AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON 4/25/97
FILE NOS: 811-3176 & 2-72066
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Pre-Effective Amendment No. X
-------- --------
Post-Effective Amendment No. 27 X
-------- --------
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
--------
Amendment No. 27
--------
(Check appropriate box or boxes.)
DECLARATION FUND
(formerly Consolidated Asset Management Fund)
(Exact name of Registrant as Specified in Charter)
Suite 6160, 555 North Lane
Conshohocken, PA 19428
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
610-832-1075
Terence P. Smith, Suite 6160
555 North Lane, Conshohocken, PA 19428
(Name and Address of Agent for Service)
Please send copy of communications to:
MARTIN V. MILLER, ESQUIRE
555 North Lane, Conshohocken, PA 19428
215-345-7110
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b)
- ---------
on pursuant to paragraph (b)
- ---------
60 days after filing pursuant to paragraph (a)(1)
- ---------
on pursuant to paragraph (a)(1)
- ---------
75 days after filing pursuant to paragraph (a)(2)
- ----------
on pursuant to paragraph (a)(2) of rule 485
- ---------
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
- -------- a previously filed post-effective amendment.
A Rule 24f-2 Notice for the year ended December 31, 1996 was filed on
February 27, 1997.
EXHIBIT INDEX BEGINS ON PAGE
FORM N-1A
CROSS REFERENCE SHEET
Form N-1A Part A - DECLARATION CASH ACCOUNT
ITEM NO. PROSPECTUS LOCATION
1. Cover Page . . . Cover Page
2. Synopsis . . . . Not Applicable
3. Condensed Financial
Information . . . Statement of Selected per
Share Data and Ratios;
Fee Table
4. General Description of
Registrant . . . What is Declaration Cash
Account? How Your Money is
Invested; General Information
and History; Tax Status
5. Management of the
Fund . . . . Who Manages Declaration
Cash Account? Investment Advisory
Agreement; Transfer Agent; Daily
Dividends; Distribution Agreement
6. Capital Stock and
Other Securities . . General Information and
History; Daily Dividends;
7. Purchase of Securities
Being Offered . . . How to Open a Declaration
Cash Account; Determination
of Net Asset Value; Fees;
What is the Declaration
Cash Account Program? DECexpres;
Accuracy of Investor Account
Information
8. Redemption or
Repurchase . . . How to Withdraw your Money;
To Redeem by Mail; To Redeem by
Telephone; To Redeem by Check
9. Pending Legal
Proceedings . . . Not Applicable
FORM N-1A PART B
LOCATION IN STATEMENT
ITEM NO. OF ADDITIONAL INFORMATION
10. Cover Page . . . Cover Page
11. Table of Contents . . Table of Contents
12. General Information and Declaration Fund - Tax Status
History . . . . General Information and History
Declaration Cash Account
13. Investment Objectives . Declaration Cash Account - Investment
and Policies Objective and Policies; Investment
Limitations
14. Management of
Fund . . . . Management, Administrative and Advisory
Services; Trustees and Officers of
Declaration Fund; Additional Declaration
Fund Executive Officers
15. Control Persons and
Principal Holders
of Securities. . . Control Persons and Principal Holders of
Securities of Cash Account
16. Investment Advisory
and Other
Services. . . . General Provisions of the Advisory
Agreement for Declaration Cash
Account; Renewal of Advisory Agreement;
Transfer Agent and Custodian;
Independent Public Accountants
17. Brokerage Allocation . Brokerage - Declaration Cash Account
18. Capital Stock and Other
Securities . . . See "General Information and History" in
Prospectus; Daily Dividends
19. Purchase, Redemption and
Pricing of Securities
Being Offered. . . Purchase and Redemption of Cash
Account; Shareholder Services; Signature
Guarantees; Determination of Net
Asset Value - Cash Account; Daily
Dividends - Cash Account;
Redemption in Cash or in Kind
20. Tax Status . . . Tax Status
21. Underwriters . . . The Distribution Plan -
Declaration Cash Account;
Agreement Pursuant to Distribution
Plan
22. Calculations of Performance
Data . . . . Calculation of Yield of
Declaration Cash Account
23. Financial Statements . None
FORM N-1A PART C
ITEM NO. LOCATION IN PART C
24. Financial Statements
and Exhibits . . . Financial Statements and
Exhibits
25. Persons controlled by or
under common Control
with Registrant . . Persons controlled by or under
Common Control with Registrant
26. Number of Holders of
Securities . . . Number of Holders of Securities
27. Indemnification . . Indemnification
28. Business and Other
Connections of Investment
Advisor . . . . Business and Other Connections
of Investment Advisor
29. Principal
Underwriters . . . Principal Underwriters
30. Location of Accounts
and Records . . . Location of Accounts and Records
31. Management Services . Management Services
32. Undertakings . . . Undertakings
<PAGE>
PART A
DECLARATION CASH ACCOUNT
A Series of The Declaration Fund
___________________________________________________
Unique check-writing features and a specially designed expense reporting
system make Declaration Cash Account a convenient and economical way to handle
money for individuals, businesses, corporations, and retirement plans, while you
...
EARN CURRENT MONEY MARKET RATES ON ALL BALANCES AND MAY ...
open an account with ANY amount.
add ANY amount.
withdraw ANY amount.
write checks for ANY amount.
Declaration Cash Account invests in a diversified portfolio of high quality
money market instruments. Its investment objective is maximum current income
consistent with safety of capital and maintenance of liquidity. Declaration Cash
Account is a type of fund commonly known as a money market fund and is a
separate series of Declaration Fund, an open end, diversified, management
company. This Prospectus relates to Declaration Cash Account.
AN INVESTMENT IN DECLARATION CASH ACCOUNT (HEREAFTER SOMETIMES THE "FUND")
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.
Please read and retain this Prospectus for future reference. It is designed
to give you concise information you should know before your invest. A Statement
of Additional Information, of even date herewith, has been filed with the
Securities and Exchange Commission. The Statement of Additional Information is
incorporated by reference into this Prospectus and a copy of it is available,
without charge, by writing or calling Declaration Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Suite 6160, 555 North Lane
Conshohocken, Pennsylvania 19428
1-800-423-2345
MAY 1, 1997
<PAGE>
Table of Contents
Pages
Fee Table.............................................................
Statement of Selected Per Share Data and Ratios.......................
What is Declaration Cash Account?.....................................
How Your Money is Invested............................................
Who Manages Declaration Cash Account?.................................
Investment Advisory Agreement.........................................
Distribution Agreement................................................
Transfer Agent........................................................
How to Open a Declaration Cash Account................................
DECexpres.............................................................
Accuracy of Investor Account Information..............................
How to Withdraw Your Money............................................
What is the Declaration Cash Account Program?.........................
Fees..................................................................
Determination of Net Asset Value......................................
Yield Quotation.......................................................
Daily Dividends.......................................................
Tax Status............................................................
General Information and History.......................................
Declaration Cash Account Application..................................
<PAGE>
DECLARATION CASH ACCOUNT
FEE TABLE
The purpose of this Fee Table is to assist the investor in understanding the
various costs and expenses that an investor in Declaration Cash Account will
bear directly or indirectly. For a more complete description of the various
costs and expenses, see in this Prospectus "Investment Advisory Agreement"
p. ___,"Distribution Agreement" p. ___ and "Fees" p. ___.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases .............. None
Sales Load Imposed on Reinvested Dividends ..... None
Deferred Sales Load Imposed on Redemptions ..... None
Redemption Fee ................................. None
Annual Administrative Expenses Fee (charged on each
account having an average quarterly balance of
less than $2,500) ............................ $64.00
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees ................................ .50%
12b-1 Fees ..................................... .03%
Transfer Agency Fees ........................... 2.00%
Other Expenses ................................. .85%
Expense Reimbursement By
Investment Advisor (.88%)
Total Fund Operating Expenses .................. 2.50%
Declaration Service Company reserves the right to charge a one-time $15 fee
to open accounts that request the checkwriting privilege, if the initial deposit
is less than $1,000. A $10 fee will be charged on wire purchases of less than
$1,000 and a $12 fee will be charged on wire redemptions. The administrative
expense fee will be paid to Declaration Service Company, which will reduce
transfer agency fees charged to the Fund by the amount of the administrative
expense fee received.
EXAMPLE:
1 Year 3 Years 5 Years 10 Years
You would pay the
following expenses
on a $1,000
investment, assuming
(1) a 5% annual return
and (2) redemption at the
end of each time period: 87 252 403 734
The purpose of the above table is to assist the investor in
understanding the various costs and expenses that an investor in the
Fund will bear. Such expenses include general fund expenses paid from
the Fund's assets and the administrative expense fee of $16 per quarter
which is charged directly to Shareholder accounts.
This example should not be considered a representation of past or future
expenses for the Fund. Actual expenses may be greater or less than those shown
above. Similarly, the annual rate of return assumed in the example is not an
estimate or guarantee of future investment performance.
<TABLE>
STATEMENT OF SELECTED PER SHARE DATA AND RATIOS
(For a share outstanding throughout each period)
The following statement regarding selected per share data and ratios is part
of Declaration Cash Account's (formerly named Consolidated Asset Management
Fund) Fiancial Statements which are included in the Statement of Additional
Information. Each of the five years in the period ended December 31, 1996 is
covered by the Independent Auditor's Report.
DECLARATION CASH FUND
FINANCIAL HIGHLIGHTS
--------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
---------------------------------------------------------------------------
The following statement regarding the financial highlights is part of
Declaration Cash Account's (formerly named Consolidated Asset Management Fund)
financial statements which are included in the Statement of Additional
Information. Each of the five years in the period ended December 31, 1996 is
covered by the Independent Auditor's Report.
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988(1) 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income 0.034 0.037 0.022 0.011 0.018 0.042 0.061 0.074 0.060 0.060
Net Realized and Unrealized
Gain (Loss) on Investments -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS 0.034 0.037 0.022 0.011 0.018 0.042 0.061 0.074 0.060 0.060
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends From Net Investment
Income (0.034) (0.037) (0.022) (0.011) (0.018) (0.042) (0.061) (0.074) (0.060) (0.060)
Distribution From Net
Realized Gain -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.034) (0.037) (0.022) (0.011) (0.018) (0.042) (0.061) (0.074) (0.060) (0.060)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 3.23% 3.78% 2.18% 1.12% 1.90% 4.27% 6.36% 7.44% 5.99% 5.79%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of
Year (000's) $ 5,207 $37,862 $38,225 $40,951 $47,767 $48,224 $54,153 $46,930 $41,532 $60,176
Ratio of Expenses to
Average Net Assets 2.00% 2.00% 2.00% 1.94% 1.71% 1.61% 1.88% 1.60% 1.50% 1.30%
Ratio of Net Investment
Income to Average Net Assets 3.18% 3.71% 2.15% 1.11% 1.83% 4.18% 6.12% 7.44% 5.99% 5.79%
Portfolio Turnover Rate(4) -- -- -- -- -- -- -- -- -- --
</TABLE>
(1) Year-ended December 30.
(2) Total return is calculated assuming a $1,000 investment on the first day
of each year reported, reinvestment of all dividends on the payable date,
and a sale at net asset value on the last day of the year reported. Total
return does not include account maintenance fees and total return would
be lower if such fees were included.
(3) Restated
(4) The Fund purchased only obligations with maturities of one year or less
and, therefore, had no portfolio securities of the kind required to be
included in portfolio turnover rate computations.
WHAT IS DECLARATION CASH ACCOUNT?
Declaration Fund (formerly Consolidated Asset Management Fund) was organized
on April 9, 1981 as a Pennsylvania corporation. On July 9, 1984, it changed its
form of organization to that of a Pennsylvania business trust. On May 15, 1990,
the shareholders of Consolidated Asset Management Fund authorized amendments to
the Fund's trust indenture, which would (1) permit the creation and issuance of
the Fund's shares in separate series, (2) reclassify the Fund's outstanding
shares as a series to be designated "Declaration Cash Account" and (3) change
the Fund's name to Declaration Fund. On May 16, 1990, it became registered as a
Pennsylvania business trust with the Commonwealth of Pennsylvania. Declaration
Fund is registered with the United States Securities and Exchange Commission as
an open-end, diversified, management investment company.
The investment objective of Declaration Cash Account is maximum current
income consistent with safety of capital and maintenance of liquidity. There
can be no assurance that this investment objective will be achieved. This
investment objective cannot be changed without the approval of a majority of
Declaration Cash Account's outstanding voting securities.
HOW YOUR MONEY IS INVESTED
Declaration Cash Account invests in U.S. dollar denominated money market
instruments with maturities of one year or less, which are Eligible Securities
(see Appendix to Statement of Additional Information for definition of "Eligible
Security") and which are issued by the U.S. Government, domestic commercial
banks and U.S. branches of foreign commercial banks, savings and loan
associations and major corporations which present minimum credit risks and which
meet the following investment criteria and restrictions:
(i) U.S. Government notes, bills and bonds, guaranteed or issued by the U.S.
government, its agencies, or instrumentalities.
(ii) negotiable certificates of deposit, bankers' acceptances, and commercial
paper of (1) domestic U.S. commercial banks, (2) U.S. branches of
foreign commercial banks having over $1 billion in assets (or the
monetary equivalent), and (3) U.S. savings and loan associations with
over $1 billion in assets.
(iii) corporate bonds and debentures with maturities of one year or less
which at the time of purchase have a Standard & Poor's rating of
at least "AA" and a Moody's Investor's Services, Inc. rating of "Aa".
(See Appendix contained in the Statement of Additional Information for
a description of the ratings.)
(iv) short-term corporate debt instruments (commercial paper or variable
amount master demand notes), with maturities not exceeding nine months,
which at the time of purchase are rated "A-1" by Standard & Poor's
Corporation and "Prime 1" by Moody's Investor's Service, Inc. or if not
so rated, that are issued by a company which on the date of investment
has an outstanding debt issue rated at least "AA" by Standard & Poor's
or "Aa" by Moody's and as to which an independent determination has been
made that the instrument presents minimum credit risks and is of high
quality. (See Appendix contained in Statement of Additional Information
for a description of the ratings.)
(v) certificates of deposit or other instruments issued by small banks or
savings and loan associations located in the U.S. that are members of
the Federal Deposit Insurance Corporation (FDIC). Such investments will
be limited to $100,000 per institution. The principal amount of these
types of investments shall be insured in full by the FDIC.
(vi) repurchase agreements secured by U.S. Government obligations that are
eligible investments of Declaration Cash Account. Declaration Fund will
only enter into repurchase agreements with the Fund's custodian bank or
banks which serve as a depositor for the insured deposit cash accounts
in the Declaration Cash Account Program. Declaration Cash Account will
not enter into Repurchase Agreements of more than seven (7) days
duration.
(vii) Adjustable rate securities that are collateralized by Small
Business Administration ("SBA") loans. The loans are guaranteed
by the SBA both as to principal and interest. The guarantee of the
SBA is backed by the full faith and credit of the United States
Government.
The SBA loans are commercial loans such as working capital and equipment
loans. The underlying loans are originated by private lenders and are
guaranteed, in part, by the SBA. It is the guaranteed portion of such
loans that constitutes the underlying financial assets of the Adjustable
Rate Securities.
The interest rates on the Adjustable Rate Securities will adjust periodically
and the current income earned by Declaration Cash Account through investments in
such securities will be a function of the Bank Prime Loan Rate made available by
the Federal Reserve Board. The interest rates paid on these Adjustable Rate
Securities is an increment over the Bank Prime Loan Rate and such interest rate
is adjusted accordingly. These Adjustable Rate Securities are relatively new and
untested instruments. The secondary market for Adjustable Rate Securities may
not be as liquid as other securities.
The money market instruments described above in items (i) through (vii)
generally will not earn as high a level of current income as investments in
instruments of lesser quality or bearing longer maturities. For further details,
see the Statement of Additional Information.
Declaration Cash Account may invest in money market obligations of banks with
over $1 billion in assets only. Certain obligations of U.S. branches of foreign
banks and banks with only state charters may carry more risk than obligations of
federally chartered U.S. banks. Federally chartered U.S. banks and Federal
Savings and Loan Associations may be subject to additional U.S. regulations
designed to promote financial soundness.
In seeking increased income, Declaration Cash Account may buy or sell
securities to take advantage of short-term market movements. Declaration Cash
Account does not anticipate incurring significant brokerage expenses as a result
of such trading since portfolio transactions ordinarily will occur directly with
the issuer or a money market dealer on a net price basis.
Declaration Cash Account will limit its portfolio investments to those
U.S. dollar denominated instruments that its Board of Trustees determines
present minimal credit risks and which are, at the time of acquisition,
eligible securities (see Appendix to Statement of Additional Information
for definition of eligible security).
Declaration Cash Account will not invest more than 25% of its assets in the
securities of issuers in any one industry other than securities issued by the
U.S. Government, agencies or instrumentalities of the U.S. Government or
domestic U.S. bank money market instruments. This policy may not be changed
without the approval of a majority of the outstanding voting securities of
Declaration Cash Account.
______________________________________________________________________________
WHO MANAGES DECLARATION CASH ACCOUNT?
The Board of Trustees of Declaration Fund has overall responsibility for the
management of Declaration Cash Account. Declaration Investment Advisors, Inc.,
Suite 6160, 555 North Lane, Conshohocken, PA 19428, serves as investment adviser
to Declaration Cash Account. Declaration Investment Advisors, Inc. (hereafter
"Declaration I/A" or "Adviser") is ultimately controlled by WMB Holdings, Inc.
and Stephen B. Tily, III individually and as beneficiary of a certain profit
sharing plan.
Declaration I/A has served as investment manager for Declaration Cash Account
and Declaration Fund (prior to its reorganization as a series fund) since the
inception of Declaration Fund in 1981.
INVESTMENT ADVISORY AGREEMENT
Under the terms of the Investment Advisory Agreement, Declaration I/A, for
the fee described below, provides investment management services to Declaration
Fund with respect to Declaration Cash Account.
Under the terms of the Agreement, Declaration I/A will determine the
composition of Declaration Cash Account's portfolio, the nature and timing of
the changes therein and the manner of implementing such changes. Declaration
I/A is responsible for the over-all management of the Fund's business affairs.
For the services and facilities which it provides pursuant to the Agreement,
Declaration I/A receives an annual fee, payable monthly, which amounts to the
following percentages of the average net assets of Declaration Cash Account:
.50% of the first $500 million
.45% of the next $500 million
.40% of the next $500 million
.35% of average net assets in excess of 1.5 billion.
The Fund's total expenses for the year ending December 31, 1996 were
$1,175,279; the expenses were 3.15% before expense reimbursement and 2.00%
thereafter of average net assets. Declaration Investment Advisors, Inc.
and Declaration Service Company reimbursed the Fund the sum of $430,201
thereby reducing the Fund's expenses to $745,078.
______________________________________________________________________________
DISTRIBUTION AGREEMENT
On November 20, 1996 Declaration Cash Account's Rule 12b-1 Distribution
Agreement, dated December 8, 1988, was continued for an additional one-year
term until December 8, 1997 Under the terms of the Agreement, the Fund pays
for certain services which are primarily intended to result in the
distribution of Declaration Cash Account shares. Such services included
advertising; compensation of persons engaged in the sale of Declaration
Cash Account shares; distribution of sales materials, including the cost of
preparing, printing and mailing such sales materials; sales presentations
and promotions and payments to brokers and others who are engaged in the
distribution of Declaration Cash Account shares and who administer the
accounts of shareholders. Fund affiliates are prohibited from receiving
payments. Payments made by the Fund shall not in the aggregate exceed .25%
of the average daily net asset value per annum of Declaration Cash Account.
In 1996, the Fund paid $4,567 or .01% of its average net assets in
distribution costs.
______________________________________________________________________________
TRANSFER AGENT
Declaration Service Company, Suite 6160, 555 North Lane, Conshohocken,
Pennsylvania 19428 serves as the Fund's transfer agent and dividend paying
agent. Declaration Service Company is an affiliate of Declaration I/A.
______________________________________________________________________________
HOW TO OPEN A DECLARATION CASH ACCOUNT
Accounts can be opened in any amount. Declaration Service Company reserves
the right to charge a one-time $15 fee to open accounts that request
check-writing privileges, if the initial deposit is less than $1,000.
Subsequent purchase payments will be accepted in any amount. Be sure to
include your account number on all checks deposited for credit to your
account.
Shares are acquired without sales charge at the net asset value per share
next determined after the recording of an order. This value has been maintained
at $1.00 since shares were first offered to the public in 1981. The Fund will
use its best efforts to maintain a $1.00 net asset value per share for the
shares in Declaration Cash Account, although there can be no assurance that it
will be able to do so on a continuous basis.
Purchases may be made as follows:
1. BY MAIL
(a) Complete the application (For a copy of the application see page ____ of
this Prospectus). It must include your name, address, correct tax
identification number, and signature(s).
(b) Make checks payable to Declaration Service Company or properly endorsed
"For Deposit Only to Declaration Service Company". Declaration Service
Company WILL NOT accept "third-party checks." A third-party check
is one that is made payable to the investor and then endorsed by the
investor to Declaration Service Company.
(c) Mail check and application (including signature card - see page ____ of
this Prospectus - if requesting check-writing privilege) to:
Declaration Service Company
Box 844
Conshohocken, PA 19428-0844
2. BY WIRE Funds must be received at Declaration Service Company by 11:00 A.M.
(East Coast time) in order to be applied to purchase shares on that
day.
(a) Call Declaration Service Company at 1-800-423-2345 to advise that a wire
order is enroute and to confirm the following wire instruction.
Funds should be wired to the account of Declaration Service Company for
credit to the account of the investor.
(b) Wire money from your bank exactly as follows:
Through the Federal Reserve Bank, Philadelphia -
Account of CoreStates Bank NA, Philadelphia, PA
ABA #031000011
Credit: Declaration Service Company, Acct. #0105-3323
Further Credit: (Your Name and Your Declaration Cash Account Number)
(c) There are no wire fees for purchases of $1,000 or more. A $10 fee will
be charged on wire purchases of less than $1,000.
3. THROUGH YOUR FINANCIAL SERVICES REPRESENTATIVE
Complete the application, including the "Appointment of Financial Service
Organization" section authorizing Declaration Service Company to act upon
instructions from your financial service representative who will then forward
your application and initial investment directly to Declaration Service
Company. Your financial service representative will receive a quarterly
summary of your account activity. Although the Fund is a no-load fund, your
financial services representative, if a registered broker-dealer, may levy a
reasonable transaction charge. Investments made directly with Declaration
Service Company without the assistance of a financial service representative
are without charge.
* * *
4. DECexpres:
DECexpres is a program for the electronic transfer of money from your
local bank account to your Declaration Cash Account. This is done through
the Automated Clearing House (ACH) system. DECexpres eliminates the need
to mail deposits to your Account. Deposit money at your local bank, then
call the Fund and request any amount over $100 to be transferred from your
local bank to your Declaration Cash Account. If the Fund receives your
transfer instructions by any Tuesday at 5:00 P.M. (Eastern time), the
money will be credited to your account on Friday of the following week.
You can give standing instructions to have a fixed amount transferred each
month or call each time and have a variable amount transferred. Your
standing instructions will be entered on the first Wednesday of each month.
Complete a DECexpres form (page ____) and return the form and a voided
blank check from your local bank to Declaration Service Company. Then
allow three weeks for Declaration Service Company to confirm that
electronic transfers can be made before you make the first transfer. Check
with your local bank to be sure it is a participant in the ACH system.
Currently, Declaration Service Company does not charge any fee for
DECexpres. However, a fee of $12 will be charged for rejected
transactions. The Fund reserves the right to terminate or modify this
service at any time with respect to a particular investor or all investors
in general.
AMOUNTS RECEIVED BEFORE 11:00 A.M. (EAST COAST TIME) ON ANY BUSINESS DAY ARE
APPLIED TO PURCHASE FUND SHARES AND BEGIN EARNING DIVIDENDS ON THE SECOND
BUSINESS DAY THEREAFTER.
THE FUND RESERVES THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON.
You will receive a confirmation of your purchase. Your checks (provided a
signature card is received with your application) will be mailed shortly after
receipt of your initial deposit.
______________________________________________________________________________
HOW TO WITHDRAW YOUR MONEY
In general, Declaration Cash Account shares are redeemed at the net asset
value per share price next determined after receipt of a withdrawal order
(redemption request). You can withdraw money (redeem shares) by phone, mail, or
by writing a check. There is no charge or penalty for withdrawals. Proceeds will
be sent by check to your address, or they can be sent for your account at a
predesignated broker or bank. Proceeds will generally be sent within 1 business
day if a request is received by 11:00 A.M. (East Coast Time) on any day when the
Federal Reserve Bank of Philadelphia is open.
If a shareholder's account balance falls below $100, the Fund reserves the
right to cause the shares in the account to be redeemed and the proceeds mailed
to the investor at his or her address of record. A shareholder will first be
notified in writing and will be allowed 60 days to make one or more additional
investments to bring the value of the account to $100 or more. This provision
does not apply to Fund shares held in a tax qualified account, such as an
Individual Retirement Account.
ALL WRITTEN REDEMPTION REQUESTS MUST BE ORIGINAL. DECLARATION SERVICE
COMPANY WILL NOT ACCEPT REQUESTS RECEIVED VIA FACSIMILE (FAX) MACHINE.
TO REDEEM BY MAIL:
Send your written redemption request to Declaration Service Company, Suite
6160, 555 North Lane, Conshohocken, PA 19428. If the redemption proceeds to
be mailed to you are greater than $5,000 or are to be paid to another person
or sent to an address other than the one of record or if you request a share
transfer, then the investor's signature(s) on the written request must be
guaranteed by an eligible guarantor. An eligible guarantor must be a
participant in a "STAMP" program (a Securities Transfer Agents Medallion
Program). A NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR. You may call the
Transfer Agent at 1-800-423-2345 to determine whether the entity that will
guarantee your signature is an eligible guarantor. Investors who have
provided the requisite bank or broker information on their account application
may request Declaration Services Company IN WRITING to have the proceeds of
redemption sent directly to the designated bank or broker without the need for
a signature guarantee.
TO REDEEM BY TELEPHONE OR WIRE:
If you elected the telephone redemption privilege on your purchase
application, you may make withdrawals from your account by calling
Declaration Service Company, 1-800-423-2345. Proceeds of $5,000 or less
will be sent by check to you or to the bank account or broker account
designated on the purchase application. Telephone redemptions of $5000 or
more will only be sent to your designated bank or brokerage account.
You may request that the proceeds be wired to your designated bank if it is
a member bank or a correspondent of a member bank of the Federal Reserve System.
There will be a $12 fee charged for all outgoing wires. Your bank may also
impose a fee upon receipt of the proceeds of a wire withdrawal. If the amount
to be wired is aggregated with the amounts to be wired to other shareholders and
sent to a predesignated account set up by your financial service representative,
the fee may be waived.
Existing shareholders may elect telephone redemption privileges or change
current instructions by sending written notice to Declaration Service Company,
with signature guarantee (as noted above) and with the name, address and account
number of the bank or broker to receive the redemption proceeds. Further
documentation may be required from corporations, fiduciaries, and institutional
investors.
TO REDEEM BY CHECK:
Upon receipt of a completed signature card and application, the Fund will
order imprinted checks. Checks may be drawn to the order of any payee. See "What
is the Declaration Cash Account Program" page ____ for details. Your account
continues earning daily dividends until withdrawal checks clear. You are subject
to the clearing bank's rules and regulations governing withdrawal checks. If a
check is presented against an account with insufficient funds, restricted funds,
or if a stop payment has been requested, there will be a charge of $15 levied
against the account.
If you have any questions about the available balance in your account, call
Declaration Service Company, toll free, at 1-800-423-2345 for information.
The Fund reserves the right to terminate, suspend or modify this service at
any time with respect to a particular investor or all investors.
IMPORTANT: Declaration Cash Account shares purchased with a check other
than a certified, treasurer's or cashier's check, will not be redeemed
until after the check issued in payment for such shares has cleared. The
Fund reserves the right to hold the funds until the purchaser's check
clears which may take up to 15 days. Shares which are purchased by
certified, treasurer's or cashier's check are not subject to the foregoing
restriction, but are available after 2 business days. Shares purchased by
Fedfunds wire received at the Fund by 11:00 A.M. (Eastern time) on a day
are available on that day. In any event, during the period prior to the
time shares are redeemed, dividends on such shares are accrued and paid as
provided herein and shareholders are entitled to exercise all other rights
of beneficial ownership.
______________________________________________________________________________
ACCURACY OF INVESTOR ACCOUNT INFORMATION
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
telephonic instructions, providing written confirmations of all such
transactions, and/or tape recording all telephonic instructions. ASSUMING
PROCEDURES SUCH AS THE ABOVE HAVE BEEN FOLLOWED, NEITHER DECLARATION
SERVICE COMPANY NOR THE FUND WILL BE LIABLE FOR ANY LOSS, COST, OR EXPENSE
FOR ACTING UPON AN INVESTOR'S TELEPHONE INSTRUCTIONS. WE SHALL HAVE
AUTHORITY, AS YOUR AGENT, TO REDEEM SHARES IN YOUR ACCOUNT TO COVER ANY
SUCH LOSS. As a result of this policy, the investor will bear the risk of
any loss unless the Fund has failed to follow procedures such as the above.
WHAT IS THE DECLARATION CASH ACCOUNT PROGRAM?
The Declaration Cash Account Program ("Declaration Cash Program") is a
program designed to integrate several financial services. It has one account
statement that reflects: (1) all activity in Declaration Cash Account, including
the unlimited and unique check-writing feature and telephone transfer of funds
between Declaration Cash Account and your broker or bank; and (2) purchases of
certain other assets through your financial services representative.
Account Statements
Each checkwriting account having one or more purchase or sales transactions
in any given month will receive a monthly statement. A monthly statement will be
mailed only if there has been a share purchase or redemption during the month.
Investors not receiving monthly account statements because of the lack of
account activity will receive quarterly statements. Non-checkwriting account
holders will receive statements on a quarterly basis only. After each redemption
(other than by check), a confirmation will be sent. Generally, monthly account
statements will be mailed by the fifth business day of the next month.
Shortly after the close of the calendar year, each account will receive an
account statement which includes a list of all transactions during the preceding
year.
______________________________________________________________________________
FEES
The costs of administering a fund like Declaration Cash Account are related
to two major factors - account size and the number of account transactions. The
smaller the account size, the less the ability of the account to provide
sufficient earnings to cover the fixed costs of operating Declaration Cash
Account. The greater the number of transactions, the greater the variable costs
of operation. The following fee schedule is designed to address these factors.
The administrative expense fee for Declaration Cash Account investors is an
annual fee of $64 and will be charged to an investor's account on a quarterly
basis. However, the fee will not be charged in any quarter in which the
average balance of the account is $2,500 or more. The fee is also charged to
the investor's account quarterly and will not be charged in any quarter in
which the balance of the investor's account averages $2,500 or more.
Declaration Cash Account is committed to providing maximum investment
flexibility for investors. This entails considerable expense. Most mutual
funds control expenses by imposing account size minimums thereby assuring a
large enough account base to absorb the fund's operating costs.
Declaration Cash Account does not have a minimum account size. Because
many Fund expenses are fixed, smaller accounts do not bear their fair share
of Fund expenses. Therefore, accounts with an average balance of less than
$2,500 will be charged an administrative expense fee. The administrative
expense fee will be paid to Declaration Service Company, which will reduce
transfer agency fees charged to the Fund by the amount of the
administrative expense fee received.
The expenses incurred in providing shareholder servicing includes, among
others, the costs of record keeping involved in maintaining the individual
shareholders accounts; the costs of preparing, printing and mailing account
statements and other reports to shareholders; the costs of maintaining a
shareholder servicing unit which assists in preparing shareholder communications
and answers questions from shareholders concerning their accounts and otherwise,
and the cost of personnel and equipment necessary to provide the above services.
An additional costly service is incurred in processing checks that are written
by individual shareholders against their accounts.
Investors may write checks in any amount at any time and without restriction
as to the number of checks that may be written. While there are no check
transaction charges, there will be an appropriate charge made for check printing
costs.
All check-writing accounts get the Fund's unique reporting system. The
account statement reflects to whom you wrote the check (the payee), as well as
the check number, dollar amount, and an 'expense code'. By writing an expense
code on the Declaration Cash Account check, the Account provides a monthly
listing and total of all the checks written for that particular expense. This
monthly expense report also shows the year-to-date totals. An expense report
providing a complete annual record of all expenses is automatically included on
the December year end account statement.
IN THE EVENT OF THE TERMINATION OF A DECLARATION CASH ACCOUNT PRIOR TO YEAR
END, THE BALANCE OF THE FEE FOR THE REMAINING MONTHS OF THE YEAR WILL BE CHARGED
AT TERMINATION AS OPERATING EXPENSE CHARGES ARE INCURRED BY THE FUND ON AN
ANNUAL BASIS.
INVESTORS WILL BE CHARGED SERVICE FEES FOR THE RETURN OF ANY PURCHASE
(DEPOSIT) CHECKS ($10) OR ELECTRONIC FUND TRANSFERS ($12); AND ALSO FOR
REDEMPTION CHECKS RETURNED FOR EITHER INSUFFICIENT OR RESTRICTED FUNDS ($15).
REDEMPTION IN CASH OR IN KIND
The Trust Indenture of Declaration Fund authorizes the Fund to pay
redemption proceeds in cash or in kind or partially in cash and partially
in kind. The Fund has filed a Notification of Election on Form N-18F-1
committing itself to paying cash on 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 or 1% of the net asset
value at the beginning of such period of the series of which the person
redeeming is a shareholder.
______________________________________________________________________________
DETERMINATION OF NET ASSET VALUE
The net asset value per share of Declaration Cash Account is determined by
subtracting its liabilities from its assets and dividing the remainder by the
number of outstanding shares. The net asset value per share is determined at
11:00 A.M., Eastern time on each weekday, with the exception of those holidays
on which the Federal Reserve Bank of Philadelphia is closed. Declaration Cash
Account's assets are determined by valuing the portfolio securities at amortized
cost. Generally, the value of securities comprising Declaration Cash Account's
portfolio vary inversely with prevailing interest rates.
______________________________________________________________________________
YIELD QUOTATION
The current yield of Declaration Cash Account may be obtained by calling
Declaration Service Company at 1-800-423-2345.
From time to time, Declaration Cash Account will advertise its
"yield" and "effective yield". The "yield" of Declaration Cash Account
refers to the income generated by an investment in Declaration Cash
Account over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized"; that is, the amount
of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage
of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in Declaration Cash
Account is assumed to be reinvested. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. See page of the Statement of Additional
Information for additional information concerning current and effective
yields.
______________________________________________________________________________
DAILY DIVIDENDS
Dividends will be declared from the net investment income of Declaration Cash
Account on each day that Declaration Fund is open for business to shareholders
of record as of 11:00 A.M., East Coast time. Income for Saturdays, Sundays and
holidays will be declared as a dividend on the subsequent business day. All
dividends will be automatically reinvested in additional shares each day and
posted to each shareholder's account to provide daily "compounding" of income.
The amount of dividends declared and paid fluctuates from day to day. If a
shareholder requests it, at the end of each month, the shares purchased with the
income dividends can be redeemed and the proceeds mailed. Also, on request of
the shareholder, any amount can be designated to be sent on a regular basis.
______________________________________________________________________________
TAX STATUS
The Fund intends to qualify Declaration Cash Account as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification relieves Declaration Cash Account of liability for
Federal income taxes to the extent its earnings are distributed in accordance
with the Code.
Qualification as a regulated investment company under the Code requires,
among other things, that Declaration Cash Account distribute to its
shareholders at least 90% of its investment company taxable income earned
during a fiscal year.In general,Declaration Cash Account's investment
company taxable income will be its taxable income, including interest,
subject to certain adjustments and excluding the excess of any net
long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year. The policy of Declaration Cash Account is to
distribute as dividends substantially all of its investment company taxable
income each year. Such dividends will be taxable as ordinary income to
Declaration Cash Account's shareholders who are not currently exempt from
Federal income taxes, whether such income or gain is received in cash or
reinvested in additional shares.(Federal income taxes for distributions to
an I.R.A., for example, are deferred under Section 408 of the Code). Such
dividends may also be subject to state income tax. It is anticipated that
none of the distributions will be eligible for the dividends received
deduction for corporations. Dividends declared in December of any year
payable to shareholders of record on a specified date in such month will be
deemed to have been received by the shareholders and paid by Declaration
Cash Account on the record date, provided such dividends are paid before
February 1 of the following year.
No part of the 1996 dividends was eligible for the deductions for dividends
received by corporations.
Shareholders will be advised at least annually as to the Federal income tax
status of distributions made to them during the year.
The Shares of Declaration Cash Account may be subject to county personal
property tax in Montgomery County, Pennsylvania based on taxable property held
and managed in Pennsylvania on the tax determination date. It is the intention
to attempt to manage the portfolio of Declaration Cash Account so that the Fund
will incur minimal or no county personal property tax liability.
The foregoing discussion is only a brief summary of some of the important tax
considerations generally affecting Declaration Cash Account and its shareholders
and is not intended as a substitute for careful tax planning. Accordingly,
investors in Declaration Cash Account should consult their tax advisers with
specific reference to their own tax situation.
It will be required, in certain cases, to withhold and remit to the United
States Treasury, 31% of dividends paid to any shareholder of Declaration Cash
Account who has failed to provide a tax identification number or who has
provided an incorrect number or who is subject to withholding by the Internal
Revenue Service for failure to properly include on his or her return, payments
of interest or dividends.
______________________________________________________________________________
GENERAL INFORMATION AND HISTORY
All shares, when issued for consideration as described herein, are fully paid
and non-assessable and have no preemptive or conversion rights.
The Fund may but is not required to hold annual meetings of shareholders.
The shares of the Fund outstanding have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election
of Trustees of Declaration Fund can elect all of the Trustees if they choose
to do so.
The Trustees of Declaration Fund shall call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees when
requested in writing to do so by the record holders of not less than 10% of the
outstanding voting securities of Declaration Fund.
Shareholder inquiries should be directed to the Fund at its address shown on
the cover.
______________________________________________________________________________
DECLARATION CASH ACCOUNT
FORMS
PAGE ____ DECLARATION CASH ACCOUNT APPLICATION
PAGE ____ CERTIFICATION & AUTHORIZATION FORM
FOR A CORPORATION, TRUST, OR PARTNERSHIP
PAGE ____ DECexpres APPLICATION
Part B
DECLARATION FUND
_______________________________________________
STATEMENT OF ADDITIONAL INFORMATION
_______________________________________________
CONCERNING
DECLARATION CASH ACCOUNT
MAY 1, 1997
_______________________________________________
This Statement is not a prospectus but should be read in conjunction
with the current Prospectus (dated May 1, 1997) of Declaration Cash Account.
To obtain a copy of the Prospectus, please call the Investor Information
Department at 1-800-423-2345.
TABLE OF CONTENTS
Page
Declaration Fund.................................................
Declaration Cash Account -
Investment Objective and Policies.............................
Investment Limitations...........................................
Calculation of Yield -
Declaration Cash Account......................................
Trustees and Officers of Declaration Fund........................
Additional Declaration Fund Executive Officers...................
Management, Administrative and Advisory Services.................
Declaration Cash Account.........................................
General Provisions of the Advisory Agreement
for Declaration Cash Account..................................
Renewal of Advisory Agreement....................................
Agreement Pursuant to the Distribution Plan for
Declaration Cash Account......................................
Brokerage - Declaration Cash Account.............................
Purchase and Redemption of Declaration Cash Account
Shares.......................................................
Shareholder Services.............................................
Signature Guarantees.............................................
Determination of Net Asset Value -
Declaration Cash Account......................................
Daily Dividends - Declaration Cash Account.......................
Tax Status.......................................................
Transfer Agent and Custodian.....................................
Independent Public Accountants...................................
General Information and History..................................
Control Persons and Principal Holders of
Declaration Cash Account Securities .........................
Appendix.........................................................
DECLARATION FUND
Declaration Fund is an open-end, diversified, management investment
company. Originally incorporated in Pennsylvania on April 9, 1981,
Declaration Fund changed its form of organization to a business trust
effective, July 9, 1984. It became registered with the Commonwealth of
Pennsylvania as a Pennsylvania Business Trust on May 16, 1990.
Declaration Fund is a series fund - Declaration Cash Account (hereafter
sometimes "Cash Account" or "Fund") is a series of Declaration Fund.
For more information, please see the Cash Account Prospectus.
DECLARATION CASH ACCOUNT
INVESTMENT OBJECTIVE AND POLICIES
The following statement of policies supplements the description of the
investment objective and policies set forth in the Declaration Cash Account
Prospectus.
Declaration Fund's Board of Directors will undertake to assure, to the
extent reasonably practical, taking into account current market conditions
affecting Cash Account's investment objectives, that its net asset value will
not deviate from $1.00 per share;
In order to accomplish this, Cash Account shall maintain a dollar-
weighted, average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per share. To this end, Cash Account
will not:
(i) purchase any instrument with a remaining maturity of greater than
397 calendar days, or
(ii) maintain a dollar-weighted average portfolio maturity that exceeds
90 days.
Credit Quality of Portfolio
Cash Account will limit its portfolio investments to those United States
dollar denominated instruments that Declaration Investment Advisors, Inc.
(Cash Account's investment manager) determines present minimal credit risks
(which determination must be based on factors pertaining to credit quality in
addition to the rating assigned to such instruments by a nationally
recognized statistical rating organization and which at the time of
acquisition are Eligible Securities.
Portfolio Diversification
(i) Immediately after the acquisition of any security (other than a
Government Security as defined in the 1940 Act) Cash Account shall not have
invested more than 5% of its total assets (i.e., the total amortized cost of
its assets) in securities issued by the issuer of the security.
(ii) It may invest in both First Tier Securities and Second Tier
Securities as defined. In the event that an investment is in a Second Tier
Security, Cash Account shall not have invested more than:
(a) the greater of 1% of its total assets or one million dollars
in securities issued by that issuer which, when acquired by Cash Account,
were Second Tier Securities; and
(b) 5% of its total assets in securities which, when acquired by
Cash Account, were Second Tier Securities.
(iii) It may invest in Unrated Securities that are determined by the
Board of Trustees to be of comparable quality to securities which are
Eligible Securities.
For definitions of Eligible Security, First Tier Security, Second
Tier Security and Unrated Security, see the Appendix to this Statement of
Additional Information.
INVESTMENT LIMITATIONS
Certain limitations have been adopted which are designed to reduce the
exposure of Cash Account in certain situations. Thus, Cash Account may not:
(1) Invest in commodities or commodity contracts or purchase or sell
real estate;
(2) Write, purchase or sell warrants, put or call options, or
combinations thereof;
(3) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(4) Make loans (except to the extent that the entry into repurchase
agreements or the acquisition of variable amount master demand notes may be
considered loans) to other persons except by the purchase of the debt
obligations in which Cash Account is authorized to invest in accordance with
its investment policies;
(5) Purchase securities on margin or sell securities short;
(6) Purchase more than 10% of the outstanding voting securities of any
issuer, except securities issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities;
(7) Purchase securities of any issuer except obligations of the U.S.
Government and its agencies and instrumentalities if as a result, more than
5% of the value of the Cash Account total assets would be invested in the
securities of such issuer;
(8) Purchase or retain securities of an issuer if an officer or
director of such issuer is an Officer or Trustee of Declaration Fund or an
officer or director of an investment advisor of Declaration Fund and one or
more of such Officers,Directors or Trustees of Declaration Fund or an
investment advisor of Declaration Fund owns beneficially more than one half
percent of the shares or securities of such issuer and all such Trustees,
Directors and Officers owning more than one half percent of such shares or
securities together own more than 5% of such shares or securities;
(9) Participate with others in any trading accounts or act as an
underwriter of securities of other issuers;
(10) Pledge, mortgage or hypothecate the Cash Account assets to an extent
greater than 5% of the value of its total assets, and then only to secure
temporary borrowings;
(11) Borrow money (except from banks for temporary, emergency purposes
and then only in amounts of up to 20% of its net assets): no securities will
be purchased for Cash Account if such borrowings exceed 5% of its net assets:
any borrowings over 5% of the net assets of Cash Account will be made solely
to facilitate the orderly sale of portfolio securities should abnormally heavy
redemption requests occur;
(12) Invest more than 10% of Cash Account's assets in securities which
are not readily marketable, including obligations of small banks and savings
and loan institutions;
(13) Invest for the purpose of controlling management of any company;
(14) Invest in securities of other investment companies except by
purchase in the open market involving only customary broker's commissions or
as part of a merger, consolidation, reorganization or purchase of assets
approved by Cash Account's shareholders.
(15) Invest in securities of companies which have (with predecessors) a
record of less than three years continuous operation, except investments in
obligations guaranteed by the U.S. Government, or issued by its agencies or
instrumentalities;
(16) Concentrate its investments in a particular industry, although it
may invest up to 25% of its total assets (taken at value) in the securities
of issuers, all of which conduct their principal business activities in the
same industry, provided that this limitation does not apply to obligations
issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities.
(17) Purchase any securities of a type other than those securities
described in the Prospectus;
(18) Issue senior securities.
The above referenced investment limitations are considered at the time
that portfolio securities are purchased.
The above restrictions are fundamental policies and may not be changed
without a vote of a majority of Cash Account's outstanding voting securities.
The vote of a majority of the outstanding voting securities, means the vote,
at an annual or special meeting of the shareholders, duly called, (a) of 67%
or more of the voting securities present at the meeting, if the holders of 50%
of the outstanding voting securities of Cash Account are present or
represented by proxy; or (b) of more than 50% of the outstanding voting
securities of Cash Account, which ever is less.
CALCULATION OF YIELD
OF
DECLARATION CASH ACCOUNT
The current yield of Cash Account is calculated daily on a base period
return of a hypothetical account having a beginning balance of one share for
a particular seven (7) day period. The return is determined by dividing the
net change (exclusive of any capital changes in such account) by its average
net asset value for the period, and then multiplying it by 365/7 to get the
annualized current yield. The calculation of net change reflects the value
of additional shares purchased with the dividends of Cash Account, including
dividends on both the original share and on such additional shares purchased
with the dividends from Cash Account. An effective yield, which reflects the
effects of compounding and represents an annualization of the current yield
with all dividends reinvested, may also be calculated for Cash Account by
adding 1 to the base period return, raising the sum to the 365/7 power, and
subtracting 1 from the result.
Set forth below is an example, for purposes of illustration only, of the
current and effective yield calculations for Cash Account for the seven (7)
day base period ending December 31, 1996:
12/31/96
--------
Value of account at beginning of period $1.00000
Value of same account at end of period 1.00049
Net change in account value .00049
Annualized current net yield 2.56%
(Net Change x 365/7)/
average net asset value
Effective yield 2.59%
(Net Change + 1) 365/7 power -1
Average weighted maturity of investments 14 days
The net asset value of a share of Cash Account is $1.00 and the value of
the share has remained at that amount since the initial offering. On the
other hand, Cash Account's yield will fluctuate. The annualization of a
week's dividends is not a representation as to what an investment in Cash
Account will actually yield in the future. Actual yields will depend on such
variables as investment quality, average maturity,the type of instruments
selected for investment, changes in interest rates on instruments, changes in
expenses and other factors. Yields are one basis investors may use to
analyze Cash Account and other investment vehicles; however, yields of other
investment vehicles may not be comparable because of the factors set forth in
the preceding sentence, differences in the time periods compared, and
differences in the methods used in valuing portfolio instruments, computing
net asset value and calculating yield.
No charge is made for redemptions. Any redemption may be more or less
than the shareholder's cost depending on the market value of the securities
held by Cash Account.
TRUSTEES AND OFFICERS OF DECLARATION FUND
Arthur S. Filean
Trustee
Mr. Filean is a Trustee of Declaration Fund. Mr. Filean has served as a
Trustee of Declaration Fund during the period from December 8, 1988 to the
present. From 1983 to 1990, Mr. Filean served as a Second Vice President of
Principal Mutual Life Insurance Company. From 1976 to the present, he has
served as Secretary of the mutual funds making up the Princor Mutual Fund
Group: he is currently Vice President and Secretary of each of the Princor
Funds. From 1981-1986 he served as President, Treasurer and Director of
Princor Financial Services Corporation (a principal underwriter and dealer
for mutual funds). Age 58.
William F. Lee, Jr.
Trustee
Mr. Lee is a Trustee of Declaration Fund. Mr. Lee has served as a
Trustee of Declaration Fund during the period from December 8, 1988 to the
present. Since 1960, Mr. Lee has owned and is principal of his own insurance
and employee benefit firm - William F. Lee, Jr. CLU Chartered Financial
Consultant. He is a member and past president of both the Philadelphia
Estate Planning Council, and the Philadelphia Association of Advanced Life
Underwriting. He is past president of the Swarthmore College Alumni
Association and is currently a member of the Board of Managers of Swarthmore
College. Age 58.
Stephen B. Tily, III*
Chairman of the Board, President and Trustee
Mr. Tily is a Trustee of Declaration Fund. Mr. Tily has served as a
Trustee of Declaration Fund during the period from September, 1988 to the
present. He has served as President of Declaration Fund since December,
1988. From 1983 to December, 1988, he served as Vice President of
Declaration Fund: as Chairman of the Board of Directors and Secretary of
Declaration Investment Advisors, Inc., (the investment manager of Declaration
Cash Account, a series of Declaration Fund) and as Chairman of the Board of
Declaration Holdings, Inc. (the then parent company of Declaration Investment
Advisors, Inc.). From 1981 to January 1, 1992, Mr. Tily served as President,
Chief Executive Officer and a Director of Delaware Charter Guarantee & Trust
Company. He became Chairman and Chief Executive officer of Delaware Charter
Guarantee & Trust Company on January 1, 1992. From 1977 to 1981 he served
as Chief Operating Officer and a Director of that Company. Effective
December 31, 1993, Mr. Tily terminated his relationship with Delaware Charter
Guarantee and Trust Company. Age 59.
Thomas S. Stewart, III
Trustee
Mr. Stewart became a Trustee of Declaration Fund in 1994. Prior to
his retirement, Mr. Stewart acted as Chairman of Provident Capital Management
Inc. and Advanced Investment Management, Inc. (investment management firms)
during the period from 1986 until 1994. During the period, 1986-1989, Mr.
Stewart served as Executive Vice President of Provident National Bank,
Philadelphia, Pennsylvania and as Manager of the Bank's Trust Division. He
was formerly Chairman of both the Executive Committee and the Asset
Management Committee of the Trust and Investment Management Division of the
American Bankers Association, President of the Corporate Fiduciaries
Association of Philadelphia, and a Director of Philadelphia Financial
Analysts, Inc. Age: 58.
ADDITIONAL DECLARATION FUND EXECUTIVE OFFICERS
Terence P. Smith
Secretary
From September, 1988 to the present, Mr. Smith has served as President
and Chief Operating Officer of the companies of the Declaration Group. He is
also a Director of Declaration Distributors, Inc., a registered
broker/dealer. From September, 1987 to September, 1988 he served as Vice
President-Operations of Declaration Holdings, Inc. (the then parent company
of Declaration Investment Advisors, Inc., the investment manager of
Declaration Cash Account, a series of Declaration Fund). From 1984 to 1987,
Mr. Smith was Executive Vice President of Review Management Corp. (investment
manager for the former The Over-The-Counter Securities Group, Inc. and
the distributor of its shares). From 1981 to 1984 he served on the tax and
audit staff of the Philadelphia office of Peat Marwick Main & Co.
(international accounting firm). Mr. Smith is a certified public accountant.
Age 50.
Mr. Martin M. Whalen and Ms. Linda K. Coyne are Assistant Secretaries
of Declaration Fund. Mr. Paul L. Giorgio is Treasurer of Declaration Fund.
The Board of Trustees of Declaration Fund has overall responsibility for
the management of Declaration Fund. For the year ended December 31, 1996,
$10,207 was paid in Board member fees and expenses; Declaration Fund did not
pay any officers' salaries. The address of each Trustee and Officer of
Declaration Fund is: Suite 6160, 555 North Lane, Conshohocken, PA 19428.
Each Trustee who is an "interested person" of Declaration Fund, is
designated by an asterisk.
MANAGEMENT, ADMINISTRATIVE AND ADVISORY SERVICES
DECLARATION CASH ACCOUNT
Declaration Investment Advisors, Inc. was organized as a Pennsylvania
corporation in 1976. Its address is Suite 6160, 555 North Lane,
Conshohocken, PA 19428. Its Directors and principal officers are: Stephen
B. Tily, III, Chairman and Secretary; Daniel R. Butler, Director and Chief
Executive Officer, and Terence P. Smith, President and Chief Operating
Officer. The address of each of these persons is Suite 6160, 555 North Lane,
Conshohocken, PA 19428.
Declaration Investment Advisors, Inc. ("Declaration I/A" or the
"Advisor") is a wholly-owned subsidiary of Declaration Holdings, Inc. ("D/H").
D/H is controlled by WMB Holdings, Inc. and Stephen B Tily, III individually
and as beneficiary of a profit sharing plan. Stephen B. Tily, III, is a
control person of D/H and is a Fund Trustee, Chairman of the Board and
President of the Fund.
The Investment Advisory Agreement ("Advisory Agreement") between
Declaration Fund, with respect to Declaration Cash Account, and Declaration
I/A dated December 8, 1988, was most recently approved by the requisite
majority of Declaration Fund's Trustees including by a majority of the Fund's
Trustees, who are not parties to the Agreement or interested persons of any
such party, on November 20, 1996 for an additional one year term to end on
December 8, 1997.
Declaration I/A has agreed to furnish, without expense to Declaration
Fund, the services of those of Declaration I/A's officers and full-time
employees who may be duly elected executive Officers or Trustees of
Declaration Fund, subject to their individual consent to serve and to any
limitations imposed by law, and shall pay all of the salaries, fees and
expenses of Declaration Fund's interested Trustees, President, Vice
Presidents, Secretary and Treasurer and all personnel who perform services
related to research and investment activities pertaining to Declaration Cash
Account.
The management fee for services rendered to Declaration Fund with respect
to Declaration Cash Account during 1994 was $195,703, during 1995 was $190,505
and during 1996 was $186,581.
GENERAL PROVISIONS OF THE ADVISORY AGREEMENT
DECLARATION CASH ACCOUNT
The Fund shall pay all administrative and other costs and expenses
directly attributable to its operations and transactions, including, without
limitation, transfer agent and custodian fees; legal and audit expenses;
expenses relating to the redemption of its shares; expenses of holding annual
shareholder meetings; expenses relating to the servicing of shareholder
accounts; fees and expenses incurred in connection with the printing and
distribution of its proxy statements, stockholders' reports and notices;
trade association fees; cost of supplies and postage; fees and expenses
relating to the registration of the Fund's shares under federal and state
laws and regulations; applicable federal, state and local taxes; insurance
premiums; the fees and expenses of the non-interested Trustees; the cost of
personnel necessary to maintain the Fund's records, perform daily pricing and
service shareholder requests; interest and brokerage commission; and such
non-recurring expenses as may arise including actions, suits or proceedings
to which the Fund is a party and the legal obligation for the indemnification
of Declaration Fund's Officers and Trustees.
RENEWAL OF ADVISORY AGREEMENT
The Advisory Agreement will continue from year to year, unless sooner
terminated; provided that it is approved at least annually, either by vote of
a majority of Declaration Fund's Trustees, including by the vote of a majority
of the Trustees who are not parties to the Agreement or "interested persons"
of any such party, cast in person at a meeting called for the purpose of
voting on such approval, or by vote of a majority of the outstanding voting
securities of Declaration Fund respecting Declaration Cash.
The Advisory Agreement is not assignable and may be terminated by either
party to the Agreement without penalty on 60 days' notice, either by a
majority vote of Declaration Fund's outstanding voting securities respecting
the particular Fund or by a majority of the Trustees of Declaration Fund.
THE DISTRIBUTION PLAN
FOR
DECLARATION CASH ACCOUNT
On August 16, 1988, the Board of Trustees of Declaration Fund approved a
Distribution Plan for the Fund. At that time, Declaration Fund offered only
one class of shares. Such approval was by a majority of those Trustees who
were not interested persons of the Fund and who had no direct or indirect
financial interest in the operation of the Plan (the "Rule 12b-1 Trustees").
The Plan made clear that the fee payable under the Plan could only be used
for sales or promotional services or activities in connection with the
distribution of Declaration Fund's shares, and for no other purpose. On
December 8, 1988, a majority of the outstanding voting securities of the Fund
approved the Plan.
On May 15, 1990, certain technical and non-material changes were made in
the Distribution Plan to reflect the change of the Fund's name to Declaration
Fund from Consolidated Asset Management Fund and the reclassification of the
Fund's outstanding shares to shares of Declaration Cash Account.
On November 20, 1996, the Fund's Board of Trustees approved the
continuation of the Plan for an additional term to end on December 8, 1997.
Pursuant to the terms of the Plan, Declaration Fund will pay the costs
of distributing Declaration Cash Account's shares. Such distribution costs
cannot exceed annually, in total, an amount equal to .25% of Declaration Cash
Account's average daily net assets (the "distribution fee"). The sums then
expended by Declaration Fund are to be reimbursed to Declaration Fund from
the portfolio assets of Declaration Cash Account. Such distribution fee can
be used for the following purposes: (1) for payment to brokers and other
persons engaged in the distribution of Declaration Cash Account shares and
who administer the accounts of shareholders; (2) to pay advertising costs;
(3) to pay the compensation of persons engaged in the marketing of the
Declaration Cash Account shares and other marketing activities; (4) to pay
the costs of distribution of materials and information concerning Declaration
Fund and the shares of Declaration Cash Account, including the Prospectus,
Statement of Additional Information, shareholder updates and sales literature
and the costs incurred in the preparation, printing and mailing of such
materials and information; and (5) to pay the costs incurred in sales
presentations and promotions made to specific market segments such as
professional associations, employee groups and the memberships of other
organizations.
As required by the Rule, the Rule 12b-1 Trustees are to nominate
replacements for non-interested Trustees, when and if needed, during the
existence of the Plan.
The Board of Trustees of Declaration Fund regularly monitors the
operation of the Plan in order to assess whether it is fulfilling its
intended objectives and whether its continuation is in the best interests of
Declaration Fund and the shareholders of Declaration Cash Account. The Plan
cannot be amended to increase materially the amount that may be paid by
Declaration Fund without the prior approval of a majority of the outstanding
voting securities of Declaration Cash Account.
A quarterly report of 12b-1 expenditures is provided to the Board
of Trustees.
THE AGREEMENT PURSUANT TO THE DISTRIBUTION PLAN
FOR DECLARATION CASH ACCOUNT
On April 22, 1992, a majority of the Board of Trustees including a
majority of the Rule 12b-1 Trustees approved an Agreement pursuant to the
Distribution Plans for Declaration Cash Account and certain other funds
between Declaration Fund and Declaration Distributors, Inc. ("Declaration
Distributors"), whereby Distributors would aid in the distribution of the
shares of the funds. Declaration Distributors would be reimbursed for the
following distribution expenses: payments to qualified broker-dealers and
others in respect of the sale of shares of the funds and account maintenance
fees; compensation and expenses of employees of the Distributor who engage in
or support distribution of Fund shares or render shareholder support services
not otherwise provided by Declaration Fund's transfer and shareholder
servicing agent; formulation and implementation of marketing and promotional
activities, and preparation, printing and distribution of supplementary sales
materials and the printing and distribution of Prospectuses, Statements of
Additional Information and shareholder reports for recipients other than
existing shareholders of the Funds.
Declaration Fund shall pay the following expenses: (i) for the preparation,
printing and distribution to existing Declaration Cash Account shareholders of
Prospectuses and Statements of Additional Information; (ii) preparation,
printing and distribution of shareholder reports and other communications to
shareholders; (iii) registration of the shares of Cash Account under the
federal securities laws; (iv) qualification of the shares of Cash Account
for sale in such states as the Distributor and Declaration Fund may approve;
(v) qualification of Declaration Fund as a dealer or broker under state law as
well as qualification of Declaration Fund as an entity authorized to do
business in certain states where necessary; (vi) maintaining facilities for
the issue and transfer of shares; (vii) supplying information, prices and
other data to be furnished by Declaration Fund; and (viii) taxes applicable to
the sale or delivery of the shares of the Fund or certificates therefor.
On November 20, 1996, the Board of Trustees approved the Agreement
pursuant to the Distribution Plan for an additional one-year period ending on
December 8, 1997.
BROKERAGE - DECLARATION CASH ACCOUNT
It is expected that some purchases and sales of portfolio securities
transacted with respect to Cash Account will be principal transactions
including some portfolio securities which may be purchased directly from an
issuer. Usually there will be no brokerage commissions paid in connection
with such purchases. Purchases from underwriters of portfolio securities
will include a commission or concession paid by the issuer to the
underwriter, and in purchases from dealers, the dealers will look to the
spread between the bid and asked price for their compensation. Other
purchases and sales, particularly with respect to certificates of deposit,
may require payment of a brokerage commission.
In the purchase and sale of portfolio securities, the Advisor's sole
consideration is the ability of the broker to promptly execute and clear
orders in an efficient manner at the best asked prices. Brokers will be
selected by the Advisor solely on this basis: Declaration I/A will seek to
either negotiate commissions or pay the lowest commission reasonable under the
circumstances. For the fiscal years ended December 31, 1994, December 31,
1995, and December 31, 1996, no brokerage commissions were paid on portfolio
transactions.
By virtue of certain restrictions on the maturities of the securities
purchased, the annual portfolio turnover with respect to Cash Account will
be relatively high. However, portfolio turnover is not expected to have a
material adverse effect on net income. The portfolio turnover rate with
respect to Cash Account is expected to be zero for regulatory reporting
purposes.
PURCHASE AND REDEMPTION OF DECLARATION CASH ACCOUNT SHARES
Declaration Fund reserves the right, in its sole discretion, (i) to
suspend the offering of a Fund's shares, (ii) to reject purchase orders when
in the judgment of management, such rejection is in the best interests of
the Fund, and (iii) to reduce or waive the minimum for initial and
subsequent investments for certain fiduciary accounts, such as employee
benefit plans or under circumstances where certain economies can be achieved
in sales of a Fund's shares.
Fractional shares will be issued to three decimal places. Share
certificates will not be issued unless requested. This saves the
shareholders the cost and trouble of providing safekeeping for share
certificates, and saves Declaration Fund the cost of issuing such
certificates.
Shareholders in Declaration Cash Account will receive a transaction
confirmation for each transaction other than for a regular mail
deposit/purchase of shares or a redemption of shares through use of
checkwriting drafts. All mail deposit/purchase and/or draft redemptions will
be confirmed by monthly statement. In the event there is no purchase or
redemption activity in an account, other than the reinvestment of daily
dividends, an investor will receive an account statement only at the end of
each quarter-yearly period.
Declaration Fund may suspend redemption privileges or postpone the date
of payment on redemption of Fund shares (i) during any period that the New
York Stock Exchange is closed, or trading on the Exchange is restricted, (ii)
during any period when an emergency exists as a result of which it is not
reasonably practicable for Declaration Fund to dispose of securities owned by
it, or to fairly determine the value of its net assets, and (iii) for such
other periods as the U.S. Securities and Exchange Commission may permit.
Shares of Declaration Fund are sold and redeemed without charge except,
in the case of Cash Account, for the balance of any administrative fee that
may be due. However, institutional investors purchasing or holding Fund
shares for their customers' accounts may charge customers for cash management
and other services provided in connection with their accounts including, for
example, account maintenance fees, compensating balance requirements or fees
based upon account transactions, assets or income. A customer should,
therefore, carefully consider the terms of his or her account with an
institution before purchasing Fund shares. An institution purchasing or
redeeming Fund shares on behalf of its customers is responsible for
transmitting orders in accordance with its customer agreements.
Proceeds paid upon redemption may be more or less than the shareholder's
cost depending on each Fund's net asset value per share at the time of
redemption.
SIGNATURE GUARANTEES
To protect your account, signature guarantees are required for certain
redemptions. Signature guarantees enable Declaration Fund to be satisfied
that you are the person who has authorized a redemption from your account.
The signature guarantee must appear either: (1) on the share
certificate (if one has been issued), or on the written request for
redemption, or (2) on a separate instrument for assignment ("stock power"),
which should specify the total number of shares to be redeemed. Please refer
to the Prospectus of Declaration Cash Account for the type of signature
guarantee that will be required.
DETERMINATION OF NET ASSET VALUE
CASH ACCOUNT
It is the policy of Declaration Fund to attempt to maintain a net asset
value of $1.00 per share for the shares of Cash Account for purposes of sales
and redemptions. The instruments held in the portfolio of Cash Account are
valued on the basis of amortized cost which does not take into account
unrealized capital gains or losses. This involves valuing an instrument at
cost and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument. While this method provides certainty
in valuation, it may result in periods during which value, as determined by
amortized cost, is either higher or lower than the price that would be
received if the instrument was sold. During periods of declining interest
rates, the daily yield on shares of Cash Account, computed as described
above, may tend to be higher than a like computation made by a fund with
identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio instruments.
Thus, if the use of amortized cost resulted in a lower aggregate portfolio
value on a particular day, a prospective investor in Cash Account would be
able to obtain a somewhat higher yield than would result from investment in a
fund utilizing solely market values, and existing Cash Account investors
would receive less investment income. The converse would apply in a period
of rising interest rates.
The valuation of Cash Account's instruments based upon their amortized cost
and the commitment to attempt to maintain Cash Account's per share net asset
value of $1.00 is authorized by the provisions of Rule 2a-7 under the 1940
Act. In compliance with the terms of the Rule, the Board of Trustees has
agreed, as a particular responsibility within the overall duty of care owed to
Cash Account shareholders, to establish procedures reasonably designed to
stabilize the net asset value per share, as computed, for the purposes of
sales and redemptions at $1.00 per share, taking into account current market
conditions and Cash Account's investment objective. These procedures include
periodic review (when the Board of Trustees deems appropriate and at such
intervals as are reasonable in light of current market conditions) of the
relationship between amortized cost value per share and a net asset value per
share based upon available indications of market value. In such review, all
portfolio securities including securities with maturities of less than 60 days
must be marked to market for purposes of computing market deviation.
Other investments and assets are valued at fair market value as
determined in good faith by the Board of Trustees or its designee(s).
In the event of a difference of over 1/2 of 1% between Cash Account's
net asset value based upon available market quotations or market equivalents
and its per share net asset value based on amortized cost, the Board of
Trustees will promptly consider what action, if any, should be taken. The
Board of Trustees will also take such action, as it deems appropriate, to
eliminate or to reduce, to the extent reasonably practicable, any material
dilution or other unfair results which might arise from differences between
the two methods of value. Such action may include redemption in kind,
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity, withholding dividends,
or utilizing a net asset value per share as determined by using available
market quotations. See "Daily Dividends" below.
DECLARATION CASH ACCOUNT - DAILY DIVIDENDS
Declaration Fund will declare and automatically invest dividends from
the net investment income of Cash Account on each day that Declaration Fund
is open for business for shareholders of record as of 11:00 A.M., East Coast
time. Income for Saturdays, Sundays, and holidays will be declared as a
dividend on the next succeeding business day. The amount of dividends
declared and paid fluctuates from day to day. Dividends are automatically
reinvested at net asset value in additional shares. Shareholders of Cash
Account will receive periodic transaction summaries of their accounts,
including information about dividends reinvested or paid.
Shareholders who make the request may have their dividends paid to them
monthly in cash. For such shareholders, the shares reinvested and credited
to their account during the month will be redeemed promptly after the end of
the month and the proceeds paid to them by check.
Net income, for dividend purposes, is the sum of: (1) net investment
income, which consists of the interest earned on Cash Account's investments
(adjusted for amortization of original issue, market discounts or premiums ),
less the estimated expenses of Declaration Fund; and (2) gains or losses
realized on the sale of portfolio securities. Net income will be so
calculated immediately prior to the determination of the Fund's net asset
value per share (see "Determination of Net Asset Value").
The Board of Trustees of Declaration Fund may revise the above dividend
policy, or postpone the payment of dividends, if Declaration Fund should have
or anticipate any large unexpected expenses, losses or fluctuations in net
assets with respect to Cash Account that, in the opinion of the Board of
Trustees, might have a significant effect on shareholders. The shareholders
will be notified of any such action taken by the Board of Trustees.
TAX STATUS
The following is only a summary of certain tax considerations generally
affecting Declaration Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of shareholders, and the discussion here and in the Prospectus is
not intended as a substitute for careful tax planning. Investors in
Declaration Fund should consult their tax advisors with specific reference to
their tax situation.
In order to qualify for tax treatment as a regulated investment company
under the Code, a fund is required, among other things, to derive less than
30% of its gross income from the sale or other disposition of securities held
for less than three months. Interest (including original issue plus accrued
market discount) received at maturity or disposition of a security held for
less than three months will not be treated as gross income derived from the
sale or other disposition of such security within the meaning of this
requirement.
Since all of a Fund's net investment income is expected to be derived
from earned interest, it is anticipated that no part of any distribution will
be eligible for the dividends received deduction for corporations. It is not
expected that Cash Account will realize long-term capital gains and,
therefore, it does not contemplate payment of any "capital gains dividends"
as described in the Code.
It will be required, in certain cases, to withhold and remit to the
United States Treasury, 31% of dividends paid to any Fund shareholder who has
failed to provide a tax identification number, or who has provided an
incorrect number, or who is subject to withholding by the Internal Revenue
Service for failure to properly include on his or her return, payments of
interest or dividends.
In those states and localities which have income tax laws, the treatment
of Cash Account and its shareholders and Declaration Fund may differ under
such laws from the treatment under Federal income tax laws. Shareholders are
advised to consult their tax advisers concerning the application of state and
local taxes.
TRANSFER AGENT AND CUSTODIAN
Declaration Service Company, an affiliated entity of Declaration I/A,
serves as Declaration Fund's transfer agent, dividend disbursing and
shareholder servicing agent, with respect to Declaration Cash Account.
CoreStates Bank, N.A., has been retained to act as Custodian of the
portfolio assets of Cash Account. The Agreement between Declaration Fund and
the Custodian provides, among other things, that the Custodian shall hold and
deliver, upon instructions from Declaration Fund, all securities and cash
placed with it; that all proceeds from the sale of Cash Account shares and
securities in the portfolio of Cash Account shall be paid to the Custodian;
and money disbursements shall be made by the Custodian in accordance with
orders from Declaration Fund. All assets will be held by the Custodian
subject to approval of the Board of Trustees. CoreStates Bank, N.A. may
employ another bank as agent to hold certain securities of Cash Account on
its behalf.
INDEPENDENT PUBLIC ACCOUNTANTS
Sanville & Company, Philadelphia, Pennsylvania, has been selected as
independent public accountants for Declaration Fund. The financial statements
included in the Prospectus have been included in reliance on the report of
Sanville & Company, given on the authority of said firm as experts in
auditing and accounting.
GENERAL INFORMATION AND HISTORY
Declaration Fund is authorized pursuant to the terms of the Declaration
of Trust, to issue an unlimited number of units of beneficial interest
("shares").
Each share in a particular fund series has an equal pro-rata interest in
the fund series and each share has identical dividend, liquidation and other
rights and preferences, except that each share will have voting and dividend
and distribution rights attributable to the fund with respect to which it has
been issued.
Shareholders of each fund series will have the right to vote on matters
relating to the investment management agreement, changes in investment
policies and restrictions relating to the particular fund series, and on all
other matters requiring shareholder approval. Fractional shares have
proportional voting rights.
All shares, when issued for consideration, as described in the
Prospectus, are fully paid and non-assessable and will have no preemptive
or conversion rights. Outstanding shares of Declaration Fund have no
cumulative voting rights.
Martin V. Miller, Esq., will pass on certain legal matters in connection
with the shares offered by Declaration Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES OF CASH ACCOUNT
No person is known to own 5% or more of Cash Account's outstanding shares.
The amount of Declaration Cash Account stock owned by all Trustees and
Officers of Declaration Fund as a group is less than 1%.
<PAGE>
<TABLE>
DECLARATION CASH ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<CAPTION>
ANNUALIZED
YIELD ON AMORTIZED
PURCHASE MATURITY COST AND
PRINCIPAL AMOUNT AND DESCRIPTION DATE DATE VALUE
- -------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
COMMERCIAL PAPER (99.5%)
$ 270,000 Abbott Laboratories ............... 5.90% 01/07/97 $ 269,734
270,000 Air Products ...................... 5.50% 02/07/97 268,474
270,000 AT&T Company ...................... 5.55% 01/10/97 269,625
270,000 E.I. DuPont ....................... 5.50% 01/22/97 269,134
1,500,000 General Electric Capital .......... 5.37% 01/03/97 1,499,553
270,000 Heinz (H.J.) Company .............. 5.55% 01/31/97 268,751
270,000 PepsiCo Incorporated .............. 5.50% 01/31/97 268,763
1,800,000 Pioneer Hi-Bred International, Inc. 5.50% 01/15/97 1,796,255
270,000 Weyerhaeuser Mortgage Company ..... 6.00% 01/08/97 269,685
----------
Total Commercial Paper ......... 5,179,974
----------
Total Amortized Cost and Value
for Financial Reporting and
Income Tax Purposes (99.5%)... $5,179,974
----------
OTHER ASSETS AND LIABILITIES (0.5%)
Other assets .................................. $ 97,142
Other liabilities ............................. ( 70,031)
----------
Total Other Assets and
Liabilities .................. 27,111
----------
NET ASSETS (100%)
Applicable to 5,207,085 outstanding shares of
beneficial interest (unlimited authorization
-- no par value) ............................ $5,207,085
==========
Net asset value (offering and redemption price
per share) .................................. $1.00
=====
</TABLE>
See notes to financial statements.
2
<PAGE>
DECLARATION CASH ACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
Investment Income:
Interest ................................................ $ 1,930,284
---------
Total Investment Income ........................... 1,930,284
---------
Expenses:
Advisory and management fees (Note 2) ................... 186,581
Audit fees .............................................. 13,975
Custodian fees .......................................... 21,329
Distribution fees (Note 2) .............................. 4,567
Insurance ............................................... 20,266
Legal ................................................... 7,271
Postage ................................................. 6,555
Pricing and blue sky administration fees (Note 2) ....... 51,000
Printing ................................................ 22,904
Registration fees ....................................... 28,984
Shareholder servicing costs ............................. 54,930
Transfer agent fees (Note 2) ............................ 731,464
Trustee fees and expenses ............................... 10,207
Miscellaneous ........................................... 15,246
----------
Total Expenses ...................................... 1,175,279
Expense Reimbursement By Investment Advisor
and Service Company (Note 2) ...................... ( 430,201)
----------
Net Expenses ........................................ 745,078
----------
Net Investment Income ............................... $ 1,185,206
==========
See notes to financial statements.
3
<PAGE>
DECLARATION CASH ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
1996 1995
-----------------------------
Increase (decrease) in net assets:
Operations: Net investment income ........ $ 1,185,206 $ 1,414,243
Net increase in net assets
resulting from operations ............ 1,185,206 1,414,243
----------- -----------
Distributions to shareholders:
Distributions from net
investment income (1) ................ ( 1,185,206) ( 1,414,243)
----------- -----------
Capital share transactions (2):
Proceeds from shares sold .............. 50,273,065 45,335,376
Proceeds from shares issued on
reinvestment of distributions
from net investment income ........... 1,185,206 1,414,243
Shares redeemed ........................ (84,113,203) (47,112,469)
----------- -----------
Net decrease from capital share
transactions ......................... (32,654,932) ( 362,850)
----------- -----------
Total decrease in net assets ............. (32,654,932) ( 362,850)
----------- -----------
Net assets:
Beginning of year ...................... 37,862,017 38,224,867
----------- -----------
End of year ............................ $ 5,207,085 $ 37,862,017
=========== ===========
(1) Income dividends per share ........... $.034 $.037
(2) Also represents transactions ==== ====
in fund shares
See notes to financial statements.
4
<PAGE>
DECLARATION CASH ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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, 1996, the Advisor
billed DCA $186,581 for these services. The Advisor was required to
reimburse DCA up to its fee and accordingly reimbursed DCA $186,541 for
the year ended December 31, 1996. On December 31, 1996, DCA had an
advisory and management fee payable to the Advisor of $2,421. 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 Company receives administrative
service fees charged to shareholders whose account value is less than
$2,500.
5
<PAGE>
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, 1996, transfer agent fees totalled $1,027,876
and administrative service fees totalled $296,412 for net transfer agent
fees of $731,464. The Service Company voluntarily agreed to cap the
ratio of total expenses to average net assets at 2.0% and accordingly
reimbursed DCA $243,620 for its year ended December 31, 1996. On
December 31, 1996, DCA had a transfer agent fee payable to the Service
Company of $66,124. 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, 1996. On December 31, 1996 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, 1996, DCA incurred .01%
of its annual average net assets for such distribution expenses.
3. SIGNIFICANT SHARE REDEMPTIONS
Prior to the end of the year ended December 31, 1996 DCA incurred
significant redemptions as a result of an action by Delaware Charter
Guaranty & Trust (DCG&T), a non-affiliated company to withdraw from DCA
all accounts for which DCG&T was the custodian. As a result of this
decision approximately $29.8 million of shares were redeemed on December
26, 1996. This redemption significantly decreased the assets of DCA.
6
<PAGE>
APPENDIX
DEFINITION OF "ELIGIBLE SECURITY"
1. Eligible Security shall mean:
(i) a security with a remaining maturity of 397 days or less that is
rated (or that has been issued by an issuer that is rated with respect to a
class of Short-Term [i.e., having a remaining maturity of 366 days or less] debt
obligations, or any security within that class that is comparable in priority
and security with the security) by the Requisite NRSROs (hereafter defined) in
one of the two highest rating categories for Short-Term debt obligations (within
which there may be sub-categories or gradations indicating relative standing),
or
(ii) a security:
(a) that at the time of issuance was a Long-Term (having a
maturity greater than 366 days) security but that has a remaining maturity of
397 calendar days or less, and
(b) whose issuer has received from the Requisite NRSROs a
rating, with respect to a class of Short-Term debt obligations (or any security
within that class) that is now comparable in priority and security with the
security, in one of the two highest rating categories for Short-Term debt
obligations (within which there may be sub-categories or gradations indicating
relative standing); or
(iii) an Unrated Security (as hereafter defined) that is
comparable in quality to a Security meeting the above requirements of (ii)(a)
and (b) above, as determined by the Fund's investment manager; provided,
however, that:
(a) the investment manager may base its determination that a
Standby Commitment is an Eligible Security upon a finding that the issuer of the
Commitment presents a minimal risk of default; and
(b) a security that at the time of issuance was a Long-Term
security but that has a remaining maturity of 397 calendar days or less and that
is a Unrated Security is not an Eligible Security if the security has a Long-
Term rating from any NRSRO that is not within the NRSRO's two highest categories
(within which there may be sub-categories or gradations indicating relative
standing);
(iv) (a) NRSRO shall mean any nationally recognized statistical
rating organization that is not an affiliate of the issuer or of any insurer,
guarantor or provider of credit support, of the instrument.
(b) "Requisite NRSROs" shall mean (1) any two NRSROs that have
issued a rating with respect to a security or class of debt obligations of an
issuer, or (2) if only one NRSRO has issued a rating with respect to such
security or issuer at the time the Fund purchases or rolls over the security,
then that NRSRO.
DEFINITION OF "FIRST TIER SECURITY"
1. "First Tier Security" shall mean any Eligible Security that:
(i) is rated (or has been issued by an issuer that is rated with
respect to a class of Short-Term debt obligations, or any security within that
class, that is comparable in priority and security with the security) by the
Requisite NRSROs in the highest rating category for Short-term debt obligations
(within which there may be sub-categories or gradations indicating relative
standing); or
(ii) is a security described in paragraph (ii) of the definition of
Eligible Security above, whose issuer has received from the Requisite
NRSROs a rating, with respect to a class of Short-Term debt obligations (or
any security within that class) that now is comparable in priority and
security with the security, in the highest rating category for Short-Term
debt obligations (within which there may be sub-categories or gradations
indicating relative standing).
(iii) is an Unrated Security that is of comparable quality to a
security meeting the requirements of clauses (i) and (ii) above of the
definition of "First Tier Security", as determined by the Fund's investment
manager.
2. "Second Tier Security" shall mean any Eligible Security that is not
a First Tier Security.
DEFINITION OF "UNRATED SECURITY"
1. An "Unrated Security" shall mean:
(i) A security with a remaining maturity of 397 days or less issued
by an issuer that does not have a current Short-Term rating assigned by any
NRSRO:
(a) to the security, or
(b) to the issuer with respect to a class of Short-Term debt
obligations (or any security within that class) that is comparable in priority
and security with the security; and
(ii) A security:
(a) that at the time of issuance was a Long-Term security but
that has a remaining maturity of 397 calendar days or less, and
(b) whose issuer has not received from any NRSRO a rating with
respect to a class of Short-Term debt obligations (or any security within that
class) that now is comparable in priority and security with the security; and
(iii) a security that is a rated security and is the subject of
an external credit support agreement that was not in effect when the security
(or the issuer) was assigned its rating, and
(iv) a security is not an Unrated Security if any Short-Term debt
obligation ("reference security") that is issued by the same issuer and is
comparable in priority and security with that security is rated by a NRSRO. The
status of such security as an Eligible Security or First Tier Security shall be
the same as that of the reference security.
PERFORMANCE MEASURES
Declaration Cash Account and each of the CAMCO Funds may, from time to
time, use one or more of the following unmanaged indices for comparative
performance purposes.
Standard and Poor's 500 Composite Stock Price Index - is a well diversified list
of 500 companies representing the U.S. Stock Market.
Salomon Brothers High-Grade Corporate Bond Index - consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.
Salomon Brothers Broad Investment-Grade Bond - is a market weighted index that
contains approximately 4700 individually priced investment-grade corporate bonds
rated BBB or better, U.S. Treasury/agency issues and mortgage pass-through
securities.
Shearson Lehman Long-Term Treasury Bond - is composed of all bonds covered by
the Shearson Lehman Hutton Treasury Bond Index with maturities of 10 years or
greater.
Ibbotson U.S. Treasury Bill Index - Each month a one-bill portfolio containing
the shortest-term bill having not less than one month to maturity is
constructed. The total return of the Index is then the month-end price divided
by the previous month-end price, minus one. This index is provided by Ibbotson
Associates.
CPI (Inflation) - The consumer price index for all urban consumers, not
seasonally adjusted, is used for inflation. This is provided by U.S. Department
of Labor, Bureau of Labor Statistics.
Lehman Brothers Government/Corporate Bond Index - Index includes all public
corporate and Government fixed rate debt issues rated investment grade or
higher. All issues have at least one year to maturity and an outstanding par
value of at least $100 million for U.S. Government issues and $50 million for
corporate issues.
Lehman Brothers Intermediate Government/Corporate Bond Index - Index includes
the issues of the Government/Corporate Bond Index (see above) that are less than
10 years in maturity.
Lehman Brothers Treasury Index - Index includes all public obligations (notes
and bonds) of the U.S. Treasury (excluding flower bonds and foreign-targeted
issues).
Lehman Brothers Intermediate Treasury Index - Index includes the issues of the
Treasury Index (see above) that are less than 10 years in maturity.
Merrill Lynch 1-3 Treasury Index - Index includes all public obligations of the
U.S. Treasury, excluding flower bonds and foreign-targeted issues, with
maturities of one to three years.
DEFINITIONS
Marketing literature for the funds may, from time to time, refer to or
discuss a fund's duration. Duration is the weighted average life of a
fund's debt instruments measured on a present-value basis; it is generally
superior to average weighted maturity as a measure of a fund's potential
volatility due to changes in interest rates.
Unlike a fund's average weighted maturity, which takes into account only
the stated maturity date of the fund's debt instruments, duration represents a
weighted average of both interest and principal payments, discounted by the
current yield-to-maturity of the securities held. For example, a four-year,
zero-coupon bond, which pays interest only upon maturity (along with principal),
has both a maturity and duration of 4 years. However, a four-year bond priced
at par with an 8% coupon has a maturity of 4 years but a duration of 3.6 years
(at an 8% yield), reflecting the bond's earlier payment of interest.
In general, a bond with a longer duration will fluctuate more in price than
a bond with a shorter duration. Also, for small changes in interest rates,
duration serves to approximate the resulting change in a bond's price. For
example, a 1% change in interest rates will cause roughly a 4% move in the
price of a zero-coupon bond with a 4 year duration, while an 8% coupon bond
(with a 3.6 year duration) will change by approximately 3.6%.
ADDITIONAL DEFINITIONS
1. The term "money market" refers to the market place composed of the
financial institutions which handle the purchase and sale of liquid, short-term,
high grade debt instruments. The money market is not a single entity, but
consists of numerous separate markets, each of which deals in a different type
of short-term instrument. These include U.S. Government obligations, commercial
paper, certificates of deposit, and bankers' acceptances, which are generally
referred to as money market instruments.
2. Definitions of common money market instruments:
(a) Commercial paper - a short term, unsecured promissory note issued
by corporations, including banks.
(b) Variable amount master demand notes - obligations that permit the
investment by Declaration Fund with respect to Cash Account of fluctuating
amounts at varying rates of interest pursuant to direct arrangements between
Declaration Fund, as lender, and the borrower. These notes permit daily changes
in the amount borrowed. Declaration Fund has the right to increase or decrease
the amount at any time up to the full amount provided by the note agreement and
the borrower may prepay up to the full amount of the note without penalty.
Because variable amount master demand notes are direct lending arrangements
between the lender and the borrower, it is not generally contemplated that such
instruments will be traded and there is no secondary market for these notes,
although they are redeemable (and, thus, immediately repayable by the borrower)
at face value, plus accrued interest at any time. In connection with the master
demand note arrangements, Cash Account's Advisor will consider, on an ongoing
basis, the earning power, cash flow and other liquidity ratios of the issuer,
and the borrower's ability to pay principal and interest on demand. While
master demand notes, as such, are not typically rated by credit rating agencies,
if not so rated, investments for Cash Account may be made only if Cash Account's
Advisor determines at the time of an investment the issuer meets the criteria
set forth for all other commercial paper issuers.
3. Negotiable certificates of deposit - short-term certificates issued
by banks against funds deposited in a bank. They are for a definite period of
time, earn a specified rate of return, and are negotiable.
4. Bankers' acceptances - short-term credit instruments primarily used
to finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
5. Description of Standard & Poor's Corporation ("S&P") and Moody's
Investor's Service, Inc. ("Moody's") highest commercial paper and bond ratings:
(a) Commercial Paper Ratings.
Commercial paper ratings of S&P's Corporation are current
assessments of the likelihood of timely payment of debts having original
maturities of no more than 365 days. Commercial paper rated A-1 by S&P's
indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus (+) sign designation. Commercial
paper rated A-2 by S&P's indicates that the capacity of timely payment on issues
with designation is strong. However, the relative degree of safety is not as
high as for issues designated A-1. Commercial paper rated A-3 by S&P's
indicates that issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's issuers rated Prime-1 (or related supporting institutions)
are considered to have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics: (1) leading market positions in well
established industries; (2) high rates of return on funds employed; (3)
conservative capitalization structures with moderate reliance on debt and ample
asset protection; (4) broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and (5) well established access to
a range of financial markets and assured sources of alternate liquidity.
(b) Bond Ratings.
Bonds rated AAA by S&P's have the highest rating assigned by
S&P's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong. Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree. To provide
more detailed indications of credit quality, the AA rating may be modified by
the addition of a plus or minus sign to show relative standing within this major
rating category.
Bonds rated Aaa by Moody's are judged by Moody's to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as a "gilt edge". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
Moody's applied numerical modifiers (1, 2, and 3) with respect
to corporate bonds rated Aa. The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa group which Moody's believes possess the strongest investment
attributes are designated by the symbol Aa1.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements in Prospectus of Declaration Fund/Declaration
Cash Account.
Statement of Selected per Share Data and Ratios -
Declaration Cash Account - years ended December 31, 1985 - 1996
(b) Financial Statements in Statement of Additional Information which
relate to Declaration Fund/Declaration Cash Account.
(1) Statement of Operations - December 31, 1996
(2) Statement of Changes in Net Assets - December 31, 1995
and December 31, 1996
(3) Statement of Net Assets - December 31, 1996
(4) Notes to Financial Statements - December 31, 1996
(c) Exhibits: Exhibit No.:
(1) Copies of the Charter as now in effect;
Copy of Declaration of Trust,
as amended 1(H)
(2) Copies of the existing bylaws
or instruments corresponding thereto;
Copy of Bylaws, as amended. 2(H)
(3) Copies of any voting trust none
agreement with respect to more than
5 percent of any class of equity
securities of the Registrant.
(4) Specimen of copy of each security
issued by the Registrant, including
copies of all constituent instruments,
defining the rights of the holders of
such securities and copies of each
security being registered;
Copy of Share Certificate 4(A)
(5) Copies of all investment advisory contracts
relating to the management of the Assets of the
Registrant;
Copy of Investment Management 5(H)
Agreement between the Registrant and
Declaration Investment Advisors, Inc.
dated December 8, 1988.
Copy of Amendment to Investment 5(a)(H)
Management Agreement relating to
Declaration Cash Account
dated May 15, 1990
(6) Copies of each underwriting or none
distribution contract between the
Registrant and a principal underwriter,
and specimens of copies of all agreements
between principal underwriters and dealers.
(7) Copies of all bonus, profit none
sharing, pension or other similar
arrangements wholly or partly for the
benefit of directors or officers of the
Registrant in their capacity as such;
any such plan that is not set forth in
a formal document, furnish a reasonably
detailed description thereof.
(8) Copies of all custodian agreements and
depository contracts under Section 17(f)
of the 1940 Act with respect to
securities and similar investments;
Copy of Custodian Agreement, 8(D)
dated February 26, 1990,
between the Registrant and
CoreStates Bank, N.A.,( formerly
Philadelphia National Bank)
Form of Amendment to Custodian 8(a)(G)
Agreement
(Executed document not filed pursuant
to Rule 403(d)(3))
(9) Copies of all material contracts not
made in the ordinary course of business
which are to be performed in whole or
in part at or after the date of the filing
of the Registration Statement;
Copy of Transfer Agency and 9(a)(D)
Service Agreement dated January 1, 1989
between the Registrant and
Declaration Service Company.
Copy of Amendment No. 1 9(b)(G)
to Transfer Agency Agreement
dated May 15, 1990 with respect
to Declaration Cash Account.
(10) An opinion and consent of counsel
as to the legality of the securities
being registered, indicating whether
they will, when sold, be legally issued,
fully paid and non-assessable;
Copy of opinion and consent of
counsel attached as an Exhibit to
Rule 24f-2 Notice filed by Registrant
on February 27, 1996 relating to
Declaration Cash Account
and incorporated herein by reference.
(11) Copies of any other opinions, appraisals
or rulings and consents to the use thereof
relied on in the preparation of this
Registration Statement and required by
Section 7 of the 1933 Act;
Independent Public Accountants' Report of Ex-99.11(a)
Sanville & Company as Independent Public
Accountants of the financial statements of
Declaration Fund relating to Declaration
Cash Account.
Consent of Sanville & Company - Ex-23
Independent Public Accountants - as
to the financial statements of Declaration
Fund relating to Declaration Cash
Account.
(12) All financial statements omitted None
from Item 23.
(13) Copies of any agreements or None
understandings made in consideration for
providing the initial capital between and
among the Registrant, the Underwriter, adviser,
promoter, or initial stockholders and
written assurances from promoters or initial
stockholders that their purchases were
made for investment purposes without any
present intention of redeeming or reselling.
(14) Copies of model plan used in None
the establishment of any retirement plan in
conjunction with which Registrant offers its
securities, any instructions thereto and any
other documents making up the model plan.
Such form(s) should disclose the costs and
fees charged in connection therewith.
(15) Copies of any plan entered into by Registrant
pursuant to Rule 12b-1 under the 1940 Act,
which describes all material aspects of the
financing of distribution of Registrant's
shares, and any agreements with any person
relating to implementation of such plan;
Copy of Plan of Distribution adopted by 15(c)
Registrant dated December 8, 1988
Copy of Amendment to Plan of Distribution 15(a)(F)
dated May 15, 1990 relating to
Declaration Cash Account.
(16) Schedule for computation of each
performance quotation provided in
the Registration Statement in response
to Item 22 (which need not be audited);
Computations of a $1,000
Hypothetical Investment in Declaration
Fund-Declaration Cash Account series; Ex-99.16(a)
Computation of the Declaration Ex-99.16(b)
Cash Account yield quotation based on
the seven days ended on the date of the
balance sheet as of December 31, 1995.
(A) This Exhibit formed part of Post-Effective Amendment No. 1 that was filed
with the Commission on March 3, 1982.
(B) This Exhibit formed part of Post-Effective Amendment No. 12 that was filed
with the Commission on April 20, 1988.
(C) This Exhibit formed part of Post-Effective Amendment No. 13 that was filed
with the Commission on March 20, 1989.
(D) This Exhibit formed part of Post-Effective Amendment No. 15 that was filed
with the Commission on March 1, 1990.
(E) This Exhibit formed part of Post-Effective Amendment No. 16 that was filed
with the Commission on May 14, 1990.
(F) This Exhibit formed part of Post-Effective Amendment No. 17 that was filed
with the Commission on February 15, 1991.
(G) This Exhibit formed part of Post-Effective Amendment No. 19 that was filed
with the Commission on April 30, 1992.
(H) This Exhibit formed part of Post-Effective Amendment No. 27 that was filed
with the Commission on February 29, 1996.
Item 25. Persons Controlled by or Under Common Control with Registrant
There are no persons controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities
Title of Class Number of Record Holders
-------------- ------------------------
Common Capital Stock 2,673 Record Holders
Declaration Cash Account as of 12/31/96
Item 27. Trustee Liability and Indemnification
Liability to third parties for any act, omission or obligation of a
Trustee when acting in such capacity shall extend to the whole trust estate
or so much thereof as may be necessary to discharge such liability but personal
liability shall not attach to the Trustee or the beneficiaries of the Trust for
any such act, omission or liability. The provisions of Subchapter B of Chapter
5 of the Pennsylvania Business Corporation Law (relating to indemnification and
corporate directors' liability) shall be applicable to the Trustees of the
Trust.
Indemnification of Trustees and Officers and Insurance
(a) The trust shall have the power to purchase and maintain insurance
on behalf of any person who is or was a Trustee or officer of the Trust, or is
or was serving at the request of the Trust as a director, officer, employee or
agent of a corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of this status as such, whether or not the Trust would
have the power to indemnify him against such liability under the provisions of
this Section.
(b) No indemnification or other protection shall be made or given to
any Trustee or officer of the Trust against any liability to the Trust or to its
Shareholders (i) to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office or (ii) which would violate the provisions
of Section 17(h) or (i) of the Act as those provisions may be amended from time
to time, together with the Rules and Regulations of the Commission adopted
thereunder.
Item 28. Business and Other Connections of Investment Adviser
Declaration Investment Advisors, Inc., Suite 6160, 555 North
Lane, Conshohocken, Pennsylvania 19428 ("Declaration I/A"), serves as
investment manager to Declaration Cash Account and that is its primary
occupation currently. Reference is made to page 15 of the Statement of
Additional Information for a listing of the principal officers and
directors of Declaration I/A.
Item 29. Principal Underwriters
Registrant distributes its own securities; it does not employ a
principal underwriter.
Item 30. Location of Accounts and Records
The records, which are being maintained by the Custodian of the
Registrant, pertaining to the custodianship of the Declaration Fund's
assets are located at the Custodian's place of business; all other records
and accounts, including those relating to the investment advisory services
are being provided to Declaration Cash Account by Declaration I/A, are
being maintained at the offices of Registrant - Suite 6160, 555 North Lane,
Conshohocken, Pennsylvania 19428.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
(a) Registrant agrees that the Trustees of Declaration Fund will
promptly call a meeting of shareholders for the purpose of acting upon the
question of removal of a trustee or trustees, when requested in writing to do
so by the record holders of not less than 10% of the outstanding shares.
(b) The Fund undertakes to furnish to each person to whom a
prospectus is delivered with a copy of the Fund's latest annual report to
shareholders upon request and without charge.
Ex-99.11 (a)
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, 1996, 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, 1996, 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, 1996, 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 /s/ Sanville & Company
February 13, 1997 Ceritified Public Accountants
Ex-23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report, dated February 13, 1997, on the
annual financial statements and financial highlights of the Declaration Fund -
Declaration Cash account, which is included in Part A and Part B in Post
Effective Amendment No. 27 to Registration Statement under the Securities Act
of 1933 and included in the Prospectus and Statement of Additional Information,
as specified, and to the reference made to us under the caption "Independent
Auditors" in the Statement of Additional Information.
Abington Pennsylvania /s/ Sanville & Company
April 21, 1997 Certified Public Accountants
Exhibit 99.16 (a)
Declaration Cash Account
Expense Table Calculation
December 31, 1996
$1,000 invested, no-load 5% annual return, 2.50% expense, $64 administrative
service fee
5% - EXPENSE % - $64 = -3.90%
Expense
Year Amounts Average % Expense Cumulative
- ------------------------------------------------------------------------------
1 1,000 981 8.90% 87 87
961
2 961 943 8.90% 84
924
3 924 906 8.90% 81 252
888
4 888 871 8.90% 77
853
5 853 837 8.90% 74 403
820
6 820 804 8.90% 72
788
7 788 773 8.90% 69
757
8 757 742 8.90% 66
727
9 727 713 8.90% 63
699
10 699 686 8.90% 61 734
672
Exhibit 99.16(b)
Computation of The Declaration Cash Account
Yield quotation based on the seven days
ended on the date of the balance sheet
as of December 31, 1996.
ACCOUNT VALUE
(COMPOUNDED) DIV FACTOR
12/24 DAY 0 1.000000
______________________________________________________________________________
12/25 DAY 1 1.00087255 .000087255
12/26 DAY 2 1.00087255 .000000000
12/27 DAY 3 1.00160572 .000073311
12/28 DAY 4 1.00233894 .000073310
12/29 DAY 5 1.00307221 .000073310
12/30 DAY 6 1.00399704 .000092454
12/31 DAY 7 1.00494608 .000094866
NET VALUE OF ACCOUNT AFTER 7 DAYS
VALUE OF ACCOUNT AT BEGINNING OF PERIOD 1.000000
NET CHANGE IN ACCOUNT VALUE
Annualized Current Net Yield
(.000494608 x 365/7) divided by 1.000252930 = 2.58%
Effective Yield (.000494608 + 1) 365/7 - 1 = 2.61%
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and the Registrant has duly
caused this Post-Effective Amendment No. 27 to its Registration Statement
under the Investment Company Act of 1940, to be signed on its behalf by the
Undersigned, thereunto duly authorized, in Conshohocken, Pennsylvania on the
____ day of April, 1997.
DECLARATION FUND
Stephen B. Tily, III
BY: ___________________________________
President
As required by the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
______________________________________________________________________________
SIGNATURE TITLE DATE
______________________________________________________________________________
Trustee and
Chairman of
Stephen B. Tily, III Board 4/25/97
____________________________ President _______________
Stephen B. Tily, III
Arthur S. Filean 4/25/97
_____________________________ Trustee _______________
Arthur S. Filean
William F. Lee, Jr 4/25/97
______________________________ Trustee _______________
William F. Lee, Jr.
Thomas S. Stewart 4/25/97
______________________________ Trustee _______________
Thomas S. Stewart
Terence P. Smith 4/25/97
______________________________ Secretary _______________
Terence P. Smith
______________________________________________________________________________
SIGNATURE TITLE DATE
______________________________________________________________________________
Paul L. Giorgio 4/25/97
______________________________ Treasurer _______________
Paul L. Giorgio
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5179974
<INVESTMENTS-AT-VALUE> 5179974
<RECEIVABLES> 0
<ASSETS-OTHER> 97142
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5277116
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70031
<TOTAL-LIABILITIES> 70031
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5207085
<SHARES-COMMON-STOCK> 5207085
<SHARES-COMMON-PRIOR> 31862017
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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