-1 Plans were
approved for Class B Shares effective October 1, 1999.
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 for the purpose of increasing the sale of each Fund's shares,
thereby 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 for Class A Shares, and up to
a maximum of 1.00% for Class B 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.
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.
RULE 18F-3 PLAN. At a meeting held on August 7, 1999, the Board adopted a Rule
18f-3 Multiple Class Plan on behalf of the Fund for the benefit of each of its
series. The key features of the Rule 18f-3 plan are as follows: (i) shares of
each class of the Fund represent an equal pro rata interest in the Fund and
generally have identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations qualifications, terms and
conditions, except that each class bears certain-specific expenses and has
separate voting rights on certain matters that relate solely to that class or in
which the interests of shareholders of one class differ from the interests of
shareholders of another class; (ii) subject to certain limitations described in
the Prospectus, shares of a particular class of the Fund may be exchanged for
shares of the same class of another Fund; and (iii) the Fund's Class B Shares
will convert automatically into Class A shares of the Fund after a period of
eight years, based on the relative net asset value of such shares at the time of
conversion. At present, each Fund offers Class A Shares charging a front-end
sales charge, Class B Shares imposing a sales charge upon the sale of shares
within six years of purchase, and Class C Shares for certain institutional
shareholders.
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 116-300 Village
Boulevard, 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.
PREEMPTIVE, 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 may 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. Unless otherwise 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," "Buying Fund Shares", and "Net
Asset Value" in the Prospectus.
Initial sales charges do not apply to certain share classes, classes of persons,
or transactions, as described in the Prospectus. A sales charge may be waived
because a transaction involves a different level of expense than the sale of
Fund shares to the general public. See "Waiver of Sales Charge" in the
Prospectus. 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.
CONVERSION OF SHARES. Class B Shares of the Fund will automatically convert to
Class A Shares of the respective Fund, based on the relative net asset values
per share of the aforementioned classes, eight years after the end of the
calendar month in which your Class B share order was accepted. For the purpose
of calculating the holding period required for conversion of Class B Shares, ,
order acceptance shall mean: (1) the date on which such Class B Shares were
issued, or (2) for Class B Shares obtained through an exchange, or a series of
exchanges, (subject to the exchange privileges for Class B Shares) the date on
which the original Class B Shares were issued. For purposes of conversion of
Class B Shares, Class B Shares purchased through the reinvestment of dividends
and capital gain distribution paid in respect of Class B Shares, Class B Shares
will be held in a separate sub-account. Each time any Class B Shares in the
shareholder's regular account (other than those shares in the sub-account)
convert to Class A shares, a pro rata portion of the Class B Shares in the
sub-account will also convert to Class A Shares. The portion will be determined
by the ratio that the shareholder's Class B Shares converting to Class A Shares
bears to the shareholder's total Class B Shares not acquired through the
reinvestment of dividends and capital gain distributions. The conversion of
Class B to Class A is not a taxable event for federal income tax purposes.
WHETHER A CONTINGENT DEFERRED SALES CHARGE APPLIES. In determining whether a
CDSC is applicable to a redemption, the calculation will be made in a manner
that results in the lowest possible rate. It will be assumed that the redemption
is made first of amounts representing (1) shares acquired by reinvestment of
dividends and capital gains distributions, (2) shares held for over six years,
and (3) shares held the longest during the six-year period.
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.
Your account may be classified as "lost" if first class mailings are returned
twice within 30 days as "undeliverable" and the Postal Service is unable to
provide any forwarding information. In that event the Fund's transfer agent, at
no cost to you will make at least two searches against national data bases to
attempt to determine your current address. If we are then still unable to
determine your current mailing address, we may deduct from your account the cost
of our efforts to find you, as, for example, 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. Each Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code. The Board of Directors reserves the right to
alter a Fund's qualified status as a regulated investment company if this is
deemed more beneficial to the shareholders. If the Board elected to take such
action, that individual Fund would be subject to federal and possibly state
corporate taxes on its taxable income and gains. In either case, distributions
to shareholders are taxable to the extent of the Fund's available earnings and
profits.
In addition to the limitations discussed below, all or a portion of the income
dividends paid by a Fund may be treated by corporate shareholders as qualifying
dividends for purposes of the dividends received deduction under federal income
tax law. If the aggregate qualifying dividends received by a Fund (generally
dividends from U.S. domestic corporations stock which is not debt-financed by
the Fund and is held for a minimum period) is less than 100% of its
distributable income, then the amount of income dividends paid to corporate
shareholders which is eligible for such deduction may not exceed the aggregate
amount of qualifying dividends received by the Fund for the taxable year. The
amount or percentage of income qualifying for the corporate dividends-received
deduction will be declared by each Fund in the Company's annual report to
shareholders.
Corporate shareholders should note that income dividends and distributions paid
by a Fund from sources other than the qualifying dividends it receives will not
qualify for the dividends-received deduction. For example, any interest income
and net short-term capital gain (in excess of any net long-term capital loss or
capital loss carryover) included in investment company taxable income and
distributed by a Fund as a dividend will not qualify for the dividends-received
deduction. Corporate shareholders should also note that the availability of the
corporate dividends-received deduction is subject to certain restrictions. For
example, the deduction is eliminated unless Fund shares have been held (or
deemed held) for more than 45 days in a substantially unhedged manner. The
dividends-received deduction may also be reduced to the extent interest paid or
accrued by a corporate shareholder is directly attributable to its investment in
shares of a Fund. Corporate shareholders whose investment in a Fund is
"debt-financed" for tax purposes should consult with their tax advisors
concerning the availability of the dividends-received deduction. The entire
income dividend and capital gain distribution, including the portion which is
treated as a deduction, may be included in the tax base on which the alternative
minimum tax is computed. Under certain circumstances, this may also result in a
reduction in the shareholder's tax basis in its Fund shares, if the shares have
been held for less than two years.
The Code requires each Fund to distribute at least 98% of its taxable ordinary
income earned during the calendar year, and at least 98% of its capital gain net
income earned during the 12 month period ending October 31 of each year (in
addition to amounts from the prior year that were neither distributed nor taxed
to the Fund). These amounts must be distributed to you by December 31 of each
year in order to avoid the imposition of a federal excise tax. For tax purposes,
under these rules those capital gain distributions that are declared in October,
November, or December but for operational reasons may not be paid to you until
the following January, will be treated as if paid by the Fund and received by
you on December 31 of the calendar year in which they are declared. Each Fund
intends as a matter of policy to declare any such capital gain distributions in
December and to pay them in either December or January in order to avoid the
imposition of this tax. Each Fund does not guarantee, however, that its capital
gain distributions will be sufficient to avoid any or all federal excise taxes.
For federal and state income tax purposes, redemptions of a Fund's shares and
exchanges of shares of one Fund for those of another. For most shareholders,
gain or loss will be an amount equal to the difference between the shareholder's
basis in the shares and the amount realized from the transaction, subject to the
rules described below. If such shares are a capital asset in the hands of the
shareholder, gain or loss will be capital gain or loss and will be long-term for
federal income tax purposes if the shares have been held for more than one year.
All or a portion of a loss realized upon a redemption of shares of a Fund will
be disallowed to the extent that other shares of the Fund are purchased (through
reinvestment of income dividends, capital gain distributions or otherwise)
within 30 days before or after such redemption. Any loss disallowed under these
rules will be added to the tax basis of the shares repurchased. All or a portion
of the sales charge incurred in buying shares of a Fund will not be included in
the federal tax basis of any of such shares sold or exchanged within 90 days of
their purchase (for purposes of determining gain or loss with respect to such
shares) if the sales proceeds are reinvested in another Fund of the Company and
a sales charge which would otherwise apply to the reinvestment is reduced or
eliminated. Any portion of such sales charge excluded from the tax basis of the
shares sold will be added to the tax basis of the shares acquired in the
reinvestment. You should consult with your tax advisor concerning the tax rules
applicable to the redemption or exchange of a Fund's shares.
A Fund's investment in options and futures contracts, including any stock
options, stock index options, stock index futures, and options on stock index
futures are subject to many complex and special tax rules. For example, OTC
options on debt securities and equity options, including options on stock and on
narrow-based stock indexes, will be subject to tax under Section 1234 of the
Code, generally producing a long-term or short-term capital gain or loss upon
exercise, lapse, or closing out of the option or sale of the underlying stock or
security. By contrast, a Fund's treatment of certain other options, futures, and
forward contracts entered into by a Fund is generally governed by Section 1256
of the Code. These Section 1256 positions generally include listed options on
debt securities, options on broad-based stock indexes, options on securities
indexes, options on futures contracts, regulated futures contracts, and certain
foreign currency contracts and options thereon.
Absent a tax election to the contrary, each Section 1256 position held by a Fund
will be marked-to-market (i.e., treated as if it were sold for fair market
value) on the last business day of the Fund's fiscal year, and all gain or loss
associated with fiscal year transactions and mark-to-market positions at fiscal
year end (except certain foreign currency gain or loss covered by Section 988 of
the Code) will generally be treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss. The effect of Section 1256 mark-to-market
rules may be to accelerate income or to convert what otherwise would have been
long-term capital gains into short-term capital gains or short-term capital
losses into long-term capital losses within a Fund. The acceleration of income
on Section 1256 positions may require a Fund to accrue taxable income without
the corresponding receipt of cash. In order to generate cash to satisfy the
distribution requirements of the Code, a Fund may be required to dispose of
portfolio securities that it otherwise would have continued to hold or to use
cash flows from other sources such as the sale of its shares. In these ways, any
or all of these rules may affect the amount, character and timing of income
distributed to you by a Fund.
When a Fund holds an option or other contract that substantially diminishes the
Fund's risk of loss with respect to another position of the Fund (as might occur
in some hedging transactions), this combination of positions could be treated as
a straddle for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of Fund securities, and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles (i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position) which may reduce or
eliminate the operation of these straddle rules.
In order for each Fund to qualify as a regulated investment company, at least
90% of each Fund's annual gross income must consist of dividends, interest, and
certain other types of qualifying income. Foreign exchange gains earned through
a Fund's investment in stock or securities, as well as options or futures based
on those stocks or securities, is considered qualifying income for purposes of
this 90% limitation.
The Funds may be subject to foreign withholding taxes or other foreign taxes on
income (including capital gains) on certain of its foreign investments, thus
reducing the return on those investments. In any year in which a Fund qualifies,
it may elect to allow certain shareholders to take a credit or a deduction for
their shares of qualified foreign taxes paid by the Fund in their gross income
total. Each shareholder would then include in his or her gross income (in
addition to dividends actually received) his or her share of the amount of
qualified foreign taxes paid by the Fund. If this election is made, the Fund
will notify its shareholders annually as to their share of the amount of
qualified foreign taxes paid and the foreign source income of the Fund.
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, where applicable, from the hypothetical initial $1,000
purchase, and the reinvestment of income dividends and capital gain
distributions at net asset value. [In calculating the ending redeemable value
for Class A Shares and assuming complete redemption at the end of the applicable
period, the maximum 4.75% sales charge is deducted from the initial $1,000
payment and, for Class B Shares, the applicable CDSC imposed upon redemption of
Class B Shares held for the period is deducted.] 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 Ibbotson
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, 1999 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 1999 annual report to shareholders (the "Annual
Report"). An investor may obtain a copy of the Annual Report free of charge by
writing to the Fund or calling (888) 420-9950.
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
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Monument Series Fund, Inc.
File Number 333-26223
Filed Pursuant to Rule 497(c)
Gentlemen:
Transmitted herewith for electronic filing on behalf of Monument Series Fund,
Inc., please find enclosed pursuant to Rule 497 (c) under the Securities Act of
1933, as amended, a copy of the Prospectus for Class A and Class B shares and
Statement of Additional Information of the Funds dated October 1, 1999, revised
as of February 9, 2000 in the form being used for distribution to the public.
Should you have any questions regarding the filing of such documents, please
call Beth-ann Roth at (703) 352-0095.
Sincerely,
/s/ Darryl S. Peay
Darryl S. Peay
