THE DECLARATION GROUP DECLARATION
Box 844 CASH ACCOUNT
Conshohocken, PA 19428-0844 --------------------------
INVESTOR INFORMATION DEPARTMENT
1-800-423-2345
CLIENT SERVICES DEPARTMENT
1-800-423-2345
TRANSFER AGENT
Declaration Service Company
Box 844
Conshohocken, PA 19428-0844
FOR MORE INFORMATION ABOUT ANNUAL REPORT
DECLARATION CASH ACCOUNT, SEE A --------------------------
CURRENT PROSPECTUS WHICH MUST DECEMBER 31, 1995
PRECEDE OR ACCOMPANY THIS REPORT.
AN INVESTMENT IN DECLARATION CASH
ACCOUNT IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT
AND THERE CAN BE NO ASSURANCE THAT
DECLARATION CASH ACCOUNT WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1 PER SHARE. DISTRIBUTED
BY DECLARATION DISTRIBUTORS, INC.,
CONSHOHOCKEN, PA.
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PRESIDENT'S LETTER
Fellow Shareholders,
While there has been much excitement in the equity market, the short-term
bond market has remained relatively quiet.
We continue our conservative approach and invest in only the
highest-rated commercial paper that provides safety with a reasonable yield.
In doing so, Declaration offers a unique alternative to conventional
checking accounts while paying money market rates. There are no minimum
balance requirements nor any restrictions on the number or size of deposits or
checks written. You may have a personal and/or business account.
Compensating balances are never required.
We continue to strive for better customer service and appreciate your
comments and concerns. Please feel free to contact Shareholder Services at
1-800-423-2345.
Sincerely,
Stephen B. Tily, III
President
February 29, 1996
TRUSTEES OFFICERS CUSTODIAN
Stephen B. Tily, III Terence P. Smith Linda K. Coyne CoreStates Bank, NA
Chairman & Secretary Assistant Philadelphia, PA 19101
President Secretary
Arthur S. Filean Paul L. Giorgio Martin M. Whalen
William F. Lee, Jr. Treasurer Assistant
Secretary
Thomas S. Stewart
Stephen B. Tily, III
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DECLARATION CASH ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
ANNUALIZED
YIELD ON AMORTIZED
PURCHASE MATURITY COST AND
DESCRIPTION AND PRINCIPAL AMOUNT DATE DATE VALUE
- -------------------------------- ---------- --------- ---------
COMMERCIAL PAPER (101.3%)
$1,800,000 Abbott Laboratories............ 5.70% 01/16/96 $ 1,795,725
1,600,000 American Express
Credit Corporation........... 5.61% 01/25/96 1,594,016
1,800,000 American Telephone &
Telegraph Capital............ 5.78% 01/08/96 1,797,688
1,400,000 American Telephone &
Telegraph Co................. 5.70% 01/12/96 1,397,562
1,153,000 Brown-Forman Corp.............. 5.71% 01/23/96 1,148,977
1,500,000 General Electric
Capital Corporation.......... 5.64% 01/24/96 1,494,595
1,000,000 Heinz (H.J.) Company........... 5.74% 01/29/96 995,536
1,600,000 Hershey Corporation............ 5.55% 01/22/96 1,594,820
1,100,000 IBM Credit Corporation......... 5.80% 01/10/96 1,098,405
1,900,000 Kimberly-Clark Corporation..... 5.60% 01/30/96 1,891,429
1,900,000 McDonald's Corporation......... 5.60% 01/08/96 1,897,931
1,000,000 Minnesota Mining &
Manufacturing Co............. 5.68% 01/04/96 999,527
1,900,000 Motorola Inc................... 5.72% 01/08/96 1,897,887
1,400,000 Motorola Credit Corporation.... 5.72% 01/26/96 1,394,438
1,900,000 Paccar Financial Corporation... 5.75% 01/22/96 1,893,627
1,900,000 PepsiCo Incorporated........... 5.78% 01/18/96 1,894,814
1,400,000 Philip Morris Companies, Inc... 5.72% 01/16/96 1,396,663
1,800,000 Pioneer Hi-Bred
International, Inc........... 5.77% 01/08/96 1,797,981
1,000,000 Pitney Bowes Credit Corp....... 5.70% 01/12/96 998,258
1,900,000 Texaco Incorporated............ 5.57% 01/17/96 1,895,296
1,800,000 Weyerhaeuser Company........... 5.80% 01/11/96 1,797,100
1,900,000 Weyerhaeuser Mortgage Company.. 5.75% 01/11/96 1,896,965
1,900,000 Xerox Corporation.............. 5.75% 01/19/96 1,894,537
1,900,000 Xerox Credit Corporation....... 5.65% 01/08/96 1,897,913
----------
Total Commercial Paper....... 38,361,690
----------
Total Amortized Cost and Value
for Financial Reporting and
Income Tax Purposes (101.3%) $38,361,690
----------
OTHER ASSETS AND LIABILITIES (1.3%)
Other assets.............................. $ 116,702
Other liabilities......................... ( 616,375)
----------
Total Other Assets and
Liabilities................ ( 499,673)
----------
NET ASSETS (100%)
Applicable to 37,862,017 outstanding shares of beneficial
interest (unlimited authorization -- no par value)............ $37,862,017
==========
Net asset value (offering and redemption price per share)....... $1.00
====
See notes to financial statements.
2
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DECLARATION CASH ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
Investment Income:
Interest............................................. $2,176,210
---------
Total Investment Income........................ 2,176,210
---------
Expenses:
Advisory and management fees (Note 2)................ 190,505
Audit fees........................................... 16,096
Custodian fees....................................... 23,920
Distribution fees (Note 2)........................... 10,414
Insurance............................................ 23,123
Legal................................................ 16,324
Postage.............................................. 7,946
Pricing and blue sky administration fees (Note 2).... 51,000
Printing............................................. 21,131
Registration fees.................................... 32,271
Shareholder servicing costs.......................... 101,370
Transfer agent fees (Note 2)......................... 316,820
Trustee fees and expenses............................ 12,967
Miscellaneous........................................ 16,682
---------
Total Expenses.................................. 840,569
Expense Reimbursement By Investment Advisor
(Note 2)..................................... ( 78,602)
---------
Net Expenses.................................... 761,967
---------
Net Investment Income........................... $1,414,243
=========
DECLARATION CASH ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994
------------ ------------
Increase (decrease) in net assets:
Operations: Net investment income................. $ 1,414,243 $ 838,561
---------- ----------
Net increase in net assets resulting
from operations............................ 1,414,243 838,561
---------- ----------
Distributions to shareholders:
Distributions from net investment income (1). ( 1,414,243) ( 838,561)
---------- ----------
Capital share transactions (2):
Proceeds from shares sold.................... 45,335,376 51,293,228
Proceeds from shares issued on reinvestment
of distributions from net investment
income..................................... 1,414,243 838,561
Shares redeemed.............................. (47,112,469) (54,857,874)
---------- ----------
Net decrease from capital share transactions. ( 362,850) ( 2,726,085)
---------- ----------
Total decrease in net assets...................... ( 362,850) ( 2,726,085)
---------- ----------
Net assets:
Beginning of year............................ 38,224,867 40,950,952
---------- ----------
End of year.................................. $37,862,017 $38,224,867
========== ==========
(1) Income dividends per share.................... $.037 $.022
==== ====
(2) Also represents transactions in fund shares
See notes to financial statements.
3
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DECLARATION CASH ACCOUNT
FINANCIAL HIGHLIGHTS
(Selected data for a share of capital stock outstanding throughout each year)
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993 1992 1991
------------------------------------
Net asset value, beginning of year.... $1.00 $1.00 $1.00 $1.00 $1.00
---- ---- ---- ---- ----
Income from Investment Operations:
Net Investment Income............ .037 .022 .011 .018 .042
---- ---- ---- ---- ----
Less Distributions:
Dividends from net investment
income........................ (.037) (.022) (.011) (.018) (.042)
---- ---- ---- ---- ----
Net asset value, end of year.......... $1.00 $1.00 $1.00 $1.00 $1.00
==== ==== ==== ==== ====
Total Return (1)...................... 3.78% 2.18% 1.12% 1.90% 4.27%
Ratios/Supplemental Data:
Net assets, end of year (000's)....... $37,862 $38,225 $40,951 $47,767 $48,224
Ratio of expenses to average net assets
(before expense reimbursement)..... 2.21% 2.18% 1.94% 1.71% 1.61%
Ratio of expense reimbursement to
average net assets................. 0.21% 0.18% -- -- --
Ratio of net investment income to
average net assets................. 3.71% 2.15% 1.11% 1.83% 4.18%
- ------------
(1) Total return is calculated assuming a $1,000 investment on the first day
of each period reported, reinvestment of all dividends on the payable date,
and a sale at net asset value on the last day of the period reported. Total
return does not include account maintenance fees and total return would be
lower if such fees were included.
See notes to financial statements.
4
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DECLARATION CASH ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Declaration Cash Account ("DCA") is a series of the
Declaration Fund (the "Trust") and is registered under the Investment Company
Act of 1940, as amended, as an open-end diversified management investment
company. The Trust is organized as a Pennsylvania business trust.
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by DCA in the preparation of its financial
statements.
Security valuation: Portfolio securities are valued utilizing the
amortized cost method. Under this method, purchase discounts and premiums are
amortized ratably to maturity and are included in interest income.
Repurchase agreements: DCA's custodian takes possession through the
Federal Reserve Book Entry System of the collateral pledged for investments in
repurchase agreements. The underlying collateral is valued daily on a
mark-to-market basis to ensure that the value, including accrued interest, is
at least equal to the repurchase price. In the event of default of the
obligation to repurchase, liquidation and/or retention of the collateral may
be subject to legal proceeding.
Federal income taxes: DCA's intention is to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the
accompanying financial statements.
Other: Security transactions are accounted for on the date the securities
are purchased or sold. Dividends from net investment income are declared and
reinvested on a daily basis. Income and expenses are recorded on the accrual
basis.
2. INVESTMENT ADVISOR AND TRANSACTIONS WITH AFFILIATES
Under terms of the investment advisory agreement approved by the
shareholders of DCA, Declaration Investment Advisors, Inc. (the "Advisor")
agrees to provide to DCA investment advisory services and all of the executive
personnel necessary for the day-to-day operation of DCA, including the general
supervision of its affairs and office facilities. This agreement provides for
an annual advisory and management fee, payable on a monthly basis, not to
exceed 0.50% of the first $500 million of DCA's average net assets. The
advisory fee is reduced if certain expenses of DCA exceed 2% of the first $100
million of average annual net assets and 1.5% of average annual net assets in
excess of $100 million. The reimbursement is limited to the fee the Advisor
is due. For the year ended December 31, 1995, the Advisor billed DCA $190,505
for these services. The Advisor was required to reimburse DCA $78,602 for the
year ended December 31, 1995. On December 31, 1995, DCA had an advisory and
management fee payable to the Advisor of $16,278. An expense reimbursement
was due to DCA from the Advisor of $78,602 at December 31, 1995. Certain
trustees and officers of DCA are directors and officers of the Advisor.
Under terms of the service agreement, Declaration Service Company (the
"Service Company") will act as DCA's transfer agent, dividend disbursing
agent, and agent in connection with any plans provided to the shareholders of
DCA. The Service Company will also provide the necessary personnel for the
shareholder servicing function of DCA. DCA will pay the Service Company, on a
monthly basis, a maintenance fee for each shareholder account and will
reimburse the Service Company for any out-of-pocket expenses. The Service
5
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DECLARATION CASH ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. INVESTMENT ADVISOR AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
Company receives administrative service fees charged to shareholders
whose account value is less than $2,500. Accordingly, the transfer agent fees
were reduced by the amount of administrative service fees paid to the Service
Company. For the year ended December 31, 1995, transfer agent fees totalled
$624,266 and administrative service fees totalled $307,446 for net transfer
agent fees of $316,820. On December 31, 1995, DCA had a transfer agent fee
payable to the Service Company of $52,584. The Service Company also provides
accounting, pricing and blue sky administration services to DCA. For these
services, the Service Company received fees totalling $51,000 for the year
ended December 31, 1995. On December 31, 1995 DCA had a payable of $4,250 for
these fees. Certain trustees and officers of DCA are directors and officers
of the Service Company. The Service Company is an affiliate of the Advisor.
DCA has adopted a plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940, whereby it is permitted to pay up to 0.25% of its annual
average net assets for expenses incurred in the distribution of its shares.
During the year ended December 31, 1995, DCA incurred 0.02% of its annual
average net assets for such distribution expenses.
3. PAYABLE TO CUSTODIAN
Included in other liabilities is $447,616 which was payable to DCA's
custodian due to a temporary cash overdraft in DCA's custodian account
resulting from over-investing at December 31, 1995. This temporary cash
overdraft was corrected on January 4, 1996 with the first maturity of
commercial paper.
6
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INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Trustees of the
Declaration Fund
Declaration Cash Account
We have audited the accompanying statement of net assets of Declaration
Cash Account as of December 31, 1995, and the related statements of operations
for the year then ended, changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Declaration Cash
Account as of December 31, 1995, the results of its operations for the year
then ended, the changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
Abington, Pennsylvania Sanville & Company
February 16, 1996 Certified Public Accountants
7
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