AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON 6/5/98
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.
----- -----
Post-Effective Amendment No. 30 X
----- -----
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
-----
Amendment No. 30
-----
(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):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on _______ pursuant to paragraph (b)
[X] 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, 1997 was filed on February
26, 1998.
<PAGE>
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, 1998
<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 ..................................... .04%
Transfer Agency Fees ........................... 1.48%
Other Expenses ................................. 4.30%
Expense Reimbursement By
Investment Advisor (2.92%)
Total Fund Operating Expenses .................. 3.40%
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: 96 273 435 775
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.
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) Financial Statements which are included in the Statement of Additional
Information. Each of the five years in the period ended December 31, 1997 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, 1997 is
covered by the Independent Auditor's Report.
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<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 0.017 0.034 0.037 0.022 0.011 0.018 0.042 0.061 0.074 0.060
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.017) (0.034) (0.037) (0.022) (0.011) (0.018) (0.042) (0.061) (0.074) (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) 1.64% 3.23% 3.78% 2.18% 1.12% 1.90% 4.27% 6.36% 7.44% 5.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's) $ 4,467 $ 5,207 $37,862 $38,225 $40,951 $47,767 $48,224 $54,153 $46,930 $41,532
Ratio of expenses to
average net assets (after
expense reimbursement) 3.40% 2.00% 2.00% 2.00% 1.94% 1.71% 1.61% 1.88% 1.60% 1.50%
Portfolio Turnover Rate(3 -- -- -- -- -- -- -- -- -- --
Number of shares outstanding
at end of period (in
thousands) 4,466 5,207 37,862 38,225 40,951 47,767 48,224 54,153 46,930 41,532
</TABLE>
(1) Year-ended December 30.
(2) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends on the payable date, and
a sale at net asset value on the last day of the period reported. Total
return does not include account maintenance fees and total return would be
lower if such fees were included.
(3) 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. Until December 19, 1997, Declaration
Investment Advisors, Inc., Suite 6160, 555 North Lane, Conshohocken, PA 19428
("Declaration I/A"), served as investment adviser to Declaration Cash Account.
Commencing on December 19 1997, Mr. Terence P. Smith, the President of
Declaration Fund began performing the investment management services on behalf
of the Declaration Cash Account. He was appointed by and serves at the pleasure
of the Board. Mr. Smith is not compensated for performing the investment
management services.
On May 20, 1998, the Board of Trustees approved a new Investment Advisory
Agreement (the "new Agreement") between Declaration Fund with respect to
Declaration Cash Account and Declaration Investment Advisors, Inc. ("Declaration
I/A"). The new Agreement will be identical in all material respects with the old
Agreement. A shareholders' meeting has been set for July 16, 1998. The
shareholders will be asked to consider for approval the new Agreement and the
Trustees will recommend in the proxy materials that the shareholders approve the
new Agreement. The information set forth below is included on the premise that
the Declaration Cash Account shareholders approve the new Agreement.
INVESTMENT ADVISORY AGREEMENT
Under the terms of the proposed Investment Advisory Agreement (the
"Agreement"), Declaration I/A, for the fee described below, will provide
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
will be 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 will receive 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, 1997 were
$289,746; the expenses were 6.32% before expense reimbursement and 3.40%
thereafter of average net assets. Declaration Investment Advisors, Inc. and
Declaration Service Company reimbursed the Fund the sum of $124,849 thereby
reducing the Fund's expenses to $164,897.
- ------------------------------------------------------------------------------
DISTRIBUTION AGREEMENT
Declaration Distributors, Inc. serves as principal underwriter of the
shares of Declaration Cash Account pursuant to a Distribution Agreement dated
April 22, 1992. All Declaration Cash Account shares sold pursuant to the
Agreement are sold at net asset value per share. The Distributor is entitled to
reimbursement of its expenses in paying commissions and account maintenance fees
to qualified dealers in respect to Fund shares sold by such dealers. There is
presently no Rule 12b-1 Plan in effect for Declaration Cash Account and,
accordingly, no payments are presently being made to Declaration Distributors.
- --------------------------------------------------------------------------------
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.
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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.
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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.
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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.
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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.
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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 1997 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 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.
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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.
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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, 1998
-----------------------------------------------
This Statement is not a prospectus but should be read in conjunction with
the current Prospectus (dated May 1, 1998) 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 $1.000000
Value of same account at end of period 1.000098
Net change in account value .000098
Annualized current net yield 0.51%
(Net Change x 365/7)/
average net asset value
Effective yield 0.51%
(Net Change + 1) 365/7 power -1
Average weighted maturity of investments 24 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 Principal Mutual Fund Group. In
addition, he is currently Vice President of each of the Principal Funds. He is
also a Vice President of Princor Financial Services Corporation. From 1981-1986
he served as President, Treasurer and Director of Princor Financial Services
Corporation. Age 59.
Stephen B. Tily, III
Chairman of the Board 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 60.
Thomas S. Stewart, III
Trustee
Mr. Stewart became a Trustee of Declaration Fund in 1994. He is the
managing principal of Stewart Associates, a firm providing consulting services
in the areas of strategic planning, investment management and retirement
planning. He organized Stewart Associates upon his retirement in 1994 from
service with PNC Bank, Philadelphia, Pennsylvania. While in the employ of the
Bank over a period of thirty years, he was Director of Economic and Investment
Research and was responsible for the management of the Investment and Trust
lines of business. He served as Chairman of Provident Capital Management, Inc.
and Advanced Investment Management, Inc., two registered investment advisors
serving the institutional investment market. Mr. Stewart has also served as
Chairman of the Executive Committee of the American Bankers Association's Trust
and Management Division and as Chairman of its Asset Management Committee. He is
the member of the Pennsylvania Bankers Association Trust and Investment
Committee. He is the member of the Pennsylvania Bankers Association and a former
Director of Philadelphia Financial Analysts. He is presently a member of the
Association for Investment Management and Research. Age 59.
ADDITIONAL DECLARATION FUND EXECUTIVE OFFICERS
Terence P. Smith
President
From September, 1988 to the present, Mr. Smith has served as President and
Chief Operating Officer of the companies of the Declaration Group of Companies.
He is also a Director of Declaration Distributors, Inc., a registered
broker/dealer and the Fund's principal underwriter. He is also a Trustee, Chief
Financial Officer and Secretary of Pauze' Funds, a registered investment
company, from February 13, 1996 to the present. 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.) 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 KPMG Peat Marwick LLP (international
accounting firm). Mr. Smith is a certified public accountant. Age 51.
Mr. Martin M. Whalen is Secretary and Ms. Linda K. Coyne is Assistant
Secretary of Declaration Fund. Mr. Christopher D'Ambrosio 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, 1997, $8,522
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.
MANAGEMENT, ADMINISTRATIVE AND ADVISORY SERVICES
At their December 19, 1997 Board Meeting, the Trustees determined that a
quorum of shareholders would not be present at a Shareholders' Meeting which had
been called for, among other things, to approve the continuation of the existing
Investment Advisory Agreement (the "old Agreement") with Declaration I/A. In
order to provide continuing advisory services, under the circumstances, the
Board determined to retain Mr. Smith the President of Declaration Fund, to
invest and reinvest the assets of Declaration Cash Account, to serve without
compensation and at the pleasure of the Board until a new investment management
agreement with Declaration I/A could be obtained.
On May 20, 1998, the Board of Trustees approved a new Investment Advisory
Agreement (the "new Agreement") between Declaration Fund with respect to
Declaration Cash Account and Declaration Investment Advisors, Inc. ("Declaration
I/A"). The new Agreement is identical in all material respects with the old
Agreement. A Shareholders' Meeting has been set for July 16, 1998. The
Shareholders will be asked to consider for approval the new Agreement and the
Trustees will recommend that the shareholders approve the new Agreement. The
information set forth below is included on the premise that the Declaration Cash
Account shareholders will vote to approve the new Agreement.
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: Terence P. Smith, President and
Sole Director and Linda K. Coyne, Vice President and Secretary. The address of
each of these persons is Suite 6160, 555 North Lane, Conshohocken, PA 19428.
Declaration I/A is a wholly owned subsidiary of Declaration Holdings, Inc.
("Holdings"). Prior to August 21, 1997, Stephen B Tily, III and WMB Holdings,
Inc. owned all of the outstanding voting stock of Holdings. On August 21, 1997,
all of the outstanding voting stock of Holdings was transferred to Terence P.
Smith, then the Secretary of the Company. On October 22, 1997, Mr. Smith
transferred 20% of the stock to Mentor Special Situations Fund (a venture
capital limited partnership), and 5% to Messers. George Stasen and Edward Sager
(the principals of Mentor Special Situations Fund). Mr. Smith now owns 75%,
Mentor Special Situations 20% and Messrs. Stasen and Sager 2 1/2% each. The
address of each of the owners is 555 North Lane Suite 6160 Conshohocken,
Pennsylvania 19428.
Under the terms of the new Investment Management Agreement the new
Agreement, Declaration I/A (i) will determine the composition of Cash Account's
portfolio, the nature and timing of the changes therein and the manner of
implementing such changes and (ii) provide Cash Account and/or the Board of
Trustees with such investment advisory research and related services and Cash
Account and/or the Board of Trustees may, from time to time, reasonably require.
Declaration I/A will furnish, without cost to the Company, the services of those
of Declaration I/A's officers and full-time employees who may be duly elected
executive officers or Trustees of the Company and shall pay all salaries, fees
and expenses of the Company's interested Trustees, president, research and
investment activities. Declaration I/A has also agreed that if the aggregate
expenses of the Company including the management fee but excluding taxes,
interest, brokerage commissions and extraordinary items should exceed 2% of the
first 1000,000,000 dollars of the average net assets of Cash Account and 1 1/2%
of all in excess of 100,000,000 dollars then such excess expenses will be paid
to the Fund by Declaration I/A but only to the extent of the management fee.
The management fee for services rendered to Declaration Fund with respect
to Declaration Cash Account during 1995 was $190,505, during 1996 was $186,581
and during 1997 was $24,405. For each such year, the management fee was
reimbursed to the Declaration Cash Account under the expense reimbursement
provision described above.
GENERAL PROVISIONS OF THE ADVISORY AGREEMENT
DECLARATION CASH ACCOUNT
Declaration Cash Account 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 Investment 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 Investment 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.
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 Investment Manager'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 Investment Manager 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, 1995, December 31, 1996,
and December 31, 1997, 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.
During the month of May 1998, shares of Declaration Cash Account were sold
to two investors at a time when there was not a statutory prospectus in effect
for Declaration Cash Account. Declaration Service Company will reimburse
Declaration Cash Account for any losses that it may sustain as a result of such
sales.
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>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Trustees of the
Declaration Cash Account
We have audited the accompanying statement of net assets of Declaration
Cash Account as of December 31, 1997, 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 and financial highlights 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, 1997, 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 and financial highlights referred
to above present fairly, in all material respects, the financial position of
Declaration Cash Account as of December 31, 1997, the results of its operations
for the year then ended, the changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
Abington, Pennsylvania Sanville & Company
February 13, 1998 Certified Public Accountants
<PAGE>
DECLARATION CASH ACCOUNT
Statement Of Net Assets
December 31, 1997
Annualized
Yield On Amortized
Purchase Maturity Cost And
Principal Amount and Description Date Date Value
-------- -------- -----------
U.S. GOVERNMENT OBLIGATIONS (99.3%)
$ 300,000 U.S. Treasury Bill 4.50% 01/08/98 $ 299,775
1,000,000 U.S. Treasury Bill 4.65% 01/15/98 998,321
1,000,000 U.S. Treasury Bill 4.93% 01/22/98 997,261
400,000 U.S. Treasury Bill 4.81% 01/29/98 398,557
1,750,000 U.S. Treasury Bill 5.07% 02/05/98 1,741,620
-----------
Total U.S. Government Obligations 4,435,534
-----------
Total Amortized Cost and Value For Financial
Reporting and Income Tax Purposes (99.3.%) 4,435,534
-----------
OTHER ASSETS AND LIABILITIES (0.7%)
Other assets 70,979
Other liabilities ( 40,018)
-----------
Total Other Assets and Liabilities 30,961
-----------
NET ASSETS (100%)
Applicable to 4,466,495 outstanding shares of beneficial
interest (unlimited authorization - no par value) $ 4,466,495
-----------
Net asset value (offering and redemption price per share) $ 1.00
-----------
See Notes to Financial Statements.
<PAGE>
DECLARATION CASH ACCOUNT
Statement of Operations
For The Year Ended December 31, 1997
Investment Income:
Interest $ 245,177
-----------
Total Investment Income 245,177
-----------
Expenses:
Advisory and management fees (note 2) 24,405
Audit fees 8,000
Bank servicing fees 27,535
Custodian fees 10,861
Distribution fees (Note 2) 765
Insurance 7,933
Legal 3,675
Postage 2,705
Pricing and blue sky administration fees (note 2) 51,033
Printing 16,160
Registration fees 27,532
Shareholder servicing costs 19,335
Transfer agent fees (Note 2) 72,256
Trustee fees and expenses 8,522
Miscellaneous 9,029
-----------
Total Expenses 289,746
Expenses waived (Note 2) ( 124,849)
-----------
Net Expenses 164,897
-----------
Net Investment Income $ 80,280
===========
See Notes to Financial Statements.
<PAGE>
DECLARATION CASH ACCOUNT
Statement Of Changes In Net Assets
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1997 1996
------------ ------------
Increase (decrease) in net assets:
<S> <C> <C>
Operations: Net investment income $ 80,280 $ 1,185,206
------------ ------------
Net increase in net assets
resulting from operations 80,280 1,185,206
------------ ------------
Distributions to shareholders:
Distributions from net investment income (1) (80,280) (1,185,206)
------------ ------------
Capital share transactions (2):
Proceeds from shares sold 25,146,660 50,273,065
Proceeds from shares issued on reinvestment of
of distributions from net investment income 80,280 1,185,206
Shares redeemed (25,967,530) (84,113,203)
------------ ------------
Net decrease from capital share transactions (740,590) (32,654,932)
------------ ------------
Total decrease in net assets (740,590) (32,654,932)
------------ ------------
Net assets:
Beginning of year 5,207,085 37,862,017
------------ ------------
End of year $ 4,466,495 $ 5,207,085
============ ============
(1) Income dividends per share $ .017 $ .034
============ ============
(2) Also represents transactions in fund shares
</TABLE>
See Notes to Financial Statements.
<PAGE>
DECLARATION CASH ACCOUNT
Financial Highlights
(Selected data for a share of capital stock outstanding throughout each year)
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment
Operations:
Net Investment Income .017 .034 .037 .022 .011
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.017) (.034) (.037) (.022) (.011)
------- ------- ------- ------- -------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Total Return (1) 1.64% 3.23% 3.78% 2.18% 1.12%
Ratios/Supplemental Data:
Net assets, end of year
(000's) $ 4,467 $ 5,207 $37,862 $38,225 $40,951
Ratio of expenses to average net
assets (before expense
reimbursement) 6.32% 3.15% 2.21% 2.18% 1.94%
Ratio of expense reimbursement to
average net assets 2.92% 1.15% 0.21% 0.18% --
Ratio of net investment income to
average net assets 1.65% 3.18% 3.71% 2.15% 1.11%
</TABLE>
(1) Total return is calculated assuming a $1,000 investment on the first day
of each period reported, reinvestment of all dividends on the payable
date, and sale at net asset value on the last day of the period reported.
Total return does not include account maintenance fees and total return
would be lower if such fees were included.
See Notes to Financial Statements.
<PAGE>
DECLARATION CASH ACCOUNT
Notes To Financial Statements
December 31, 1997
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.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
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
<PAGE>
DECLARATION CASH ACCOUNT
Notes To Financial Statements (Continued)
December 31, 1997
2. Investment Advisor and Transactions with Affiliates (Continued)
of DCA exceed 3% 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, 1997, the Advisor billed DCA $24,405 for these services. The
Advisor was required to reimburse DCA up to its fee and accordingly
reimbursed DCA $24,405 for the year ended December 31, 1997. On December
31, 1997, DCA had an advisory and management fee payable to the Advisor of
$61. Certain trustees and officers of DCA are directors and officers of the
Advisor. The investment advisory agreement with the Advisor was terminated
December 19, 1997. Subsequent to this time an officer of DCA has performed
the investment functions.
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. 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, 1997,
transfer agent fees totalled $128,824 and administrative service fees
totalled $56,568 for net transfer agent fees of $72,256. The Service
Company also provides accounting, pricing and blue sky administration
services to DCA. For these services, the Service Company received fees
totalling $51,033 for the year ended December 31, 1997. On December 31,
1997 DCA had a payable of $4,250 for these fees. The Service Company
voluntarily waived $100,444 of its transfer agent and accounting, pricing
and blue sky administration 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, 1997, DCA incurred .04% of its annual
average net assets for such distribution expenses.
<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
Financial Highlights - Period 12/31/88 to 12/31/97
(b) Financial Statements in Statement of Additional Information
which relate to Declaration Fund/Declaration Cash Account
Statement of Net Assets and Liabilities - December 31, 1997
Statement of Operations - December 31, 1997
Statement of Changes in Net Assets - December 31, 1996 and
December 31, 1997
Notes to Financial Statements - December 31, 1997
Schedule of Investments - December 31, 1997
(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 agreement with none
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 Advisory Agreement between the Registrant 5b(H)
with respect to The Michigan Heritage Fund and
Dickinson Asset Management, Inc. dated
February 19, 1997.
(6) Copies of each underwriting or distribution contract
between the Registrant and a principal underwriter,
and specimens of copies of all agreements between
principal underwriters and dealers.
Copy of Agreement Pursuant to Plan of Distribution 6a(J)
between the Registrant and Declaration Distributors,
Inc. dated April 22, 1992.
Copy of Distribution Agreement between the 6b.1(H)
Registrant with respect to The Michigan
Heritage Fund and Declaration Distributors,
Inc. dated February 19, 1997.
Copy of Amendment No. 1 to Distribution Agreement 6b.2(J)
dated December 19, 1997.
(7) Copies of all bonus, profit sharing, pension or other none
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, dated February 26, 8a.1(D)
1990, between the Registrant with respect to
Declaration Cash Account and CoreStates Bank,
N.A., (formerly Philadelphia National Bank)
Form of Amendment to Custodian Agreement 8a.2(G)
Copy of Custodian Agreement, dated July 8, 8b(J)
1997 between the Registrant with respect to The
Michigan Heritage Fund and Star Bank, N.A.
Compensation Schedule 8b.1
(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 Shareholder 9a.1(D)
Service Agreement dated January 1, 1989 between
Registrant with respect to Declaration Cash
Account and Declaration Service Company
Copy of Amendment No. 1 to Transfer Agency 9a.2(G)
Agreement dated May 15, 1990 with respect
to Declaration Cash Account.
Copy of Transfer Agency and Service 9b(I)
Agreement Dated February 19, 1997 between
the Registrant for The Michigan Heritage
Fund and Declaration Service Company.
Copy of Accounting Services Agreement 9c(I)
dated February 19, 1997 between the
Registrant with respect to The Michigan Heritage
Fund and Declaration Service Company.
Copy of Administration Agreement dated 9d(I)
February 19, 1997 between the Registrant
with respect to The Michigan Heritage Fund and
Declaration Service Company.
(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 10a(J)
Copy of Opinion of Sanville and Company
Independent Public Accountants dated
February 13, 1998
Copy of Consent of Sanville and Company 10b
(11) Copies of any other opinions, appraisals. None
(12) All financial statements omitted from Item 23. None
(13) Copies of any agreements or understandings made None
in consideration for providing the initial
capital between and among the Registrant, the
Underwriter, advisor, 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 the establishment of None
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 15a.1(C)
Registrant dated December 8, 1988 relating to
Declaration Cash Account. (Not renewed)
Copy of Amendment to Plan of Distribution dated 15a.2(F)
May 15, 1990. (Plan not renewed)
Copy of Distribution Plan of The Michigan 15b.1(I)
Heritage Fund pursuant to Rule 12b-1 dated
February 27, 1997
Copy of Amendment No. 1 dated December 20, 15b.2(J)
1997 to Distribution Plan of the Michigan
Heritage Fund
(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 16a(I)
Declaration Fund - Declaration Cash Account
series;
Computation of Yield Quotation - Declaration 16b
Cash Account
(17) A Financial Data Schedule meeting the Ex.27
requirements of Rule 485 under the Securities
Act of 1933
(18) Copies of any plan entered into pursuant to
Rule 18f-3 under the 1940 Act
Plan of Michigan Heritage Fund for the Issuance 18(J)
of Shares in Classes
(A) This Exhibit formed part of Post-Effective Amendment No. 1 that was filed
with the Commission on March 3, 1982.
(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.
(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. 26 that was filed
with the Commission on February 29, 1997.
(I) This Exhibit formed part of Post-Effective Amendment No. 27 that was filed
with the Commission on March 11, 1997.
(J) This Exhibit formed part of Post Effective Amendment No. 28 that was filed
with the Commission on January 14, 1998.
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 913 Record Holders
Declaration Cash Account as of 12/31/97
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.
<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. 30 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 4th day of June,
1998.
DECLARATION FUND
By: /s/ Terence P. Smith
----------------------------
Terence P. Smith
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
Stephen B. Tily, III Chairman of
- ----------------------------- Board June 4, 1998
Stephen B. Tily, III
Arthur S. Filean
- ----------------------------- Trustee June 4, 1998
Arthur S. Filean
Thomas S. Stewart
- ------------------------------ Trustee June 4, 1998
Thomas S. Stewart
Terence P. Smith
- ------------------------------ President June 4, 1998
Terence P. Smith
Exhibit 10(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report, dated February 13, 1998, on the annual
financial statements and financial highlights of the Declaration Fund -
Declaration Cash Account, which is included in Part A and B in Post Effective
Amendment No. 30 to the 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
May 26, 1998 Certified Public Accountants
Exhibit 16 (a)
Declaration Cash Account
Expense Table Calculation
December 31, 1997
$1,000 invested, no-load 5% annual return, 3.40% expense, $64 administrative
service fee
5% - EXPENSE % - $64 = -4.80%
Expense
Year Amounts Average % Expense Cumulative
- --------------------------------------------------------------------------------
1 1,000 976 9.80% 96 96
952
2 952 929 9.80% 91
906
3 906 885 9.80% 87 273
863
4 863 843 9.80% 83
822
5 822 803 9.80% 79 435
783
6 783 764 9.80% 75
745
7 745 727 9.80% 71
709
8 709 692 9.80% 68
675
9 675 659 9.80% 65
643
10 643 628 9.80% 61 775
612
Exhibit 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, 1997.
ACCOUNT VALUE
(COMPOUNDED) DIV FACTOR
12/24 DAY 0 1.000000
- ------------------------------------------------------------------------------
12/25 DAY 1 1.000011574 .000011574
12/26 DAY 2 1.000025081 .000013507
12/27 DAY 3 1.000038588 .000013507
12/28 DAY 4 1.000052095 .000013507
12/29 DAY 5 1.000066303 .000014208
12/30 DAY 6 1.000081361 .000015058
12/31 DAY 7 1.000098287 .000098287
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
(.000098287 x 365/7) divided by 1.000053327 = 0.51%
Effective Yield (.000098287 + 1) 365/7 - 1 = 0.51%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> Declaration Cash Account
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 4,435,534
<INVESTMENTS-AT-VALUE> 4,435,534
<RECEIVABLES> 0
<ASSETS-OTHER> 70,979
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,506,513
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,018
<TOTAL-LIABILITIES> 40,018
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,466,495
<SHARES-COMMON-STOCK> 4,466,495
<SHARES-COMMON-PRIOR> 5,207,085
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,466,495
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 245,177
<OTHER-INCOME> 0
<EXPENSES-NET> 164,897
<NET-INVESTMENT-INCOME> 80,280
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 80,280
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 80,280
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,146,660
<NUMBER-OF-SHARES-REDEEMED> 25,967,530
<SHARES-REINVESTED> 80,280
<NET-CHANGE-IN-ASSETS> (740,590)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .017
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .017
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 3.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
