<PAGE>
As filed with the Securities and Exchange Commission on January 31, 1997
Registration Nos. 33-7647 and 811-4782
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 42
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 43
Republic Funds
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219-3035
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(614) 470-8000
George O. Martinez
3435 Stelzer Road, Columbus, Ohio 43219-3035
(Name and Address of Agent for Service)
Copy to:
Allan S. Mostoff, Esq.
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, DC 20005
It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) 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.
The Registrant has previously registered an indefinite number of its shares
under the Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Registrant has filed Rule 24f-2
notices with respect to its series as follows: Republic U.S. Government Money
Market Fund (for its fiscal year ended September 30, 1996) on November 26, 1996;
Republic New York Tax Free Money Market Fund, Republic New York Tax Free Bond
Fund, Republic Equity Fund, Republic Bond Fund, Republic Overseas
Equity Fund and Republic Opportunity Fund for their fiscal years ended
October 31, 1996 on December 23, 1996.
Republic Portfolios has also executed this Registration Statement.
<PAGE>
CROSS REFERENCE SHEET
PART A; INFORMATION REQUIRED IN PROSPECTUS
ITEM NUMBER PROSPECTUS CAPTION
Item 1. Cover Page Cover Page
Item 2. Synopsis Highlights
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description of Investment Objective
Registrant and Policies; Additional
Risk Factors and Policies
Item 5. Management of the Fund Management of the Trust
Item 5A. Management's Discussion Not Applicable
of Fund Performance
Item 6. Capital Stock and Other Dividends and
Securities Distributions; Tax Matters;
Description of
Shares, Voting Rights and
Liabilities
Item 7. Purchase of Securities Purchase of Shares;
Being Offered Determination of Net
Asset Value
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Legal Proceedings Not Applicable
PART B; INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
Statement of Additional
ITEM NUMBER INFORMATION CAPTION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Not Applicable
History
Item 13. Investment Objectives and Investment Objective,
Policies Policies and Restrictions
Item 14. Management of the Registrant Management of the Trust
Item 15. Control Persons and Other Information
Principal Holders of
Securities
Item 16. Investment Advisory and Management of the Trust -
Other Services Investment Adviser
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Other Information
Securities
<PAGE>
Item 19. Purchase, Redemption and Prospectus - Purchase of
Pricing of Securities Being Shares; Prospectus -
Offered Redemption of Shares;
Prospectus - Determination
of Net Asset Value
Item 20. Tax Status Taxation
Item 21. Underwriters Management of the Trust -
Administrator, Distributor
and Sponsor
Item 22. Calculation of Performance Performance Information
Data
Item 23. Financial Statements Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate items, so numbered, in Part C of this Registration Statement.
<PAGE>
EXPLANATORY NOTE
This post-effective amendment no. 42 (the "Amendment") to the Registrant's
registration statement on Form N-1A (File no. 33-7647) (the "Registration
Statement") is being filed to amend the Registrant's disclosure with respect to
the Republic U.S. Government Money Market Fund and Republic New York Tax-Free
Money Market Fund, two of the series of shares of the Registrant. The Amendment
does not affect any other series of shares of the Registrant, which are the
subject of other post-effective amendments to the Registration Statement.
<PAGE>
REPUBLIC
U.S. GOVERNMENT
MONEY MARKET FUND
REPUBLIC
NEW YORK TAX-FREE
MONEY MARKET FUND
[GRAPHIC OMITTED]
PROSPECTUS
FEBRUARY 1, 1997
[LOGO]
<PAGE>
REPUBLIC FUNDS:
U.S. GOVERNMENT MONEY MARKET FUND
NEW YORK TAX-FREE MONEY MARKET FUND
3435 STELZER ROAD, COLUMBUS, OHIO 43219-3035
- ------------------------------------------------------------------------------
ACCOUNT AND GENERAL INFORMATION: (888) 525-5757 (TOLL FREE)
The Republic Funds (the "Trust") is an open-end investment management company
(a mutual fund) that currently offers a selection of seven portfolios, each of
which has different and distinct investment objectives and policies. This
prospectus describes two investment portfolios offered by the Trust
(collectively, the "Funds"):
REPUBLIC U.S. GOVERNMENT MONEY MARKET FUND
REPUBLIC NEW YORK TAX-FREE MONEY MARKET FUND
An investor who is not purchasing directly from the Distributor should obtain
from his securities broker, if applicable, or Shareholder Servicing Agent, and
should read in conjunction with this Prospectus, the materials provided by the
securities broker or Shareholder Servicing Agent describing the procedures under
which shares of the Funds may be purchased and redeemed through such securities
broker or Shareholder Servicing Agent.
This Prospectus sets forth concisely the information concerning the Funds that
a prospective investor ought to know before investing. Investors should read
this Prospectus and retain it for future reference. The Trust has filed with the
Securities and Exchange Commission a Statement of Additional Information, dated
February 1, 1997, with respect to each Fund, containing additional and more
detailed information about the Fund, each of which is hereby incorporated by
reference into this Prospectus. An investor may obtain a copy of a Statement of
Additional Information without charge by contacting the Distributor or his
Shareholder Servicing Agent (see back cover for addresses and phone numbers).
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, REPUBLIC OR ANY OTHER BANK, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT THE FUNDS
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
BECAUSE, THE NEW YORK TAX-FREE MONEY MARKET FUND WILL CONCENTRATE ITS
INVESTMENTS IN NEW YORK AND MAY CONCENTRATE A SIGNIFICANT PORTION OF ITS ASSETS
IN THE SECURITIES OF A SINGLE ISSUER, AN INVESTMENT IN THIS FUND MAY POSE
INVESTMENT RISKS GREATER THAN THOSE PRESENTED BY A MORE BROADLY DIVERSIFIED
PORTFOLIO.
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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1997
Republic National Bank of New York ("Republic" or the "Adviser") continuously
manages the investment portfolio of each Fund. The Trust offers two classes of
shares of each Fund, Class C Shares (the "Investor Shares") and Class Y Shares
(the "Adviser Shares"); (the Investor Shares and Adviser Shares are
collectively, the "Shares"). Investor Shares are offered to the public, to
customers of Shareholder Servicing Agents and to customers of a securities
broker that has entered into a dealer agreement with the Distributor. Adviser
Shares are being offered only to customers of Shareholder Servicing Agents.
Both Investor Shares and Adviser Shares of each Fund are continuously offered
for sale at net asset value with no sales charge by BISYS Fund Services ("BISYS"
or the "Distributor") to customers of a financial institution, such as a federal
or state-chartered bank, trust company or savings and loan association that has
entered into a shareholder servicing agreement with the Trust (collectively,
"Shareholder Servicing Agents"). At present, the only Shareholder Servicing
Agents for Adviser Shares of the Funds are Republic and its affiliates. Investor
Shares of each Fund are also continuously offered for sale at net asset value
with no sales charge by BISYS directly to the public and to customers of a
securities broker that has entered into a dealer agreement with the Distributor.
<PAGE>
HIGHLIGHTS
THE FUNDS PAGE 1
Republic U.S. Government Money Market Fund and Republic New York Tax-Free
Money Market Fund (the "Funds") are separate series (portfolios) of the Republic
Funds (the "Trust"), a Massachusetts business trust organized on April 22, 1987,
which currently consists of seven funds, each of which has different and
distinct investment objectives and policies.
INVESTMENT OBJECTIVES AND POLICIES PAGE 10
The investment objective of the U.S. Government Money Market Fund is to
provide shareholders of the Fund with liquidity and as high a level of current
income as is consistent with the preservation of capital. The Trust seeks to
achieve the investment objective of the U.S. Government Money Market Fund by
investing the assets of the Fund in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities with maturities of 397 days or
less, and repurchase agreements with respect to such obligations.
The investment objective of the New York Tax-Free Money Market Fund is to
provide shareholders of the Fund with liquidity and as high a level of current
income exempt from federal, New York State and New York City personal income
taxes as is consistent with the preservation of capital. The Trust seeks to
achieve the investment objective of the New York Tax-Free Money Market Fund by
investing the assets of the Fund primarily in a non-diversified portfolio of
short-term, high quality, fixed rate and variable rate tax-exempt money market
instruments with maturities of 397 days or less, including obligations issued by
or on behalf of the State of New York and its authorities, agencies,
instrumentalities and political subdivisions, and in participation interests
issued by banks, insurance companies or other financial institutions with
respect to such obligations.
There can be no assurance that the investment objectives of the Funds will be
achieved.
MANAGEMENT OF THE TRUST PAGE 18
Republic National Bank of New York ("Republic" or the "Adviser") acts as
investment adviser to the Funds. For its services, the Adviser receives from the
U.S. Government Money Market Fund a fee at the annual rate of 0.20% of the
Fund's average daily net assets and from the New York Tax-Free Money Market Fund
a fee at the annual rate of 0.15% of the Fund's daily net assets.
BISYS Fund Services ("BISYS" or the "Sponsor") acts as administrator and
sponsor of each of the Funds. The Sponsor provides certain management and
administrative services to each of the Funds for which it receives from the U.S.
Government Money Market Fund a fee at the annual rate of 0.10% of the Fund's
average daily net assets and from the New York Tax-Free Money Market Fund a fee
at the annual rate of 0.10% of the Fund's average daily net assets.
The Trust has also retained BISYS (the "Distributor") to distribute Investor
Shares of each of the Funds pursuant to a Distribution Plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"). Under the Distribution Plan, the Distributor is reimbursed
from the Funds (in amounts equal to an annual rate of up to 0.25% of the average
daily net assets represented by Investor Shares outstanding of each of the Funds
during the period for which payment is being made) for marketing costs and
payments to other organizations for services rendered in distributing the
Shares. See "Management of the Trust".
PURCHASES AND REDEMPTIONS PAGES 24 AND 28
The U.S. Government Money Market Fund is a type of mutual fund commonly
referred to as a "money market fund". The New York Tax-Free Money Market Fund is
a type of mutual fund commonly referred to as a "triple tax exempt money market
fund." The net asset value of each Fund's shares is expected to remain constant
at $1.00, although this cannot be assured. See "Determination of Net Asset
Value" and "Dividends and Distributions".
Investor Shares and Adviser Shares of each of the Funds are continuously
offered for sale by the Distributor at net asset value (normally $1.00 per
share) with no sales charge to customers of a financial institution, such as a
federal or state-chartered bank, trust company or savings and loan association,
that has entered into a shareholder servicing agreement with the Trust
(collectively, "Shareholder Servicing Agents"). At present, the only Shareholder
Servicing Agents for Adviser Shares of the Funds are Republic and its
affiliates. Investor Shares of each of the Funds are also continuously offered
for sale at net asset value, normally a dollar, with no sales charges by BISYS
directly to the public and to customers of a securities broker that has entered
into a dealer agreement with the Distributor. For investors who purchase
Investor Shares directly from the Distributor or who purchase Adviser Shares of
the Funds, the minimum initial investment is $1,000 and the minimum subsequent
investment is $100. The Trust offers to buy back (redeem) Shares from
shareholders of the Funds at any time at net asset value. See "Purchase of
Shares" and "Redemption of Shares". Shares of the U.S. Government Money Market
Fund are offered in connection with tax-deferred retirement plans. See
"Retirement Plans".
DIVIDENDS AND DISTRIBUTIONS PAGE 30
The Trust declares all of each Fund's net investment income daily as a
dividend to each Fund's shareholders and distributes all such dividends
monthly. Any net realized capital gains are distributed at least annually. See
"Dividends and Distributions" .
<PAGE>
FEE TABLE
The following table provides (i) a summary of expenses relating to purchases
and sales of Investor Shares and Adviser Shares of each of the Funds, and the
aggregate annual operating expenses of Investor Shares and Adviser Shares of
each of the Funds, as a percentage of average net assets of each Fund during the
Fund's last completed fiscal year, and (ii) an example illustrating the dollar
cost of such expenses on a $1,000 investment in Investor Shares and Adviser
Shares of each of the Funds. Historical information in the expense table
regarding investment advisory fees has been restated to reflect expected fee
waivers for the current fiscal year.
<TABLE>
<CAPTION>
U.S. GOVERNMENT NEW YORK TAX-FREE
MONEY MARKET FUND MONEY MARKET FUND
--------------------------------- -------------------------------
INVESTOR SHARES ADVISER SHARES INVESTOR SHARES ADVISER SHARES
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses .......... None None None None
Annual Fund Operating Expenses
Investment Advisory Fee after waiver* ... 0.10% 0.10% 0.05% 0.05%
Distribution Fee (Rule 12b-1 fee) ....... 0.04% None 0.01% None
Other Expenses .......................... 0.51% 0.30% 0.54% 0.30%
---- ---- ---- ----
-- Shareholder Servicing Fee ............ 0.21% None 0.24% None
-- Administrative Services Fee .......... 0.10% 0.10% 0.10% 0.10%
-- Other Operating Expenses ............. 0.20% 0.20% 0.20% 0.20%
Total Fund Operating Expenses after expense
limitation and fee waivers** ............ 0.65% 0.40% 0.60% 0.35%
==== ==== ==== ====
- ----------
* Investment Advisory Fee is shown net of expected waiver for the current fiscal year. Without such
waiver, the fee would be equal on an annual basis to 0.20% of the U.S. Government Money Market Fund's
average net assets and 0.15% of the New York Tax-Free Money Market Fund's average net assets.
** Total Fund Operating Expenses are shown net of a voluntary expense limitation and expected fee
waivers. Without such voluntary expense limitation and expected fee waivers, the Total Fund Operating
Expenses for the Investor Shares and Adviser Shares of the U.S. Government Money Market Fund and the
Investor Shares and Adviser Shares of the New York Tax-Free Money Market Fund would be equal on an
annual basis to 0.75%, 0.50%, 0.70%, and 0.45%, respectively, of each of the Fund's average net
assets. There can be no assurance that expenses will be reimbursed or waived in the future.
</TABLE>
<PAGE>
EXAMPLE
A shareholder of one of the Funds would pay the following expenses on a $1,000
investment in Investor Shares or Adviser Shares, assuming (1) 5% annual return
and (2) redemption at the end of:
<TABLE>
<CAPTION>
U.S. GOVERNMENT NEW YORK TAX-FREE
MONEY MARKET FUND MONEY MARKET FUND
--------------------------------------- ---------------------------------------
INVESTOR SHARES ADVISER SHARES INVESTOR SHARES ADVISER SHARES
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
1 year ................ $ 7 $ 4 $ 6 $ 4
3 years ............... $21 $13 $19 $11
5 years ............... $36 $22 $33 $20
10 years ............... $81 $51 $75 $44
</TABLE>
The purpose of the expense table provided above is to assist investors in
understanding the various costs and expenses that a shareholder will bear
directly or indirectly. For a more detailed discussion of the costs and expenses
of investing in the Funds, see "Management of the Trust."
For Investor Shares of each of the Funds, the fees paid from the Funds to each
Shareholder Servicing Agent are determined by a formula based upon the number of
accounts serviced by such Shareholder Servicing Agent during the period for
which payment is being made, the level of activity in such accounts during such
period, and the expenses incurred by such Shareholder Servicing Agent.
Similarly, the fee from the Funds to the Distributor is in anticipation of, or
as reimbursement for, expenses incurred by the Distributor in connection with
the sale of Investor Shares of the Funds. The aggregate fees paid to Shareholder
Servicing Agents pursuant to the Administrative Services Plan and to the
Distributor pursuant to the Distribution Plan may not exceed 0.25% of the
average daily net assets of the Funds represented by Investor Shares outstanding
during the period for which payment is being made. Long- term shareholders may
pay more than the economic equivalent of the maximum distribution charges
permitted by the National Association of Securities Dealers, Inc.
Some securities brokers, if applicable, and Shareholder Servicing Agents may
impose certain conditions on their customers, subject to the terms of this
Prospectus, in addition to or different from those imposed by the Trust, such as
requiring a minimum initial investment or charging their customers a direct fee
for their services. The effect of any such fees will be to reduce the net return
on the investment of customers of that Shareholder Servicing Agent or securities
broker. Each Shareholder Servicing Agent and securities broker has agreed to
transmit to shareholders who are its customers appropriate written disclosure of
any transaction fees that it may charge them directly at least 30 days before
the imposition of any such charge.
THE EXAMPLE SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUNDS; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data shown below is to assist investors in evaluating the
performance of the Investor Shares and Adviser Shares since commencement of
operations through September 30, 1996 for the U.S. Government Money Market Fund
and October 31, 1996 for the New York Tax-Free Money Market Fund. The
information for the U.S. Government Money Market Fund and New York Tax-Free
Money Market Fund for the years ended September 30, 1996 and October 31, 1996,
respectively, in the following schedules has been derived from information
audited by KPMG Peat Marwick LLP, independent auditors, whose reports on each
Fund's financial statements is incorporated by reference into the Statement of
Additional Information from each Fund's Annual Report dated September 30, 1996
for the U.S. Government Money Market Fund and October 31, 1996 for the New York
Tax-Free Money Market Fund. The Annual Report may be obtained without charge
upon request. This information should be read in conjunction with the financial
statements.
The information for the Funds for the years or periods ended September 30,
1995 or prior for the U.S. Government Money Market Fund and for the period ended
October 31, 1995 for the New York Tax-Free Money Market Fund was audited by the
Funds' former independent auditors who expressed an unqualified opinion thereon.
Republic became the U.S. Government Money Market Fund's investment adviser
effective October 14, 1994. Prior to that time, Republic Asset Management
Corporation, an affiliate of Republic, served as the Fund's adviser. Prior to
September 1, 1993, M.D. Hirsch Investment Management, Inc., also an affiliate of
Republic, was the Fund's investment adviser.
<PAGE>
SELECTED DATA FOR AN INVESTOR SHARE AND AN ADVISER SHARE OF THE U.S. GOVERNMENT
MONEY MARKET FUND OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
INVESTOR SHARES ADVISER SHARES
----------------------------------------------------------------------------------- -----------------
FOR THE PERIOD FOR THE PERIOD
MAY 3, 1990 JULY 1, 1996
(COMMENCEMENT (DATE OF INITIAL
YEARS ENDED SEPTEMBER 30, OF OPERATIONS TO OFFERING) TO
---------------------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994 1993 1992 1991 1990 1996
---- ---- ---- ---- ---- ---- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income* 0.049 0.052 0.035 0.027 0.038 0.061 0.031 0.012
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ......... 0.049 0.052 0.035 0.027 0.038 0.061 0.031 0.012
------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
- -Dividends to
shareholders from net
investment income ... (0.049) (0.052) (0.035) (0.027) (0.038) (0.061) (0.031) (0.012)
------ ------ ------ ------ ------ ------ ------ ------
Total distributions . (0.049) (0.052) (0.035) (0.027) (0.038) (0.061) (0.031) (0.012)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ====== ======
Total return .......... 4.98% 5.27% 3.51% 2.70% 3.82% 6.36% 6.03%** 5.03%(a)
====== ====== ====== ====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of
period (in 000's) .. $246,368 $113,218 $100,443 $73,284 $46,499 $55,795 $38,017 $1,413
Ratio of expenses to
average net assets* .. 0.57% 0.58% 0.24% 0.56% 0.70% 0.70% 0.57%** 0.43%**
Ratio of net investment
income to average net
assets* .............. 4.80% 5.17% 3.50% 2.66% 3.76% 5.96% 7.85%** 4.90%**
- ----------
* Reflects a voluntary expense limitation and waivers of fees by affiliated parties of the Funds. If this limitation and these
waivers had not been in effect, the annualized ratios of net investment income and expenses to average net assets for the
Investor Shares for the years ended September 30, 1996, 1995, 1994, 1993, 1992, and 1991, and for the period from May 3,
1990 (commencement of operations) to September 30, 1990 would have been 4.62% and 0.75%, 4.97% and 0.78%, 3.08% and 0.67%,
2.28% and 0.93%, 3.54% and 0.91%, 5.68% and 0.98%, and 7.25% and 0.98%, respectively, and for the Adviser Shares for the
period from July 1, 1996 (date of initial offering) to September 30, 1996 would have been 4.72% and 0.61%, respectively.
** Annualized.
(a) Represents total return for Investor Shares for the period from October 1, 1995 to June 30, 1996 plus the total return for
the A dviser Shares for the period from July 1, 1996 to September 30, 1996.
</TABLE>
<PAGE>
SELECTED DATA FOR AN INVESTOR SHARE AND AN ADVISER SHARE OF THE NEW YORK
TAX-FREE MONEY MARKET FUND OUTSTANDING THROUGHOUT EACH PERIOD:
INVESTOR SHARES ADVISER SHARES
------------------------------- ---------------
FOR THE PERIOD
FOR THE PERIOD JULY 1, 1996
NOVEMBER 17, 1994 (DATE OF INITIAL
YEAR ENDED (COMMENCEMENT OF OFFERING) TO
OCTOBER 31, OPERATIONS TO OCTOBER 31,
1996 OCTOBER 31, 1995 1996
-------------- ---------------- ---------------
Net asset value, beginning of
period ..................... $ 1.00 $ 1.00 $ 1.00
------ ------ ------
Income from investment
operations:
Net investment income* ...... 0.030 0.033 0.010
------ ------ ------
Total from investment
operations ............... 0.030 0.033 0.010
------ ------ ------
Less distributions:
- -Dividends to shareholders
from net investment income (0.030) (0.033) (0.010)
------ ------ ------
Total distributions ....... (0.030) (0.033) (0.010)
------ ------ ------
Net asset value, end of
period .................... $ 1.00 $ 1.00 $ 1.00
====== ====== ======
Total return ................ 3.04% 3.31%(a) 1.03%(a)
==== ==== ====
Ratios/supplemental data:
Net assets, end of period
(in 000's) ............... $78,594 $56,652 $3,714
Ratio of expenses to average
net assets* ................ 0.54% 0.41%** 0.35%**
Ratio of net investment
income to average net assets* 2.97% 3.45%** 3.12%**
- ----------
*Reflects a voluntary expense limitation and waivers of fees by affiliated
parties of the Funds. If this limitation and these waivers had not been in
effect, the annualized ratios of net investment income and expenses to average
net assets for the Investor Shares for the year ended October 31, 1996 and for
the period from November 17, 1994 (commencement of operations) to October 31,
1995 would have been 2.88% and 0.63%, and 3.20% and 0.65%, respectively, and
for the Adviser Shares for the period from July 1, 1996 (date of initial
offering) to October 31, 1996 would have been 3.02% and 0.45%, respectively.
**Annualized.
(a)Not annualized.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Purchasing shares of any Fund shall not be considered a complete investment
program, but an important segment of a well-diversified program.
INVESTMENT OBJECTIVES
The investment objective of the U.S. Government Money Market Fund is to
provide shareholders of the Fund with liquidity and as high a level of current
income as is consistent with the preservation of capital. The investment
objective of the New York Tax-Free Money Market Fund is to provide shareholders
of the Fund with liquidity and as high a level of current income exempt from
federal, New York State and New York City personal income taxes as is consistent
with the preservation of capital. There can be no assurance that the investment
objectives of the Funds will be achieved. The investment objective of a Fund may
be changed without approval by the Fund's shareholders. If there is a change in
the investment objective of a Fund, shareholders should consider whether the
Fund remains an appropriate investment in light of their then-current financial
position and needs.
INVESTMENT POLICIES
U.S. GOVERNMENT MONEY MARKET FUND
The Trust seeks to achieve the investment objective of the U.S. Government
Money Market Fund by investing at least 65% of the assets of the Fund in debt
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, commitments to purchase such obligations, and repurchase
agreements collateralized by such obligations. All investments on behalf of the
Fund (i.e., 100% of the Fund's investments) mature or are deemed to mature
within 397 days from the date of acquisition and the average maturity of the
investments held in the Fund's portfolio (on a dollar-weighted basis) is 90 days
or less. The Fund may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities which are subject to repurchase
agreements with recognized securities dealers and banks.
U.S. Government Securities. The U.S. Government Money Market Fund invests in
obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. These include issues of the U.S. Treasury, such as bills,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an Act of Congress. Some of the latter category of obligations
are supported by the "full faith and credit" of the United States, others are
supported by the right of the issuer to borrow from the U.S. Treasury, and still
others are supported only by the credit of the agency or instrumentality.
Examples of each of the three types of obligations described in the preceding
sentence are (i) obligations guaranteed by the Export-Import Bank of the United
States, (ii) obligations of the Federal National Mortgage Association, and (iii)
obligations of the Student Loan Marketing Association, respectively.
NEW YORK TAX-FREE MONEY MARKET FUND
The Trust seeks to achieve the investment objective of the New York Tax-Free
Money Market Fund by investing the assets of the Fund primarily in short-term,
high quality, fixed rate and variable rate obligations issued by or on behalf of
the State of New York, other states, territories and possessions of the United
States, and their authorities, agencies, instrumentalities and political
subdivisions, the interest on which is exempt from federal income taxes,
including participation interests issued by banks, insurance companies or other
financial institutions with respect to such obligations. (Such obligations,
whether or not the interest thereon is subject to the federal alternative
minimum tax, are referred to herein as "Municipal Obligations".) The Trust
invests on behalf of the Fund in certain Municipal Obligations of the State of
New York and its authorities, agencies, instrumentalities and political
subdivisions, and of Puerto Rico, other U.S. territories and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which is
exempt from federal, New York State and New York City personal income taxes,
including participation interests issued by banks, insurance companies or other
financial institutions with respect to such obligations ("New York Municipal
Obligations"). In determining the tax status of interest on Municipal
Obligations and New York Municipal Obligations, the Adviser relies on opinions
of bond counsel who may be counsel to the issuer.
Although under normal circumstances, the Trust attempts to invest 100%, and
does invest at least 65%, of the New York Tax-Free Money Market Fund's assets in
New York Municipal Obligations, market conditions may from time to time limit
the availability of such obligations. To the extent that acceptable New York
Municipal Obligations are not available for investment, the Trust may purchase
on behalf of the Fund Municipal Obligations issued by other states, their
authorities, agencies, instrumentalities and political subdivisions, the
interest income on which is exempt from federal income tax but is subject to New
York State and New York City personal income taxes. As a fundamental policy, the
Trust will invest at least 80% of the Fund's net assets in tax exempt
obligations. The Trust may invest up to 20% of the Fund's total assets in
obligations the interest income on which is subject to federal, New York State
and New York City personal income taxes or the federal alternative minimum tax.
Uninvested cash reserves may be held temporarily for the Fund pending
investment.
The Trust may invest more than 25% of the New York Tax-Free Money Market
Fund's assets in participation interests issued by banks in industrial
development bonds and other Municipal Obligations. In view of this possible
"concentration" in bank participation interests, an investment in the Fund
should be made with an understanding of the characteristics of the banking
industry and the risks which such an investment may entail. See "Variable Rate
Instruments and Participation Interests" below.
All investments on behalf of the New York Tax-Free Money Market Fund (i.e.,
100% of the Fund's investments) mature or are deemed to mature within 397 days
from the date of acquisition and the average maturity of the investments in the
Fund's portfolio (on a dollar-weighted basis) is 90 days or less. The maturities
of variable rate instruments held in the Fund's portfolio are deemed to be the
longer of the period remaining until the next interest rate adjustment or the
period until the Fund would be entitled to payment pursuant to demand rights,
although the stated maturities may be in excess of 397 days. See "Variable Rate
Instruments and Participation Interests" below. As a fundamental policy, the
investments of the Fund are made primarily (i.e., at least 80% of its assets
under normal circumstances) in:
(1) Municipal bonds with remaining maturities of 397 days or less that at
the date of purchase are rated Aaa or Aa by Moody's Investors Service, Inc.
("Moody's"), AAA or AA by Standard & Poor's Corporation ("Standard & Poor's")
or AAA or AA by Fitch Investors Service, Inc. ("Fitch") or, if not rated by
any of these rating agencies, are of comparable quality as determined by or on
behalf of the Board of Trustees of the Trust on the basis of a credit
evaluation of the obligor on the bonds or of the bank issuing a participation
interest or guarantee or of any insurance policy issued in support of the
bonds or the participation interest;
(2) Municipal notes with remaining maturities of 397 days or less that at
the date of purchase are rated MIG 1/VMIG 1 or MIG 2/VMIG 2 by Moody's, SP-1+,
SP-1 or SP-2 by Standard & Poor's or F-1+ , F-1 or F-2 by Fitch or, if not
rated by any or these rating agencies, are of comparable quality as determined
by or on behalf of the Board of Trustees of the Trust (The principal kinds of
municipal notes are tax and revenue authorization notes, tax anticipation
notes, bond anticipation notes and revenue anticipation notes. Notes sold in
anticipation of collection of taxes, a bond sale or receipt of other revenues
are usually general obligations of the issuing municipality or agency. The
Fund's investments may be concentrated in municipal notes of New York
issuers.); and
(3) Municipal commercial paper that at the date of purchase is rated Prime-1
or Prime-2 by Moody's, A-1+ , A-1 or A-2 by Standard & Poor's or F-1+, F-1
or F-2 by Fitch or, if not rated by any of these rating agencies, is of
comparable quality as determined by or on behalf of the Board of Trustees of
the Trust. Issues of municipal commercial paper typically represent very
short-term, unsecured, negotiable promissory notes. These obligations are
often issued to meet seasonal working capital needs of municipalities or to
provide interim construction financing and are paid from general revenues of
municipalities or are refinanced with long-term debt. In most cases municipal
commercial paper is backed by letters of credit, lending agreements, note
repurchase agreements or other credit facility agreements offered by banks or
other institutions which may be called upon in the event of default by the
issuer of the commercial paper.
For a general discussion of Municipal Obligations and an explanation of the
ratings of Municipal Obligations by Moody's, Standard & Poor's and Fitch, see
Appendix A. For a comparison of yields on such Municipal Obligations and taxable
securities, see the Taxable Equivalent Yield Tables in Appendix B.
As a non-diversified investment company, the Trust is not subject to any
statutory restriction under the 1940 Act with respect to limiting the investment
of the New York Tax-Free Money Market Fund's assets in one or relatively few
issuers. Since the Trust may invest a relatively high percentage of the Fund's
assets in the obligations of a limited number of issuers, the value of shares of
the Fund may be more susceptible to any single economic, political or regulatory
occurrence than the value of shares of a diversified investment company would
be. The Trust may also invest 25% or more of the Fund's assets in obligations
that are related in such a way that an economic, business or political
development or change affecting one of the obligations would also affect the
other obligations including, for example, obligations the interest on which is
paid from revenues of similar type projects, or obligations the issuers of which
are located in the same state.
Variable Rate Instruments and Participation Interests. Variable rate
instruments that the Trust may purchase on behalf of the New York Tax-Free Money
Market Fund provide for a periodic adjustment in the interest rate paid on the
instrument and permit the holder to receive payment upon a specified number of
days' notice of the unpaid principal balance plus accrued interest either from
the issuer or by drawing on a bank letter of credit, a guarantee or an insurance
policy issued with respect to such instrument or by tendering or "putting" such
instrument to a third party.
Variable rate instruments in which the New York Tax-Free Money Market Fund's
assets may be invested include participation interests in Municipal Obligations
owned by a bank, insurance company or other financial institution or affiliated
organization. A participation interest gives the Fund an undivided interest in
the Municipal Obligation in the proportion that the Fund's participation bears
to the total principal amount of the Municipal Obligation and provides the
demand or put feature described below. Each participation interest is backed by
an insurance policy of an insurance company or by an irrevocable letter of
credit or guarantee of, or a right to put to, a bank that has been determined by
or on behalf of the Board of Trustees of the Trust to meet the prescribed
quality standards for the Fund. There is usually the right to sell the
participation interest back to the institution or draw on the letter of credit,
guarantee or insurance policy after notice (usually seven days), for all or any
part of the full principal amount of the Fund's participation in the Municipal
Obligation, plus accrued interest. If the notice period is more than seven days,
the Municipal Obligation is treated as an obligation that is not readily
marketable. In some cases, these rights may not be exercisable in the event of a
default on the underlying Municipal Obligations; in these cases the underlying
Municipal Obligations must meet the Fund's high credit standards at the time of
purchase of the participation interest. Although participation interests may be
sold, the Trust intends to hold them for the Fund until maturity, except under
certain specified circumstances. Purchase of a participation interest may
involve the risk that the Fund will not be deemed to be the owner of the
underlying Municipal Obligation for purposes of the ability to claim tax
exemption of interest paid thereon.
Because of the variable rate nature of the instruments, during periods when
prevailing interest rates decline, the New York Tax-Free Money Market Fund's
yield will decline. On the other hand, during periods when prevailing interest
rates increase, the Fund's yield will increase.
In view of the possible "concentration" of the New York Tax-Free Money Market
Fund in participation interests in Municipal Obligations secured by bank letters
of credit or guarantees, an investment in the Fund should be made with an
understanding of the characteristics of the banking industry and the risks which
such an investment may entail. Banks are subject to extensive governmental
regulations which may limit both the amounts and types of loans and other
financial commitments which may be made and interest rates and fees which may be
charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit or guarantee.
For additional information concerning variable rate instruments and
participation interests, see "Investment Objective, Policies and Restrictions --
Variable Rate Instruments and Participation Interests" in the Statement of
Additional Information.
"When-issued" Municipal Obligations. New issues of Municipal Obligations may
be offered on a "when-issued" or "forward delivery" basis. The payment
obligation and the interest rate that will be received on the Municipal
Obligations offered on this basis are each fixed at the time the Trust commits
to the purchase for the New York Tax-Free Money Market Fund, although
settlement, i.e., delivery of and payment for the Municipal Obligations, takes
place beyond customary settlement time (but normally within 45 days of the
commitment). Between the time the Trust commits to purchase the "when-issued" or
"forward delivery" Municipal Obligation for the Fund and the time delivery and
payment are made, the "when-issued" or "forward delivery" Municipal Obligation
is treated as an asset of the Fund and the amount which the Fund is committed to
pay for that Municipal Obligation is treated as a liability of the Fund. No
interest on a "when-issued" or "forward delivery" Municipal Obligation is
accrued for the Fund until delivery occurs. Although the Trust only makes
commitments to purchase "when-issued" or "forward delivery" Municipal
Obligations for the Fund with the intention of actually acquiring them, the
Trust may sell these obligations before the settlement date if deemed advisable
by the Adviser. Purchasing Municipal Obligations on a "when-issued" or "forward
delivery" basis can involve a risk that the yields available in the market on
the settlement date may actually be higher (or lower) than those obtained in the
transaction itself and, as a result, the "when-issued" or "forward delivery"
Municipal Obligation may have a lesser (or greater) value at the time of
settlement than the Fund's payment obligation with respect to that Municipal
Obligation. Furthermore, if the Trust sells the "when-issued" or "forward
delivery" Municipal Obligation before the settlement date or if the Trust sells
other obligations from the Fund's portfolio in order to meet the payment
obligations, the Fund may realize a capital gain, which is not exempt from
federal, New York State or New York City income taxation.
For additional information concerning "when-issued" or "forward delivery"
Municipal Obligations, see "Investment Objective, Policies and Restrictions --
"When-Issued" Municipal Obligations" in the Statement of Additional Information.
Stand-By Commitments. When the Trust purchases Municipal Obligations on behalf
of the New York Tax-Free Money Market Fund it may also acquire stand-by
commitments from banks with respect to such Municipal Obligations. The Trust
also reserves the right, and may in the future, subject to receipt of an
exemptive order pursuant to the 1940 Act, acquire stand-by commitments from
broker-dealers on behalf of the Fund. There can be no assurance that such an
order will be granted. Under a stand-by commitment, a bank or broker-dealer
agrees to purchase at the Trust's option a specified Municipal Obligation at a
specified price. A stand-by commitment is the equivalent of a "put" option
acquired for the Fund with respect to a particular Municipal Obligation held for
it.
The Trust intends to acquire stand-by commitments on behalf of the New York
Tax-Free Money Market Fund solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes. The purpose of
this practice is to permit the Fund to be fully invested in Municipal
Obligations, and to the extent possible New York Municipal Obligations, while
preserving the necessary liquidity to purchase Municipal Obligations on a
"when-issued" basis, to meet unusually large redemptions and to purchase at a
later date Municipal Obligations other than those subject to the stand-by
commitment.
The stand-by commitments that the Trust may enter into on behalf of the New
York Tax-Free Money Market Fund are subject to certain risks, which include the
ability of the issuer of the commitment to pay for the Municipal Obligations at
the time the commitment is exercised, the fact that the commitment is not
marketable by the Trust, and the fact that the maturity of the underlying
Municipal Obligation will generally be different from that of the commitment.
For additional information concerning stand-by commitments, see "Investment
Objective, Policies and Restrictions -- Stand-by Commitments" in the Statement
of Additional Information.
Risk Factors Affecting Investments in New York Municipal Obligations. The
Trust intends to invest a high proportion of the New York Tax-Free Money Market
Fund's assets in New York Municipal Obligations. Payment of interest and
preservation of principal is dependent upon the continuing ability of New York
issuers and/or obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors should consider the
greater risk inherent in the Fund's concentration in such obligations versus the
safety that comes with a less geographically concentrated investment portfolio
and should compare the yield available on a portfolio of New York issues with
the yield of a more diversified portfolio including out-of-state issues before
making an investment decision. The Adviser believes that by maintaining the
Fund's investment portfolio in liquid, short-term, high quality Municipal
Obligations, including participation interests and other variable rate
instruments that have high quality credit support from banks, insurance
companies or other financial institutions, the Fund is somewhat insulated from
the credit risks that may exist for long-term New York Municipal Obligations.
New York State and other issuers of New York Municipal Obligations have
historically experienced periods of financial difficulties which have caused the
credit ratings of certain of their obligations to be downgraded by certain
rating agencies. There can be no assurance that credit ratings on obligations of
New York State and New York City and other New York Municipal Obligations will
not be downgraded further. See "Investment Objective, Policies and Restrictions
- -- Special Factors Affecting New York" in the Statement of Additional
Information.
Subject to the fundamental policy described on page 11, the Trust is
authorized to invest on behalf of the New York Tax-Free Money Market Fund in
taxable securities (such as U.S. Government obligations or certificates of
deposit of domestic banks). If the Trust invests on behalf of the Fund in
taxable securities, such securities will, in the opinion of the Adviser, be of
comparable quality and credit risk with the Municipal Obligations described
above. See the Statement of Additional Information for a description, including
specific rating criteria, of such taxable securities.
REPURCHASE AGREEMENTS
A repurchase agreement arises when a buyer purchases an obligation and
simultaneously agrees with the vendor to resell the obligation to the vendor at
an agreed-upon price and time, which is usually not more than seven days from
the date of purchase. The resale price of a repurchase agreement is greater than
the purchase price, reflecting an agreed-upon market rate which is effective for
the period of time the buyer's funds are invested in the obligation and which is
not related to the coupon rate on the purchased obligation. Obligations serving
as collateral for each repurchase agreement are delivered to each Fund's
custodian bank either physically or in book entry form and the collateral is
marked to the market daily to ensure that each repurchase agreement is fully
collateralized at all times. A buyer of a repurchase agreement runs a risk of
loss if, at the time of default by the issuer, the value of the collateral
securing the agreement is less than the price paid for the repurchase agreement.
If the vendor of a repurchase agreement becomes bankrupt, the Trust might be
delayed, or may incur costs or possible losses of principal and income, in
selling the collateral on behalf of a Fund. The Trust may enter into repurchase
agreements on behalf of the Funds only with a vendor which is a member bank of
the Federal Reserve System or which is a "primary dealer" (as designated by the
Federal Reserve Bank of New York) in U.S. Government obligations. The
restrictions and procedures described above which govern the investment of each
Fund's assets in repurchase obligations are designed to minimize a Fund's risk
of losses from those investments. Repurchase agreements are considered
collateralized loans under the 1940 Act.
GENERAL
The Trust may, in the future, seek to achieve the investment objective of a
Fund by investing all of its assets in a no-load, open-end management investment
company having the same investment objective and policies and substantially the
same investment restrictions as those applicable to the Fund. In such event, a
Fund's Investment Advisory Contract would be terminated and the administrative
services fees paid by the Fund would be reduced. Such investment would be made
only if the Trustees of the Trust believe that the aggregate per share expenses
of a Fund and such other investment company will be less than or approximately
equal to the expenses which the Fund would incur if the Trust were to continue
to retain the services of an investment adviser for the Fund and the assets of
the Fund were to continue to be invested directly in portfolio securities.
The investment policies of the Funds as described above may be changed by the
Board of Trustees of the Trust without approval by the shareholders of the
Funds. Each Fund's Statement of Additional Information includes a further
discussion of investment policies and a listing of the specific investment
restrictions which govern the investment policies of the Fund, including a
restriction that not more than 10% of each Fund's net assets may be invested in
securities that are not readily marketable, such as repurchase agreements
maturing in more than seven days. Although the Trust currently does not borrow
on behalf of the Funds for the purpose of leveraging, these restrictions permit
the Trust to borrow money on behalf of each Fund for certain other purposes in
amounts up to 33 1/3% of the Fund's net assets (although no securities will be
purchased for the Fund at any time at which borrowings exceed 5% of that Fund's
total assets taken at market value). These specific investment restrictions, as
well as the fundamental policy described above for the New York Tax-Free Money
Market Fund, may not be changed without the approval of a Fund's shareholders.
If a percentage restriction (other than a restriction as to borrowing) or a
rating restriction on investment or utilization of assets is adhered to at the
time an investment is made, or assets are so utilized, a later change in
percentage resulting from changes in the value of each Fund's portfolio
securities is not considered a violation of policy.
MANAGEMENT OF THE TRUST
The business and affairs of the Funds are managed under the direction of the
Board of Trustees of the Trust. The Trustees are Frederick C. Chen, Alan S.
Parsow, Larry M. Robbins and Michael Seely. Additional information about the
Trustees, as well as the Trust's executive officers, may be found in the
Statement of Additional Information under the caption "Management of the Trust
- -- Trustees and Officers".
THE ADVISER
Republic serves as investment adviser to the Funds. Prior to October 14, 1994
Republic Asset Management Corporation advised the U.S. Government Money Market
Fund. The Adviser manages the investment and reinvestment of the assets of the
Funds and continuously reviews, supervises and administers the investments of
each Fund pursuant to an Investment Advisory Contract (the "Investment Advisory
Contract"). Subject to such policies as the Board of Trustees may determine, the
Adviser places orders for the purchase and sale of a Fund's investments directly
with brokers or dealers selected by it in its discretion. The Adviser does not
place orders with the Distributor. For its services under the Investment
Advisory Contract, the Adviser receives fees, payable monthly, from the U.S.
Government Money Market Fund and the New York Tax-Free Money Market Fund at the
annual rate of 0.20% and 0.15%, respectively, of each Fund's average daily net
assets.
Republic is a wholly-owned subsidiary of Republic New York Corporation, a
registered bank holding company. As of December 31, 1996, Republic was the
largest bank holding company in the United States measured by assets and
the largest commercial bank measured by shareholder equity. Republic or an
affiliate of Republic serves as investment adviser to the other series of the
Trust. Republic currently provides investment advisory services for individuals,
trusts, estates and institutions.
Republic and its affiliates may have deposit, loan and other commercial
banking relationships with issuers of obligations purchased for the Funds,
including outstanding loans to such issuers which may be repaid in whole or in
part with the proceeds of obligations so purchased. Republic and its affiliates
deal, trade and invest for their own accounts in U.S. Government and Municipal
obligations and are dealers of various types of U.S. Government and Municipal
obligations. Republic and its affiliates may sell U.S. Government and Municipal
obligations to, and purchase them from, other investment companies sponsored by
BISYS. The Adviser does not invest any U.S. Government Money Market Fund assets
in any U.S. Government obligation or any New York Tax-Free Money Market Fund
assets in any Municipal Obligations purchased from itself or any affiliate,
although under certain circumstances such obligations may be purchased from
other members of an underwriting syndicate in which Republic or an affiliate is
a non-principal member. This restriction should not limit the amount or type of
U.S. Government or Municipal obligations available to be purchased for the Funds
The Adviser has informed the Trust that, in making its investment decisions, it
does not obtain or use material inside information in the possession of any
division or department of Republic or in the possession of any affiliate of
Republic.
Based upon the advice of counsel, Republic believes that the performance of
investment advisory and other services for the Funds will not violate the
Glass-Steagall Act or other applicable banking laws or regulations. However,
future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes and
regulations, could prevent Republic from continuing to perform such services for
the Funds. If Republic were prohibited from acting as investment adviser to the
Funds, it is expected that the Board of Trustees would recommend to shareholders
of the Funds approval of a new investment advisory agreement with another
qualified investment adviser selected by the Board or that the Board would
recommend other appropriate action. If Republic were prohibited from acting as a
Shareholder Servicing Agent for the Funds, the Trust would seek alternative
means of providing such services.
Pursuant to a license agreement between the Trust and Republic dated October
6, 1994, the Trust may continue to use in its name "Republic" only if Republic
does not request that the Trust change its name to eliminate all reference to
"Republic" upon the expiration or earlier termination of any investment advisory
agreement between the Trust and Republic.
THE DISTRIBUTOR AND SPONSOR
BISYS, whose address is 3435 Stelzer Road, Columbus, Ohio 43219-3035, acts as
sponsor and distributor to each Fund under a Distribution Contract with the
Trust. The Distributor may, out of its own resources, make payments to
broker-dealers for their services in distributing Shares. BISYS and its
affiliates also serve as administrator or distributor to other investment
companies. BISYS is a wholly owned subsidiary of BISYS Group, Inc.
Pursuant to a Distribution Plan adopted by the Trust with respect to Investor
Shares of the Funds (the "Plan"), the Distributor is reimbursed from each Fund
monthly (subject to a limit on an annual basis of 0.25% of each Fund's average
daily net assets represented by Investor Shares outstanding during the period
for which payment is being made) for costs and expenses incurred by the
Distributor in connection with the distribution of Investor Shares and for the
provision of certain shareholder services with respect to Investor Shares.
Payments to the Distributor are for various types of activities, including: (1)
payments to broker-dealers which advise shareholders regarding the purchase,
sale or retention of Investor Shares of the Funds and which provide shareholders
with personal services and account maintenance services ("service fees"), (2)
payments to employees of the Distributor, and (3) printing and advertising
expenses. Such payments by the Distributor to broker-dealers may be in amounts
on an annual basis of up to 0.25% of each Fund's average daily net assets
represented by Investor Shares outstanding during the period for which payment
is being made. It is currently intended that the aggregate fees paid to the
Distributor pursuant to the Plan and to Shareholder Servicing Agents pursuant to
the Administrative Services Plan will not exceed on an annual basis 0.25% of
each Fund's average daily net assets represented by Investor Shares outstanding
during the period for which payment is being made. Salary expense of BISYS
personnel who are responsible for marketing shares of the various series of the
Trust may be allocated to such series on the basis of average net assets; travel
expense is allocated to, or divided among, the particular series for which it is
incurred.
Any payment by the Distributor or reimbursement of the Distributor from the
Funds made pursuant to the Plan is contingent upon the Board of Trustees'
approval. The Funds are not liable for distribution and shareholder servicing
expenditures made by the Distributor in any given year in excess of the maximum
amount (0.25% per annum of each Fund's average daily net assets represented by
Investor Shares outstanding) payable under the Plan in that year.
ADMINISTRATIVE SERVICES PLAN
The Trust has adopted an Administrative Services Plan which provides that the
Trust may obtain the services of an administrator, transfer agent, and
custodian, and, with respect to the Investor Shares of each Fund, one or more
Shareholder Servicing Agents, and may enter into agreements providing for the
payment of fees for such services.
ADMINISTRATOR
Pursuant to an Administration Agreement, BISYS provides the Trust with general
office facilities and supervises the overall administration of the Trust and the
Funds, including, among other responsibilities, the negotiation of contracts and
fees with, and the monitoring of performance and billings of, the independent
contractors and agents of the Trust; the preparation and filing of all documents
required for compliance by the Trust with applicable laws and regulations; and
arranging for the maintenance of books and records of the Trust and the Funds.
BISYS provides persons satisfactory to the Board of Trustees of the Trust to
serve as officers of the Trust. Such officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
BISYS or its affiliates. For these services and facilities, BISYS receives from
the Funds fees payable monthly at an annual rate equal to 0.10% of the first $1
billion of a Fund's average daily net assets, 0.08% of the next $1 billion of
such assets; and 0.07% of such assets in excess of $2 billion.
TRANSFER AGENT AND CUSTODIAN
The Trust has entered into Transfer Agency Agreements with Investors Bank &
Trust Company ("IBT"), pursuant to which IBT acts as transfer agent for the
Funds (the "Transfer Agent"). The Transfer Agent maintains an account for each
shareholder of the Funds (unless such account is maintained by the shareholder's
securities-broker, if applicable, or Shareholder Servicing Agent), performs
other transfer agency functions, and acts as dividend disbursing agent for the
Funds. Pursuant to Custodian Agreements, IBT also acts as the custodian of each
Fund's assets (the "Custodian"). The Custodian's responsibilities include
safeguarding and controlling each Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on each Fund's investments, maintaining books of original entry for portfolio
and fund accounting and other required books and accounts, and calculating the
daily net asset value of shares of the Funds. Securities held for the Funds may
be deposited into the Federal Reserve-Treasury Department Book Entry System or
the Depositary Trust Company. The Custodian does not determine the investment
policies of the Funds or decide which securities will be purchased or sold for
the Funds. Assets of the Funds may, however, be invested in securities of the
Custodian and the Trust may deal with the Custodian as principal in securities
transactions for the Funds. For its services, IBT receives such compensation as
may from time to time be agreed upon by it and the Trust.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent, including Republic, pursuant
to which a Shareholder Servicing Agent, as agent for its customers, among other
things: answers customer inquiries regarding account status and history, the
manner in which purchases and redemptions of Investor Shares and Adviser Shares
of the Funds may be effected and certain other matters pertaining to the Funds;
assists shareholders in designating and changing dividend options, account
designations and addresses; provides necessary personnel and facilities to
establish and maintain shareholder accounts and records; assists in processing
purchase and redemption transactions; arranges for the wiring of funds;
transmits and receives funds in connection with customer orders to purchase or
redeem shares; verifies and guarantees shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnishes (either separately or on an integrated basis with other reports sent
to a shareholder by a Shareholder Servicing Agent) monthly and year-end
statements and confirmations of purchases and redemptions; transmits, on behalf
of the Trust, proxy statements, annual reports, updated prospectuses and other
communications from the Trust to each Fund's shareholders; receives, tabulates
and transmits to the Trust proxies executed by shareholders with respect to
meetings of shareholders of each Fund or the Trust; and provides such other
related services as the Trust or a shareholder may request. With respect to
Investor Shares, each Shareholder Servicing Agent receives a fee from each Fund
for these services, which may be paid periodically, determined by a formula
based upon the number of accounts serviced by such Shareholder Servicing Agent
during the period for which payment is being made, the level of activity in
accounts serviced by such Shareholder Servicing Agent during such period, and
the expenses incurred by such Shareholder Servicing Agent. It is currently
intended that the aggregate fees paid to the Distributor pursuant to the Plan
and to Shareholder Servicing Agents pursuant to the Administrative Services Plan
will not exceed on an annual basis 0.25% of each Fund's average daily net assets
represented by Investor Shares outstanding during the period for which payment
is being made. Fees are not paid under the terms of the Administrative Services
Plan with respect to Adviser Shares.
The Trust understands that some Shareholder Servicing Agents also may impose
certain conditions on their customers, subject to the terms of this Prospectus,
in addition to or different from those imposed by the Trust, such as requiring a
different minimum initial or subsequent investment, account fees (a fixed amount
per transaction processed), compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered), or
account maintenance fees (a periodic charge based on a percentage of the assets
in the account or of the dividends paid on those assets). Each Shareholder
Servicing Agent has agreed to transmit to its customers who are holders of
Shares appropriate prior written disclosure of any fees that it may charge them
directly and to provide written notice at least 30 days prior to the imposition
of any transaction fees. Conversely, the Trust understands that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other fees
or the fees received by the Shareholder Servicing Agent from the Funds with
respect to those accounts.
The Glass-Steagall Act prohibits certain financial institutions from engaging
in the business of underwriting securities of open-end investment companies,
such as shares of the Funds. The Trust engages banks as Shareholder Servicing
Agents on behalf of the Funds only to perform administrative and shareholder
servicing functions as described above. The Trust believes that the
Glass-Steagall Act should not preclude a bank from acting as a Shareholder
Servicing Agent. There is presently no controlling precedent regarding the
performance of shareholder servicing activities by banks. Future changes in
either federal statutes or regulations relating to the permissible activities of
banks, as well as future judicial or administrative decisions and
interpretations of present and future statutes and regulations, could prevent a
bank from continuing to perform all or part of its servicing activities. If a
bank were prohibited from so acting, its shareholder customers would be
permitted to remain shareholders of the Funds and alternative means for
continuing the servicing of such shareholders would be sought. In such event,
changes in the operation of the Funds might occur and a shareholder serviced by
such bank might no longer be able to avail himself of any automatic investment
or other services then being provided by such bank. The Trustees of the Trust do
not expect that shareholders of the Funds would suffer any adverse financial
consequences as a result of these occurrences.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by the Distributor or the Adviser. See "Management of the Trust --
Expenses and Expense Limits" in the Statement of Additional Information.
Expenses attributable to a particular class of shares shall be allocated to that
class of shares only. Investor Share Expenses must include payments made
pursuant to the Plan and Shareholder Servicing Agent fees paid pursuant to the
Administrative Services Plan. In the event a particular expense is not
reasonably allocable by class or to a particular class, it shall be treated as a
Fund expense or a Trust expense. Trust expenses directly attributable to a Fund
are charged to the Fund; other expenses are allocated proportionately among all
the series in the Trust in relation to the net assets of each series. For the
most recent fiscal year, the operating expenses of the Investor Shares of the
U.S. Government Money Market Fund and the New York Tax- Free Money Market Fund
equaled on an annual basis 0.57% and 0.54%, respectively, of each Fund's average
daily net assets attributable to Investor Shares, and 0.43% and 0.35%
respectively, of each Fund's average daily net assets attributable to Adviser
Shares.
CLASSES OF SHARES
The Trust currently offers two classes of shares of the Funds, the Investor
Shares and Adviser Shares, pursuant to this prospectus. Investor Shares and
Adviser shares may have different class expenses, which may affect performance.
Additionally, Adviser Shares are only being offered to customers of Shareholder
Servicing Agents, while Investor Shares are being offered to the public, to
customers of a Shareholder Servicing Agent and to customers of a securities
broker that has entered into a dealer agreement with the Distributor.
The Investor Shares and Adviser Shares each have exclusive voting rights with
respect to their respective Plan and the Shareholder Servicing Agent fees paid
pursuant to their respective Administrative Services Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value for a particular share in a Fund is determined on each day
on which the New York Stock Exchange is open for trading ("Fund Business Day").
This determination is made once during each such day as of 12:00 noon, New York
time, by dividing the value of a Fund's net assets allocable to a class of share
(i.e., the value of its assets less its liabilities, including expenses payable
or accrued) by the number of shares of that class outstanding at the time the
determination is made. It is anticipated that the net asset value of each
Investor Share and Adviser Share will remain constant at $1.00 (although no
assurance can be given that it will be so constant on a continuing basis) and
specific investment policies and procedures, including the use of the amortized
cost valuation method, are being employed to accomplish this result. Income
earned on each Fund's investments is accrued daily and the Net Income, as
defined under "Dividends and Distributions" on page 30, is declared each Fund
Business Day as a dividend.
PURCHASE OF SHARES
Shares may be purchased through Shareholder Servicing Agents or, in the case
of Investor Shares only, through securities brokers that have entered into a
dealer agreement with the Distributor ("Securities Brokers"). Shares may be
purchased without a sales load at their net asset value next determined after an
order is transmitted to and accepted by the Distributor or is received by a
Shareholder Servicing Agent or a Securities Broker if it is transmitted to and
accepted by the Distributor. Purchases are therefore effected on the same day
the purchase order is received by the Distributor provided such order is
received prior to 12:00 noon, New York time, on any Fund Business Day. Shares
purchased earn dividends from and including the day the purchase is effected. It
is anticipated that the net asset value of $1.00 per share of a Fund will remain
constant, and although no assurance can be given that it will be so constant on
a continuing basis, specific investment policies and procedures are being
employed to accomplish this result. The Trust intends the Funds to be as fully
invested at all times as is reasonably practicable in order to enhance the yield
on their assets. Each Shareholder Servicing Agent or Securities Broker is
responsible for and required to promptly forward orders for shares to the
Distributor.
While there is no sales load on purchases of Investor Shares, the Distributor
may receive fees from the Funds. See "Management of the Trust -- The Distributor
and Sponsor". Other funds which have investment objectives similar to those of
the Funds but which do not pay some or all of such fees from their assets may
offer a higher yield.
All purchase payments are invested in full and fractional Shares. The Trust
reserves the right to cease offering Shares for sale at any time or to reject
any order for the purchase of Shares.
An investor may purchase Investor Shares through the Distributor directly or
by authorizing his Shareholder Servicing Agent or his securities broker to
purchase such shares on his behalf through the Distributor. An investor may
purchase Adviser Shares by authorizing his Shareholder Servicing Agent to
purchase such shares on his behalf through the Distributor.
Exchange Privilege. By contacting the Transfer Agent or his Shareholder
Servicing Agent or his securities broker, a shareholder may exchange some or all
of his Shares for shares of an identical class of one or more of the following
investment companies at net asset value without a sales charge: Republic U.S.
Government Money Market Fund, Republic Bond Fund, Republic Overseas Equity Fund,
Republic Opportunity Fund, Republic New York Tax-Free Bond Fund, Republic New
York Tax-Free Money Market Fund, Republic Equity Fund, and such other Republic
Funds or other registered investment companies for which Republic serves as
investment adviser as Republic may determine. An exchange may result in a change
in the number of Shares held, but not in the value of such Shares immediately
after the exchange. Each exchange involves the redemption of the Shares to be
exchanged and the purchase of the shares of the other Republic Fund.
The exchange privilege (or any aspect of it) may be changed or discontinued
upon 60 days' written notice to shareholders and is available only to
shareholders in states in which such exchanges may be legally made. A
shareholder considering an exchange should obtain and read the prospectus of the
other Republic Fund and consider the differences in investment objectives and
policies before making any exchange.
DIRECTLY THROUGH THE DISTRIBUTOR
For each shareholder who purchases Investor Shares directly through the
Distributor, the Trust, as the shareholder's agent, establishes an open account
to which all Investor Shares purchased are credited together with any dividends
and capital gains distributions which are paid in additional Investor Shares.
See "Dividends and Distributions". The minimum initial investment is $1,000,
except that the minimum initial investment for an Individual Retirement Account
is $250. The minimum subsequent investment is $100. Initial and subsequent
purchases may be made by writing a check (in U.S. dollars) payable to The
Republic Funds -- U.S. Government Money Market Fund or The Republic Funds -- New
York Tax-Free Money Market Fund and mailing it to:
The Republic Funds
c/o Investors Bank & Trust Company
P.O. Box 1537 MFD23
Boston, Massachusetts 02205-1537
In the case of an initial purchase, the check must be accompanied by a
completed Purchase Application.
In the case of subsequent purchases, a shareholder may transmit purchase
payments by wire directly to the custodian bank of the Funds at the following
address:
Investors Bank & Trust Company
Boston, Massachusetts
Attn: Transfer Agent
ABA # 011001438
Acct. #5999-99451
For further credit to the Republic Funds (U.S. Government Money Market Fund
or New York Tax-Free Money Market Fund, Investor, account name, account #)
The wire order must specify the Fund, the account name, number, confirmation
number, address, amount to be wired, name of the wiring bank and name and
telephone number of the person to be contacted in connection with the order.
Automatic Investment Plan. The Trust offers a plan for regularly investing
specified dollar amounts ($25.00 minimum in monthly, quarterly, semi-annual or
annual intervals) in a Fund. If an Automatic Investment Plan is selected,
subsequent investments will be automatic and will continue until such time as
the Trust and the investor's bank are notified to discontinue further
investments. Due to the varying procedures to prepare, process and to forward
bank withdrawal information to the Trust, there may be a delay between the time
of the bank withdrawal and the time the money reaches the Fund. The investment
in a Fund will be made at the net asset value per share determined on the day
that both the check and the bank withdrawal data are received in required form
by the Distributor. Further information about the plan may be obtained from IBT
at the telephone number listed on the back cover.
For further information on how to purchase Investor Shares from the
Distributor, an investor should contact the Distributor directly (see back cover
for address and phone number).
THROUGH A SHAREHOLDER SERVICING AGENT OR A SECURITIES BROKER
Investor Shares of each Fund are being offered to the public, to customers of
a Shareholder Servicing Agent and to customers of a securities broker that has
entered into a dealer agreement with the Distributor. Adviser Shares of each
Fund are only being offered to customers of Shareholder Servicing Agents.
Shareholder Servicing Agents and securities brokers, if applicable, may offer
services to their customers, including specialized procedures for the purchase
and redemption of Shares, such as pre-authorized or automatic purchase and
redemption programs and "sweep" checking programs. Each Shareholder Servicing
Agent and securities broker may establish its own terms, conditions and charges,
including limitations on the amounts of transactions, with respect to such
services. Charges for these services may include fixed annual fees, account
maintenance fees and minimum account balance requirements. The effect of any
such fees will be to reduce the net return on the investment of customers of
that Shareholder Servicing Agent or securities broker. Conversely, certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from each Fund, which will have the effect of
increasing the net return on the investment of such customers of those
Shareholder Servicing Agents.
Shareholder Servicing Agents and securities brokers may transmit purchase
payments on behalf of their customers by wire directly to a Fund's custodian
bank by following the procedures described above.
For further information on how to direct a securities broker, if applicable,
or a Shareholder Servicing Agent to purchase Shares, an investor should contact
his securities broker or his Shareholder Servicing Agent.
RETIREMENT PLANS
Shares of the U.S. Government Money Market Fund are offered in connection with
tax-deferred retirement plans. Application forms and further information about
these plans, including applicable fees, are available from the Trust or the
Sponsor upon request. Recently enacted federal tax legislation has substantially
affected the tax treatment of contributions to certain retirement plans. Before
investing in the Fund through one or more of these plans, an investor should
consult his or her tax adviser.
INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the U.S. Government Money Market Fund may be used as a funding
medium for an IRA. An Internal Revenue Service-approved IRA plan may be
available from an investor's Shareholder Servicing Agent. In any event, such a
plan is available from the Sponsor naming IBT as custodian. The minimum initial
investment for an IRA is $250; the minimum subsequent investment is $100. IRAs
are available to individuals who receive compensation or earned income and their
spouses whether or not they are active participants in a tax-qualified or
Government-approved retirement plan. An IRA contribution by an individual who
participates, or whose spouse participates, in a tax-qualified or
Government-approved retirement plan may not be deductible depending upon the
individual's income. Individuals also may establish an IRA to receive a
"rollover" contribution of distributions from another IRA or a qualified plan.
Tax advice should be obtained before planning a rollover.
DEFINED CONTRIBUTION PLANS
Investors who are self-employed may purchase shares of the U.S. Government
Money Market Fund for retirement plans for self-employed persons which are known
as Defined Contribution Plans (formerly Keogh or H.R. 10 Plans). Republic offers
a prototype plan for Money Purchase and Profit Sharing Plans.
SECTION 457 PLAN, 401(K) PLAN, 403(B) PLAN
The U.S. Government Money Market Fund may be used as a vehicle for certain
deferred compensation plans provided for by Section 457 of the Internal Revenue
Code of 1986, as amended, (the "Code") with respect to service for state
governments, local governments, rural electric cooperatives and political
subdivisions, agencies, instrumentalities and certain affiliates of such
entities. The Fund may also be used as a vehicle for both 401(k) plans and
403(b) plans.
REDEMPTION OF SHARES
A shareholder may redeem all or any portion of the Shares in his account at
any time at the net asset value (normally $1.00 per share) next determined after
a redemption order in proper form is furnished by the shareholder to the
Transfer Agent, with respect to Shares purchased directly through the
Distributor, or to his securities broker or his Shareholder Servicing Agent, and
is transmitted to and received by the Transfer Agent. Redemptions are effected
on the same day the redemption order is received by the Transfer Agent provided
such order is received prior to 12:00 noon, New York time, on any Fund Business
Day. Shares redeemed earn dividends up to and including the day prior to the day
the redemption is effected.
The proceeds of a redemption are normally paid from a Fund in federal funds on
the next Fund Business Day following the date on which the redemption is
effected, but in any event within seven days. The right of any shareholder to
receive payment with respect to any redemption may be suspended or the payment
of the redemption proceeds postponed during any period in which the New York
Stock Exchange is closed (other than weekends or holidays) or trading on such
Exchange is restricted or, to the extent otherwise permitted by the 1940 Act, if
an emergency exists. To be in a position to eliminate excessive expenses, the
Trust reserves the right to redeem upon not less than 30 days' notice all Shares
in an account which has a value below $50. However, a shareholder will be
allowed to make additional investments prior to the date fixed for redemption to
avoid liquidation of the account.
Unless Shares have been purchased directly from the Distributor, a shareholder
may redeem Shares only by authorizing his securities broker, if applicable, or
his Shareholder Servicing Agent to redeem such Shares on his behalf (since the
account and records of such a shareholder are established and maintained by his
securities broker or his Shareholder Servicing Agent). For further information
as to how to direct a securities broker or a Shareholder Servicing Agent to
redeem Shares, a shareholder should contact his securities broker or his
Shareholder Servicing Agent.
SYSTEMATIC WITHDRAWAL PLAN
Any shareholder who owns Shares with an aggregate value of $10,000 or more may
establish a Systematic Withdrawal Plan under which they redeem at net asset
value the number of full and fractional shares which will produce the monthly,
quarterly, semi-annual or annual payments specified (minimum $50.00 per
payment). Depending on the amounts withdrawn, systematic withdrawals may deplete
the investor's principal. Investors contemplating participation in this Plan
should consult their tax advisers. No additional charge to the shareholder is
made for this service.
REDEMPTION OF INVESTOR SHARES PURCHASED DIRECTLY THROUGH THE DISTRIBUTOR
Redemption by Letter. Redemptions may be made by letter to the Transfer Agent
specifying the dollar amount or number of Investor Shares to be redeemed,
account number and the Fund. The letter must be signed in exactly the same way
the account is registered (if there is more than one owner of the Shares all
must sign). In connection with a written redemption request, all signatures of
all registered owners or authorized parties must be guaranteed by an Eligible
Guarantor Institution, which includes a domestic bank, broker, dealer, credit
union, national securities exchange, registered securities association, clearing
agency or savings association. A Fund's transfer agent, however, may reject
redemption instructions if the guarantor is neither a member or not a
participant in a signature guarantee program (currently known as "STAMP",
"SEMP", or "NYSE MPS"). Corporations, partnerships, trusts or other legal
entities may be required to submit additional documentation.
An investor may redeem Investor Shares in any amount by written request mailed
to the Transfer Agent at the following address:
The Republic Funds
c/o Investors Bank & Trust Company
P.O. Box 1537 MFD23
Boston, Massachusetts 02205-1537
Checks for redemption proceeds normally will be mailed within seven days, but
will not be mailed until all checks in payment for the purchase of the Investor
Shares to be redeemed have been cleared, which may take up to 15 days or more.
Unless other instructions are given in proper form, a check for the proceeds of
a redemption will be sent to the shareholder's address of record.
Redemption by Wire or Telephone. An investor may redeem Investor Shares by
wire or by telephone if he has checked the appropriate box on the Purchase
Application or has filed a Telephone Authorization Form with the Trust. These
redemptions may be paid from the applicable Fund by wire or by check. The Trust
reserves the right to refuse telephone wire redemptions and may limit the amount
involved or the number of telephone redemptions. The telephone redemption
procedure may be modified or discontinued at any time by the Trust. Instructions
for wire redemptions are set forth in the Purchase Application. The Trust
employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. For instance, the following information must be verified
by the shareholder or securities broker at the time a request for a telephone
redemption is effected: (1) shareholder's account number; (2) shareholder's
social security number; and (3) name and account number of shareholder's
designated securities broker or bank. If the Trust fails to follow these or
other established procedures, it may be liable for any losses due to
unauthorized or fraudulent instructions.
Check Redemption Service. Shareholders may redeem Investor Shares by means of
a Check Redemption Service. If Investor Shares are held in book credit form and
the Check Redemption Service has been elected on the Purchase Application on
file with the Trust, redemptions of shares may be made by using redemption
checks provided by the Trust. There is no charge for this service. Checks must
be written for amounts of $250 or more, may be payable to anyone and negotiated
in the normal way. If more than one shareholder owns the Investor Shares, all
must sign the check unless an election has been made to require only one
signature on checks and that election has been filed with the Trust.
Investor Shares represented by a redemption check continue to earn daily
dividends until the check clears the banking system. When honoring a redemption
check, the Trust causes the redemption of exactly enough full and fractional
Investor Shares of a Fund from an account to cover the amount of the check. The
Check Redemption Services may be terminated at any time by the Trust.
If the Check Redemption Service is requested for an account in the name of a
corporation or other institution, additional documents must be submitted with
the application, i.e., corporations (Certification of Corporate Resolution),
partnerships (Certification of Partnership) and trusts (Certification of
Trustees). In addition, since the share balance of each Fund account is changing
on a daily basis, the total value of a Fund account cannot be determined in
advance and a Fund account cannot be closed or entirely redeemed by check.
DIVIDENDS AND DISTRIBUTIONS
The net income of a Fund, as defined below, is determined each Fund Business
Day (and on such other days as the Trustees deem necessary in order to comply
with Rule 22c-1 under the 1940 Act). This determination is made once during each
such day as of 12:00 noon, New York time. All the net income of the Fund so
determined is declared in shares of the Fund as a dividend to shareholders of
record at the time of such determination. Shares begin accruing dividends on the
day they are purchased. Dividends are distributed monthly. Unless a shareholder
elects to receive dividends in cash (subject to the policies of the
shareholder's Shareholder Servicing Agent or securities broker), dividends are
distributed in the form of additional shares of the Fund at the rate of one
share (and fraction thereof) of the Fund for each one dollar (and fraction
thereof) of dividend income.
For this purpose the net income of each Fund (from the time of the immediately
preceding determination thereof) consists of (i) all income accrued, less the
amortization of any premium, on the assets of the Fund, less (ii) all actual and
accrued expenses determined in accordance with generally accepted accounting
principles. Interest income includes discount earned (including both original
issue and market discount) on discount paper accrued ratably to the date of
maturity and any net realized gains or losses on the assets of the Fund.
Obligations held in a Fund's portfolio are valued at amortized cost, which the
Trustees of the Trust have determined in good faith constitutes fair value for
the purposes of complying with the 1940 Act. This method provides certainty in
valuation, but may result in periods during which the stated value of an
obligation held for a Fund is higher or lower than the price the Fund would
receive if the obligation were sold. This valuation method will continue to be
used until such time as the Trustees of the Trust determine that it does not
constitute fair value for such purposes.
Since the net income of a Fund is declared as a dividend each time the net
income of the Fund is determined, the net asset value per share of a Fund is
expected to remain at $1.00 per share immediately after each such determination
and dividend declaration. Any increase in the value of a shareholder's
investment in a Fund, representing the reinvestment of dividend income, is
reflected by an increase in the number of Shares in his account.
It is expected that each Fund will have a positive net income at the time of
each determination thereof. If, for any reason, the net income of a Fund
determined at any time is a negative amount, which could occur, for instance,
upon default by an issuer of an obligation held in the Fund's portfolio, the
negative amount with respect to each shareholder account would first be offset
from the dividends declared during the month with respect to each such account.
If and to the extent that such negative amount exceeds such declared dividends
at the end of the month, the number of outstanding Fund Shares would be reduced
by treating each shareholder as having contributed to the capital of the Fund
that number of full and fractional Shares in the account of such shareholder
which represents his proportion of the amount of such excess. Each shareholder
will be deemed to have agreed to such contribution in these circumstances by his
investment in the Fund. Thus, the net asset value per Share is expected to be
maintained at a constant $1.00.
TAX MATTERS
This discussion is intended for general information only. An investor should
consult with his or her own tax advisor as to the tax consequences of an
investment in the Funds including the status of distributions from the New York
Tax-Free Money Market Fund under applicable state or local law and the possible
applicability of a federal alternative minimum tax to a portion of the
distributions of this Fund.
FEDERAL INCOME TAXES
Each year, the Trust intends to qualify the Funds and elect that each Fund be
treated as a separate "regulated investment company" under Subchapter M of the
Code. To so qualify, the Funds must meet certain income, distribution and
diversification requirements. Provided such requirements are met and all
investment company taxable income and net realized capital gains of the Funds
are distributed to shareholders in accordance with the timing requirements
imposed by the Code, generally no federal (or, in the case of the New York
Tax-Free Money Market Fund, New York State and New York City) income or excise
taxes will be paid by the Funds on amounts so distributed.
U.S. Government Money Market Fund. At the end of each calendar year, each
shareholder receives information for tax purposes on the dividends and any
realized net capital gains distributions received during that calendar year
including the portion taxable as ordinary income, the portion taxable as capital
gains, and the amount of dividends eligible for the dividends-received deduction
for corporations. However, since no portion of the U.S. Government Money Market
Fund's income is expected to consist of dividends paid by U.S. corporations, no
portion of the dividends paid by the Fund is expected to qualify for the
dividends-received deduction for corporations.
The Trust may be required to withhold federal income tax at the rate of 31%
from all taxable distributions payable to shareholders who do not provide the
Trust with their correct taxpayer identification number or make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the shareholder's federal
income tax liability.
New York Tax-Free Money Market Fund. After the end of each calendar year, each
shareholder receives a statement setting forth the federal, New York State and
New York City personal income tax status of all dividends and capital gains
distributions, if any, made during that calendar year.
In accordance with the New York Tax-Free Money Market Fund's investment
objective, it is expected that most of the Fund's net income will be
attributable to interest from Municipal Obligations and, as a result, most of
the dividends to Fund shareholders will be designated by the Trust as "exempt-
interest dividends" under the Code, which may be treated as items of interest
excludible from a shareholder's gross income. Since the preservation of capital
and liquidity are important aspects of the Fund's investment objective, the
Trust may from time to time invest a portion of the Fund's assets in short-term
obligations the interest on which is not exempt from federal income taxes.
Moreover, dividends attributable to interest on certain Municipal Obligations
which may be purchased for the Fund may be treated as a tax preference item for
shareholders potentially subject to an alternative minimum tax and all
exempt-interest dividends may increase a corporate shareholder's alternative
minimum tax. Although it is not intended, it is possible that the Fund may
realize short-term or long-term capital gains or losses from its portfolio
transactions. Any distributions from net short-term capital gains would be
taxable to shareholders as ordinary income and any distributions from net
long-term capital gains would be taxable to shareholders as long-term capital
gains regardless of how long they have held their shares.
The Code provides that interest on indebtedness incurred, or continued, to
purchase or carry shares of the New York Tax-Free Money Market Fund is not
deductible. Further, exempt-interest dividends are taken into account in
calculating the amount of social security and railroad retirement benefits that
may be subject to federal income tax. Finally, entities or persons who may be
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development bonds should consult their tax advisors
before purchasing shares of the Fund.
STATE AND LOCAL TAXES
U.S. Government Money Market Fund. Distributions which are derived from
interest on obligations of the U.S. Government and certain of its agencies and
instrumentalities (but generally not from capital gains realized upon the
disposition of such obligations) may be exempt from state and local taxes in
certain states. In other states, arguments can be made on the basis of a U.S.
Supreme Court decision to the effect that such distributions should be exempt
from state and local taxes. Shareholders of the U.S. Government Money Market
Fund are advised of the proportion of its distributions which consists of such
interest.
New York Tax-Free Money Market Fund. The exemption for federal income tax
purposes of dividends derived from interest on Municipal Obligations does not
necessarily result in an exemption under the income or other tax laws of any
state or local taxing authority. However, to the extent that dividends are
derived from interest on New York Municipal Obligations, the dividends will also
be excluded from the gross income of a New York individual resident shareholder
for New York State and New York City personal income tax purposes.
DIVIDENDS FROM THE NEW YORK TAX-FREE MONEY MARKET FUND ARE NOT EXCLUDED IN
DETERMINING NEW YORK STATE OR NEW YORK CITY FRANCHISE TAXES ON CORPORATIONS
AND FINANCIAL INSTITUTIONS.
Dividends and capital gains distributions, if any, paid to shareholders are
treated in the same manner for federal and, in the case of the New York Tax-
Free Money Market Fund, New York State and New York City income tax purposes
whether received in cash or reinvested in additional shares of the Funds.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as each series of the Trust (including the Funds)
qualifies as a "regulated investment company" under the Code.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional Investor Shares and Adviser Shares of Beneficial
Interest (par value $0.001 per share) and to divide or combine the shares into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interests in the Trust. The shares of each series participate equally
in the earnings, dividends and assets of the particular series. Currently, the
Trust has seven series of shares, each of which constitutes a separately managed
fund. The Trust reserves the right to create additional series of shares. The
Trust may authorize the creation of multiple classes of shares of separate
series of the Trust. Currently, each Fund is divided into two classes of shares.
Each share of each class of the Funds represents an equal proportionate
interest in the Fund with each other share of that class. Shares have no
preference, pre-emptive, conversion or similar rights. Shares when issued are
fully paid and non-assessable, except as set forth below. Shareholders are
entitled to one vote for each share held on matters on which they are entitled
to vote. Each Shareholder Servicing Agent has agreed to transmit all proxies and
voting materials from the Trust to their customers who are beneficial owners of
the Fund and such Shareholder Servicing Agents have agreed to vote as instructed
by such customers. The Trust is not required and has no current intention to
hold annual meetings of shareholders, although the Trust will hold special
meetings of Fund shareholders when in the judgment of the Trustees of the Trust
it is necessary or desirable to submit matters for a shareholder vote.
Shareholders of each series generally vote separately, for example, to approve
investment advisory agreements or changes in fundamental investment policies or
restrictions, but shareholders of all series may vote together to the extent
required under the 1940 Act, such as in the election or selection of Trustees,
principal underwriters and accountants for the Trust. Shares of each class of a
series represent an equal pro rata interest in such series and, generally, have
identical voting, dividend, liquidation, and other rights, preferences, powers,
terms and conditions, except that: (a) each class shall have a different
designation; (b) each class of shares shall bear any class expenses; and (c)
each class shall have exclusive voting rights on any matter submitted to
shareholders that relate solely to its distribution arrangement, and each class
shall have separate voting rights on any matter submitted to shareholders in
which the interests of one class differ from the interests of any other class.
Shareholders of the Funds have under certain circumstances (e.g., upon
application and submission of certain specified documents to the Trustees by a
specified number of shareholders) the right to communicate with other
shareholders of the Trust in connection with requesting a meeting of
shareholders of the Trust for the purpose of removing one or more Trustees.
Shareholders of the Trust also have the right to remove one or more Trustees
without a meeting by a declaration in writing subscribed to by a specified
number of shareholders. Upon liquidation or dissolution of a Fund, shareholders
of the Fund would be entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
The Trust's Declaration of Trust provides that, at any meeting of shareholders
of the Funds or the Trust, a Shareholder Servicing Agent may vote any shares as
to which such Shareholder Servicing Agent is the agent of record and which are
otherwise not represented in person or by proxy at the meeting, proportionately
in accordance with the votes cast by holders of all shares otherwise represented
at the meeting in person or by proxy as to which such Shareholder Servicing
Agent is the agent of record. Any shares so voted by a Shareholder Servicing
Agent will be deemed represented at the meeting for purposes of quorum
requirements.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust". Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
PERFORMANCE INFORMATION
From time to time the Trust may provide annualized "yield" and "effective
yield" quotations for the U.S. Government Money Market Fund and annualized
"yield", "effective yield", and "tax equivalent yield" quotations for the New
York Tax-Free Money Market Fund in advertisements, shareholder reports or other
communications to shareholders and prospective investors. The methods used to
calculate a Fund's yield, effective yield and tax equivalent yield are mandated
by the Securities and Exchange Commission. The "yield" of a Fund refers to the
income generated by an investment in the Fund over a seven day period (which
period will be stated in any such advertisement or communication). This income
is then "annualized". That is, the amount of income generated by the investment
during that seven day period is assumed to be generated each week over a 365 day
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly, but when annualized the income earned by the investment
during that seven day period is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment. With respect to the New York Tax-Free Money Market Fund,
the "tax equivalent yield" refers to the yield that a fully taxable money market
fund would have to generate, given a stated aggregate state and local income tax
rate, in order to produce an after-tax yield equivalent to that of the Fund. The
use of a tax equivalent yield allows investors to compare the yield of the Fund,
all or a significant portion of which is exempt from federal, New York State and
New York City personal income taxes, with yields of funds which are not so tax
exempt.
Since these yield, effective yield and tax equivalent yield quotations are
based on historical earnings and since a Fund's yield, effective yield and tax
equivalent yield fluctuate from day to day, these quotations should not be
considered as an indication or representation of a Fund's yield, effective yield
or tax equivalent yield, if applicable, in the future. Any performance
information should be considered in light of a Fund's investment objective and
policies, characteristics and quality of the Fund's portfolio and the market
quotations during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. From time to time the
Trust may also use comparative performance information in such an advertisement
or communication, including the performance of unmanaged indices, the
performance of the Consumer Price Index (as a measure for inflation), and data
from Lipper Analytical Services, Inc., Bank Rate Monitor(tm) , IBC/Donoghue's
Money Fund Report and other industry publications.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield of a Fund varies based on the type, quality and
maturities of the obligations held for the Fund, fluctuations in short-term
interest rates, and changes in the expenses of the Fund. These factors and
possible differences in the methods used to calculate yields should be
considered when comparing the yield of a Fund to yields published for other
investment companies or other investment vehicles.
A Shareholder Servicing Agent or a securities broker, if applicable, may
charge its customers direct fees in connection with an investment in the Funds,
which will have the effect of reducing the net return on the investment of
customers of that Shareholder Servicing Agent or that securities broker.
Conversely, the Trust has been advised that certain Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Funds, which will have the effect of
increasing the net return on the investment of such customers of those
Shareholder Servicing Agents. Such customers may be able to obtain through their
Shareholder Servicing Agent or securities broker quotations reflecting such
decreased or increased return.
The yield and effective yield of the U.S. Government Money Market Fund and the
yield, effective yield and tax equivalent yield of the New York Tax-Free Money
Market Fund are not fixed or guaranteed, and an investment in the Funds is not
insured. The Trust's Statements of Additional Information with respect to the
Funds include more detailed information concerning the calculation of yield,
effective yield and tax equivalent yield, if applicable, quotations for the
Funds.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to the Trust, 3435 Stelzer Road,
Columbus, Ohio 43219-3035.
GENERAL AND ACCOUNT INFORMATION (888) 525-5757 (TOLL FREE)
--------------------
The Trust's Statement of Additional Information, dated February 1, 1997, with
respect to each Fund contains more detailed information about the Fund,
including information related to (i) the Fund's investment restrictions, (ii)
the Trustees and officers of the Trust and the Adviser and Sponsor of the Fund,
(iii) portfolio transactios, (iv) the Fund's shares, including rights and
liabilities of shareholders, and (v) additional yield information, including the
method used to calculate the annualized yield, effective yield and tax
equivalent yield, if applicable, of the Fund.
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL OBLIGATIONS
There are four major varieties of state and municipal notes: Tax and Revenue
Anticipation Notes ("TRANs"); Tax Anticipation Notes ("TANs"); Revenue
Anticipation Notes ("RANs"); and Bond Anticipation Notes ("BANs").
TRANs, TANs and RANs are issued by states, municipalities and other tax-exempt
issuers to finance short-term cash needs or, occasionally, to finance
construction. Most TRANs, TANs and RANs are general obligations of the issuing
entity payable from taxes or designated revenues, respectively, expected to be
received within the related fiscal period.
BANs are issued with the expectation that principal and interest of the
maturing notes will be paid out of proceeds from notes or bonds to be issued
concurrently or at a later date. BANs are issued by both general obligation and
revenue bond issuers usually to finance such items as land acquisition, facility
acquisition and/or construction and capital improvement projects.
Municipal bonds are debt obligations of states, cities, counties,
municipalities and municipal agencies and authorities (all of which are
generally referred to as "municipalities") which generally have a maturity at
the time of issue of one year or more and which are issued to raise funds for
various public purposes such as construction of a wide range of public
facilities, to refund outstanding obligations and to obtain funds for
institutions and facilities.
The two principal classifications of municipal bonds are "general obligation"
and "revenue" bonds. General obligation bonds are secured by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest. Issuers of general obligation bonds include states, counties, cities,
towns and other governmental units. The principal of, and interest on, revenue
bonds are payable from the income of specific projects or authorities and
generally are not supported by the issuer's general power to levy taxes. In some
cases, revenues derived from specific taxes are pledged to support payments on a
revenue bond.
In addition, certain kinds of industrial development bonds ("IDBs") are issued
by or on behalf of public authorities to provide funding for various privately
operated industrial facilities such as warehouse, office, plant and store
facilities, and environmental and pollution control facilities. Interest on the
IDBs is generally exempt, with certain exceptions, from federal income tax
pursuant to Section 103(a) of the Internal Revenue Code, provided the issuer and
corporate obligor thereof continue to meet certain conditions. IDBs are, in most
cases, revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds. The payment of the principal and interest on IDBs
usually depends solely on the ability of the user of the facilities financed by
the bonds or other guarantor to meet its financial obligations and, in certain
instances, the pledge of real and personal property as security for payment. In
the case of many IDBs, there is no established secondary market for their
purchase or sale and therefore they may not be readily marketable. However, the
IDBs or the participation interests in IDBs purchased by the Fund will have
liquidity because they generally will be supported by demand features to "high
quality" banks, insurance companies or other financial institutions which may be
exercised by the Fund. In some cases, these demand features may not be
exercisable in the event of a default on the underlying IDB. (See "Investment
Objective, Policies and Restrictions -- Variable Rate Instruments and
Participation Interests" in the Statement of Additional Information.)
DESCRIPTION OF RATINGS*
The ratings of Moody's Investors Service, Inc., Standard & Poor's Corporation
and Fitch Investors Service, Inc. represent their opinions as to the quality of
various debt obligations. It should be emphasized, however, that ratings are not
absolute standards of quality. Consequently, Municipal Obligations with the same
maturity, coupon and rating may have different yields while Municipal
Obligations of the same maturity and coupon with different ratings may have the
same yield.
- ----------
*As described by the rating agencies. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time revise
such ratings, they undertake no obligation to do so.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST LONG-TERM DEBT RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to as
"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.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are 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 fluctuation 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.
Note: Those bonds in the Aa group which Moody's believes
possess the strongest investment attributes are
designated by the symbol Aa 1.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TWO HIGHEST
RATINGS OF STATE AND MUNICIPAL NOTES:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade ("MIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk, such
as long-term secular trends, may be less important over the short run. A
short-term rating may also be assigned on an issue having a demand feature. Such
ratings will be designated as "VMIG" or, if the demand feature is not rated, as
"NR". Short-term ratings on issues with demand features are differentiated by
the use of the "VMIG" symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on external
liquidity. Additionally, investors should be alert to the fact that the source
of payment may be limited to the external liquidity with no or limited legal
recourse to the issuer in the event the demand is not met. Symbols used are as
follows:
MIG 1/VMIG 1 -- Notes bearing this designation are of the best quality, with
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2 -- Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding group.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior short-term debt obligations not having an original
maturity in excess of one year.
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of senior short-term debt 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.
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S
TWO HIGHEST LONG-TERM DEBT RATINGS:
AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
Plus (+) or Minus (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S TWO HIGHEST
RATINGS OF STATE AND MUNICIPAL NOTES:
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Source of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
are given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S
TWO HIGHEST COMMERCIAL PAPER RATINGS:
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
A -- Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1 -- This designation 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.
A-2 -- Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S DUAL RATINGS:
Standard & Poor's assigns "dual" ratings to all long-term debt issues that
have as part of their provisions a demand or double feature.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1+"). For demand notes, the note rating symbols are
used with the commercial paper symbols (for example, "SP-1+/A-1+").
DESCRIPTION OF FITCH INVESTORS SERVICE, INC.'S
TWO HIGHEST BOND RATINGS:
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA -- Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
Plus (+) or Minus (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA rating category.
DESCRIPTION OF FITCH INVESTORS SERVICE, INC'S THREE HIGHEST
RATINGS OF STATE AND MUNICIPAL NOTES:
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+ -- Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 -- Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2 -- Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues assigned "F-1+" and "F-1" ratings.
DESCRIPTION OF FITCH INVESTORS SERVICE, INC.'S
THREE HIGHEST COMMERCIAL PAPER RATINGS:
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+ -- Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 -- Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2 -- Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues assigned "F-1+" and "F-1" ratings.
<PAGE>
APPENDIX B
TAXABLE EQUIVALENT YIELD TABLES
The tables below show the approximate taxable yields which are equivalent to
tax-exempt yields, for the ranges indicated, under (i) federal and New York
State personal income tax laws, and (ii) federal, New York State and New York
City personal income tax laws, in each case based upon the applicable 1996
rates. Such yields may differ under the laws applicable to subsequent years if
the effect of any such law is to change any tax bracket or the amount of taxable
income which is applicable to a tax bracket. Separate calculations, showing the
applicable taxable income brackets, are provided for investors who file single
returns and for those investors who file joint returns. For cases in which two
or more state (or city) brackets fall within a federal bracket, the highest
state (or city) bracket is combined with the federal bracket. The combined
income tax brackets shown reflect the fact that state and city income taxes are
currently deductible as an itemized deduction for federal tax purposes (however,
a taxpayer's itemized deductions may be subject to an overall limitation, the
effect of which has not been taken into account in preparing these tables).
<TABLE>
<CAPTION>
FEDERAL AND NEW YORK STATE TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME* TAX-EXEMPT YIELD
- ---------------------------------------- INCOME --------------------------------------------------------------------------
SINGLE JOINT TAX 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
RETURN RETURN BRACKET** EQUIVALENT TAXABLE YIELD
- ----------------- ------------------ --------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 24,000 $ 0-$ 40,100 21.06% 2.53% 3.17% 3.80% 4.43% 5.07% 5.70% 6.33% 6.97% 7.60% 8.23%
$ 24,001-$ 58,150 $ 40,101-$ 96,900 33.13% 2.99% 3.74% 4.49% 5.23% 5.98% 6.73% 7.48% 8.22% 8.97% 9.72%
$ 58,151-$121,500 $ 96,901-$147,700 35,92% 3.12% 3.90% 4.68% 5.46% 6.24% 7.02% 7.80% 8.58% 9.36% 10.14%
$121,301-$263,750 $147,701-$263,750 40.56% 3.36% 4.21% 5.05% 5.89% 6.73% 7.57% 8.41% 9.25% 10.09% 10.94%
Over $263,750 Over $263,750 43.90% 3.57% 4.46% 5.35% 6.24% 7.13% 8.02% 8.91% 9.80% 10.70% 11.59%
- ----------
* Net amount subject to federal and New York State personal income tax after deductions and exemptions.
** Effective combined federal and state tax bracket. This table does not take into account: (i) any taxes other than the regular
federal income tax and the regular New York State personal income tax; or (ii) the New York State tax table benefit recapture
tax. Also, it is assumed that: (i) there are no federal or New York State minimum taxes applicable; (ii) a shareholder has no
net capital gain; and (iii) a shareholder's taxable income for federal income tax purposes is the same as his or her taxable
income for New York State income tax purposes. Also, this table does not reflect the fact that, due to factors including the
federal phase-out of personal exemptions and reduction of certain itemized deductions for taxpayers whose adjusted gross
income exceed specified thresholds, a shareholder's effective marginal tax rate may differ from his or her tax bracket rate.
<CAPTION>
FEDERAL, NEW YORK STATE AND NEW YORK CITY TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME* TAX-EXEMPT YIELD
- ---------------------------------------- INCOME --------------------------------------------------------------------------
SINGLE JOINT TAX 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
RETURN RETURN BRACKET** EQUIVALENT TAXABLE YIELD
- ----------------- ----------------- --------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 24,000 $ 0-$ 40,100 24.79% 2.66% 3.32% 3.99% 4.65% 5.32% 5.98% 6.65% 7.31% 7.98% 8.64%
$ 24,001-$ 50,000 $ 40,101-$ 96,900 36.30% 3.14% 3.92% 4.71% 5.49% 6.28% 7.06% 7.85% 8.63% 9.42% 10.20%
$ 50,001-$121,300 $ 96,901-$147,700 39.00% 3.28% 4.10% 4.92% 5.74% 6.56% 7.38% 8.20% 9.02% 9.84% 10.66%
$121,301-$263,750 $147,701-$263,750 43.42% 3.53% 4.42% 5.30% 6.19% 7.07% 7.95% 8.84% 9.72% 10.60% 11.49%
Over $263,750 Over $263,750 46.60% 3.75% 4.68% 5.62% 6.55% 7.49% 8.43% 9.36% 10.30% 11.24% 12.17%
- ---------
*Net amount subject to federal, New York State and New York City personal income tax after deductions and exemptions.
**Effective combined federal, state and city tax bracket. This table does not take into account: (i) any taxes other than the
regular federal income tax, the regular New York State personal income tax, and the regular New York City personal income tax
(including the temporary tax surcharge and the additional tax); or (ii) the New York State tax table benefit recapture tax.
Also, it is assumed that: (i) there are no federal, state or city minimum taxes applicable; (ii) a shareholder has no net
capital gain; and (iii) a shareholder's taxable income for federal income tax purposes is the same as his or her income for
state and city tax purposes. Also, this table does not reflect the fact that, due to factors including the federal phase-out
of personal exemptions and reduction of certain itemized deductions for taxpayers whose adjusted gross income exceed
specified thresholds, a shareholder's effective marginal tax rate may differ from his or her tax bracket rate.
</TABLE>
While it is expected that most of the dividends paid to the shareholders of
the Fund will be exempt from federal, New York State and New York City personal
income taxes, portions of such dividends from time to time may be subject to
such taxes.
<PAGE>
REPUBLIC
U.S. GOVERNMENT
MONEY MARKET FUND
REPUBLIC
NEW YORK TAX-FREE
MONEY MARKET FUND
REPUBLIC FAMILY OF FUNDS:
CUSTOMER SERVICE
Republic National Bank of New York
452 Fifth Avenue
New York, NY 10018
(888) 525-5757
(212) 525-7833
FOR NON-REPUBLIC CLIENTS
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
(800) 782-8183
INVESTMENT ADVISER
Republic National Bank of New York
452 Fifth Avenue
New York, NY 10018
ADMINISTRATOR, DISTRIBUTOR AND SPONSOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
99 High Street
Boston, MA 02110
LEGAL COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
RFFMM (2/97)
<PAGE>
REPUBLIC NEW YORK
TAX FREE MONEY MARKET FUND
3435 Stelzer Road
Columbus, Ohio 43219-3035
General
and (888) 525-5757 (Toll Free)
Account Information
- --------------------------------------------------------------------------------
Republic National Bank of New York - Investment Adviser
("Republic" or the "Adviser")
BISYS Fund Services -
Administrator, Distributor and Sponsor
("BISYS," "Sponsor" or the "Distributor")
STATEMENT OF ADDITIONAL INFORMATION
Republic New York Tax Free Money Market Fund (the "Fund") is a separate
series (portfolio) of the Republic Funds (the "Trust"), an open-end, management
investment company which currently consists of seven portfolios, each of which
has different and distinct investment objectives and policies. The Fund is
described in this Statement of Additional Information. Shares of the Fund are
divided into two separate classes, Class C shares and Class Y shares.
The investment objective of the Fund is to provide shareholders of the
Fund with liquidity and as high a level of current income exempt from federal,
New York State and New York City personal income taxes as is consistent with the
preservation of capital. The Trust seeks to achieve the investment objective of
the Fund by investing the assets of the Fund primarily in a non-diversified
portfolio of short-term, high quality, tax-exempt money market instruments with
maturities of 397 days or less, including obligations of the State of New York
and its political subdivisions, and in participation interests issued by banks
or other financial institutions with respect to such obligations. There can be
no assurance that the investment objective of the Fund will be achieved.
Shares of the Fund are continuously offered for sale by the Distributor
at net asset value (normally $1.00 per share) with no sales charge (i) directly
to the public, (ii) to customers of a financial institution, such as a federal
or state-chartered bank, trust company or savings and loan association that has
entered into a shareholder servicing agreement with the Trust (collectively,
"Shareholder Servicing Agents"), and (iii) to customers of a securities broker
that has entered into a dealer agreement with the Distributor.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
ONLY AUTHORIZED FOR DISTRIBUTION WHEN PRECEDED OR ACCOMPANIED BY A PROSPECTUS
FOR THE FUND DATED FEBRUARY 1, 1997 (THE "PROSPECTUS"). This Statement of
Additional Information contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus. The Prospectus and Statement of Additional Information may be
obtained without charge by writing or calling the Trust at the address and
telephone number printed above.
February 1, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Investment Objective, Policies and Restrictions . . . . . . . . . . 1
Variable Rate Instruments and Participation Interests . . 1
"When-Issued" Municipal Obligations . . . . . . . . . . . 2
Stand-by Commitments . . . . . . . . . . . . . . . . . . . 2
Taxable Securities . . . . . . . . . . . . . . . . . . . . 3
Repurchase Agreements . . . . . . . . . . . . . . . . . . 3
Portfolio Transactions . . . . . . . . . . . . . . . . . . 4
Special Factors Affecting New York . . . . . . . . . . . . 5
Investment Restrictions . . . . . . . . . . . . . . . . . 5
Non-Fundamental Restrictions . . . . . . . . . . . . . . 7
Percentage and Rating Restrictions . . . . . . . . . . . . 8
Performance Information . . . . . . . . . . . . . . . . . . . . . . 9
Management of the Trust . . . . . . . . . . . . . . . . . . . . . . 10
Trustees and Officers . . . . . . . . . . . . . . . . . . 10
Compensation Table . . . . . . . . . . . . . . . . . . . . 11
Investment Adviser . . . . . . . . . . . . . . . . . . . . 12
Administrator . . . . . . . . . . . . . . . . . . . . . . 13
Distribution Plan - Class C shares only . . . . . . . . . 13
Administrative Services Plan . . . . . . . . . . . . . . . 14
Shareholder Servicing Agents . . . . . . . . . . . . . . . 14
Transfer Agent and Custodian . . . . . . . . . . . . . . . 14
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 14
Determination of Net Asset Value . . . . . . . . . . . . . . . . . 15
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Federal Income Tax . . . . . . . . . . . . . . . . . . . . 15
Alternative Minimum Tax . . . . . . . . . . . . . . . . . 17
Special Tax Considerations . . . . . . . . . . . . . . . . 17
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 17
Capitalization . . . . . . . . . . . . . . . . . . . . . . 17
Voting Rights . . . . . . . . . . . . . . . . . . . . . . 18
Independent Auditors . . . . . . . . . . . . . . . . . . . 18
Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 18
Registration Statement . . . . . . . . . . . . . . . . . . 18
Financial Statements . . . . . . . . . . . . . . . . . . . 19
Appendix - Additional Information Concerning New York
Municipal Obligations . . . . . . . . . . . . . . . . . . . . A-1
References in this Statement of Additional Information to the
"Prospectus" are to the Prospectus, dated February 1, 1997, of the Trust by
which shares of the Fund are offered. Unless the context otherwise requires,
terms defined in the Prospectus have the same meaning in this Statement of
Additional Information as in the Prospectus.
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The following information supplements the discussion of the investment
objective and policies of the Fund discussed under the caption "Investment
Objective and Policies" in the Prospectus.
The investment objective of the Fund is to provide shareholders of the
Fund with liquidity and as high a level of current income exempt from Federal,
New York State and New York City personal income taxes as is consistent with the
preservation of capital.
As a non-diversified investment company, the Trust is not subject to
any statutory restrictions under the Investment Company Act of 1940 (the "1940
Act") with respect to limiting the investment of the Fund's assets in one or
relatively few issuers. This concentration may present greater risks than in the
case of a diversified company. However, the Trust intends to qualify the Fund as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). In order to qualify under current law, at the
close of each quarter of the Fund's taxable year, at least 50% of the Fund's
total assets must be represented by cash, U.S. Government securities, investment
company securities and other securities limited in respect of any one issuer to
not more than 5% in value of the total assets of the Fund and not more than 10%
of the outstanding voting securities of such issuer. In addition, and again
under current law, at the close of each quarter of its taxable year, not more
than 25% of the Fund's total assets may be invested in securities of one issuer
(or two or more issuers which are controlled by the Fund and which are
determined to be engaged in the same or similar trades or businesses or related
businesses) other than U.S. Government securities.
VARIABLE RATE INSTRUMENTS AND PARTICIPATION INTERESTS. The variable
rate instruments in which the Fund's assets may be invested are payable upon a
specified period of notice which may range from one day up to one year. The
terms of the instruments provide that interest rates are adjustable at intervals
ranging from daily to up to one year and the adjustments are based upon an
appropriate interest rate adjustment index as provided in the respective
instruments. The Trust decides which variable rate instruments it will purchase
on behalf of the Fund in accordance with procedures prescribed by its Board of
Trustees to minimize credit risks. An unrated variable rate instrument may be
determined to meet the Fund's high quality criteria if it is backed by a letter
of credit or guarantee or a right to tender or put the instrument to a third
party or is insured by an insurer that meets the high quality criteria for the
Fund discussed above or on the basis of a credit evaluation of the underlying
obligor. If the credit of the obligor is of "high quality", no credit support
from a bank or other financial institution is necessary. Each unrated variable
rate instrument is evaluated on a quarterly basis to determine that it continues
to meet the Fund's high quality criteria. If an instrument is ever deemed to be
of less than high quality, the Trust either will sell it in the market or
exercise the liquidity feature described below.
Although the rate of the underlying Municipal Obligations may be fixed,
the terms of the participation interest may result in the Fund receiving a
variable rate on its investment. The bank to which a participation interest may
be "put" for the Fund, as well as the bank which issues an irrevocable letter of
credit or guarantee, may be the bank issuing the participation interest, a bank
issuing a confirming letter of credit to that of the issuing bank, or a bank
serving as agent of the issuing bank with respect to the possible repurchase of
the participation interest. The Trust intends to exercise the liquidity feature
on behalf of the Fund only (1) upon a default under terms of the bond documents,
(2) as needed to provide liquidity to the Fund in order to make redemptions of
Fund shares, or (3) to maintain a high quality investment portfolio. Issuers of
participation interests retain a service and letter of credit fee and a fee for
providing the liquidity feature, in an amount equal to the excess of the
interest paid on the instruments over the negotiated yield at which the
participations were purchased on behalf of the Fund. The total fees generally
range from 5% to 15% of the applicable prime rate or other interest rate index.
With respect to insurance, the Trust attempts to have the issuer of the
participation interest bear the cost of the insurance, although the Trust
retains the option to purchase insurance if necessary, in which case the cost of
insurance will be an expense of the Fund. The Adviser has been instructed by the
Trust's Board of Trustees to monitor continually the pricing, quality and
liquidity of the variable rate instruments held for the Fund, including the
participation interests, on the basis of published financial information and
reports of the rating agencies and other bank analytical services to which the
Adviser may subscribe.
While the value of the underlying variable rate instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate instruments should minimize changes in value of the
instruments. Accordingly, as interest rates decrease or increase, the potential
for capital appreciation and the risk of potential capital depreciation is less
than would be the case with a portfolio of fixed income securities. The
portfolio may contain variable rate instruments on which stated minimum or
maximum rates, or maximum rates set by state law, limit the degree to which
interest on such variable rate instruments may fluctuate; to the extent it does,
increases or decreases in value may be somewhat greater than would be the case
without such limits. Because the adjustment of interest rates on the variable
rate instruments is made in relation to movements of various interest rate
adjustment indices, the variable rate instruments are not comparable to
long-term fixed rate securities. Accordingly, interest rates on the variable
rate instruments may be higher or lower than current market rates for fixed rate
obligations of comparable quality with similar maturities.
"WHEN-ISSUED" MUNICIPAL OBLIGATIONS. Municipal Obligations purchased on
a "when-issued" or "forward delivery" basis and the securities held in the
Fund's portfolio are subject to changes in value (both generally changing in the
same way, that is, both experiencing appreciation when interest rates decline
and depreciation when interest rates rise) based upon the public's perception of
the creditworthiness of the issuer and changes, real or anticipated, in the
level of interest rates. A separate account of the Fund consisting of cash, cash
equivalents or high quality debt securities equal to the amount of the
"when-issued" or "forward delivery" commitments is established at the Fund's
custodian bank. For the purpose of determining the adequacy of the securities in
the account, the deposited securities are valued at market value. If the market
value of such securities declines, additional cash or high quality debt
securities are placed in the account daily so that the value of the account
equals the amount of the Fund's commitments. On the settlement date of the
"when-issued" or "forward delivery" securities, the Fund's obligations are met
from then-available cash flow, sale of securities held in the separate account,
sale of other securities or, although not normally expected, from sale of the
"when-issued" or "forward delivery" securities themselves (which may have a
value greater or lesser than the Fund's payment obligations).
STAND-BY COMMITMENTS. The amount payable to the Fund upon the exercise
of a stand-by commitment normally is (1) the acquisition cost of the Municipal
Obligation (excluding any accrued interest paid on the acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (2) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the underlying Municipal Obligation is valued at amortized cost.
Accordingly, the amount payable by a bank or dealer during the time a stand-by
commitment is exercisable would be substantially the same as the market value of
the underlying Municipal Obligation. Stand-by commitments are valued at zero for
purposes of computing the net asset value per share of the Fund.
TAXABLE SECURITIES. Although the Trust attempts to invest 100% of the
Fund's net assets in Municipal Obligations, the Trust may invest up to 20% of
the Fund's net assets in securities of the kind described below, the interest
income on which is subject to federal income tax, under any one or more of the
following circumstances: (a) pending investment of proceeds of sales of Fund
shares or of portfolio securities; (b) pending settlement of purchases of
portfolio securities; and (c) to maintain liquidity for the purpose of meeting
anticipated redemptions. In addition, the Trust may temporarily invest more than
20% of the Fund's assets in such taxable securities when, in the opinion of the
Adviser, it is advisable to do so because of adverse market conditions affecting
the market for Municipal Obligations. The kinds of taxable securities in which
the Fund's assets may be invested are limited to the following short-term, fixed
income securities (maturing in 397 days or less from the time of purchase): (1)
obligations of the U.S. Government or its agencies, instrumentalities or
authorities; (2) commercial paper rated Prime-1 or Prime-2 by Moody's Investors
Service, Inc. ("Moody's"), A-1+, A-1 or A-2 by Standard & Poor's Corporation
("Standard & Poor's") or F-1+, F-1 or F-2 by Fitch Investors Service, Inc.
("Fitch"); (3) certificates of deposit of domestic banks with assets of $1
billion or more; and (4) repurchase agreements with respect to Municipal
Obligations or other securities which the Fund is permitted to own. The Fund's
assets may also be invested in Municipal Obligations which are subject to an
alternative minimum tax.
REPURCHASE AGREEMENTS. The Trust may invest the Fund's assets in
instruments subject to repurchase agreements only with member banks of the
Federal Reserve System or "primary dealers" (as designated by the Federal
Reserve Bank of New York) in U.S. Government securities. Under the terms of a
typical repurchase agreement, an underlying debt instrument would be acquired
for a relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase the instrument at a fixed price and time,
thereby determining the yield during the Fund's holding period. This results in
a fixed rate of return insulated from market fluctuations during such period. A
repurchase agreement is subject to the risk that the seller may fail to
repurchase the security. Repurchase agreements may be deemed to be loans under
the 1940 Act. All repurchase agreements entered into on behalf of the Fund are
fully collateralized at all times during the period of the agreement in that the
value of the underlying security is at least equal to the amount of the loan,
including the accrued interest thereon, and the Trust or its custodian bank has
possession of the collateral, which the Trust's Board of Trustees believes gives
the Fund a valid, perfected security interest in the collateral. Whether a
repurchase agreement is the purchase and sale of a security or a collateralized
loan has not been definitively established. This might become an issue in the
event of the bankruptcy of the other party to the transaction. In the event of
default by the seller under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned by the Fund but
only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, the Fund may suffer time delays and incur costs in connection
with the disposition of the collateral. The Trust's Board of Trustees believes
that the collateral underlying repurchase agreements may be more susceptible to
claims of the seller's creditors than would be the case with securities owned by
the Fund. Repurchase agreements give rise to income which does not qualify as
tax-exempt income when distributed to Fund shareholders. The Trust will not
invest on behalf of the Fund in a repurchase agreement maturing in more than
seven days if any such investment together with illiquid securities held for the
Fund exceed 10% of the Fund's net assets.
PORTFOLIO TRANSACTIONS. Municipal Obligations and other debt securities
are traded principally in the over-the-counter market on a net basis through
dealers acting for their own account and not as brokers. The cost of executing
portfolio securities transactions for the Fund primarily consists of dealer
spreads and underwriting commissions or concessions. Under the 1940 Act, persons
affiliated with the Fund or the Distributor are prohibited from dealing with the
Fund as a principal in the purchase and sale of securities unless a permissive
order allowing such transactions is obtained from the Securities and Exchange
Commission.
The Trust has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities for the Fund. Subject
to policies established by the Trust's Board of Trustees, the Adviser is
primarily responsible for portfolio decisions and the placing of portfolio
transactions. Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser in its best judgment and in a manner deemed
to be in the best interest of Fund shareholders rather than by any formula. In
placing orders for the Fund, the primary consideration is prompt execution of
orders in an effective manner at the most favorable price, although the Fund
does not necessarily pay the lowest spread or commission available. Other
factors taken into consideration are the dealer's general execution and
operational facilities, the type of transaction involved and other factors such
as the dealer's risk in positioning the securities.
The Adviser may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to the Adviser. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of securities firms. These services,
which in some cases may also be purchased for cash, include such matters as
general economic and security market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to the Adviser in advising
various of its clients (including the Fund), although not all of these services
are necessarily useful and of value in managing the Fund. The management fee
paid from the Fund is not reduced because the Adviser and its affiliates receive
such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
the Adviser may cause the Fund to pay a broker-dealer which provides "brokerage
and research services" (as defined in the Act) to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.
Consistent with the rules of the National Association of Securities
Dealers, Inc. and such other policies as the Trustees may determine, and subject
to seeking the most favorable price and execution available, the Adviser may
consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
Investment decisions for the Fund and for the other investment advisory
clients of the Adviser are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved. Thus, a
particular security may be bought for certain clients even though it could have
been sold for other clients at the same time, and a particular security may be
sold for certain clients even though it could have been bought for other clients
at the same time. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling that same security. In some
instances, one client may sell a particular security to another client. Two or
more clients may simultaneously purchase or sell the same security, in which
event each day's transactions in that security are, insofar as practicable,
averaged as to price and allocated between such clients in a manner which in the
Adviser's opinion is equitable to each and in accordance with the amount being
purchased or sold by each. In addition, when purchases or sales of the same
security for the Fund and for other clients of the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantage available to large denomination purchases or sales.
There may be circumstances when purchases or sales of portfolio securities for
one or more clients will have an adverse effect on other clients in terms of the
price paid or received or of the size of the position obtainable.
SPECIAL FACTORS AFFECTING NEW YORK. The fiscal stability of New York is
related, at least in part, to the fiscal stability of its localities and
authorities. Various State agencies, authorities and localities have issued
large amounts of bonds and notes either guaranteed or supported by the State
through lease-purchase arrangements, other contractual arrangements or moral
obligation provisions. While debt service is normally paid out of revenues
generated by projects of such State agencies, authorities and localities, the
State has had to provide special assistance in recent years, in some cases of a
recurring nature, to enable such agencies, authorities and localities to meet
their financial obligations and, in some cases, to prevent or cure defaults. To
the extent State agencies and local governments require State assistance to meet
their financial obligations, the ability of the State to meet its own
obligations as they become due or to obtain additional financing could be
adversely affected.
On July 10, 1995, Standard & Poor's downgraded its rating on New York
city's outstanding general obligation bonds to BBB+ from A-, citing the city's
chronic structural budget problems and weak economic outlook. Other factors
contributing to Standard & Poor's downgrade include the city's reliance on
one-time revenue measures to close annual budget gaps, a dependence on
unrealized labor savings, overly optimistic estimates of revenues and of state
and federal aid, and the city's continued high debt levels.
For further information concerning New York Municipal Obligations, see
the Appendix to this Statement of Additional Information. The summary set forth
above and in the Appendix is included for the purpose of providing a general
description of New York State and New York City credit and financial conditions.
This summary is based on information from statements of issuers of New York
Municipal Obligations and does not purport to be complete.
INVESTMENT RESTRICTIONS. The Trust has adopted the following investment
restrictions with respect to the Fund which may not be changed without approval
by holders of a "majority of the outstanding shares" of the Fund, which as used
in this Statement of Additional Information means the vote of the lesser of (i)
67% or more of the outstanding "voting securities" of the Fund present at a
meeting, if the holders of more than 50% of the outstanding "voting securities"
of the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding "voting securities" of the Fund. The term "voting securities" as
used in this paragraph has the same meaning as in the 1940 Act.
The Trust, on behalf of the Fund, may not:
(1) borrow money or pledge, mortgage or hypothecate assets of
the Fund, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the
value of the net assets of the Fund, including the amount borrowed, and
may pledge, mortgage or hypothecate not more than 1/3 of such assets to
secure such borrowings (it is intended that money would be borrowed
only from banks and only to accommodate requests for the redemption of
shares of the Fund while effecting an orderly liquidation of portfolio
securities); for additional related restrictions, see clause (i) under
the caption "State and Federal Restrictions" below;
(2) purchase any security or evidence of interest therein on
margin, except that the Trust may obtain such short-term credit for the
Fund as may be necessary for the clearance of purchases and sales of
securities;
(3) underwrite securities issued by other persons, except
insofar as the Trust may technically be deemed an underwriter under the
Securities Act of 1933, as amended (the "1933 Act"), in selling a
portfolio security for the Fund;
(4) make loans to other persons except (a) through the lending
of securities held by the Fund, but not in excess of 1/3 of the Fund's
net assets taken at market value, (b) through the use of fixed time
deposits or repurchase agreements or the purchase of short-term
obligations, (c) by purchasing all or a portion of an issue of debt
securities of types commonly distributed privately to financial
institutions; for purposes of this Investment Restriction (4) the
purchase of short-term commercial paper or a portion of an issue of
debt securities which are part of an issue to the public shall not be
considered the making of a loan;
(5) purchase or sell real estate (including limited
partnership interests but excluding securities secured by real estate
or interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts in the ordinary course of business
(the Trust reserves the freedom of action to hold and to sell for the
Fund real estate acquired as a result of its ownership of securities);
(6) concentrate its investments in any particular industry,
but if it is deemed appropriate for the achievement of the Fund's
investment objective, up to 25% of the assets of the Fund (taken at
market value at the time of each investment) may be invested in any one
industry, except that the Trust may invest all or substantially all of
the Fund's assets in another registered investment company having the
same investment objective and policies and substantially the same
investment restrictions as those with respect to the Fund;
(7) issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the 1940 Act
or the rules and regulations promulgated thereunder, except as
appropriate to evidence a debt incurred without violating Investment
Restriction (1) above;
(8) write, purchase or sell any put or call option or any
combination thereof;
(9) invest in securities which are subject to legal or
contractual restrictions on resale (other than fixed time deposits and
repurchase agreements maturing in not more than seven days) if, as a
result thereof, more than 10% of the net assets of the Fund would be so
invested (including fixed time deposits and repurchase agreements
maturing in more than seven days); provided, however, that this
Investment Restriction shall not apply to (a) any security if the
holder thereof is permitted to receive payment upon a specified number
of days' notice of the unpaid principal balance plus accrued interest
either from the issuer or by drawing on a bank letter of credit, a
guarantee or an insurance policy issued with respect to such security
or by tendering or "putting" such security to a third party, or (b) the
investment by the Trust of all or substantially all of the Fund's
assets in another registered investment company having the same
investment objective and policies and substantially the same investment
restrictions as those with respect to the Fund;
(10) make short sales of securities or maintain a short
position, unless at all times when a short position is open the Fund
owns an equal amount of such securities or securities convertible into
or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short, and unless not more than 10% of the net assets of the Fund
(taken at market value) is held as collateral for such sales at any one
time (it is the present intention of management to make such sales only
for the purpose of deferring realization of gain or loss for federal
income tax purposes).
For purposes of the investment restrictions described above and the state and
federal restrictions described below, the issuer of a tax-exempt security is
deemed to be the entity (public or private) ultimately responsible for the
payment of the principal of and interest on the security. If, however, the
creating government or some other entity, such as an insurance company or other
corporate obligor, guarantees a security or a bank issues a letter of credit,
such a guarantee or letter of credit may, in accordance with applicable rules of
the Securities and Exchange Commission, be considered a separate security and
treated as an issue of such government, other entity or bank.
NON-FUNDAMENTAL RESTRICTIONS. The Trust on behalf of the Fund does not,
as a matter of operating policy: (i) borrow money for any purpose in excess of
10% of the Fund's total assets (taken at cost) (moreover, the Trust will not
purchase any securities for the Fund's portfolio at any time at which borrowings
exceed 5% of the Fund's total assets (taken at market value)), (ii) pledge,
mortgage or hypothecate for any purpose in excess of 10% of the Fund's net
assets (taken at market value), (iii) sell any security which it does not own
unless by virtue of its ownership of other securities it has at the time of sale
a right to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that if such
right is conditional the sale is made upon the same conditions, (iv) invest for
the purpose of exercising control or management, (v) purchase securities issued
by any registered investment company except by purchase in the open market where
no commission or profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such purchase, though not
made in the open market, is part of a plan of merger or consolidation, provided,
however, that the Trust will not purchase the securities of any registered
investment company for the Fund if such purchase at the time thereof would cause
more than 10% of the Fund's total assets (taken at the greater of cost or market
value) to be invested in the securities of such issuers or would cause more than
3% of the outstanding voting securities of any such issuer to be held for the
Fund; and provided, further, that the Trust shall not purchase securities issued
by any open-end investment company, (vi) invest more than 10% of the Fund's net
assets in securities that are not readily marketable, including fixed time
deposits and repurchase agreements maturing in more than seven days, (vii)
purchase securities of any issuer if such purchase at the time thereof would
cause the Fund to hold more than 10% of any class of securities of such issuer,
for which purposes all indebtedness of an issuer shall be deemed a single class
and all preferred stock of an issuer shall be deemed a single class, (viii)
invest more than 5% of the Fund's assets in companies which, including
predecessors, have a record of less than three years' continuous operation, or
(ix) purchase or retain in the Fund's portfolio any securities issued by an
issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust, or is an officer or director of the Adviser, if
after the purchase of the securities of such issuer for the Fund one or more of
such persons owns beneficially more than 1/2 of 1% of the shares or securities,
or both, all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more than
5% of such shares or securities, or both, all taken at market value. These
policies are not fundamental and may be changed by the Trust on behalf of the
Fund without shareholder approval.
For purposes of the investment restrictions described above, the issuer
of a tax-exempt security is deemed to be the entity (public or private)
ultimately responsible for the payment of principal of and interest on the
security. If, however, the creating government or some other entity, such as an
insurance company or other corporate obligor, guarantees a security or a bank
issues a letter of credit, such a guarantee or letter of credit may, in
accordance with applicable rules of the Securities and Exchange Commission, be
considered a separate security and treated as an issue of such government, other
entity or bank.
PERCENTAGE AND RATING RESTRICTIONS. If a percentage restriction or a
rating restriction on investment or utilization of assets set forth above or
referred to in the Prospectus is adhered to at the time an investment is made or
assets are so utilized, a later change in percentage resulting from changes in
the value of the securities held by the Fund or a later change in the rating of
a security held by the Fund is not considered a violation of policy, however the
Adviser will consider such change in its determination of whether to hold the
security.
Subsequent to its purchase by the Trust on behalf of the Fund, a rated
Municipal Obligation may cease to be rated or its rating may be reduced below
the minimum required for purchase for the Fund. Neither event requires sale of
such Municipal Obligation by the Trust (other than variable rate instruments
which must be sold if they are not "high quality"), but the Adviser considers
such event in determining whether the Trust should continue to hold the
Municipal Obligation on behalf of the Fund. To the extent that the ratings given
to the Municipal Obligations or other securities held by the Trust on behalf of
the Fund are altered due to changes in either the Moody's, Standard & Poor's or
Fitch's ratings systems (see "Description of Ratings" in Appendix A to the
Prospectus for an explanation of Standard & Poor's, Moody's and Fitch ratings),
the Adviser will adopt such changed ratings as standards for its future
investments in accordance with the investment policies contained in the
Prospectus. Certain Municipal Obligations issued by instrumentalities of the
U.S. Government are not backed by the full faith and credit of the U.S. Treasury
but only by the creditworthiness of the instrumentality. The Trust's Board of
Trustees has determined that any Municipal Obligation that depends directly, or
indirectly through a government insurance program or other guarantee, on the
full faith and credit of the U.S. Government is considered to have a rating in
the highest category. Where necessary to ensure that the Municipal Obligations
are of "high quality" (i.e., within the two highest ratings assigned by any
major rating service), or where the obligations are not freely transferable, the
Trust requires that the obligation to pay the principal and accrued interest be
backed by an unconditional irrevocable bank letter of credit, a guarantee,
insurance or other comparable undertaking of an approved financial institution.
PERFORMANCE INFORMATION
Any current "yield" quotation of the Fund which is used in such a
manner as to be subject to the provisions of Rule 482(d) under the 1933 Act
consists of an annualized historical yield, carried at least to the nearest
hundredth of one percent, based on a specific seven calendar day period and is
calculated by dividing the net change in the value of an account having a
balance of one share at the beginning of the period by the value of the account
at the beginning of the period and multiplying the quotient by 365/7. For this
purpose the net change in account value would reflect the value of additional
shares purchased with dividends declared on the original share and dividends
declared on both the original share and any such additional shares, but would
not reflect any realized gains or losses from the sale of securities or any
unrealized appreciation or depreciation on portfolio securities. In addition,
any "effective yield" quotation of the Fund so used is calculated by compounding
the current yield quotation for such period by multiplying such quotation by
7/365, adding 1 to the product, raising the sum to a power equal to 365/7, and
subtracting 1 from the result. For the 7-day period ended October 31, 1996, the
yield of the Fund was 3.08% for Class C shares and 3.32% for Class Y shares. For
the 7-day period ended October 31, 1996, the effective yield of the Fund was
3.13% for Class C shares and 3.38% for Class Y shares.
Any "tax equivalent yield" quotation for the Fund is calculated as
follows: if the entire current yield quotation for such period is tax-exempt,
the tax equivalent yield will be the current yield quotation divided by 1 minus
a stated income tax rate or rates. If a portion of the current yield quotation
is not tax-exempt, the tax equivalent yield will be the sum of (a) that portion
of the yield which is tax-exempt divided by 1 minus a stated income tax rate or
rates, and (b) the portion of the yield which is not tax-exempt. For the 7-day
period ended October 31, 1996, the tax equivalent yield of the Fund was 5.10%
for Class C shares and 5.50% for Class Y shares. For the 7-day period ended
October 31, 1996, the tax equivalent effective yield of the Fund was 5.18%% for
Class C shares and 5.60% for Class Y shares.
A "total rate of return" quotation for the Fund is calculated for any
period by (a) dividing (i) the sum of the net asset value per share on the last
day of the period and the net asset value per share on the last day of the
period of shares purchasable with dividends and capital gains distributions
declared during such period with respect to a share held at the beginning of
such period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the net asset value on the first day of such
period, and (b) subtracting 1 from the result. Any annualized total rate of
return quotation is calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result. The total return of the Class C shares of the Fund for the
one-year period ended October 31, 1996 was 3.04%, and the total return of the
Class C shares of the Fund for the period from November 17, 1994 (commencement
of operations) to October 31, 1996 was 3.31%. The total return for Class Y
shares of the Fund for the period from July 1, 1996 (commencement of operations)
to October 31, 1996 was 1.03%.
Any "tax equivalent total rate of return" quotation for the Fund is
calculated as follows: if the entire current total rate of return quotation for
such period is tax-exempt, the tax equivalent total rate of return will be the
current total rate of return quotation divided by 1 minus a stated income tax
rate or rates. If a portion of the current total rate of return quotation is not
tax-exempt, the tax equivalent total rate of return will be the sum of (a) that
portion of the total rate of return which is tax-exempt divided by 1 minus a
stated income tax rate or rates, and (b) the portion of the total rate of return
which is not tax-exempt. The tax equivalent total rate of return of the Class C
shares of the Fund for the one-year period ended October 31, 1996 was 5.03%, and
the tax equivalent total rate of return of the Class C shares of the Fund for
the period from November 17, 1994 (commencement of operations) to October 31,
1996 was 5.48%. The tax equivalent total rate of return of the Class Y shares of
the Fund for the period from July 1, 1996 (commencement of operations) to
October 31, 1996 was 1.71%.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The principal occupations of the Trustees and executive officers of the
Trust for the past five years are listed below. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Trust. The address of each, unless otherwise indicated, is 3435 Stelzer
Road, Columbus, Ohio 43219-3035.
FREDERICK C. CHEN, Trustee
126 Butternut Hollow Road, Greenwich, Connecticut 06830 - Management
Consultant.
ALAN S. PARSOW*, Trustee
2222 Skyline Drive, Elkhorn, Nebraska 68022 - General Partner of Parsow
Partnership, Ltd. (investments).
LARRY M. ROBBINS, Trustee
Wharton Communication Program, University of Pennsylvania, 336
Steinberg Hall-Dietrich Hall, Philadelphia, Pennsylvania 19104 -
Director of the Wharton Communication Program and Adjunct Professor of
Management at the Wharton School of the University of Pennsylvania.
MICHAEL SEELY, Trustee
405 Lexington Avenue, Suite 909, New York, New York 10174 - President
of Investor Access Corporation (investor relations consulting firm).
GEORGE O. MARTINEZ*, President and Secretary
Senior Vice President and Director of Legal and Compliance Services,
BISYS Fund Services, Inc., March 1995 to present; Senior Vice
President, Emerald Asset Management, Inc., August 1995 to present; Vice
President and Associate General Counsel, Alliance Capital Management,
June 1989 to March 1995.
KAREN DOYLE*, Vice President
Manager of Client Services for BISYS Fund Services, Inc., October 1994
to present; from 1979 to October 1994, an employee of the Bank of New
York.
FRANK M. DEUTCHKI*, Vice President
Employee of BISYS Fund Services, Inc., April 1996 to present; Vice
President, Chase Global Funds Service, September 1995 to April 1996;
Vice President, Mutual Funds Service Company, 1989 to September 1995.
KEVIN MARTIN*, Vice President
Employee of BISYS Fund Services, Inc., February 1996 to present; Senior
Manager, Ernst & Young, 1984 to February 1996.
ADRIAN WATERS*, Treasurer
Employee of BISYS Fund Services (Ireland) LTD., May 1993 to present;
Manager, Price Waterhouse, 1989 to May 1993.
CATHERINE BRADY*, Assistant Treasurer
Employee of BISYS Fund Services (Ireland) LTD., March 1994 to present;
Supervisor, Price Waterhouse, 1990 to March 1994.
ALAINA METZ*, Assistant Secretary
Chief Administrator, Administrative and Regulatory Services, BISYS Fund
Services, Inc., June 1995 to present; Supervisor, Mutual Fund Legal
Department, Alliance Capital Management, May 1989 to June 1995.
Messrs. Martinez, Deutchki, Martin and Waters and Mss. Doyle, Brady and
Metz also are officers of certain other investment companies of which Signature
or an affiliate is the administrator.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Estimated Total
Aggregate Accrued as Annual Compensation
Name of Compensation Part of Fund Benefits Upon From Fund Complex*
Trustee from Trust Expenses Retirement to Trustees
- ------- ------------ ------------ ------------- ------------------
<S> <C> <C> <C> <C>
Frederick C. Chen $1,950 none none $8,600
Alan S. Parsow $1,950 none none $8,600
Larry M. Robbins $1,950 none none $8,600
Michael Seely $1,950 none none $8,600
</TABLE>
- ----------
* The Fund Complex includes the Trust, Republic Advisor Funds Trust, and
Republic Portfolios.
The compensation table above reflects the fees received by the Trustees
for the year ended October 31, 1996. The Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust will receive an annual
retainer of $3,600 and a fee of $1,000 for each meeting of the Board of Trustees
or committee thereof attended, except that Mr. Robbins will receive an annual
retainer of $4,600 and a fee of $1,000 for each meeting attended.
As of January 28, 1997, the Trustees and officers of the Trust, as a
group, owned less than 1% of the outstanding shares of the Fund. As of the same
date, the following shareholders of record owned 5% or more of the outstanding
shares of the Fund (the Trust has no knowledge of the beneficial ownership of
such shares): Republic National Bank of New York, 10 East 40th Street, New York,
New York, 10016 -- 78.62%; and Kinco & Co. c/o Securities Services, One Hanson
Place, Brooklyn, New York, 11243 -- 7.19%. Shareholders who own more than 25% of
the outstanding voting securities of the Fund may be deemed to control the Fund
by virtue of such share ownership.
The Trust's Declaration of Trust provides that it will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their officers with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in their offices, or unless with
respect to any other matter it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Trust. In the case of settlement, such indemnification will not
be provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon a
review of readily available facts, by vote of a majority of disinterested
Trustees or in a written opinion of independent counsel, that such officers or
Trustees have not engaged in wilful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
INVESTMENT ADVISER
Pursuant to an Investment Advisory Contract, Republic is responsible
for the investment management of the Fund's assets, including the responsibility
for making investment decisions and placing orders for the purchase and sale of
securities for the Fund directly with the issuers or with brokers or dealers
selected by Republic in its discretion, not including the Distributor. See
"Portfolio Transactions". Republic also furnishes to the Board of Trustees,
which has overall responsibility for the business and affairs of the Trust,
periodic reports on the investment performance of the Fund.
Republic is a wholly-owned subsidiary of Republic New York Corporation,
a registered bank holding company. No securities or instruments issued by
Republic New York Corporation or Republic will be purchased for the Fund.
Republic complies with applicable laws and regulations, including the
regulations and rulings of the U.S. Comptroller of the Currency relating to
fiduciary powers of national banks. These regulations provide, in general, that
assets managed by a national bank as fiduciary shall not be invested in stock or
obligations of, or property acquired from, the bank, its affiliates or their
directors, officers or employees or other persons with substantial connections
with the bank. The regulations further provide that fiduciary assets shall not
be sold or transferred, by loan or otherwise, to the bank or persons connected
with the bank as described above. Republic, in accordance with federal banking
laws, may not purchase for its own account securities of any investment company
the investment adviser of which it controls, extend credit to any such
investment company, or accept the securities of any such investment company as
collateral for a loan to purchase such securities. Moreover, Republic, its
officers and employees do not express any opinion with respect to the
advisability of any purchase of such securities.
The investment advisory services of Republic to the Fund are not
exclusive under the terms of the Investment Advisory Contract. Republic is free
to and does render investment advisory services to others.
The Investment Advisory Contract will remain in effect until October 6,
1997, and will continue in effect thereafter from year to year with respect to
the Fund, provided such continuance is approved annually (i) by the holders of a
majority of the outstanding voting securities of the Fund or by the Board of
Trustees, and (ii) by a majority of the Trustees who are not parties to such
Contract or "interested persons" (as defined in the 1940 Act) of any such party.
The Contract may be terminated with respect to the Fund without penalty by
either party on 60 days' written notice and will terminate automatically if
assigned. The Contract provides that neither the Adviser nor its personnel shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution of portfolio
transactions for the Fund, except for willful misfeasance, bad faith or gross
negligence or of reckless disregard of its or their obligations and duties under
the Contract.
For the period November 17, 1994 (commencement of operations) to
October 31, 1995, investment advisory fees aggregated $77,177, of which the
entire amount was waived. For the year ended October 31, 1996, investment
advisory fees aggregated $104,179, of which $32,202 was waived.
ADMINISTRATOR
The Administration Agreement will remain in effect until March 31,
1999, and automatically will continue in effect thereafter from year to year
unless terminated upon 60 days' written notice to BISYS. The Administration
Agreement will terminate automatically in the event of its assignment. The
Administration Agreement also provides that neither BISYS nor its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the administration or management of the Trust, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the Administration Agreement.
For the period from November 17, 1994 (commencement of operations) to
October 31, 1995, the Fund accrued administration fees of $77,177, of which
$46,053 was waived by its former administrator. For the year ended October 31,
1996, the Fund accrued administration fees equal to $104,179, of which $34,720
was waived.
DISTRIBUTION PLAN - CLASS C SHARES ONLY
A Distribution Plan has been adopted by the Trust (the "Distribution
Plan") with respect to Class C shares only, and provides that it may not be
amended to increase materially the costs which Class C shares may bear pursuant
to the Distribution Plan without approval by shareholders of Class C shares, and
that any material amendments of the Distribution Plan must be approved by the
Board of Trustees, and by the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any related agreement
("Qualified Trustees"), by vote cast in person at a meeting called for the
purpose of considering such amendments. The selection and nomination of the
Trustees who are not "interested persons" of the Trust (the "Independent
Trustees") has been committed to the discretion of the Independent Trustees. The
Distribution Plan has been approved, and is subject to annual approval, by the
Board of Trustees and by the Qualified Trustees, by vote cast in person at a
meeting called for the purpose of voting on the Distribution Plan. In adopting
the Distribution Plan, the Trustees considered alternative methods to distribute
Class C shares and to reduce Class C shares' per share expense ratio and
concluded that there was a reasonable likelihood that the Distribution Plan will
benefit that class and its shareholders. The Distribution Plan is terminable
with respect to Class C shares at any time by a vote of a majority of the
Qualified Trustees or by vote of the holders of a majority of Class C shares.
Prior to the adoption by the Trustees of a multiple class structure,
effective January 15, 1996, a predecessor distribution plan was in effect with
respect to all shares of the Fund. Pursuant to the predecessor and current
distribution plans, during the year ended October 31, 1996, the Fund spent a
total of $24,377, on the following pursuant to the Distribution Plan: printing
and mailing of prospectuses and annual reports to other than current
shareholders, $22,677; and other marketing expenses, $1,700. Total expenditures
pursuant to the distribution plans as a percentage of average daily net assets
during the same period were 0.027%.
ADMINISTRATIVE SERVICES PLAN
An Administrative Services Plan has been adopted by the Trust with
respect to Class C shares and Class Y shares, and continues in effect
indefinitely if such continuance is specifically approved at least annually by a
vote of both a majority of the Trustees and a majority of the Trustees who are
not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of the Administrative Services Plan or in
any agreement related to such Plan ("Qualified Trustees"). The Administrative
Services Plan may be terminated at any time by a vote of a majority of the
Qualified Trustees or with respect to Class C shares or Class Y shares by a
majority vote of shareholders of that class. The Administrative Services Plan
may not be amended to increase materially the amount of permitted expenses
thereunder with respect to Class C shares or Class Y shares without the approval
of a majority of shareholders of that class, and may not be materially amended
in any case without a vote of the majority of both the Trustees and the
Qualified Trustees.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into a shareholder servicing agreement with each
Shareholder Servicing Agent. For additional information, including a description
of the fees paid to Shareholder Servicing Agents from assets attributable to the
Fund's Class C shares, see "Management of the Trust - Shareholder Servicing
Agents" in the Prospectus.
TRANSFER AGENT AND CUSTODIAN
The Board of Trustees of the Trust has approved a Custodian Agreement
and a Transfer Agency Agreement between the Trust and Investors Bank & Trust
Company ("IBT") pursuant to which IBT will provide custodial, fund accounting,
transfer agency, dividend disbursing and shareholder servicing services to the
Trust and the Fund. The principal business address of IBT is 89 South Street,
Boston, Massachusetts 02111.
EXPENSES
Except for the expenses paid by the Adviser and the Distributor, the
Fund bears all costs of its operations. Expenses attributable to a class ("Class
Expenses") shall be allocated to that class only. Class Expenses with respect to
Class C shares must include payments made pursuant to the Distribution Plan and
the Administrative Services Plan. In the event a particular expense is not
reasonably allocable by class or to a particular class, it shall be treated as a
Fund expense or a Trust expense. Trust expenses directly related to the Fund are
charged to the Fund; other expenses are allocated proportionally among all the
portfolios of the Trust in relation to the net asset value of the portfolios.
DETERMINATION OF NET ASSET VALUE
The net asset value of each share of each class of the Fund is
determined on each day on which the New York Stock Exchange is open for trading.
As of the date of this Statement of Additional Information, the New York Stock
Exchange is open every weekday except for the days on which the following
holidays are observed: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
As discussed under the caption "Dividends and Distributions" in the
Prospectus, the Trust uses the amortized cost method to determine the value of
the Fund's portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The
amortized cost method involves valuing an obligation at its cost and amortizing
any discount or premium over the period until maturity, regardless of the impact
of fluctuating interest rates on the market value of the security. During these
periods the yield to a shareholder may differ somewhat from that which could be
obtained from a similar fund which utilizes a method of valuation based upon
market prices. Thus, during periods of declining interest rates, if the use of
the amortized cost method resulted in a lower value of the Fund's portfolio on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values, and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Fund's dollar-weighted average portfolio maturity of
90 days or less must be maintained, and only securities having remaining
maturities of 397 days or less which are determined by the Trust's Board of
Trustees to be of high quality with minimal credit risks may be purchased.
Pursuant to Rule 2a-7, the Board has established procedures designed to
stabilize, to the extent reasonably possible, the price per share of the Fund,
as computed for the purpose of sales and redemptions, at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Board of Trustees, at
such intervals as it may deem appropriate, to determine whether the net asset
value of the Fund calculated by using available market quotations deviates from
the $1.00 per share valuation based on amortized cost. The extent of any
deviation is examined by the Board of Trustees. If such deviation exceeds
$0.003, the Board promptly considers what action, if any, will be initiated. In
the event the Board determines that a deviation exists which may result in
material dilution or other unfair results to investors or existing shareholders,
the Board will take such corrective action as it regards as necessary and
appropriate, which may include selling portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or establishing a net asset value per share by using
available market quotations.
TAXATION
FEDERAL INCOME TAX
The Fund intends to qualify each year as a "regulated investment
company" under Subchapter M of the Code. By so qualifying, the Fund will be
exempt from federal income taxes to the extent that it distributes substantially
all of its net investment income and net realized capital gains to shareholders.
It is intended that the Fund's assets will be sufficiently invested in
municipal securities to qualify to pay "exempt-interest dividends" (as defined
in the Code) to shareholders. The Fund's dividends payable from net tax-exempt
interest earned from municipal securities will qualify as exempt-interest
dividends if, at the close of each quarter of its taxable year, at least 50% of
the value of its total assets consists of securities the interest on which is
exempt from the regular federal income tax under Code section 103.
Exempt-interest dividends distributed to shareholders are not included in
shareholders' gross income for regular federal income tax purposes.
The Fund will determine periodically which distributions will be
designated as exempt-interest dividends. If the Fund earns income which is not
eligible to be so designated, the Fund, nonetheless, intends to distribute such
income. Such distributions will be subject to federal, state, and local state
taxes, as applicable, in the hands of shareholders.
Distributions of net investment income received by the Fund from
investment in taxable debt securities, or ordinary income realized upon the
disposition of market discount bonds (including tax-exempt market discount
bonds), and of any net realized short-term capital gains will be taxable to
shareholders as ordinary income. Because the Fund's investment income is derived
from interest rather than dividends, no portion of such distributions is
expected to be eligible for the dividends-received deduction available to
corporations.
Under the Code, any distribution designated as being made from the
Fund's net realized long-term capital gains is taxable to shareholders as
long-term capital gains, regardless of the length of time shares are held.
Distributions by the Fund other than exempt-interest dividends and
redemption proceeds may be subject to backup withholding at the rate of 31%.
Backup withholding generally applies to shareholders who have failed to properly
certify their taxpayer identification numbers, who fail to provide other
required tax-related certifications, and with respect to whom the Fund has
received certain notifications from the Internal Revenue Service requiring or
permitting the Fund to apply backup withholding is not an additional tax and
amounts so withheld generally may be applied by affected shareholders as a
credit against their federal income tax liability.
Interest on certain types of private activity bonds is not exempt from
federal income tax when received by "substantial users" or persons related to
substantial users as defined in the Code. The term "substantial user" includes
any "nonexempt person" who regularly uses in trade or business part of a
facility financed from the proceeds of private activity bonds. The Fund may
invest periodically in private activity bonds and, therefore, may not be
appropriate investments for entities that are substantial users of facilities
financed by private activity bonds or "related persons" of substantial users.
Generally, an individual will not be a related person of a substantial user
under the Code unless he/she or his/her immediate family (spouse, brothers,
sisters, and lineal descendants) owns indirectly in aggregate more than 50% in
the equity value of the substantial user.
Opinions relating to the tax status of interest derived from individual
municipal securities are rendered by bond counsel to the issuer. Although the
Fund's advisor attempts to determine that any security it contemplates
purchasing on behalf of the Fund is issued with an opinion indicating that
interest payments will be federal and (as applicable) state tax-exempt, neither
the advisor nor the Fund's counsel makes any review of proceedings relating to
the issuance of municipal securities or the bases of such opinions.
From time to time, proposals have been introduced in Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities, and similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be adversely affected. Under these
circumstances, Fund management would re-evaluate the Fund's investment
objectives and policies and would consider either changes in the structure of
the Fund and the Trust or their dissolution.
ALTERNATIVE MINIMUM TAX
While the interest on bonds issued to finance essential state and local
government operations is generally tax-exempt, interest on certain nonessential
or private activity securities issued after August 7, 1986, while exempt from
the regular federal income tax, constitutes a tax-preference item for taxpayers
in determining alternative minimum tax liability under the Code and income tax
provisions of several states. The interest on private activity securities could
subject a shareholder to, or increase liability under, the federal alternative
minimum tax, depending on the shareholder's tax situation.
All distributions derived from interest exempt from regular federal
income tax may subject corporate shareholders to or increase their liability
under, the alternative minimum tax and environmental tax because these
distributions are included in the corporation's adjusted current earnings.
The Fund will inform shareholders annually as to the dollar amount of
distributions derived from interest payments on private activity securities.
The information above is only a summary of some of the tax
considerations affecting the Fund and its shareholders; no attempt has been made
to discuss individual tax consequences. A prospective investor should consult
his or her tax advisor or state or local tax authorities to determine whether
the Fund is a suitable investment based on his or her tax situation.
SPECIAL TAX CONSIDERATIONS
Exempt-interest dividends, whether received by shareholders in cash or
in additional shares, derived by New York residents from interest on qualifying
New York bonds generally are exempt from New York State and New York City
personal income taxes, but not corporate franchise taxes. Dividends and
distributions derived from taxable income and capital gains are not exempt from
New York State and New York City taxes. Interest on indebtedness incurred or
continued by a shareholder to purchase or carry shares of the Fund is not
deductible for New York State or New York City personal income tax purposes.
Gain on the sale of redemption of Fund shares generally is subject to New York
State and New York City personal income tax.
OTHER INFORMATION
CAPITALIZATION
The Trust is a Massachusetts business trust established under a
Declaration of Trust dated April 22, 1987, as a successor to two
previously-existing Massachusetts business trusts, FundTrust Tax-Free Trust
(organized on July 30, 1986) and FundVest (organized on July 17, 1984, and since
renamed FundSource). Prior to October 3, 1994 the name of the Trust was
"FundTrust".
The capitalization of the Trust consists solely of an unlimited number
of shares of beneficial interest with a par value of $0.001 each. The Board of
Trustees may establish additional series (with different investment objectives
and fundamental policies) and classes of shares within each series at any time
in the future. Establishment and offering of additional classes or series will
not alter the rights of the Fund's shareholders. When issued, shares are fully
paid, nonassessable, redeemable and freely transferable. Shares do not have
preemptive rights or subscription rights. In liquidation of the Fund, each
shareholder is entitled to receive his pro rata share of the net assets of the
Fund.
VOTING RIGHTS
Under the Declaration of Trust, the Trust is not required to hold
annual meetings of Fund shareholders to elect Trustees or for other purposes. It
is not anticipated that the Trust will hold shareholders' meetings unless
required by law or the Declaration of Trust. In this regard, the Trust will be
required to hold a meeting to elect Trustees to fill any existing vacancies on
the Board if, at any time, fewer than a majority of the Trustees have been
elected by the shareholders of the Trust. In addition, the Declaration of Trust
provides that the holders of not less than two-thirds of the outstanding shares
of the Trust may remove persons serving as Trustee either by declaration in
writing or at a meeting called for such purpose. The Trustees are required to
call a meeting for the purpose of considering the removal of persons serving as
Trustee if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Trust.
The Trust's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
INDEPENDENT AUDITORS
The Board of Trustees has appointed KPMG Peat Marwick LLP as
independent accountants of the Funds of the Trust. KPMG Peat Marwick LLP will
audit the Trust's annual financial statements, prepare the Trust's income tax
returns, and assist in the filings with the Securities and Exchange Commission.
KPMG Peat Marwick LLP's address is 99 High Street, Boston, Massachusetts 02110.
COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C. 20005,
passes upon certain legal matters in connection with the shares of the Fund
offered by the Trust, and also acts as counsel to the Trust.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not
contain all the information included in the Trust's registration statement filed
with the Securities and Exchange Commission under the 1933 Act with respect to
shares of the Fund, certain portions of which have been omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. The
registration statement, including the exhibits filed therewith, may be examined
at the office of the Securities and Exchange Commission in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of
any contract or other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
which was filed as an exhibit to the registration statement, each such statement
being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Fund's current audited financial statements dated October 31, 1996
are hereby incorporated herein by reference from the Annual Report of the Fund
dated October 31, 1996 as filed with the Securities and Exchange Commission. A
copy of such report will be provided without charge to each person receiving
this Statement of Additional Information.
<PAGE>
APPENDIX
Additional Information Concerning
New York Municipal Obligations
The following information is a summary of special factors affecting
investments in New York municipal obligations. It does not purport to be a
complete description and is based on information from the Annual Information
Statement of the State of New York dated July 26, 1996.
GENERAL
New York (the "State") is the third most populous state in the nation
and has a relatively high level of personal wealth. The State's economy is
diverse with a comparatively large share of the nation's finance, insurance,
transportation, communications and services employment, and a very small share
of the nation's farming and mining activity. The State's location, air transport
facilities and natural harbors have made it an important link in international
commerce. Travel and tourism constitute an important part of the economy. The
State has a declining proportion of its work force engaged in manufacturing and
an increasing proportion engaged in service industries. This transition reflects
a national trend.
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State economy has grown more slowly than that
of the nation as a whole, resulting in the gradual erosion of its relative
economic affluence. Statewide, urban centers have experienced significant
changes involving migration of the more affluent to the suburbs and an influx of
generally less affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West have had in
attracting people and business. New York City (the "City") has also had to face
greater competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
Although industry and commerce are broadly spread across the State,
particular activities are concentrated in the following areas: Westchester
County -- headquarters for several major corporations; Buffalo -- diverse
manufacturing base; Rochester -- manufacture of photographic and optical
equipment; Syracuse and Utica-Rome area -- production of machinery and
transportation equipment; Albany-Troy-Schenectady -- government and education
center and production of electrical products; Binghampton -- original site of
the International Business Machines Corporation and continued concentration of
employment in computer and other high technology manufacturing; and New York
City -- headquarters for the nation's securities business and for a major
portion of the nation's major commercial banks, diversified financial
institutions and life insurance companies. In addition, the City houses the home
offices of three major radio and television broadcasting networks, most of the
national magazines and a substantial portion of the nation's book publishers.
The City also retains leadership in the design and manufacture of men's and
women's apparel.
ECONOMIC OUTLOOK
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the Federal government, that
are not under the control of the State. The State Financial Plan is based upon
forecasts of national and State economic activity. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes in
the national and the State economies. Many uncertainties exist in forecasts of
both the national and State economies, including consumer attitudes toward
spending, the extent of corporate and governmental restructuring, Federal
financial and monetary policies, the availability of credit, the level of
interest rates, and the condition of the world economy, which would have an
adverse effect on the State. There can be no assurance that the State economy
will not experience results in the current fiscal year that are worse than
predicted, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.
The national economy has resumed a more robust rate of growth after a
"soft landing" in 1995, with over 11 million jobs added nationally since early
1992. Since late 1992, the State has added approximately 240,000 jobs.
Employment growth has been hindered during recent years by significant cutbacks
in the computer and instrument manufacturing, utility, defense, and banking
industries. Government downsizing has also moderated these job gains.
The overall rate of growth of the national economy during calendar year
1996 was forecast to be slightly below the "consensus" of a widely followed
survey of national economic forecasters. Growth in the real gross domestic
product during 1996 was projected to be moderate (2.1 percent), with anticipated
declines in federal spending and net exports more than offset by increases in
consumption and investment. Inflation, as measured by the Consumer Price Index,
was projected to be contained at about 3 percent due to moderate wage growth and
foreign competition. Personal income and wages were projected to increase by
about 5 percent.
The forecast of the State's economy showed modest expansion during the
first half of calendar 1996, but some slowdown was projected during the second
half of the year. Although industries that export goods and services abroad are
expected to continue to do well, growth was expected to be slowed by government
cutbacks at all levels and by tight fiscal constraints on health and social
services. On an average annual basis, employment growth in the State was
expected to be up slightly from the 1995 rate. Personal income was expected to
record moderate gains in 1996. Bonus payments in the securities industry were
expected to increase further from the prior year's record level.
The forecast for continued slow growth, and any resultant impact on the
State's 1996-97 Financial Plan, contains some uncertainties.
Stronger-than-expected gains in employment could lead to a significant
improvement in consumption spending. Investment could also remain robust.
Conversely, the prospect of a continuing deadlock on federal budget deficit
reduction or fears of excessively rapid economic growth could create upward
pressures on interest rates. In addition, the State economic forecast could
over- or underestimate the level of future bonus payments or inflation growth,
resulting in forecasted average wage growth that could differ significantly from
actual growth. Similarly, the State forecast could fail to correctly account for
expected declines in government and banking employment and the direction of
employment change that is likely to accompany telecommunications deregulation.
STATE FINANCIAL PLAN
The State Constitution requires the Governor to submit to the
Legislature a balanced Executive Budget which contains a complete plan of
expenditures (the "State Financial Plan") for the ensuing fiscal year and all
moneys and revenues estimated to be available therefor, accompanied by bills
containing all proposed appropriations or reappropriations and any new or
modified revenue measures to be enacted in connection with the Executive Budget.
A final budget must be approved before the statutory deadline of April 1. The
State Financial Plan is updated quarterly pursuant to law.
The State's fiscal year, which commenced on April 1, 1996, and ends on
March 31, 1997, is referred to herein as the State's 1996-97 fiscal year.
The State's budget for the 1996-97 fiscal year was enacted by the
Legislature on July 13, 1996, more than three months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State operations
and other purposes, including all necessary appropriations for all
State-supported debt service. The State Financial Plan for the 1996-97 fiscal
year was formulated on July 25, 1996, and is based on the State's budget as
enacted by the Legislature and signed into law by the Governor, as well as
actual results for the first quarter of the 1996-97 fiscal year. The State
Financial Plan will be updated quarterly pursuant to law in October and January.
After adjustments for comparability between fiscal years, the adopted
1996-97 budget projects a year-over-year increase in General Fund disbursements
of 0.2 percent. Adjusted State Funds (excluding federal grants) disbursements
are projected to increase by 1.6 percent from the prior fiscal year. All
Governmental Funds projected disbursements increase by 4.1 percent over the
prior fiscal year, after adjustments for comparability.
The 1996-97 State Financial Plan is projected to be balanced on a cash
basis. As compared to the Governor's proposed budget as revised on March 20,
1996, the State's adopted budget for 1996-97 increases General Fund spending by
$842 million, primarily from increases for education, special education and
higher education ($563 million). The balance represents funding increases to a
variety of other programs, including community projects and increased assistance
to fiscally distressed cities. Resources used to fund these additional
expenditures include $540 million in increased revenues projected for 1996-97
based on higher-than-projected tax collections during the first half of calendar
1996, $110 million in projected receipts from a new State tax amnesty program,
and other resources including certain non-recurring resources. The total amount
of non-recurring resources included in the 1996-97 State budget is projected to
be $1.3 billion, or 3.9 percent of total General Fund receipts.
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that
are not under the control of the State. In addition, the State Financial Plan is
based upon forecasts of national and State economic activity. Economic forecasts
have frequently failed to predict accurately the timing and magnitude of changes
in the national and the State economies. The Division of Budget believes that
its projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth in the Annual Information Statement, and those projections
may be changed materially and adversely from time to time. There are also risks
and uncertainties concerning the future-year impact of actions taken in the
1996-97 budget.
GOVERNMENT FUNDS
The four governmental fund types that comprise the State Financial Plan
are the General Fund, the Special Revenue Funds, the Capital Projects Funds, and
the Debt Service Funds.
General Fund Receipts
The General Fund is the principal operating fund of the State and is
used to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular purposes.
In the State's 1996-97 fiscal year, the General Fund is expected to account for
approximately 47 percent of total governmental-funded disbursements and 71
percent of total State-funded disbursements. General Fund moneys are also
transferred to other funds, primarily to support certain capital projects and
debt service payments in other fund types.
The Financial Plan for the 1996-97 fiscal year projects General Fund
receipts, including transfers from other funds, of $33.17 billion, an increase
of $444 million from the total receipts in the prior fiscal year.
Personal income tax is imposed on the income of individuals, estates
and trusts and is based on federal definitions of income and deductions with
certain modifications. In 1995, the State enacted a tax-reduction program
designed to reduce receipts from the personal income tax by 20 percent over
three years. Prior to 1995, the tax had remained substantially unchanged since
1989 as a result of annual deferrals of tax reductions originally enacted in
1987. The tax-reduction program is estimated to reduce receipts by $2.3 billion
in the 1996-97 fiscal year, compared to what tax receipts would have been under
the pre-1995 rate structure. The maximum rate was reduced from the 7.875 percent
in effect between 1989 and 1994 to 7.59375 percent for 1995, to 7.125 percent
for 1996, and is scheduled under current law to be reduced to 6.85 percent for
1997 and thereafter. In addition to significant reductions in overall tax rates,
the program also includes increases in the standard deduction, widening tax
brackets to increase the income thresholds to which higher tax rates apply, and
modification of certain tax credits.
The projected yield of personal income tax in the 1996-97 fiscal year
of $17.1 billion is an increase of $103 million from reported collections in the
State's 1995-96 fiscal year. The increase reflects both the effects of the tax
reductions and the fact that reported collections in the preceding year were
affected by net refund reserve account transactions that depressed collections
in that year by $500 million. Without these changes, the yield of the tax would
have grown by more than $1.0 billion (nearly 7 percent), reflecting liability
growth for the 1995 tax year projected at approximately the same rate. The
income base for the tax is projected to rise approximately 5 percent for the
1996 tax year.
Receipts in user taxes and fees in the State's 1996-97 fiscal year are
expected to total $6.73 billion, an increase of $97 million from reported
1995-96 results. Underlying growth in the continuing sales tax base is forecast
to be 5 percent, accounting for the increase in the category as a whole.
Projected receipts in 1996-97 are adversely affected by the full-year effects of
reductions in the diesel motor fuel, container and beer taxes adopted in 1995
and by a temporary reduction of the sales tax on clothing enacted in 1996.
Business tax receipts are projected at $4.62 billion, a decline of $360 million
from reported 1995-96 results. The decline in the 1996-97 fiscal year largely
reflects the effect of tax reductions enacted in 1994 and 1995, and the
previously scheduled diversion of petroleum business and other tax receipts to
dedicated transportation funds.
Total receipts from other taxes in the State's 1996-97 fiscal year are
projected at $945 million, $151 million less than in the preceding year. The
estimates reflect 1994 and 1995 legislation reducing the burden of the real
property gains tax and the estate tax as well as 1996 legislation repealing the
real property gains tax, and diversion of a portion of the real estate transfer
tax proceeds to the Environmental Protection Fund. Miscellaneous receipts in the
State's 1996-97 fiscal year are expected to total $2.1 billion, an increase of
$683 million above the amount received in the prior State fiscal year. This
includes $481 million in surplus revenues from the Medical Malpractice Insurance
Association ("MMIA"), and other various non-recurring resources. MMIA is a
statutorily-created joint underwriting association of property/casualty
insurance companies authorized to write certain personal liability insurance in
the State which provides primary and excess medical malpractice insurance for
medical service providers in the State. It has been reported that certain health
care providers are considering a challenge to the State's right to these surplus
revenues. Transfers from other funds remain virtually unchanged from the prior
year. In the 1996-97 fiscal year, excess sales tax revenues are projected to be
$1.4 billion, $75 million more than in the 1995-96 fiscal year. All other
transfers are projected to decrease by $82 million, primarily reflecting the
non-recurring transfer of $117 million from the Mass Transportation Operating
Assistance Fund to the Revenue Accumulation Fund in 1995-96.
General Fund Disbursements
Disbursements from grants to local governments are projected to total
$23.10 billion in the 1996-97 State Financial Plan, an increase of $597 million
from 1995-96 levels. This category of the State Financial Plan includes $11.27
billion in aid for elementary, secondary, and higher education. Costs for social
services, including Medicaid, account for $8.96 billion. Remaining disbursements
primarily support community-based mental hygiene programs, community and public
health programs, local transportation programs, and revenue sharing.
Spending for State operations is projected at $5.82 billion, a decrease
of $135 million. The lack of growth in this category reflects the workforce
reduction program for 1996-97 that will be accomplished primarily through
attrition, a continued hiring freeze and implementation of a retirement
incentive program. Most agencies will spend less in 1996-97 than in 1995-96;
however, criminal justice spending will increase modestly to reflect the impact
of stricter sentencing laws.
Spending for general State charges is projected at $2.22 billion in the
1996-97 State Financial Plan, an increase of $138 million from the 1995-96
level. Fringe benefit costs in 1995-96 were depressed by the one-time
application of more than $100 million in reimbursements traditionally budgeted
in other categories of the Financial Plan. Pension costs do not increase in
1996-97 assuming savings will be achieved as planned from the refinancing of
certain pension liabilities. Other fringe benefit costs (including unemployment
insurance) decline, due to workforce reductions accomplished primarily through
attrition and early retirements.
Debt service in the General Fund for 1996-97 reflects only the $10
million interest cost of the State's commercial paper program. No cost is
included for a TRAN borrowing, since none is expected to be undertaken. General
Fund debt service on short-term obligations of the State reflects the
elimination of the State's spring borrowing. Transfers in support of debt
service and capital project spending are projected to total $1.94 billion, an
increase of $161 million. Transfers in support of capital projects decrease $210
million due to the availability of non-recurring revenues which will be
deposited directly to the Capital Projects Funds in 1996-97 and the
reclassification of economic development programs from capital projects to
grants to local governments. Transfers in support of debt service increase $60
million reflecting prior year bond sales for prisons, housing programs, and
State universities. All other transfers decrease $11 million from previous year
levels.
The 1996-97 opening fund balance of $287 million includes $237 million
which is reserved in the Tax Stabilization Reserve Fund, as well as $41 million
which is reserved in the Contingency Reserve Fund. The Contingency Reserve Fund
was established in 1993-94 to set aside moneys to address adverse judgments or
settlements resulting from litigation against the State. The closing fund
balance in the General Fund of $337 million reflects a balance of $252 million
in the Tax Stabilization Reserve Fund, following an additional payment of $15
million during the year, and a balance of $85 million in the Contingency Reserve
Fund.
Special Revenue Funds
Special Revenue Funds are used to account for the proceeds of specific
revenue sources such as federal grants that are legally restricted, either by
the Legislature or outside parties, to expenditures for specified purposes. For
1996-97, the State Financial Plan projects disbursements of $28.51 billion from
these funds, an increase of $2.25 billion over 1995-96 levels. Disbursements
from federal funds, primarily the federal share of Medicaid and other social
services programs, are projected to total $21.31 billion in the 1996-97 fiscal
year. Remaining projected spending of $7.20 billion primarily reflects aid to
SUNY supported by tuition and dormitory fees, education aid funded from lottery
receipts, operating aid payments to the Metropolitan Transportation Authority
funded from the proceeds of dedicated transportation taxes, and costs of a
variety of self-supporting programs which deliver services financed by user
fees.
Capital Projects Funds
Capital Projects Funds are used to account for the financial resources
used for the acquisition, construction, or rehabilitation of major State capital
facilities and for capital assistance grants to certain local government or
public authorities. This fund type consists of the Capital Projects Fund, which
is supported by tax dollars transferred from the General Fund, and 37 other
capital funds established to distinguish specific capital construction purposes
supported by other revenues.
Disbursements from the Capital Projects Funds in 1996-97 are projected
at $3.85 billion, a decrease of $120 million over prior-year levels.
Debt Service Funds
Debt Service Funds are used to account for the payment of principal of,
and interest on, long-term debt of the State and to meet commitments under
lease-purchase and other contractual-obligation financing arrangements.
Disbursements are estimated at $2.58 billion in the 1996-97 fiscal year, an
increase of $164 million from 1995-96. The transfer from the General Fund of
$1.59 billion is expected to finance 62 percent of these payments. The remaining
payments are expected to be financed by pledged revenues, including $1.83
billion in taxes, $234 million in dedicated fees, and $2.35 billion in patient
revenues, including transfers of federal and State reimbursements and State
dedicated taxes. After impoundment for debt service, as required, $3.7 billion
is expected to be transferred to the General Fund and other funds in support of
State operations. The largest transfer - $1.9 billion - is made to the Special
Revenue Fund type in support of operations of the mental hygiene agencies.
Another $1.4 billion in excess sales taxes is expected to be transferred to the
General Fund, following payment of projected debt service on bonds of LGAC.
PRIOR FISCAL YEARS
New York State's financial operations have improved during recent
fiscal years. During the period 1989-90 through 1991-92, the State incurred
General Fund operating deficits that were closed with receipts from the issuance
of tax and revenue anticipation notes ("TRANs"). First, the national recession,
and then the lingering economic slowdown in the New York and regional economy,
resulted in repeated shortfalls in receipts and three budget deficits. For its
last four fiscal years, the State recorded balanced budgets on a cash basis,
with positive fund balances in each year.
1995-96 Fiscal Year
The State ended its 1995-96 fiscal year on March 31, 1996 with a
General Fund cash surplus. The Division of the Budget reported that revenues
exceeeded projections by $270 million, while spending for social service
programs was lower than forecast by $120 million and all other spending was
lower by $55 million. From the resulting benefit of $445 million, a $65 million
voluntary deposit was made into the Tax Stabilization Reserve Fund ("TSRF"), and
$380 million was used to reduce 1996-97 Financial Plan liabilities by
accelerating 1996-97 payments, deferring 1995-96 revenues, and making a deposit
to the tax refund reserve account.
The General Fund closing fund balance was $287 million, an increase of
$129 million form 1994-95 levels. The $129 million change in fund balance is
attributable to the $65 million voluntary deposit to the TSRF, a $15 million
required deposit to the TSRF, a $40 million deposit to the Contingency Reserve
Fund ("CRF"), and a $9 million deposit to the Revenue Accumulation Fund. The
closing fund balance includes $237 million on deposit in the TSRF, to be used in
the event of any future General Fund deficit as provided under the State
Constitution and State Finance Law. In addition, $41 million is on deposit in
the CRF. The CRF was established in State fiscal year 1993-94 to assist the
State in financing the costs of extraordinary litigation. The remaining $9
million reflects amounts on deposit in the Revenue Accumulation Fund. This fund
was created to hold certain tax receipts temporarily before their deposit to
other accounts. In addition, $678 million was on deposit in the tax refund
reserve account, of which $521 million was necessary to complete the
restructuring of the State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease of 1.1 percent
from 1994-95 levels. This decrease reflects the impact of tax reductions enacted
and effective in both 1994 and 1995. General Fund disbursements totaled $32.68
billion for the 1995-96 fiscal year, a decrease of 2.2 percent from 1994-95
levels. Mid-year spending reductions, taken as part of a management review
undertaken in October at the direction of the Governor, yielded savings from
Medicaid utilization controls, office space consolidation, overtime and
contractual expense reductions, and statewide productivity improvements achieved
by State agencies. Together with decreased social services spending, this
management review accounts for the bulk of the decline in spending.
1994-95 Fiscal Year
The State ended its 1994-95 fiscal year with the General Fund in
balance. The $241 million in the fund balance reflects the planned use of $264
million from the CRF, partially offset by the required deposit of $23 million to
the TSRF. In addition, $278 million was on deposit in the tax refund reserve
account, $250 million of which was deposited to continue the process of
restructuring the State's cash flow as part of the LGAC program. The closing
fund balance of $158 million reflects $157 million in the TSRF and $1 million in
the CRF.
General Fund receipts totaled $33.16 billion, an increase of 2.9
percent from 1993-94 levels. General Fund disbursements totaled $33.40 billion
for the 1994-95 fiscal year, an increase of 4.7 percent form the previous fiscal
year. The increase in disbursements was primarily the result of one-time
litigation costs for the State, funded by the use of the CRF, offset by $188
million in spending reductions initiated in January 1995 to avert a potential
gap in the 1994-95 State Financial Plan. These actions included savings from a
hiring freeze, halting the development of certain services, and the suspension
of non-essential capital projects.
1993-94 Fiscal Year
The State ended its 1993-94 fiscal year with a General Fund cash
surplus, primarily the result of an improving national economy, State employment
growth, tax collections that exceeded earlier projections and disbursements that
were below expectations. A deposit of $268 million was made to the CRF, with a
withdrawal during the year of $3 million, and a deposit of $67 million was made
to the TSRF. These three transactions result in the change in fund balance of
$332 million. In addition, a deposit of $1.14 billion was redeposited in the tax
refund reserve account, of which $1.03 billion was available for budgetary
purposes in the 1994-95 fiscal year. The remaining $114 million was redeposited
in the tax refund reserve account at the end of the State's 1994-95 fiscal year
to continue the process of restructuring the State's cash flow as part of the
LGAC program. The General Fund closing balance was $399 million, of which $265
million was on deposit in the CRF and $134 million in the TSRF. The CRF was
initially funded with a transfer of $100 million attributable to a positive
margin recorded in the 1992-93 fiscal year.
General Fund receipts totaled $32.23 billion, an increase of 2.6
percent from 1992-93 levels. General Fund disbursements totaled $31.90 billion
for the 1993-94 fiscal year, 3.5 percent higher than the previous fiscal year.
Receipts were higher in part due to improved tax collections from renewed State
economic growth, although the State continued to lag behind the national
economic recovery. Disbursements were higher due in part to increased local
assistance costs for school aid and social services, accelerated payment of
certain Medicaid expenses, and the cost of an additional payroll for State
employees.
CERTAIN LITIGATION
Certain litigation pending against New York or its officers or
employees could have a substantial or long-term adverse effect on New York
finances. Among the more significant of these cases are those that involve: (i)
the validity of agreements and treaties by which various Indian tribes
transferred to New York title to certain land in New York; (ii) certain aspects
of New York's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services, and the eligibility for
and nature of home care services; (iii) challenges to provisions of Section
2807-c of the Public Health Law, which impose a 13% surcharge on inpatient
hospital bills paid by commercial insurers and employee welfare benefit plans;
(iv) an action against the State of New York and New York City officials
alleging that the present level of shelter allowance for public assistance
recipients is inadequate under statutory standards to maintain proper housing;
(v) challenges to the practice of reimbursing certain Office of Mental Health
patient care expenses from the client's Social Security benefits; (vi) alleged
responsibility of New York officials to assist in remedying racial segregation
in the City of Yonkers; (vii) a claim for reimbursement from the State for
certain costs arising out of the provision of preschool services and programs
for children with handicapping conditions; and (viii) a claim that the State's
Department of Environmental Conservation prevented the completion of a
cogeneration facility by the projected date by failing to provide data in a
timely manner and that the plaintiff thereby suffered damages. In addition,
aspects of petroleum business taxes are the subject of administrative claims and
litigation.
THE CITY OF NEW YORK
The fiscal health of the State of New York is closely related to the
fiscal health of its localities, particularly the City, which has required and
continues to require significant financial assistance from New York. The City
has achieved balanced operating results for each of its fiscal years since 1981
as reported in accordance with GAAP.
In response to the City's fiscal crisis in 1975, the State took action
to assist the City in returning to fiscal stability. Among those actions, the
State established the Municipal Assistance Corporation for the City of New York
(the "MAC") to provide financing assistance to the City; the New York State
Financial Control Board (the "Control Board") to oversee the City's financial
affairs; the Office of the State Deputy Comptroller for the City of New York
("OSDC") to assist the Control Board in exercising its powers and
responsibilities; and a "Control Period" from 1975 to 1986 during which the City
was subject to certain statutorily-prescribed fiscal-monitoring arrangements.
Although the Control Board terminated the Control Period in 1986 when certain
statutory conditions were met, thus suspending certain Control Board powers, the
Control Board, MAC and OSDC continue to exercise various fiscal-monitoring
functions over the City, and upon the occurrence or "substantial likelihood and
imminence" of the occurrence of certain events, including, but not limited to, a
City operating budget deficit of more than $100 million, the Control Board is
required by law to reimpose a Control Period. Currently, the City and its
Covered Organizations (i.e., those which receive or may receive monies from the
City directly, indirectly or contingently) operate under a four-year financial
plan which the City prepares annually and periodically updates.
Implementation of the financial plan is also dependent upon the ability
of the City and certain Covered Organizations to market their securities
successfully. The City issues securities to finance, refinance and rehabilitate
infrastructure and other capital needs, as well as for seasonal financing needs.
The City currently projects that if no action is taken, it will exceed its State
Constitutional general debt limit beginning in the City fiscal year 1998. The
current financial plan includes certain alternative methods of financing a
portion of the City's capital program which require State or other outside
approval. Future developments concerning the City or its Covered Organizations,
and public discussion of such developments, as well as prevailing market
conditions and securities credit ratings, may affect the ability or cost to sell
securities issued by the City or such Covered Organizations and may also affect
the market for their outstanding securities.
The staffs of the OSDC, the Control Board and the City Controller issue
periodic reports on the City's financial plans, as modified, analyzing forecasts
of revenues and expenditures, cash flow, and debt service requirements, as well
as compliance with the financial plan, as modified, by the City and its Covered
Organizations. According to recent staff reports, the City's economy has
experienced weak employment and moderate wage and income growth throughout the
mid-1990's. Although this trend is expected to continue for the rest of the
decade, there is the risk of a slowdown in the City's economy in the next few
years, which would depress revenue growth and put further strains on the City's
budget. Also, staff reports have indicated that the City's recent balanced
budgets have been accomplished, in part, through the use of non-recurring
resources; that the City's financial plan tends to rely on actions outside its
direct control; that the City has not yet brought its long-term expenditures in
line with recurring revenues; and that the City is therefore likely to continue
to face future projected budget gaps requiring the City to increase revenues
and/or reduce expenditures.
OTHER LOCALITIES
In addition to the City, certain localities, including the City of
Yonkers and the City of Troy, could have financial problems leading to requests
for additional State assistance during the State's 1996-97 fiscal year and
thereafter. Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1994, the total indebtedness of all
localities in the State other than New York City was approximately $17.7
billion.
From time to time, federal expenditure reductions could reduce, or in
some cases, eliminate, federal funding of some local programs, and, accordingly,
might impose substantial increased expenditure requirements on affected
localities. If the State, the City or any of the public authorities were to
suffer serious financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds issued by
localities within the State could be adversely affected. Localities also face
anticipated and potential problems resulting from certain pending litigation,
judicial decisions and long-range economic trends. Long-range potential problems
of declining urban population, increasing expenditures and other economic trends
could adversely affect localities and require increasing State assistance in the
future.
AUTHORITIES
The fiscal stability of the State is related, in part, to the fiscal
stability of its public authorities. Public authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the State
itself and may issue bonds and notes within the amounts, and as otherwise
restricted by, their legislative authorization. As of September 30, 1995,
aggregate outstanding debt of all State public authorities was $73.45 billion.
Some authorities also receive moneys from State appropriations to pay for the
operating costs of certain of their programs.
The Metropolitan Transit Authority (the "MTA"), which receives the bulk
of the appropriated moneys from the State, oversees the operation of the City's
bus and subway system by its affiliates, the New York City Transit Authority and
Manhattan and Bronx Surface Transit Operating Authority (collectively, the
"TA"). The MTA has depended and will continue to depend upon federal, state and
local government support to operate the transit system because fare revenues are
insufficient.
Since 1980, the State has enacted several taxes (including a surcharge
on the profits of banks, insurance corporations and general business
corporations doing business in the 12-county region served by the MTA and a
special one-quarter of one percent regional sales and use tax) that provide
additional revenues for mass transit purposes, including assistance to the MTA.
In addition, a one-quarter of one percent regional mortgages recording tax paid
on certain mortgages creates an additional source of recurring revenues for the
MTA. Further, in 1993, the State dedicated a portion of the State petroleum
business tax to assist the MTA. For the 1996-97 State fiscal year, total State
assistance to the MTA is estimated at approximately $1.09 billion.
State legislation accompanying the 1996-97 adopted State budget
authorized the MTA, Triborough Bridge and Tunnel Authority, and AT to issue an
aggregate of $6.5 billion in bonds to finance a portion of a new $11.98 billion
MTA capital plan for the 1995 through 1999 calendar years (the "1995-99 Capital
Program"), and authorized the MTA to submit the 1995-99 Capital Program to the
Capital Program Review Board for approval. This plan will supersede the
overlapping portion of the MTA's 1992-96 Capital Program. This is the fourth
five-year plan since the Legislature authorized procedures for the adoption,
approval and amendment of capital programs designed to upgrade the performance
of the MTA's transportation systems and to supplement, replace and rehabilitate
facilities and equipment. The 1995-99 Capital Program assumes the issuance of an
estimated $5.1 billion in bonds under this $6.5 billion aggregate bonding
authority. The remainder of the plan is projected to be financed through
assistance from the State, the federal government, and the City of New York, and
from various other revenues generated from actions taken by the MTA.
There can be no assurance that all the necessary governmental actions
for the Capital Program or future capital programs will be taken, that funding
sources currently identified will not be decreased or eliminated, or that the
1995-99 Capital Program, or parts thereof, will not be delayed or reduced.
Should funding levels fall below current projections, the MTA would have to
revise its 1995-99 Capital Program accordingly. If the Capital Program is
delayed or reduced, ridership and fare revenues may decline, which could, among
other things, impair the MTA's ability to meet its operating expenses without
additional State assistance.
<PAGE>
REPUBLIC U.S.
GOVERNMENT MONEY MARKET FUND
3435 Stelzer Road
Columbus, Ohio 43219-3035
General
and (888) 525-5757(Toll Free)
Account Information
- --------------------------------------------------------------------------------
Republic National Bank of New York - Investment Adviser
("Republic" or the "Adviser")
BISYS Fund Services -
Administrator, Distributor and Sponsor
("BISYS," "Sponsor" or "Distributor")
STATEMENT OF ADDITIONAL INFORMATION
Republic U.S. Government Money Market Fund (the "Fund") is a separate
series (portfolio) of the Republic Funds (the "Trust"), an open-end management
investment company which currently consists of seven separate portfolios, each
of which has different and distinct investment objectives and policies. The Fund
is described in this Statement of Additional Information. Shares of the Fund are
divided into two separate classes, Class C shares and Class Y shares.
The investment objective of the Fund is to provide shareholders of the
Fund with liquidity and as high a level of current income as is consistent with
the preservation of capital. The Trust seeks to achieve the investment objective
of the Fund by investing the assets of the Fund in debt obligations issued or
guaranteed by the United States, its agencies or instrumentalities, and
commitments to purchase such obligations ("U.S. Government-backed obligations").
The Fund may invest in U.S. Government-backed obligations subject to repurchase
agreements with recognized securities dealers and banks. There can be no
assurance that the investment objective of the Fund will be achieved.
Shares of the Fund are continuously offered for sale by the Distributor
at net asset value (normally $1.00 per share) with no sales charge (i) directly
to the public, (ii) to customers of a financial institution, such as a federal
or state-chartered bank, trust company or savings and loan association that has
entered into a shareholder servicing agreement with the Trust (collectively,
"Shareholder Servicing Agents"), and (iii) to customers of a securities broker
that has entered into a dealer agreement with the Distributor.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
ONLY AUTHORIZED FOR DISTRIBUTION WHEN PRECEDED OR ACCOMPANIED BY A PROSPECTUS
FOR THE FUND DATED FEBRUARY 1, 1997 (THE "PROSPECTUS"). This Statement of
Additional Information contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus. The Prospectus and Statement of Additional Information may be
obtained without charge by writing or calling the Trust at the address and
telephone number printed above.
February 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
Investment Objective, Policies and Restrictions.......................... 1
Portfolio Transactions.......................................... 1
Investment Restrictions......................................... 2
Non-Fundamental Restriction..................................... 5
Percentage and Rating Restrictions.............................. 5
Performance Information.................................................. 6
Management Of the Trust.................................................. 6
Trustees and Officers........................................... 6
Compensation Table.............................................. 7
Investment Adviser.............................................. 8
Administrator................................................... 8
Distribution Plan - Class C shares only......................... 9
Administrative Services Plan.................................... 9
Shareholder Servicing Agents.................................... 10
Transfer Agent and Custodian.................................... 10
Expenses........................................................ 10
Determination Of Net Asset Value......................................... 10
Taxation................................................................. 11
Other Information........................................................ 13
Capitalization.................................................. 13
Voting Rights................................................... 13
Independent Auditors............................................ 13
Counsel......................................................... 13
Registration Statement.......................................... 13
Financial Statements............................................ 14
References in this Statement of Additional Information to the
"Prospectus" are to the Prospectus, dated February 1, 1997, of the Trust by
which shares of the Fund are offered. Unless the context otherwise requires,
terms defined in the Prospectus have the same meaning in this Statement of
Additional Information as in the Prospectus.
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The following information supplements the discussion of the investment
objective and policies of the Fund discussed under the caption "Investment
Objective and Policies" in the Prospectus.
The investment objective of the Fund is to provide shareholders of the
Fund with liquidity and as high a level of current income as is consistent with
the preservation of capital. The Trust seeks to achieve the investment objective
of the Fund by investing the assets of the Fund in U.S. Government-backed
obligations which have, or are deemed to have, remaining maturities not
exceeding 397 days, and in repurchase agreements collateralized by U.S.
Government-backed obligations.
The investment objective of the Fund and related policies and
activities are not fundamental and may be changed by the Board of Trustees of
the Trust without the approval of Fund shareholders.
PORTFOLIO TRANSACTIONS. Purchases and sales of securities will usually
be principal transactions. Portfolio securities normally will be purchased or
sold from or to issuers directly or from or to dealers serving as market makers
for the securities at a net price. Generally, money market securities are traded
on a net basis and do not involve brokerage commissions. The cost of executing
portfolio securities transactions for the Fund primarily consists of dealer
spreads and underwriting commissions. Under the Investment Company Act of 1940
(the "1940 Act"), persons affiliated with the Fund or the Sponsor are prohibited
from dealing with the Fund as a principal in the purchase and sale of securities
unless a permissive order allowing such transactions is obtained from the
Securities and Exchange Commission.
The Trust has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities for the Fund, except
that portfolio transactions for the Fund will not be executed through the
Sponsor and the Fund will not deal with the Sponsor as agent or principal.
Subject to policies established by the Trust's Board of Trustees, the Adviser is
primarily responsible for portfolio decisions and the placing of portfolio
transactions. Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser in its best judgment and in a manner deemed
to be in the best interest of Fund shareholders rather than by any formula. In
placing orders for the Fund, the primary consideration is prompt execution of
orders in an effective manner at the most favorable price, although the Fund
does not necessarily pay the lowest spread or commission available. Other
factors taken into consideration are the dealer's general execution and
operational facilities, the type of transaction involved and other factors such
as the dealer's risk in positioning the securities. The policy of the Fund of
investing in securities with short maturities will result in high portfolio
turnover, generally exceeding 100% per year.
The Adviser may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to the Adviser. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of securities firms. These services,
which in some cases may also be purchased for cash, include such matters as
general economic and security market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to the Adviser in advising
various of its clients (including the Fund), although not all of these services
are necessarily useful and of value in managing the Fund. The management fee
paid by the Fund is not reduced because the Adviser and its affiliates receive
such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
the Adviser may cause the Fund to pay a broker-dealer which provides "brokerage
and research services" (as defined in the Act) to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.
Consistent with the rules of the National Association of Securities
Dealers, Inc. and such other policies as the Trustees may determine, and subject
to seeking the most favorable price and execution available, the Adviser may
consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
Investment decisions for the Fund and for the other investment advisory
clients of the Adviser are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved. Thus, a
particular security may be bought for certain clients even though it could have
been sold for other clients at the same time, and a particular security may be
sold for certain clients even though it could have been bought for other clients
at the same time. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling that same security. In some
instances, one client may sell a particular security to another client. Two or
more clients may simultaneously purchase or sell the same security, in which
event each day's transactions in that security are, insofar as practicable,
averaged as to price and allocated between such clients in a manner which in the
Adviser's opinion is equitable to each and in accordance with the amount being
purchased or sold by each. In addition, when purchases or sales of the same
security for the Fund and for other clients of the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantage available to large denomination purchases or sales.
There may be circumstances when purchases or sales of portfolio securities for
one or more clients will have an adverse effect on other clients in terms of the
price paid or received or of the size of the position obtainable.
INVESTMENT RESTRICTIONS. The Trust has adopted the following investment
restrictions with respect to the Fund which may not be changed without approval
by holders of a "majority of the outstanding shares" of the Fund, which as used
in this Statement of Additional Information means the vote of the lesser of (i)
67% or more of the outstanding "voting securities" of the Fund present at a
meeting, if the holders of more than 50% of the outstanding "voting securities"
of the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding "voting securities" of the Fund. The term "voting securities" as
used in this paragraph has the same meaning as in the 1940 Act.
The Trust, on behalf of the Fund, may not:
(1) borrow money, except that as a temporary measure for
extraordinary or emergency purposes, the Fund may borrow from banks in
an amount not to exceed 1/3 of the value of the net assets of the Fund
including the amount borrowed (moreover, the Trust (on behalf of the
Fund) may not purchase any securities at any time at which borrowings
exceed 5% of the total assets of the Fund) taken in each case at market
value;
(2) purchase any security or evidence of interest therein on
margin, except that the Trust may obtain such short-term credit for the
Fund as may be necessary for the clearance of purchases and sales of
securities;
(3) underwrite securities issued by other persons, except
insofar as the Trust may technically be deemed an underwriter under the
Securities Act of 1933, as amended (the "1933 Act"), in selling a
portfolio security for the Fund;
(4) make loans to other persons except (a) through the lending
of securities held by the Fund, but not in excess of 1/3 of the Fund's
net assets taken at market value, (b) through the use of fixed time
deposits or repurchase agreements or the purchase of short term
obligations, (c) by purchasing all or a portion of an issue of debt
securities of types commonly distributed privately to financial
institutions; for purposes of this Investment Restriction (4) the
purchase of short-term commercial paper or a portion of an issue of
debt securities which are part of an issue to the public shall not be
considered the making of a loan;
(5) purchase or sell real estate (including limited
partnership interests but excluding securities secured by real estate
or interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts in the ordinary course of business
(the Trust reserves the freedom of action to hold and to sell for the
Fund real estate acquired as a result of its ownership of securities);
(6) concentrate its investments in any particular industry
(except for obligations of the U.S. Government and domestic banks), but
if it is deemed appropriate for the achievement of the Fund's
investment objective, up to 25% of the assets of the Fund (taken at
market value at the time of each investment) may be invested in any one
industry;
(7) issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the 1940 Act
or the rules and regulations promulgated thereunder, except as
appropriate to evidence a debt incurred without violating Investment
Restriction (1) above;
(8) pledge, mortgage or hypothecate for any purpose in
excess of 10% of the net assets of the Fund (taken at market value);
(9) sell any security which it does not own unless by virtue
of its ownership of other securities it has at the time of sale a right
to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold; and provided,
that if such right is conditional the sale is made upon the same
conditions;
(10) invest for the purpose of exercising control or
management;
(11) purchase securities issued by any registered investment
company, except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission and except when such purchase, though not
made in the open market, is part of a plan of merger or consolidation;
provided, however, that the Trust (on behalf of the Fund) will not
purchase the securities of any registered investment company if such
purchase at the time thereof would cause more than 10% of the total
assets of the Fund (taken at the greater of cost or market value) to be
invested in the securities of such issuers or would cause more than 3%
of the outstanding voting securities of any such issuer to be held by
the Fund; and provided, further, that the Fund shall not purchase
securities issued by any open-end investment company (for purposes of
this clause (11), securities of foreign banks shall be treated as
investment company securities except that debt securities and nonvoting
preferred stock of foreign banks are not subject to the 10% limitation
described herein). (The Trust, on behalf of the Fund, has no current
intention of investing in the obligations of foreign banks.);
(12) taken together with any investments described in clause
(15) below, invest more than 10% of the net assets of the Fund in
securities that are not readily marketable, including debt securities
for which there is no established market and fixed time deposits and
repurchase agreements maturing in more than seven days;
(13) purchase or retain any securities issued by an issuer any
of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust, or is an officer or director of the
Adviser, if after the purchase of the securities of such issuer by the
Trust, on behalf of the Fund, one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both,
all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially
more than 5% of such shares or securities, or both, all taken at market
value;
(14) write, purchase or sell any put or call option or any
combination thereof;
(15) taken together with any investments described in clause
(12) above, invest in securities which are subject to legal or
contractual restrictions on resale (other than fixed time deposits and
repurchase agreements maturing in not more than seven days) if, as a
result thereof, more than 10% of the net assets of the Fund, (taken at
market value) would be so invested (including fixed time deposits and
repurchase agreements maturing in more than seven days);
(16) purchase securities of any issuer if such purchase at the
time thereof would cause more than 10% of the voting securities of such
issuer to be held for the Fund; or
(17) make short sales of securities or maintain a short
position, unless at all times when a short position is open the Fund
owns an equal amount of such securities or securities convertible into
or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short, and unless not more than 10% of the net assets of the Fund
(taken at market value) is held as collateral for such sales at any one
time.
NON-FUNDAMENTAL RESTRICTION. The Fund will not as a matter of operating
policy:
(i) invest more than 15% of the net assets of the Fund (taken at the
greater of cost or market value) in securities that are issued by
issuers which (including the period of operation of any predecessor
company or unconditional guarantor of such issuer) have been in
operation less than three years (including predecessors) or in
securities that are restricted as to resale by the 1933 Act (including
Rule 144A securities).
PERCENTAGE AND RATING RESTRICTIONS. If a percentage restriction or a
rating restriction on investment or utilization of assets set forth above or
referred to in the Prospectus is adhered to at the time an investment is made or
assets are so utilized, a later change in percentage resulting from changes in
the value of the securities held by the Fund or a later change in the rating of
a security held by the Fund is not considered a violation of policy, however the
Adviser will consider such change in its determination of whether to hold the
security. To the extent the ratings given by Moody's Investors Service, Inc. or
Standard & Poor's Corporation may change as a result of changes in such
organizations or their rating systems, the Adviser will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies set forth in the Prospectus.
PERFORMANCE INFORMATION
Any current "yield" quotation of the Fund which is used in such a
manner as to be subject to the provisions of Rule 482(d) under the 1933 Act
consists of an annualized historical yield, carried at least to the nearest
hundredth of one percent, based on a specific seven calendar day period and is
calculated by dividing the net change in the value of an account having a
balance of one share at the beginning of the period by the value of the account
at the beginning of the period and multiplying the quotient by 365/7. For this
purpose the net change in account value would reflect the value of additional
shares purchased with dividends declared on the original share and dividends
declared on both the original share and any such additional shares, but would
not reflect any realized gains or losses from the sale of securities or any
unrealized appreciation or depreciation on portfolio securities. In addition,
any "effective yield" quotation of the Fund so used is calculated by compounding
the current yield quotation for such period by multiplying such quotation by
7/365, adding 1 to the product, raising the sum to a power equal to 365/7, and
subtracting 1 from the result.
The annualized yield of the Fund for the seven-day period ended
September 30, 1996 was 4.73% for Class C shares and 4.93% for Class Y shares.
The effective annualized yield of the Fund for such period was 4.84% for Class C
shares and 5.05% for Class Y shares.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) unmanaged indices so that investors may compare
the Fund's results with those of a group of unmanaged securities widely regarded
by investors as representative of the securities markets in general, (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies
(including IBC/Donoghue's Money Fund Reports), publications, or persons who rank
mutual funds on overall performance or other criteria; and (iii) the Consumer
Price Index (measure for inflation) to assess the real rate of return from an
investment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objective and policies, characteristics and
quality of the portfolios and the market conditions during the given time
period, and should not be considered as a representation of future results.
Investors who purchase and redeem shares of the Fund through a
Shareholder Servicing Agent may be charged one or more of the following types of
fees as agreed upon by the Shareholder Servicing Agent and the investor, with
respect to the customer services provided by the Shareholder Servicing Agent:
account fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets). Such fees will have the effect of reducing the yield and
effective yield of the Fund for those investors.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The principal occupations of the Trustees and executive officers of the
Trust for the past five years are listed below. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Trust. The address of each, unless otherwise indicated, is 3435 Stelzer
Road, Columbus, Ohio 43219-3035.
FREDERICK C. CHEN, Trustee
126 Butternut Hollow Road, Greenwich, Connecticut 06830 - Management
Consultant.
ALAN S. PARSOW*, Trustee
2222 Skyline Drive, Elkhorn, Nebraska 68022 - General Partner of Parsow
Partnership, Ltd. (investments).
LARRY M. ROBBINS, Trustee
Wharton Communication Program, University of Pennsylvania, 336
Steinberg Hall-Dietrich Hall, Philadelphia, Pennsylvania 19104 -
Director of the Wharton Communication Program and Adjunct Professor of
Management at the Wharton School of the University of Pennsylvania.
MICHAEL SEELY, Trustee
405 Lexington Avenue, Suite 909, New York, New York 10174 - President
of Investor Access Corporation (investor relations consulting firm).
GEORGE O. MARTINEZ*, President and Secretary
Senior Vice President and Director of Legal and Compliance Services,
BISYS Fund Services, Inc., March 1995 to present; Senior Vice
President, Emerald Asset Management, Inc., August 1995 to present; Vice
President and Associate General Counsel, Alliance Capital Management,
June 1989 to March 1995.
KAREN DOYLE*, Vice President
Manager of Client Services for BISYS Fund Services, Inc., October 1994
to present; Employee of the Bank of New York, 1979 to October 1994.
FRANK M. DEUTCHKI*, Vice President
Employee of BISYS Fund Services, Inc., April 1996 to present; Vice
President, Chase Global Funds Service, September 1995 to April 1996;
Vice President, Mutual Funds Service Company, 1989 to September 1995.
KEVIN MARTIN*, Vice President
Employee of BISYS Fund Services, Inc., February 1996 to present; Senior
Manager, Ernst & Young, 1984 to February 1996.
ADRIAN WATERS*, Treasurer
Employee of BISYS Fund Services (Ireland) LTD., May 1993 to present;
Manager, Price Waterhouse, 1989 to May 1993.
CATHERINE BRADY*, Assistant Treasurer
Employee of BISYS Fund Services (Ireland) LTD., March 1994 to present;
Supervisor, Price Waterhouse, 1990 to March 1994.
ALAINA METZ*, Assistant Secretary
Chief Administrator, Administrative and Regulatory Services, BISYS Fund
Services, Inc., June 1995 to present; Supervisor, Mutual Fund Legal
Department, Alliance Capital Management, May 1989 to June 1995.
Messrs. Martinez, Deutchki, Martin and Waters and Mss. Doyle, Brady and
Metz also are officers of certain other investment companies of which BISYS or
an affiliate is the administrator.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Estimated Total
Aggregate Accrued as Annual Compensation
Name of Compensation Part of Fund Benefits Upon From Fund Complex*
Trustee from Trust Expenses Retirement to Trustees
- ------- ------------ ------------ ------------- ------------------
<S> <C> <C> <C> <C>
Frederick C. Chen $1,950 none none $8,600
Alan S. Parsow $1,950 none none $8,600
Larry M. Robbins $1,950 none none $8,600
Michael Seely $1,950 none none $8,600
</TABLE>
- ----------
* The Fund Complex includes the Trust, Republic Advisor Funds Trust, and
Republic Portfolios.
The compensation table above reflects the fees received by the Trustees
for the year ended September 30, 1996. The Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust will receive an annual
retainer of $3,600 and a fee of $1,000 for each meeting of the Board of
Trustees or committee thereof attended, except that Mr. Robbins will receive an
annual retainer of $4,600 and a fee of $1,000 for each meeting attended.
As of January 28, 1997, the Trustees and officers of the Trust, as a
group, owned less than 1% of the outstanding shares of the Fund. As of the same
date, the following shareholders of record owned 5% or more of the outstanding
shares of the Fund (the Trust has no knowledge of the beneficial ownership of
such shares): Republic National Bank of New York, 10 East 40th Street, New York,
New York, 10016 -- 71.32%; Kinco & Co. c/o Securities Services, One Hanson
Place, Brooklyn, New York, 11243 -- 15.14%; and BHC Securities, Inc. attn. Cash
Sweeps Dept., Twelve Hundred, One Commerce Square, 2005 Market Street,
Philadelphia, Pennsylvania 19103-3212 -- 6.80%. Shareholders who own more than
25% of the outstanding voting securities of the Fund may be deemed to control
the Fund by virtue of such share ownership.
The Trust's Declaration of Trust provides that it will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their officers with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Trust. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable determination,
based upon a review of readily available facts, by vote of a majority of
disinterested Trustees or in a written opinion of independent counsel, that such
officers or Trustees have not engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties.
INVESTMENT ADVISER
Pursuant to an Investment Advisory Contract, Republic is responsible
for the investment management of the Fund's assets, including the responsibility
for making investment decisions and placing orders for the purchase and sale of
securities for the Fund directly with the issuers or with brokers or dealers
selected by Republic in its discretion, not including the Distributor. See
"Portfolio Transactions". Republic also furnishes to the Board of Trustees,
which has overall responsibility for the business and affairs of the Trust,
periodic reports on the investment performance of the Fund.
Republic is a wholly-owned subsidiary of Republic New York Corporation,
a registered bank holding company. No securities or instruments issued by
Republic New York Corporation or Republic will be purchased for the Fund.
Republic complies with applicable laws and regulations, including the
regulations and rulings of the U.S. Comptroller of the Currency relating to
fiduciary powers of national banks. These regulations provide, in general, that
assets managed by a national bank as fiduciary shall not be invested in stock or
obligations of, or property acquired from, the bank, its affiliates or their
directors, officers or employees or other persons with substantial connections
with the bank. The regulations further provide that fiduciary assets shall not
be sold or transferred, by loan or otherwise, to the bank or persons connected
with the bank as described above. Republic, in accordance with federal banking
laws, may not purchase for its own account securities of any investment company
the investment adviser of which it controls, extend credit to any such
investment company, or accept the securities of any such investment company as
collateral for a loan to purchase such securities. Moreover, Republic, its
officers and employees do not express any opinion with respect to the
advisability of any purchase of such securities.
The investment advisory services of Republic to the Fund are not
exclusive under the terms of the Investment Advisory Contract. Republic is free
to and does render investment advisory services to others.
The Investment Advisory Contract will remain in effect until October
14, 1997, and will continue in effect thereafter from year to year with respect
to the Fund, provided such continuance is approved annually (i) by the holders
of a majority of the outstanding voting securities of the Fund or by the Board
of Trustees, and (ii) by a majority of the Trustees who are not parties to such
Contract or "interested persons" (as defined in the 1940 Act) of any such party.
The Contract may be terminated with respect to the Fund without penalty by
either party on 60 days' written notice and will terminate automatically if
assigned. The Contract provides that neither the Adviser nor its personnel shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution of portfolio
transactions for the Fund, except for willful misfeasance, bad faith or gross
negligence or of reckless disregard of its or their obligations and duties under
the Contract.
For the year ended September 30, 1994, Republic Asset Management
Corporation received investment advisory fees of $30,201 net of fee waivers and
reimbursements. For the year ended September 30, 1995, Republic (formerly
Republic Asset Management Corporation) received investment advisory fees of
$110,960 net of fee waivers and reimbursement. For the year ended September 30,
1996, the Fund accrued investment advisory fees of $365,782 to Republic, of
which $182,891 was waived.
ADMINISTRATOR
The Administration Agreement will remain in effect until March 31,
1999, and automatically will continue in effect thereafter from year to year
unless terminated upon 60 days' written notice to BISYS. The Administration
Agreement will terminate automatically in the event of its assignment. The
Administration Agreement also provides that neither BISYS nor its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the administration or management of the Trust, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the Administration Agreement.
For the year ended September 30, 1994, the Fund accrued administration
fees of $180,875, all of which was waived, and was reimbursed $54,090 by its
former administrator. For the year ended September 30, 1995, the Fund accrued
administration fees of $221,919, of which $104,924 was waived by its former
administrator. For the year ended September 30, 1996, the Fund accrued
administration fees equal to $365,782, of which $148,783 was waived.
DISTRIBUTION PLAN - CLASS C SHARES ONLY
A Distribution Plan has been adopted by the Trust (the "Distribution
Plan") with respect to Class C shares only, and provides that it may not be
amended to increase materially the costs which Class C shares may bear pursuant
to the Distribution Plan without approval by shareholders of Class C shares, and
that any material amendments of the Distribution Plan must be approved by the
Board of Trustees, and by the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any related agreement
("Qualified Trustees"), by vote cast in person at a meeting called for the
purpose of considering such amendments. The selection and nomination of the
Trustees who are not "interested persons" of the Trust (the "Independent
Trustees") has been committed to the discretion of the Independent Trustees. The
Distribution Plan has been approved, and is subject to annual approval, by the
Board of Trustees and by the Qualified Trustees, by vote cast in person at a
meeting called for the purpose of voting on the Distribution Plan. In adopting
the Distribution Plan, the Trustees considered alternative methods to distribute
the Class C shares and to reduce Class C shares'expense ratio and concluded that
there was a reasonable likelihood that the Distribution Plan will benefit that
class and its shareholders. The Distribution Plan is terminable with respect to
Class C shares at any time by a vote of a majority of the Qualified Trustees or
by vote of the holders of a majority of Class C shares.
Prior to the adoption by the Trustees of a multiple class structure,
effective January 15, 1996, a predecessor distribution plan was in effect with
respect to all shares of the Fund. Pursuant to the predecessor and current
distribution plans, during the fiscal year ended September 30, 1996, the Fund
spent a total of $22,415 on the following pursuant to the Distribution Plan:
printing and mailing of prospectuses and annual reports to other than current
shareholders, $20,710; and other marketing expenses, $1,705. Total expenditures
pursuant to the distribution plans as a percentage of average daily net assets
during the same period were 0.012%.
ADMINISTRATIVE SERVICES PLAN
An Administrative Services Plan has been adopted by the Trust with
respect to Class C shares and Class Y shares, and continues in effect
indefinitely if such continuance is specifically approved at least annually by a
vote of both a majority of the Trustees and a majority of the Trustees who are
not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of the Administrative Services Plan or in
any agreement related to such Plan ("Qualified Trustees"). The Administrative
Services Plan may be terminated at any time by a vote of a majority of the
Qualified Trustees or with respect to Class C shares or Class Y shares by a
majority vote of shareholders of that class. The Administrative Services Plan
may not be amended to increase materially the amount of permitted expenses
thereunder with respect to Class C shares or Class Y shares without the approval
of a majority of shareholders of that class, and may not be materially amended
in any case without a vote of the majority of both the Trustees and the
Qualified Trustees.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into a shareholder servicing agreement with each
Shareholder Servicing Agent. For additional information, including a description
of the fees paid to Shareholder Servicing Agents from assets attributable to the
Fund's Class C shares, see "Management of the Trust - Shareholder Servicing
Agents" in the Prospectus.
TRANSFER AGENT AND CUSTODIAN
The Board of Trustees of the Trust has also approved a Custodian
Agreement and a Transfer Agency Agreement between the Trust and Investors Bank &
Trust Company ("IBT") pursuant to which IBT will provide custodial, fund
accounting, transfer agency, dividend disbursing and shareholder servicing
services to the Trust and the Fund. The principal business address of IBT is 89
South Street, Boston, Massachusetts 02111.
EXPENSES
Except for the expenses paid by the Adviser and the Distributor, the
Fund bears all costs of its operations. Expenses attributable to a class ("Class
Expenses") shall be allocated to that class only. Class Expenses with respect to
Class C shares must include payments made pursuant to the Distribution Plan and
the Administrative Services Plan. In the event a particular expense is not
reasonably allocable by class or to a particular class, it shall be treated as a
Fund expense or a Trust expense. Trust expenses directly related to the Fund are
charged to the Fund; other expenses are allocated proportionally among all the
portfolios of the Trust in relation to the net asset value of the portfolios.
DETERMINATION OF NET ASSET VALUE
The net asset value of each share of each class of the Fund is
determined on each day on which the New York Stock Exchange is open for trading.
As of the date of this Statement of Additional Information, the New York Stock
Exchange is open every weekday except for the days on which the following
holidays are observed: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
As discussed under the caption "Dividends and Distributions" in the
Prospectus, the Trust uses the amortized cost method to determine the value of
the Fund's portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The
amortized cost method involves valuing an obligation at its cost and amortizing
any discount or premium over the period until maturity, regardless of the impact
of fluctuating interest rates on the market value of the security. During these
periods the yield to a shareholder may differ somewhat from that which could be
obtained from a similar fund which utilizes a method of valuation based upon
market prices. Thus, during periods of declining interest rates, if the use of
the amortized cost method resulted in a lower value of the Fund's portfolio on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values, and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Fund's dollar-weighted average portfolio maturity of
90 days or less must be maintained, and only securities having remaining
maturities of 397 days or less which are determined by the Trust's Board of
Trustees to be of high quality with minimal credit risks may be purchased.
Pursuant to Rule 2a-7, the Board has established procedures designed to
stabilize, to the extent reasonably possible, the price per share of the Fund,
as computed for the purpose of sales and redemptions, at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Board of Trustees, at
such intervals as it may deem appropriate, to determine whether the net asset
value of the Fund calculated by using available market quotations deviates from
the $1.00 per share valuation based on amortized cost. The extent of any
deviation is examined by the Board of Trustees. If such deviation exceeds
$0.003, the Board promptly considers what action, if any, will be initiated. In
the event the Board determines that a deviation exists which may result in
material dilution or other unfair results to investors or existing shareholders,
the Board will take such corrective action as it regards as necessary and
appropriate, which may include selling portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or establishing a net asset value per share by using
available market quotations.
TAXATION
Each year, the Trust intends to qualify the Fund and elect that the
Fund be treated as a separate "regulated investment company" under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). To so qualify,
the Fund must distribute to shareholders at least 90% of its investment company
taxable income (which includes, among other items, interest, dividends and the
excess of net short-term capital gains over net long-term capital losses) and
must meet certain diversification of assets, source of income, and other
requirements of the Code. By so doing, the Fund will not be subject to federal
income tax on that portion of its net investment income and net realized capital
gains (the excess of any net long-term capital gains over net short-term capital
losses), if any, distributed to shareholders. If the Fund does not meet all of
these Code requirements, it will be taxed as an ordinary corporation.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, the Fund must distribute for each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income
(excluding any capital gains or losses) for the calendar year, (2) at least 98%
of the excess of its capital gains over capital losses for the 12-month period
ending October 31 of the calendar year, and (3) all such ordinary income and
capital gains for previous years that were not distributed during such years. A
distribution will be treated as paid during the calendar year if it is declared
by the Fund in October, November or December of that year with a record date in
such month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. It is not expected that such
distributions will be eligible for the dividends-received deduction for
corporations. Distributions of net capital gains, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time the
Fund shares have been held by a shareholder. Long-term capital gains, including
distributions of net capital gains, are currently subject to a maximum federal
tax rate of 28% which is less than the maximum rate imposed on other types of
taxable income. All distributions are taxable to the shareholder whether
reinvested in additional shares or received in cash. Shareholders receiving
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share received equal to the net asset value
of a share of the Fund on the reinvestment date. Shareholders will be notified
annually as to the federal tax status of distributions.
Upon disposition (by redemption, repurchase, sale or exchange) of Fund
shares, a shareholder may realize a taxable gain or loss depending upon his
basis in his shares. Realization of such a gain or loss is considered unlikely
because of the Fund's policy to attempt to maintain a $1.00 per share net asset
value. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands. Such gain or loss will generally
be long-term or short-term depending upon the shareholder's holding period for
the shares. However, a loss realized by a shareholder on the disposition of Fund
shares with respect to which long-term capital gain dividends have been received
will, to the extent of such long-term capital gain dividends, be treated as
long-term capital loss if such shares have been held by the shareholder for six
months or less. Further, a loss realized on a disposition will be disallowed to
the extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
The Trust will be required to report to the Internal Revenue Service
(the "IRS") all distributions by the Fund except in the case of certain exempt
shareholders. All such distributions generally will be subject to withholding of
federal income tax at a rate of 31% ("backup withholding") in the case of
nonexempt shareholders if (1) the shareholder fails to furnish the Fund with and
to certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the Fund that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions whether
reinvested in additional shares or taken in cash, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against the
shareholder's federal income tax liability. Investors may wish to consult their
tax advisors about the applicability of the backup withholding provisions.
The Trust is organized as a Massachusetts business trust and, under
current law, is not liable for any income or franchise tax in the Commonwealth
of Massachusetts as long as each series of the Trust (including the Fund)
qualifies as a regulated investment company under the Code.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). Distributions by the Fund also
may be subject to state and local taxes, and their treatment under state and
local income tax laws may differ from the federal income tax treatment.
Shareholders should consult their tax advisors with respect to particular
questions of federal, state and local taxation. Shareholders who are not U.S.
persons should consult their tax advisors regarding U.S. and foreign tax
consequences of ownership of shares of the Fund including the likelihood that
distributions to them would be subject to withholding of U.S. tax at a rate of
30% (or at a lower rate under a tax treaty).
OTHER INFORMATION
CAPITALIZATION
The Trust is a Massachusetts business trust established under a
Declaration of Trust dated April 22, 1987, as a successor to two
previously-existing Massachusetts business trusts, FundTrust Tax-Free Trust
(organized on July 30, 1986) and FundVest (organized on July 17, 1984, and since
renamed FundSource). Prior to October 3, 1994 the name of the Trust was
"FundTrust".
The capitalization of the Trust consists solely of an unlimited number
of shares of beneficial interest with a par value of $0.001 each. The Board of
Trustees may establish additional series (with different investment objectives
and fundamental policies) and classes of shares within each series at any time
in the future. Establishment and offering of additional classes or series will
not alter the rights of the Fund's shareholders. When issued, shares are fully
paid, nonassessable, redeemable and freely transferable. Shares do not have
preemptive rights or subscription rights. In liquidation of the Fund, each
shareholder is entitled to receive his pro rata share of the net assets of the
Fund.
VOTING RIGHTS
Under the Declaration of Trust, the Trust is not required to hold
annual meetings of Fund shareholders to elect Trustees or for other purposes. It
is not anticipated that the Trust will hold shareholders' meetings unless
required by law or the Declaration of Trust. In this regard, the Trust will be
required to hold a meeting to elect Trustees to fill any existing vacancies on
the Board if, at any time, fewer than a majority of the Trustees have been
elected by the shareholders of the Trust. In addition, the Declaration of Trust
provides that the holders of not less than two-thirds of the outstanding shares
of the Trust may remove persons serving as Trustee either by declaration in
writing or at a meeting called for such purpose. The Trustees are required to
call a meeting for the purpose of considering the removal of persons serving as
Trustee if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Trust.
The Trust's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
INDEPENDENT AUDITORS
The Board of Trustees has appointed KPMG Peat Marwick LLP as
independent accountants of the Funds of the Trust. KPMG Peat Marwick LLP will
audit the Trust's annual financial statements, prepare the Trust's income tax
returns, and assist in the filings with the Securities and Exchange Commission.
KPMG Peat Marwick LLP's address is 99 High Street, Boston, Massachusetts 02110.
COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C. 20005,
passes upon certain legal matters in connection with the shares of the Fund
offered by the Trust, and also acts as counsel to the Trust.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not
contain all the information included in the Trust's registration statement filed
with the Securities and Exchange Commission under the 1933 Act with respect to
shares of the Fund, certain portions of which have been omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. The
registration statement, including the exhibits filed therewith, may be examined
at the office of the Securities and Exchange Commission in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of
any contract or other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
which was filed as an exhibit to the registration statement, each such statement
being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Fund's audited financial statements dated September 30, 1996 are
hereby incorporated herein by reference from the Annual Report of the Fund dated
September 30, 1996 as filed with the Securities and Exchange Commission. A copy
of such report will be provided without charge to each person receiving this
Statement of Additional Information.
<PAGE>
PART C
Item 24. Financial Statements.
(a)(i) Included in Part A of this Post-Effective Amendment:
FINANCIAL HIGHLIGHTS -- Republic U.S. Government Money Market Fund; Republic New
York Tax Free Money Market Fund.
(ii) Incorporated by reference into Part B of the Registration
Statement:
REPUBLIC U.S. GOVERNMENT MONEY MARKET FUND
Statement of Net Assets, September 30, 1996
Statement of Operations for the year ended September 30, 1996
Statement of Changes in Net Assets for the years ended September 30, 1995 and
September 30, 1996
Financial Highlights
Notes to Financial Statements, September 30, 1996
Report of Independent Auditors
REPUBLIC NEW YORK TAX FREE MONEY MARKET FUND
Statement of Net Assets, October 31, 1996
Statement of Operations for the year ended October 31, 1996
Statement of Changes in Net Assets for the period November 17, 1994
(commencement of operations) to October 31, 1995 and the year ended
October 31, 1996
Financial Highlights
Notes to Financial Statements, October 31, 1996
Report of Independent Auditors
(b) Exhibits
1. Amended and Restated Declaration of Trust, with establishments and
designations of series and further amendments. 1
1(a). Establishment and designation of series for Republic Taxable Bond Fund,
Republic Overseas Equity Fund and Republic Opportunity Fund. 7
2. By-Laws.1
4. Specimen certificate of shares of beneficial interest of Republic Funds. 1
5(a). Master Investment Advisory Contract, with supplements regarding Republic
New York Tax Free Bond Fund, Republic New York Tax Free Money Market Fund and
Republic Equity Fund. 1
5(b). Amended and Restated Second Master Investment Advisory Contract, with
supplement regarding Republic U.S. Government Money Market Fund. 1
5(c). Subadvisory Agreement between Alliance Capital Management L.P. and
Republic Mational Bank of New York regarding Republic Equity Fund.
5(d). Subadvisory Agreement between Brinson Partners, Inc. and Republic National
Bank of New York regarding Republic Equity Fund.
6(a). Distribution Agreement regarding Republic U.S.
Government Money Market Fund, Republic New York Tax Free Money Market Fund,
Republic New York Tax Free Bond Fund, Republic Equity Fund, Republic Taxable
Bond Fund, Republic Overseas Equity Fund and Republic Opportunity Fund.
8(a). Custodian Agreement. 1
8(b). Transfer Agency and Service Agreement. 1
9(a). Form of Service Agreement. 1
9(b). Administrative Agreement regarding Republic U.S. Government Money Market
Fund, Republic New York Tax Free Money Market Fund, Republic New York Tax Free
Bond Fund, Republic Equity Fund, Republic Bond Fund, Republic Overseas Equity
Fund and Republic Opportunity Fund.
9(e). Amended and Restated Administrative Services Plan. 6
10. Opinion of Counsel. 2
11. Consents of Independent Auditors.
13(a). Initial Investor Representation letter regarding Republic International
Equity Fund and Republic Fixed Income Fund. 3
13(b). Initial Investor Representation letter regarding Republic Equity Fund. 2
15(a). Amended and Restated Master Distribution Plan, with supplements regarding
Republic U.S. Government Money Market Fund, Republic New York Tax Free Money
Market Fund, Republic New York Tax Free Bond Fund, Republic Equity Fund,
Republic Bond Fund, Republic Overseas Equity Fund and Republic
Opportunity Fund. 6
16. Schedule of Performance Computations. 1
17. Financial Data Schedules.
18. Multiple Class Plan. 5
19. Powers of Attorney of Trustees and Officers of Registrant and Republic
Portfolios. 8
- -----------------
1 Incorporated herein by reference from post-effective amendment No. 35 to
the registration statement on Form N-1A of the Registrant (File no. 33-7647)
(the "Registration Statement") as filed with the Securities and Exchange
Commission (the "SEC") on January 23, 1996.
2 Incorporated herein by reference from post-effective amendment No. 33 to
the Registration Statement as filed with the SEC on June 27, 1995.
3 Incorporated herein by reference from post-effective amendment No. 29 to
the Registration Statement as filed with the SEC on December 20, 1994.
4 Incorporated herein by reference from Exhibit 18 to post-effective
amendment No. 28 to the Registration Statement as filed with the SEC on December
2, 1994.
5 Incorporated herein by reference from post-effective amendment No. 36 to
the Registration Statement as filed with the SEC on March 1, 1996.
6 Incorporated herein by reference from post-effective amendment No. 37 to
the Registration Statement as filed with the SEC on April 4, 1996.
7 Incorporated herein by reference from post-effective amendment No. 39 to
the Registration Statement as filed with the SEC on June 17, 1996.
8 Incorporated herein by reference from post-effective amendment No. 40 to
the Registration Statement as filed with the SEC on November 27, 1996.
Item 25. Persons Controlled by or under Common Control with
Registrant.
Not applicable.
Item 26. Number of Holders of Securities
As of October 31, 1996, the number of shareholders of each Fund was as
follows:
Republic U.S. Government Money Market Fund: 789
Republic New York Tax Free Money Market Fund: 182
Republic New York Tax Free Bond Fund: 17
Republic Bond Fund: 2
Republic Equity Fund: 34
Republic Overseas Equity Fund: 3
Republic Opportunity Fund: 5
Item 27. Indemnification
Reference is hereby made to Article IV of the Registrant's Declaration
of Trust. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees or officers of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Investment Company Act of 1940 and, therefore, is unenforceable.
If a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by trustees or officers
of the Registrant in connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees or officers in connection with the
shares being registered, the Registrant will, unless in the opinion of its
Counsel, the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issues.
Item 28. Business and Other Connections of Investment Advisers
(a) Republic National Bank of New York ("Republic") acts as investment
adviser to Republic Funds and Republic Advisor Funds Trust, and is a subsidiary
of Republic New York Corporation ("RNYC"), 452 Fifth Avenue, New York, New York
10018, a registered bank holding company. Republic's directors and principal
executive officers, and their business and other connections for at least the
past two years, are as follows (unless otherwise noted by footnote, the address
of all directors and officers is 452 Fifth Avenue, New York, New York 10018):
NAME -- BUSINESS AND OTHER CONNECTIONS
KURT ANDERSEN
Vice Chairman and a Director of Republic New York Corporation ("RNYC") and
Republic Bank.
ANTHONY G. CHAPPELL
Executive Vice President and Director of Republic Bank.
CYRIL S. DWEK
Vice Chairman of the Board and Director of Republic Bank and RNYC.
ERNEST GINSBERG
Vice Chairman of the Board and Director of RNYC and Republic Bank.
NATHAN HASSON
Vice Chairman of the Board, Director and Treasurer of Republic Bank and
Vice Chairman of the Board and Director of RNYC.
JEFFREY C. KEIL
President and Director of RNYC and Vice Chairman of the Board and
Director of Republic Bank.
PETER KIMMELMAN
A private investor and a Director of RNYC and Republic Bank.(1)
PAUL L. LEE
Executive Vice President and Director of Republic Bank;
Executive Vice President and General Counsel of RNYC.
LEONARD LIEBERMAN
Director of various companies, including Consolidated Cigar Corporation and
Outlet Communications, Inc.; Director of RNYC and Republic Bank.
WILLIAM C. MACMILLEN, JR.
President, William C. MacMillen & Co., Inc. (Investment Banking) and
a Director of RNYC and Republic Bank.(2)
PETER J. MANSBACH
Director and Chairman of the Executive Committee of Republic Bank and RNYC.
MARTIN F. MERTZ
Director of RNYC and Republic Bank.
CHARLES G. MEYER, JR.
President of Cord Meyer Development Co. and Director of Republic Bank.(3)
JAMES L. MORICE
Partner in the management consulting and executive search firm of
Mirtz Morice, Inc. and a Director of RNYC and Republic Bank.(4)
E. DANIEL MORRIS
President, Corsair Capital Corporation and Director of RNYC.
DR. JANET L. NORWOOD
Senior Fellow at The Urban Institute (research organization); Director of RNYC
and Republic Bank.
JOHN A. PANCETTI
Director of RNYC and Republic Bank.
VITO S. PORTERA
Vice Chairman of the Board, and a Director of RNYC and Republic Bank. Also,
Chairman of the Board of Republic International Bank of New York, the Florida
Edge Act subsidiary of Republic Bank.
WILLIAM P. ROGERS
Partner, Rogers & Wells and Director of RNYC and Republic Bank.
SILAS SAAL
Vice Chairman and Director of Republic Bank and RNYC; Chief Trading Officer of
Republic Bank.
DOV C. SCHLEIN
President and Chief Operating Officer of Republic Bank, and a Director of RNYC
and Republic Bank.
RICHARD C. SPIKERMAN
Executive Vice President and Director of Republic Bank.
JOHN TAMBERLANE
Director of Republic Bank; President of the Consumer Bank Division of Republic
Bank.
WALTER H. WEINER
Chairman of the Board, Director and Chief Executive Officer of Republic Bank
and RNYC.
GEORGE T. WENDLER
Vice Chairman and Director of Republic Bank; Senior Credit Officer of Republic
Bank.
PETER WHITE
Senior Consultant and a Director of RNYC and Republic Bank.
- -----------------------------------
(1) 1270 Avenue of the Americas, Suite 3010, New York 10020.
(2) 254 Victoria Place, Lawrence, New York 11559.
(3) 111-15 Queens Boulevard, 2nd Floor, Forest Hills, New York,
New York 11375.
(4) One Dock Street, Stamford, CT 06902
ITEM 29. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services (the "Sponsor") and its affiliates serve as
distributor and administrator for other registered investment companies.
(b) The information required by this Item 29 with respect to each director
or officer of BISYS is hereby incorporated herein by reference from Form BD as
filed by the Sponsor pursuant to the Securities Exchange Act of 1934 (File No.
8-32480).
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The account books and other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices of: Republic National
Bank of New York, 452 Fifth Avenue, New York, New York 10018; BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219-3035; and Investors Bank &
Trust Company, N.A., 89 South Street, Boston, Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
(b) The Registrant undertakes to comply with Section 16(c) of the 1940
Act as though such provisions of the Act were applicable to the Registrant
except that the request referred to in the third full paragraph thereof may only
be made by shareholders who hold in the aggregate at least 10% of the
outstanding shares of the Registrant, regardless of the net asset value or
values of shares held by such requesting shareholders.
(c) The Registrant undertakes to file a post-effective amendment, using
financials which need not be certified, within four to six months following the
latter of the effective date of Post-Effective Amendment No. 39 or the date
that shares of the Republic Bond Fund, Republic Overseas Equity Fund and
Republic Opportunity Fund were publicly offered. The financial statements
included in such amendment will be as of and for the time period ended on a date
reasonably close or as soon as practicable to the date of the filing of the
amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Republic Funds 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 has duly caused this
registration statement on Form N-1A (File No. 33-7647) (the "Registration
Statement") to be signed on its behalf by the undersigned, thereto duly
authorized in Ireland on the 31st day of January, 1997.
REPUBLIC FUNDS
By /S/ GEORGE MARTINEZ**
---------------------------
George Martinez
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on January 31, 1997.
/S/ GEORGE MARTINEZ**
---------------------------
George Martinez
President
/S/ ADRIAN WATERS
---------------------------
Adrian Waters
Treasurer and Principal Accounting
and Financial Officer
ALAN S. PARSOW*
- ------------------------------
Alan S. Parsow
Trustee
LARRY M. ROBBINS*
- ------------------------------
Larry M. Robbins
Trustee
MICHAEL SEELY*
- ------------------------------
Michael Seely
Trustee
FREDERICK C. CHEN*
- ------------------------------
Frederick C. Chen
Trustee
*By /S/ DAVID J. HARRIS
-------------------------
David J. Harris,
as attorney-in-fact pursuant to a power of attorney filed as
Exhibit 19 to post-effective amendment No. 40.
**By /S/ ADRIAN WATERS
-------------------------
Adrian Waters,
as attorney-in-fact pursuant to a power of attorney filed as
Exhibit 19 to post-effective amendment No. 40.
<PAGE>
SIGNATURES
Republic Portfolios (the "Portfolio Trust") has duly caused this amendment
to the registration statement on Form N-1A (File No. 33-7647) ("Registration
Statement") of Republic Funds (the "Trust") to be signed on its behalf by the
undersigned, thereto duly authorized in Ireland on the 31st day of January,
1997.
REPUBLIC PORTFOLIOS
By GEORGE MARTINEZ**
---------------------------
George Martinez
President
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on January 31, 1997.
GEORGE MARTINEZ**
--------------------------
George Martinez
President
/S/ ADRIAN WATERS
--------------------------
Adrian Waters
Treasurer and Principal Accounting
and Financial Officer
ALAN S. PARSOW*
- ------------------------------
Alan S. Parsow
Trustee of the Portfolio Trust
LARRY M. ROBBINS*
- ------------------------------
Larry M. Robbins
Trustee of the Portfolio Trust
MICHAEL SEELY*
- ------------------------------
Michael Seely
Trustee of the Portfolio Trust
FREDERICK C. CHEN*
- ------------------------------
Frederick C. Chen
Trustee of the Portfolio Trust
*By /S/ DAVID J. HARRIS
-------------------------
David J. Harris,
as attorney-in-fact pursuant to a power of attorney filed as
Exhibit 19 to post-effective amendment No. 40.
** By /S/ ADRIAN WATERS
----------------------
Adrian Waters
as attorney-in-fact pursuant to a power of attorney filed as
Exhibit 19 to post-effective amendment No. 40.
<PAGE>
EXHIBIT LIST
Exhibit No. Exhibit Name
5(c) Subadvisory Agreement between Alliance
Capital Management L.P. and Republic
National Bank of New York regarding
Republic Equity Fund
5(d) Subadvisory Agreement between Brinson
Partners, Inc. and Republic National
Bank of New York regarding Republic
Equity Fund
6(a) Distribution Agreement regarding
Republic U.S. Government Money Market
Fund, Republic New York Tax Free Money
Market Fund, Republic New York Tax Free
Bond Fund, Republic Equity Fund,
Republic Bond Fund, Republic Overseas
Equity Fund and Republic Opportunity
Fund
9(b) Administration Agreement regarding
Republic U.S. Government Money Market
Fund, Republic New York Tax Free Money
Market Fund, Republic New York Tax Free
Bond Fund, Republic Equity Fund,
Republic Bond Fund, Republic Overseas
Equity Fund and Republic Opportunity
Fund
11 Consents of Independent Auditors
17 (filed as 27) Financial Data Schedules
<PAGE>
EXHIBIT 5(c)
REPUBLIC FUNDS
REPUBLIC EQUITY FUND
SUBADVISORY AGREEMENT
AGREEMENT, effective commencing on January 21, 1997, between Alliance
Capital Management L.P. (the "Subadviser") and Republic National Bank of New
York (the "Manager").
WHEREAS, the Manager has been retained by Republic Funds, a Massachusetts
business trust (the "Trust") registered as an open-end diversified investment
management company under the Investment Company Act of 1940, as amended (the
"1940 Act"), to provide investment advisory services to Republic Equity Fund
(the "Fund") pursuant to an Investment Management Contract and Supplement
thereto dated April 7, 1995 (the "Management Agreement");
WHEREAS, the Trust's Board of Trustees, including a majority of the
trustees who are not "interested persons," as defined in the 1940 Act, and the
Fund's stockholders have approved the appointment of the Subadviser to perform
certain investment advisory services for the Fund pursuant to this Subadvisory
Agreement and the Subadviser is willing to perform such services for the Fund;
WHEREAS, the Subadviser is registered or exempt from registration as an
investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Manager and the Subadviser as
follows:
1. Appointment. The Manager hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Subadvisory Agreement. The Subadviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the Board of
Trustees of the Trust and the Manager, the Subadviser will, in coordination with
the Manager, (a) provide a program of continuous investment management for the
portion of the Fund allocated by the Manager to the Subadviser (the
"Subadviser's Portfolio") for management in accordance with the Fund's
investment objectives, policies and limitations as stated in the Fund's
Prospectus and Statement of Additional Information included as part of the
Trust's Registration Statement on behalf of the Fund filed with the Securities
and Exchange Commission, as they may be amended from time to time, copies of
which shall be provided to the Subadviser by the Manager; (b) make investment
decisions for the Subadviser's Portfolio; and (c) place orders to purchase and
sell securities for the Subadviser's Portfolio. In particular, the Subadviser
will be responsible for the market timing of purchases and sales and for all
yield enhancement strategies used in managing the Subadviser's Portfolio.
In performing its investment management services to the Fund hereunder,
the Subadviser will provide the Fund with ongoing investment guidance and policy
direction, including oral and written research, analysis, advice, statistical
and economic data and judgments regarding individual investments, general
economic conditions and trends and long-range investment policy, with respect,
in all cases, to the Subadviser's Portfolio. The Subadviser will determine the
securities, instruments, repurchase agreements, options and other investments
and techniques that the Subadviser's Portfolio will purchase, sell, enter into
or use, and will provide an ongoing evaluation of the Subadviser's Portfolio.
The Subadviser will determine what portion of the Subadviser's Portfolio shall
be invested in securities and other assets.
The Subadviser further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder, the
Advisers Act, the Internal Revenue Code of 1986, as amended (the "Code"), and
all other applicable federal and state laws and regulations, and with any
applicable procedures adopted by the Trustees;
(b) manage the Subadviser's Portfolio so that it will qualify, and
continue to qualify (except where extraordinary circumstances dictate
otherwise), as a regulated investment company under Subchapter M of the Code and
regulations issued thereunder, and conduct periodically such Subchapter M
compliance reviews as the Manager and Subadviser determine appropriate;
(c) place orders pursuant to its investment determinations for the
Subadviser's Portfolio directly with the issuer, or with any broker or dealer,
in accordance with applicable policies expressed in the Fund's Prospectus and/or
Statement of Additional Information and in accordance with applicable legal
requirements;
(d) furnish to the Trust whatever statistical information the Trust may
reasonably request with respect to the Subadviser's Portfolio's assets or
contemplated investments. In addition, the Subadviser will keep the Trust and
the Trustees informed of developments materially affecting the Subadviser's
Portfolio and shall, on the Subadviser's own initiative, furnish to the Trust
from time to time whatever information the Subadviser believes appropriate for
this purpose;
(e) provide the Manager and the Board of Trustees of the Trust with a copy
of a written code of ethics complying with the requirements of Rule 17j-1 under
the 1940 Act, together with evidence of its adoption. Within fifteen days of the
end of the calendar quarter of each year that this Subadvisory Agreement is in
effect, the president or a vice-president of the Subadviser shall certify to the
Manager that the Subadviser has complied with the requirements of Rule 17j-1
during the previous year and that there has been no violation of the
Subadviser's code of ethics or, if such a violation has occurred, that
appropriate action was taken in response to such violation. Upon the written
request of the Manager, the Subadviser shall permit the Manager, its employees
or its agents to examine the reports required to be made to the Subadviser by
Rule 17j-l(c)(1) and all other records relevant to the Subadviser's code of
ethics;
(f) provide the Manager with a copy of its Form ADV as most recently filed
with the Securities and Exchange Commission ("SEC") and promptly will furnish a
copy of all amendments to the Manager at least annually;
(g) notify the Manager of any change of control of the Subadviser and any
changes in the key personnel or general partners of the Subadviser, in each case
prior to or promptly after such change;
(h) make available to the Manager and the Trust, promptly upon their
request, such copies of its investment records and ledgers with respect to the
Subadviser's Portfolio as may be required to assist the Manager and the Trust in
their compliance with applicable laws and regulations. The Subadviser will
furnish the Trustees with such periodic and special reports regarding the
Subadviser's Portfolio as they may reasonably request;
(i) immediately notify the Manager and the Trust in the event that the
Subadviser or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory Agreement; or (2) becomes aware
that it is the subject of an administrative proceeding or enforcement action by
the SEC or other regulatory authority. The Subadviser further agrees to notify
the Trust and the Manager immediately of any material fact known to the
Subadviser respecting or relating to the Subadviser that is not contained in the
Trust's Registration Statement with respect to the Fund, or any amendment or
supplement thereto, but that is required to be disclosed therein, and of any
statement contained therein that becomes untrue in any material respect.
3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this Section 3, the Subadviser shall pay the compensation and
expenses of all its directors, partners, officers and employees, if any, who
serve as officers and executive employees of the Trust (including the Fund's
share of payroll taxes), and the Subadviser shall make available, without
expense to the Fund, the service of its directors, partners, officers and
employees, if any, who may be duly elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law.
The Subadviser shall not be required to pay any expenses of the Fund other
than those specifically allocated to the Subadviser in this Section 3. In
particular, but without limiting the generality of the foregoing, the Subadviser
shall not be responsible for any of the following expenses of the Fund:
organization and offering expenses of the Fund (including out-of- pocket
expenses); fees payable to the Manager and to any other Fund advisers or
consultants; legal expenses; auditing and accounting expenses; interest
expenses; telephone, telex, facsimile, postage and other communications
expenses; taxes and governmental fees; dues and expenses incurred by or with
respect to the Fund in connection with membership in investment company trade
organizations; cost of insurance relating to fidelity coverage for the Trust's
officers and employees; fees and expenses of any custodian, subcustodian,
transfer agent, registrar, or dividend disbursing agent of the Fund; payments
for maintaining the Fund's financial books and records and calculating the daily
net asset value of the Fund's shares; other payments for portfolio pricing or
valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and other expenses
in connection with the issuance, offering, distribution or sale of securities
issued by the Fund; expenses relating to investor and public relations; expenses
of registering and qualifying shares of the Fund for sale; freight, insurance
and other charges in connection with the shipment of the portfolio securities of
the Fund; brokerage commissions or other costs of acquiring or disposing of any
portfolio securities or other assets of the Fund, or of entering into other
transactions or engaging in any investment practices with respect to the Fund;
expenses of printing and distributing prospectuses, Statements of Additional
Information, reports, notices and dividends to stockholders; costs of
stationery; litigation expenses; costs of stockholders' and other meetings; the
compensation and all expenses (specifically including travel expenses relating
to the Fund's business) of officers, trustees and employees of the Trust who are
not interested persons of the Subadviser; and travel expenses (or an appropriate
portion thereof) of officers or trustees of the Trust who are officers,
directors or employees of the Subadviser to the extent that such expenses relate
to attendance at meetings of the Board of Trustees of the Trust or any
committees thereof or advisers thereto.
4. Compensation. As compensation for the services provided and expenses
assumed by the Subadviser under this Agreement, the Trust will pay the
Subadviser within 21 calendar days after the end of each calendar quarter an
advisory fee computed daily on the basis of the Subadviser's Portfolio's average
daily net assets allocated to the Subadviser at an annual rate of 0.325% of net
assets up to $50 million, 0.25% of net assets over $50 million up to $100
million, 0.20% of net assets over $100 million up to $200 million, and 0.15% of
net assets over $200 million. The "average daily net assets" of the Subadviser's
Portfolio shall mean the average of the values placed on the Subadviser's
Portfolio's net assets as of 4:00 p.m. (New York time) on each day on which the
net asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its
net assets as of some other time on each business day, as of such other time.
The value of net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Trust's Declaration of Trust and Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of regular trading on
the New York Stock Exchange, or as of such other time as the value of the net
assets of the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any quarter end when the Subadviser's
compensation is payable pursuant to this Section, then the Subadviser's
compensation payable at the end of such month shall be computed on the basis of
the value of the net assets of the Fund as last determined (whether during or
prior to such quarter). If the Fund determines the value of the net assets of
its portfolio more than once on any day, then the last such determination
thereof on that day shall be deemed to be the sole determination thereof on that
day for the purposes of this Section 4. In the event that this Agreement is
terminated pursuant to Section 10 hereof, the Subadviser shall be entitled to a
pro rata portion of the fee under this Section 4 through and including the date
upon which the Agreement is terminated and the Subadviser ceases to provide
investment advisory services to the Fund hereunder.
5. Books and Records. The Subadviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Subadviser
also agrees that records it maintains and preserves pursuant to Rules 31a-1 and
Rule 31a-2 under the 1940 Act and otherwise in connection with its services
hereunder are the property of the Fund and will be surrendered promptly to the
Fund upon its request. The Subadviser further agrees that it will furnish to
regulatory authorities having the requisite authority any information or reports
in connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
6. Standard of Care and Limitation of Liability. The Subadviser shall
exercise its best judgment in rendering the services provided by it under this
Subadvisory Agreement. The Subadviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the holders
of the Fund's shares in connection with the matters to which this Subadvisory
Agreement relate, provided that nothing in this Subadvisory Agreement shall be
deemed to protect or purport to protect the Subadviser against any liability to
the Fund or to holders of the Fund's shares to which the Subadviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of the
Subadviser's reckless disregard of its obligations and duties under this
Subadvisory Agreement. As used in this Section 6, the term "Subadviser" shall
include any officers, directors, partners, employees or other affiliates of the
Subadviser performing services for the Fund.
7. Indemnification.
(a) The Subadviser hereby agrees to indemnify and hold harmless the
Manager from any controversies, claims, suits, losses, liabilities, judgments,
awards or settlements, and costs or expenses, including reasonable legal fees,
caused by, or in any way related to, the investment decisions rendered by the
Subadviser concerning the Subadviser's Portfolio in a manner inconsistent with
Section 6 hereof, any failure of the Subadviser to fulfill any of its other
obligations under this Subadvisory Agreement, any material misrepresentation, or
omission to disclose material facts, by the Subadviser to the Manager or any
shareholder of the Fund, or any violation of applicable law by the Subadviser.
The Subadviser also agrees to indemnify and hold harmless the Manager with
respect to any losses incurred as the result of errors made by the Subadviser in
transmitting orders to any broker for execution.
(b) The Manager hereby agrees to indemnify and hold harmless the
Subadviser from any controversies, claims, suits, losses, liabilities,
judgments, awards or settlements, and costs or expenses, including reasonable
legal fees, caused by, or in any related to, its failure to fulfill any of its
obligations under this Subadvisory Agreement. The Manager also agrees to
indemnify and hold harmless the Subadviser with respect to any losses related to
the failure of any other subadviser to the Fund to perform its obligations to
the Fund in a manner consistent with the applicable subadvisory agreement
between the Manager and such other subadviser, provided that the Manager's
liability to the Subadviser shall be limited to the extent that the Manager is
indemnified by the other subadviser and the Manager uses all reasonable efforts
to obtain any indemnification that is available to the Manager from the other
subadviser.
(c) If any party seeks indemnification under this Agreement (an
"indemnified party"), it shall notify the other party (the "indemnifying party")
in writing of the assertion of any third party claim or action and shall deliver
all copies of materials received in connection with the matter to the
indemnifying party. The indemnifying party shall have the right to participate
at its own expense in the defense of any such claim or action with counsel of
its own choosing satisfactory to the indemnified party, and the indemnified
party shall cooperate fully with the indemnifying party in the defense or
settlement of any matter that is covered by paragraphs (a) or (b) above, subject
to reimbursement by the indemnifying party for expenses incurred by the
indemnified party in connection with the indemnifying party's participation in
the defense.
8. Services Not Exclusive. It is understood that the services of the
Subadviser are not exclusive, and that nothing in this Subadvisory Agreement
shall prevent the Subadviser from providing similar services to other
individuals, institutions or investment companies (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities, provided such other services and activities do
not, during the term of this Subadvisory Agreement, interfere in a material
manner with the Subadviser's ability to meet its obligations to the Trust and
the Fund hereunder. When the Subadviser recommends the purchase or sale of a
security for other investment companies and other clients, and at the same time
the Subadviser recommends the purchase or sale of the same security for the
Fund, the Subadviser may, but shall not be obligated to, aggregate the orders
for securities to be purchased or sold. It is understood that in light of its
fiduciary duty to the Fund, such transactions will be executed on a basis that
is fair and equitable to the Fund. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Subadviser nor any
of its directors, partners, officers or employees shall act as a principal or
agent or receive any commission.
9. Documentation. The Fund shall provide the Subadviser with the following
documents, as soon as they are available:
(a) the Trust's registration statement relating to the
Fund, and any amendments thereto;
(b) the Declaration of Trust and By-laws (and any
amendments thereto) of the Trust;
(c) resolutions of the Board of Trustees of the Trust
authorizing the appointment of Alliance Capital
Management L.P. to serve as Subadviser and approving
this Subadvisory Agreement;
(d) the Trust's Notification of Registration on Form N-8A;
and
(e) the Fund's current Prospectus and Statement of
Additional Information, and any supplements thereto.
10. Duration and Termination. This Subadvisory Agreement shall continue
for an initial term of two years from the date set forth above, unless sooner
terminated as provided herein. Notwithstanding the foregoing, this Subadvisory
Agreement may be terminated: (a) at any time without penalty upon thirty (30)
days' written notice to the Subadviser by (i) the Fund upon the vote of a
majority of the Trustees or upon the vote of a majority of the Fund's
outstanding voting securities, or (ii) the Manager, or (b) by the Subadviser
upon thirty (30) days' written notice to the Fund, provided that the Subadviser
shall continue to be responsible for managing the assets of the Fund for sixty
(60) business days after the end of the notice period unless the Fund shall
agree in writing to shorten the period. Anything to the contrary herein
notwithstanding, any termination carried out pursuant to this Section 10(b)
shall be without penalty and, further, the compensation schedule set forth in
Section 4 hereof shall apply to the service of the Subadviser beyond the end of
the notice period provided in this Section 10(b). This Subadvisory Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act) or the assignment or termination of the Management Agreement.
11. Amendments. No provision of this Subadvisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Subadvisory Agreement shall
be effective until approved by an affirmative vote of (i) a majority of the
outstanding voting securities of the Fund, and (ii) a majority of the Trustees
of the Fund, including a majority of Trustees who are not interested persons of
any party to this Subadvisory Agreement, cast in person at a meeting called for
the purpose of voting on such approval, if such approval is required by
applicable law.
12. Notices. Any notice or other communication required or
permitted to be given hereunder shall be given in writing and
mailed, faxed or delivered to the other party at its address as
follows:
If to the Manager:
Republic National Bank of New York
452 Fifth Avenue
New York, New York 10018
Attention: Ms. Mary E. Martinez
If to the Subadviser:
Alliance Capital Management L.P.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
Attention: John L. Blundin
Copy to: Mark R. Manley
Any party may specify a different or additional address for notice by
sending a written notice to the other at the address above, or at that or those
last given hereunder.
13. Miscellaneous.
(a) This Subadvisory Agreement shall be governed by the laws of the State
of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder. Exclusive original jurisdiction to any claim, action or dispute
between the parties arising out of this Agreement shall be solely in state or
federal district courts sitting in the State of New York.
(b) The captions of this Subadvisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) If any provision of this Subadvisory Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Subadvisory Agreement shall not be affected hereby and, to this extent, the
provisions of this Subadvisory Agreement shall be deemed to be severable. Where
the effect of a requirement of the federal securities laws reflected in any
provision of this Subadvisory Agreement is made less restrictive by a rule,
regulation or order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order. This Agreement may be signed in counterpart.
(d) Nothing herein shall be construed as constituting the Subadviser, or
any of its directors, officers or employees, an agent of the Manager or the
Fund, nor the Manager, or any of its directors, officers or employees, an agent
of the Subadviser.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of _______________, 199_.
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management
Corporation, General Partner
By
------------------------------
Name:
Title:
REPUBLIC NATIONAL BANK OF
NEW YORK
By
------------------------------
Name:
Title:
<PAGE>
EXHIBIT 5(d)
REPUBLIC FUNDS
REPUBLIC EQUITY FUND
SUBADVISORY AGREEMENT
AGREEMENT, effective commencing on January 21, 1997, between Brinson
Partners, Inc. (the "Subadviser") and Republic National Bank of New York (the
"Manager").
WHEREAS, the Manager has been retained by Republic Funds, a Massachusetts
business trust (the "Trust") registered as an open-end diversified investment
management company under the Investment Company Act of 1940, as amended (the
"1940 Act"), to provide investment advisory services to Republic Equity Fund
(the "Fund") pursuant to an Investment Management Contract and Supplement
thereto dated April 7, 1995 (the "Management Agreement");
WHEREAS, the Trust's Board of Trustees, including a majority of the
trustees who are not "interested persons," as defined in the 1940 Act, and the
Fund's stockholders have approved the appointment of the Subadviser to perform
certain investment advisory services for the Fund pursuant to this Subadvisory
Agreement and the Subadviser is willing to perform such services for the Fund;
WHEREAS, the Subadviser is registered or exempt from registration as an
investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Manager and the Subadviser as
follows:
1. Appointment. The Manager hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Subadvisory Agreement. The Subadviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the Board of
Trustees of the Trust and the Manager, the Subadviser will, in coordination with
the Manager, (a) provide a program of continuous investment management for the
portion of the Fund allocated by the Manager to the Subadviser (the
"Subadviser's Portfolio") for management in accordance with the Fund's
investment objectives, policies and limitations as stated in the Fund's
Prospectus and Statement of Additional Information included as part of the
Trust's Registration Statement on behalf of the Fund filed with the Securities
and Exchange Commission, as they may be amended from time to time, copies of
which shall be provided to the Subadviser by the Manager; (b) make investment
decisions for the Subadviser's Portfolio; and (c) place orders to purchase and
sell securities for the Subadviser's Portfolio. In particular, the Subadviser
will be responsible for the market timing of purchases and sales and for all
yield enhancement strategies used in managing the Subadviser's Portfolio.
In performing its investment management services to the Fund hereunder,
the Subadviser will provide the Fund with ongoing investment guidance and policy
direction, including oral and written research, analysis, advice, statistical
and economic data and judgments regarding individual investments, general
economic conditions and trends and long-range investment policy, with respect,
in all cases, to the Subadviser's Portfolio. The Subadviser will determine the
securities, instruments, repurchase agreements, options and other investments
and techniques that the Subadviser's Portfolio will purchase, sell, enter into
or use, and will provide an ongoing evaluation of the Subadviser's Portfolio.
The Subadviser will determine what portion of the Subadviser's Portfolio shall
be invested in securities and other assets.
The Subadviser further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder, the
Advisers Act, the Internal Revenue Code of 1986, as amended (the "Code"), and
all other applicable federal and state laws and regulations, and with any
applicable procedures adopted by the Trustees;
(b) manage the Subadviser's Portfolio so that it will qualify, and
continue to qualify (except where extraordinary circumstances dictate
otherwise), as a regulated investment company under Subchapter M of the Code and
regulations issued thereunder, and conduct periodically such Subchapter M
compliance reviews as the Manager and Subadviser determine appropriate based on
reports prepared and issued by the Custodian;
(c) place orders pursuant to its investment determinations for the
Subadviser's Portfolio directly with the issuer, or with any broker or dealer,
in accordance with applicable policies expressed in the Fund's Prospectus and/or
Statement of Additional Information and in accordance with applicable legal
requirements;
(d) furnish to the Trust whatever statistical information the Trust may
reasonably request with respect to the Subadviser's Portfolio's assets or
contemplated investments. In addition, the Subadviser will keep the Trust and
the Trustees informed of developments materially affecting the Subadviser's
Portfolio's and shall, on the Subadviser's own initiative, furnish to the Trust
from time to time whatever information the Subadviser believes appropriate for
this purpose;
(e) provide the Manager and the Board of Trustees of the Trust with a copy
of a written code of ethics complying with the requirements of Rule 17j-1 under
the 1940 Act, together with evidence of its adoption. Within fifteen days of the
end of the calendar quarter of each year that this Subadvisory Agreement is in
effect, the president or a vice-president of the Subadviser shall certify to the
Manager that the Subadviser has complied with the requirements of Rule 17j-1
during the previous year and that there has been no violation of the
Subadviser's code of ethics or, if such a violation has occurred, that
appropriate action was taken in response to such violation. Upon the written
request of the Manager, the Subadviser shall permit the Securities and Exchange
Commission, its employees or its agents to examine the reports required to be
made to the Subadviser by Rule 17j-l(c)(1) and all other records relevant to the
Subadviser's code of ethics;
(f) provide the Manager with a copy of its Form ADV as most recently filed
with the Securities and Exchange Commission ("SEC") and promptly will furnish a
copy of all amendments to the Manager at least annually;
(g) notify the Manager of any material change of control of the Subadviser
and any changes in the key personnel of the Subadviser, in each case prior to or
promptly after such change;
(h) make available to the Manager and the Trust, promptly upon their
request, such copies of its investment records and ledgers with respect to the
Subadviser's Portfolio as may be required to assist the Manager and the Trust in
their compliance with applicable laws and regulations. The Subadviser will
furnish the Trustees with such periodic and special reports regarding the
Subadviser's Portfolio as they may reasonably request;
(i) immediately notify the Manager and the Trust in the event that the
Subadviser or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory Agreement; or (2) becomes aware
that it is the subject of an administrative proceeding or enforcement action by
the SEC or other regulatory authority. The Subadviser further agrees to notify
the Trust and the Manager immediately of any material fact known to the
Subadviser respecting or relating to the Subadviser that is not contained in the
Trust's Registration Statement with respect to the Fund, or any amendment or
supplement thereto, but that is required to be disclosed therein, and of any
statement contained therein that becomes untrue in any material respect.
3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this Section 3, the Subadviser shall pay the compensation and
expenses of all its directors, partners, officers and employees, if any, who
serve as officers and executive employees of the Trust (including the Fund's
share of payroll taxes), and the Subadviser shall make available, without
expense to the Fund, the service of its directors, partners, officers and
employees.
The Subadviser shall not be required to pay any expenses of the Fund other
than those specifically allocated to the Subadviser in this Section 3. In
particular, but without limiting the generality of the foregoing, the Subadviser
shall not be responsible, except to the extent of the reasonable compensation of
such of the Trust's employees as are officers or employees of the Subadviser
whose services may be involved, for the following expenses of the Fund:
organization and offering expenses of the Fund (including out-of-pocket
expenses); fees payable to the Manager and to any other Fund advisers or
consultants; legal expenses; auditing and accounting expenses; interest
expenses; telephone, telex, facsimile, postage and other communications
expenses; taxes and governmental fees; dues and expenses incurred by or with
respect to the Fund in connection with membership in investment company trade
organizations; cost of insurance relating to fidelity coverage for the Trust's
officers and employees; fees and expenses of any custodian, subcustodian,
transfer agent, registrar, or dividend disbursing agent of the Fund; payments
for maintaining the Fund's financial books and records and calculating the daily
net asset value of the Fund's shares; other payments for portfolio pricing or
valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and other expenses
in connection with the issuance, offering, distribution or sale of securities
issued by the Fund; expenses relating to investor and public relations; expenses
of registering and qualifying shares of the Fund for sale; freight, insurance
and other charges in connection with the shipment of the portfolio securities of
the Fund; brokerage commissions or other costs of acquiring or disposing of any
portfolio securities or other assets of the Fund, or of entering into other
transactions or engaging in any investment practices with respect to the Fund;
expenses of printing and distributing prospectuses, Statements of Additional
Information, reports, notices and dividends to stockholders; costs of
stationery; litigation expenses; costs of stockholders' and other meetings; the
compensation and all expenses (specifically including travel expenses relating
to the Fund's business) of officers, trustees and employees of the Trust who are
not interested persons of the Subadviser; and travel expenses (or an appropriate
portion thereof) of officers or trustees of the Trust who are officers,
directors or employees of the Subadviser to the extent that such expenses relate
to attendance at meetings of the Board of Trustees of the Trust or any
committees thereof or advisers thereto.
4. Compensation. As compensation for the services provided and expenses
assumed by the Subadviser under this Agreement, the Trust will pay the
Subadviser within 21 calendar days after the end of each calendar quarter an
advisory fee computed daily on the basis of the Subadviser's Portfolio's average
daily net assets allocated to the Subadviser at an annual rate of 0.325% of net
assets up to $50 million, 0.25% of net assets over $50 million up to $100
million, 0.20% of net assets over $100 million up to $200 million, and 0.15% of
net assets over $200 million. The "average daily net assets" of the Subadviser's
Portfolio shall mean the average of the values placed on the Subadviser's
Portfolio's net assets as of 4:00 p.m. (New York time) on each day on which the
net asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its
net assets as of some other time on each business day, as of such other time.
The value of net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Trust's Declaration of Trust and Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of regular trading on
the New York Stock Exchange, or as of such other time as the value of the net
assets of the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any quarter end when the Subadviser's
compensation is payable pursuant to this Section, then the Subadviser's
compensation payable at the end of such month shall be computed on the basis of
the value of the net assets of the Fund as last determined (whether during or
prior to such quarter). If the Fund determines the value of the net assets of
its portfolio more than once on any day, then the last such determination
thereof on that day shall be deemed to be the sole determination thereof on that
day for the purposes of this Section 4. In the event that this Agreement is
terminated pursuant to Section 10 hereof, the Subadviser shall be entitled to a
pro rata portion of the fee under this Section 4 through and including the date
upon which the Agreement is terminated and the Subadviser ceases to provide
investment advisory services to the Fund hereunder.
5. Books and Records. The Subadviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Subadviser
also agrees that records it maintains and preserves pursuant to Rules 31a-1 and
Rule 31a-2 under the 1940 Act and otherwise in connection with its services
hereunder are the property of the Fund and will be surrendered promptly to the
Fund upon its request. The Subadviser further agrees that it will furnish to
regulatory authorities having the requisite authority any information or reports
in connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
6. Standard of Care and Limitation of Liability. The Subadviser shall
exercise its best judgment in rendering the services provided by it under this
Subadvisory Agreement. The Subadviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the holders
of the Fund's shares in connection with the matters to which this Subadvisory
Agreement relate, provided that nothing in this Subadvisory Agreement shall be
deemed to protect or purport to protect the Subadviser against any liability to
the Fund or to holders of the Fund's shares to which the Subadviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of the
Subadviser's reckless disregard of its obligations and duties under this
Subadvisory Agreement. As used in this Section 6, the term "Subadviser" shall
include any officers, directors, partners, employees or other affiliates of the
Subadviser performing services for the Fund.
7. Indemnification.
(a) Subject in all cases to the provisions of Section 6 hereof, the
Subadviser hereby agrees to indemnify and hold harmless the Manager from any
controversies, claims, suits, losses, liabilities, judgments, awards or
settlements, and costs or expenses, including reasonable legal fees, caused by,
or in any way related to: the investment decisions rendered by the Subadviser
concerning the Subadviser's Portfolio; any failure of the Subadviser to fulfill
any of its other obligations under this Subadvisory Agreement; any material
misrepresentation, or omission to disclose material facts, by the Subadviser to
the Manager or any shareholder of the Fund; or any violation of applicable law
by the Subadviser. Subject to Section 6 hereof, the Subadviser also agrees to
indemnify and hold harmless the Manager with respect to any losses incurred as
the result of errors made by the Subadviser in transmitting orders to any broker
for execution.
(b) The Manager hereby agrees to indemnify and hold harmless the
Subadviser from any controversies, claims, suits, losses, liabilities,
judgments, awards or settlements, and costs or expenses, including reasonable
legal fees, caused by, or in any related to, its failure to fulfill any of its
obligations under this Subadvisory Agreement.
(c) If any party seeks indemnification under this Agreement (an
"indemnified party"), it shall notify the other party (the "indemnifying party")
in writing of the assertion of any third party claim or action and shall deliver
all copies of materials received in connection with the matter to the
indemnifying party. The indemnifying party shall have the right to participate
at its own expense in the defense of any such claim or action with counsel of
its own choosing satisfactory to the indemnified party, and the indemnified
party shall cooperate fully with the indemnifying party in the defense or
settlement of any matter that is covered by paragraphs (a) or (b) above, subject
to reimbursement by the indemnifying party for expenses incurred by the
indemnified party in connection with the indemnifying party's participation in
the defense.
8. Services Not Exclusive. It is understood that the services of the
Subadviser are not exclusive, and that nothing in this Subadvisory Agreement
shall prevent the Subadviser from providing similar services to other
individuals, institutions or investment companies (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities, provided such other services and activities do
not, during the term of this Subadvisory Agreement, interfere in a material
manner with the Subadviser's ability to meet its obligations to the Trust and
the Fund hereunder. When the Subadviser recommends the purchase or sale of a
security for other investment companies and other clients, and at the same time
the Subadviser recommends the purchase or sale of the same security for the
Fund, the Subadviser may, but shall not be obligated to, aggregate the orders
for securities to be purchased or sold. It is understood that in light of its
fiduciary duty to the Fund, such transactions will be executed on a basis that
is fair and equitable to the Fund. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Subadviser nor any
of its directors, partners, officers or employees shall act as a principal or
agent or receive any commission.
9. Documentation. The Fund shall provide the Subadviser
with the following documents, as requested by the Subadviser:
(a) the Trust's registration statement relating to the
Fund, and any amendments thereto;
(b) the Declaration of Trust and By-laws (and any
amendments thereto) of the Trust;
(c) resolutions of the Board of Trustees of the Trust
authorizing the appointment of Brinson Partners, Inc.
to serve as Subadviser and approving this Subadvisory
Agreement;
(d) the Trust's Notification of Registration on Form N-8A;
(e) the Fund's current Prospectus and Statement of
Additional Information, and any supplements thereto;
and
(f) such information as the Subadviser reasonably may request in order
for the Subadviser to comply with Section 2 hereof.
10. Duration and Termination. This Subadvisory Agreement shall continue
for an initial term of two years from the date set forth above, unless sooner
terminated as provided herein. Notwithstanding the foregoing, this Subadvisory
Agreement may be terminated: (a) at any time without penalty upon thirty (30)
days' written notice to the Subadviser by (i) the Fund upon the vote of a
majority of the Trustees or upon the vote of a majority of the Fund's
outstanding voting securities, or (ii) the Manager, or (b) by the Subadviser
upon thirty (30) days' written notice to the Fund, provided that the Subadviser
shall continue to be responsible for managing the assets of the Fund for sixty
(60) business days after the end of the notice period unless the Fund shall
agree in writing to shorten the period. Anything to the contrary herein
notwithstanding, any termination carried out pursuant to this Section 10(b)
shall be without penalty and, further, the compensation schedule set forth in
Section 4 hereof shall apply to the service of the Subadviser beyond the end of
the notice period provided in this Section 10(b). This Subadvisory Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act) or the assignment or termination of the Management Agreement.
11. Amendments. No provision of this Subadvisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Subadvisory Agreement shall
be effective until approved by an affirmative vote of (i) a majority of the
outstanding voting securities of the Fund, and (ii) a majority of the Trustees
of the Fund, including a majority of Trustees who are not interested persons of
any party to this Subadvisory Agreement, cast in person at a meeting called for
the purpose of voting on such approval, if such approval is required by
applicable law.
12. Notices. Any notice or other communication required or
permitted to be given hereunder shall be given in writing and
mailed, faxed or delivered to the other party at its address as
follows:
If to the Manager:
Republic National Bank of New York
452 Fifth Avenue
New York, New York 10018
Attention: Ms. Mary E. Martinez
If to the Subadviser:
Brinson Partners, Inc.
209 South LaSalle Street
Chicago, Illinois 60604-1295
Attention: Charles J. Freund
Any party may specify a different or additional address for notice by
sending a written notice to the other at the address above, or at that or those
last given hereunder.
13. Miscellaneous.
(a) This Subadvisory Agreement shall be governed by the laws of the State
of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder. Exclusive original jurisdiction to any claim, action or dispute
between the parties arising out of this Agreement shall be solely in state or
federal district courts sitting in the State of New York.
(b) The captions of this Subadvisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) If any provision of this Subadvisory Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Subadvisory Agreement shall not be affected hereby and, to this extent, the
provisions of this Subadvisory Agreement shall be deemed to be severable. Where
the effect of a requirement of the federal securities laws reflected in any
provision of this Subadvisory Agreement is made less restrictive by a rule,
regulation or order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order. This Agreement may be signed in counterpart.
(d) Nothing herein shall be construed as constituting the Subadviser, or
any of its directors, officers or employees, an agent of the Manager or the
Fund, nor the Manager, or any of its directors, officers or employees, an agent
of the Subadviser.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of _______________, 199_.
BRINSON PARTNERS, INC.
By
------------------------------
Name:
Title:
REPUBLIC NATIONAL BANK OF
NEW YORK
By
------------------------------
Name:
Title:
<PAGE>
EXHIBIT 6(a)
DISTRIBUTION AGREEMENT
AGREEMENT made this 1st day of October, 1996, between Republic Funds (the
"Trust"), a Massachusetts business trust having its principal place of business
at 3435 Stelzer Road, Suite 1000, Columbus, Ohio 43219, and BISYS Fund Services
Limited Partnership, d/b/a BISYS Fund Services ("Distributor"), having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219-3035.
WHEREAS, the Trust is an open-end management investment company, organized
as a Massachusetts business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each class of the currently
constituted investment portfolios and any additional investment portfolios of
the Trust identified in Schedule A hereto as such Schedule may be amended from
time to time (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended (the "Securities Act"). As used in
this Agreement, the term "registration statement" shall mean Parts A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. Distributor's
promotional activities may include (a) calling upon and providing assistance to
third-party broker-dealers (including sales training), (b) calling upon and
providing assistance to institutional investors, (c) assisting in the
development and implementation of marketing plans for the Trust's Funds and (d)
providing such additional assistance relating to the marketing of the Trust's
Funds that the Trust and Distributor may, from time to time, deem to be
appropriate. The Trust understands that Distributor is now and may in the future
be the distributor of the shares of several investment companies or series
(together, "Companies") including Companies having investment objectives similar
to those of the Trust. The Trust further understands that investors and
potential investors in the Trust may invest in shares of such other Companies.
The Trust agrees that Distributor's duties to such Companies shall not be deemed
in conflict with its duties to the Trust under this paragraph 1.2.
Distributor may finance appropriate activities which it deems reasonable
which are primarily intended to result in the sale of the Shares, including, but
not limited to, advertising, and the compensation of underwriters, dealers and
sales personnel.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.5 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind, the
Trust's officers may decline to accept any orders for, or make any sales of, the
Shares until such time as those officers deem it advisable to accept such orders
and to make such sales.
1.6 Distributor will act only on its own behalf as principal if it chooses
to enter into selling agreements with selected dealers or others.
1.7 The Trust agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all actions that
may be reasonably necessary in connection with the qualification of the Shares
for sale in such states as Distributor may designate.
1.8 The Trust shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) a monthly itemized list of the securities in
the Funds, (c) monthly balance sheets as soon as practicable after the end of
each month, and (d) from time to time such additional information regarding the
financial condition of the Funds as Distributor may reasonably request.
1.9 The Trust represents to Distributor that, with respect to the Shares,
all registration statements and prospectuses filed by the Trust with the
Commission under the Securities Act have been carefully prepared in conformity
with requirements of said Act and rules and regulations of the Commission
thereunder. The registration statement and prospectus contain all statements
required to be stated therein in conformity with said Act and the rules and
regulations of said Commission and all statements of fact contained in any such
registration statement and prospectus are true and correct. Furthermore, neither
any registration statement nor any prospectus includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of the
Shares. The Trust may, but shall not be obligated to, propose from time to time
such amendment or amendments to any registration statement and such supplement
or supplements to any prospectus as, in the light of future developments, may,
in the opinion of the Trust's counsel, be necessary or advisable. If the Trust
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Trust of a written request from
Distributor to do so, Distributor may, at its option, terminate this Agreement.
The Trust shall not file any amendment to any registration statement or
supplement to any prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
1.10 The Trust authorizes Distributor and dealers to use any prospectus in
the form furnished from time to time in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its several partners
and employees, and any person who controls Distributor within the meaning of
Section 15 of the Securities Act free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which Distributor, its partners and employees, or any
such controlling person, may incur under the Securities Act or under common law
or otherwise, arising out of or based upon any untrue statement, or alleged
untrue statement, of a material fact contained in any registration statement or
any prospectus or arising out of or based upon any omission, or alleged
omission, to state a material fact required to be stated in either any
registration statement or any prospectus or necessary to make the statements in
either thereof not misleading; provided, however, that the Trust's agreement to
indemnify Distributor, its partners or employees, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any statements or representations as are contained in any
prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.9 shall not
be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify Distributor, its partners and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust being notified of any action brought against
Distributor, its partners or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
principal office in Columbus, Ohio and sent to the Trust by the person against
whom such action is brought, within 10 days after the summons or other first
legal process shall have been served. The failure to so notify the Trust of any
such action shall not relieve the Trust from any liability which the Trust may
have to the person against whom such action is brought by reason of any such
untrue, or allegedly untrue, statement or omission, or alleged omission,
otherwise than on account of the Trust's indemnity agreement contained in this
paragraph 1.10. The Trust will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Trust and
approved by Distributor, which approval shall not be unreasonably withheld. In
the event the Trust elects to assume the defense of any such suit and retain
counsel of good standing approved by Distributor, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Trust does not elect to assume the defense of any
such suit, or in case Distributor reasonably does not approve of counsel chosen
by the Trust, the Trust will reimburse Distributor, its partners and employees,
or the controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by Distributor or them.
The Trust's indemnification agreement contained in this paragraph 1.10 and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling person,
and shall survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Trustees in connection with the issue and sale of any Shares.
1.11 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or Trustees or such controlling person
resulting from such claims or demands, shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in information
furnished in writing by Distributor to the Trust and used in the answers to any
of the items of the registration statement or in the corresponding statements
made in the prospectus, or shall arise out of or be based upon any omission, or
alleged omission, to state a material fact in connection with such information
furnished in writing by Distributor to the Trust required to be stated in such
answers or necessary to make such information not misleading. Distributor's
agreement to indemnify the Trust, its officers and Trustees, and any such
controlling person, as aforesaid, is expressly conditioned upon Distributor
being notified of any action brought against the Trust, its officers or
Trustees, or any such controlling person, such notification to be given by
letter or telegram addressed to Distributor at its principal office in Columbus,
Ohio, and sent to Distributor by the person against whom such action is brought,
within 10 days after the summons or other first legal process shall have been
served. Distributor shall have the right of first control of the defense of such
action, with counsel of its own choosing, satisfactory to the Trust, if such
action is based solely upon such alleged misstatement or omission on
Distributor's part, and in any other event the Trust, its officers or Trustees
or such controlling person shall each have the right to participate in the
defense or preparation of the defense of any such action. The failure to so
notify Distributor of any such action shall not relieve Distributor from any
liability which Distributor may have to the Trust, its officers or Trustees, or
to such controlling person by reason of any such untrue or alleged untrue
statement, or omission or alleged omission, otherwise than on account of
Distributor's indemnity agreement contained in this paragraph 1.11.
1.12 No Shares shall be offered by either Distributor or the Trust under
any of the provisions of this Agreement and no orders for the purchase or sale
of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.12 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Declaration of Trust, or Bylaws.
1.13 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its
counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
prospectus then in effect or the initiation by service of process on
the Trust of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement or prospectus then
in effect or which requires the making of a change in such
registration statement or prospectus in order to make the statements
therein not misleading; and
(d) of all action of the Commission with respect to any amendment to any
registration statement or prospectus which may from time to time be
filed with the Commission.
For purposes of this section, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.14 Distributor agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and its prior, present or potential
Shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except, after
prior notification to and approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld where Distributor may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust.
1.15 This Agreement shall be governed by the laws of the Commonwealth
of Massachusetts.
2. Fees.
2.1 As reimbursement for the services set forth in Section 1 of this
Agreement, Distributor shall be entitled to receive from the Funds identified in
Schedule A hereto, with respect to such Funds' Shares, a distribution fee and/or
service fee at the rate and upon the terms and conditions set forth in the
Trust's Distribution Plan, as amended from time to time. The fees described
above shall be accrued daily and shall be paid on the first business day of each
month, or at such time(s) as the Distributor shall reasonably request.
3. Sale and Payment.
Pursuant to the Declaration of Trust, as amended from time to time,
each Fund may be divided into separate classes of Shares in which case the
Shares of one or more classes may be subject to a sales load and may be subject
to the imposition of a distribution fee and/or a service fee. To the extent that
Shares of a Fund are sold at an offering price which includes a sales load or at
net asset value subject to a contingent deferred sales load with respect to
certain redemptions (either within a single class of Shares or pursuant to two
or more classes of Shares), such Shares shall hereinafter be referred to
collectively as "Load Shares" (in the case of Shares that are sold with a
front-end sales load or Shares that are sold subject to a contingent deferred
sales load), "Front-End Load Shares" or "CDSL Shares" and individually as a
"Load Share," a "Front-End Load Share" or a "CDSL Share." A Fund that contains
Front-End Load Shares shall hereinafter be referred to collectively as "Load
Funds" or "Front-End Load Funds" and individually as a "Load Fund" or a
"Front-End Load Fund." A Fund that contains CDSL Shares shall hereinafter be
referred to collectively as "Load Funds" or "CDSL Funds" and individually as a
"Load Fund" or a "CDSL Fund." Under this Agreement, the following provisions
shall apply with respect to the sale of, and payment for, Load Shares of the
Funds identified in Schedule A attached hereto.
3.1 Distributor shall have the right, as principal, to purchase Front-End
Load Shares at their net asset value and to sell such Shares to the public
against orders therefor at the applicable public offering price, as defined in
Section 4 hereof. Distributor shall also have the right, as principal, to sell
Front-End Load Shares to dealers against orders therefor at the public offering
price less a concession determined by Distributor, which concession shall not
exceed the amount of the sales charge or underwriting discount, if any,
described in the current prospectus of the applicable Front-End Load Fund.
3.2 Distributor shall have the right, as principal, to purchase CDSL
Shares at the applicable net asset value and to sell such Shares to the public
against orders therefor at the applicable net asset value subject to the right
to receive from each CDSL Fund certain contingent deferred sales load payments
that are made to the Fund when such Shares are redeemed. Distributor shall also
have the right, as principal, to sell CDSL Shares to dealers against orders
therefor at the applicable net asset value subject to the right to receive the
aforementioned contingent deferred sales load payments.
3.3 Prior to the time of delivery of any Load Shares by a Load Fund to, or
on the order of, Distributor, Distributor shall pay or cause to be paid to the
Load Fund or to its order an amount in federal funds equal to the applicable net
asset value of such Shares. The Distributor may retain so much of any front-end
sales load or underwriting discount as is not allowed by the Distributor as a
concession to dealers.
4. Public Offering Price.
The public offering price of a Front-End Load Share shall be the net
asset value of such Share, plus any applicable sales charge, all as set forth in
the current prospectus of the Front-End Load Fund.
5. Net Asset Value.
The net asset value of all Shares shall be determined in accordance
with the provisions of the Declaration of Trust and Bylaws of the Trust and the
then-current prospectus of each Fund.
6. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load Shares
at net asset value, without the imposition of a front-end sales load or a
contingent deferred sales load, (a) in connection with the merger or
consolidation of the Trust or the Load Fund(s) with any other investment company
or the acquisition by the Trust or the Load Fund(s) of all or substantially all
of the assets or of the outstanding Shares of any other investment company; (b)
in connection with a pro rata distribution directly to the holders of Shares in
the nature of a stock dividend or split; (c) upon the exercise of subscription
rights granted to the holders of Shares on a pro rata basis; (d) in connection
with the issuance of Load Shares pursuant to any exchange and reinvestment
privileges described in any then current prospectus of the Load Fund; and (e)
otherwise in accordance with any then current prospectus of the Load Fund.
7. Term, Duration and Termination.
This Agreement shall become effective on October 1, 1996 and, unless
sooner terminated as provided herein, shall continue until September 30, 1998.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive one-year terms, provided that such continuance is specifically
approved at least annually by (a) by the vote of a majority of those members of
the Trust's Board of Trustees who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting for the
purpose of voting on such approval and (b) by the vote of the Trust's Board of
Trustees or the vote of a majority of the outstanding voting securities of such
Fund. This Agreement is terminable without penalty, on not less than sixty-days
prior written notice, by the Trust's Board of Trustees, by vote of a majority of
the outstanding voting securities of the Trust or by the Distributor. This
Agreement will also terminate automatically in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities", "interested persons" and "assignment" shall have the same meanings
as ascribed to such terms in the 1940 Act.)
8. Limitation of Liability of the Trustees and Shareholders.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees, and this Agreement has been signed and delivered by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in the Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
REPUBLIC FUNDS BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
-----------------------------
General Partner
By: By:
------------------------------- -----------------------------
Title: Title:
---------------------------- --------------------------
Date: Date:
----------------------------- ---------------------------
<PAGE>
Dated: October 1, 1996
Schedule A
to the
Distribution Agreement
between Republic Funds and
BISYS Fund Services Limited Partnership
Name of Fund
- ------------------------------
U.S. Government Money Market
New York Tax-Free Money Market
New York Tax-Free Bond
Equity
Bond
Overseas Equity
Opportunity
REPUBLIC FUNDS
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
-----------------------------------
General Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT 9(b)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this _____ day of ____________, 1996, by
and between the REPUBLIC FUNDS, a Massachusetts business trust (the "Trust"),
and BISYS FUND SERVICES LIMITED PARTNERSHIP, d/b/a BISYS FUND SERVICES (the
"Administrator"), an Ohio limited partnership.
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares of beneficial interest ("Shares");
and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Trust as the Trust and the Administrator may agree on
("Portfolios") and as listed on Schedule A attached hereto and made a part of
this Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator. The Trust hereby retains the
Administrator to act as the administrator of the Portfolios and to furnish the
Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way and shall
not be deemed an agent of the Trust.
ARTICLE 2. Administrative Services. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Trust,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Trustees of the Trust with such reports
regarding investment performance as they may reasonably request but shall have
no responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
The Administrator shall provide the Trust with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Trustees' meetings) for handling the
affairs of the Portfolios and such other services as the Administrator shall,
from time to time, determine to be necessary to perform its obligations under
this Agreement. In addition, at the request of the Board of Trustees, the
Administrator shall make reports to the Trust's Trustees concerning the
performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual Trust expenses and control all
disbursements for the Trust, and as appropriate compute the
Trust's yields, total return, expense ratios, portfolio, turnover
rate and, if required, portfolio average dollar-weighted
maturity;
(b) assist Trust counsel with the preparation of prospectuses,
statements of additional information, registration statements and
proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of Shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register the Trust's
Shares with state securities authorities, monitor sale of Trust
Shares for compliance with state securities laws, and file with
the appropriate state securities authorities the registration
statements and reports for the Trust and the Trust's Shares and
all amendments thereto, as may be necessary or convenient to
register and keep effective the Trust and the Trust's Shares with
state securities authorities to enable the Trust to make a
continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Trust's
investment adviser, communications to Shareholders, including the
annual report to Shareholders, coordinate the mailing of
prospectuses, notices, proxy statements, proxies and other
reports to Trust Shareholders, and supervise and facilitate the
proxy solicitation process for all shareholder meetings,
including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Trust with, among others,
the Trust's investment adviser, distributor, custodian, transfer
agent and fund accountant;
(f) supervise the Trust's transfer agent with respect to the payment
of dividends and other distributions to Shareholders;
(g) calculate performance data of the Trust and its portfolios for
dissemination to information services covering the investment
company industry;
(h) coordinate and supervise the preparation and filing of the
Trust's tax returns;
(i) examine and review the operations and performance of the various
organizations providing services to the Trust or any Portfolio of
the Trust, including, without limitation, the Trust's investment
adviser, distributor, custodian, fund accountant, transfer agent,
outside legal counsel and independent public accountants, and at
the request of the Board of Trustees, report to the Board on the
performance of organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing
of the Trust's semi-annual and annual reports to Shareholders;
(k) assist with the design, development, and operation of Trust
Portfolios, including new classes, investment objectives,
policies and structure;
(l) provide individuals reasonably acceptable to the Trust's Board of
Trustees to serve as officers of the Trust, who will be
responsible for the management of certain of the Trust's affairs
as determined by the Trust's Board of Trustees;
(m) advise the Trust and its Board of Trustees on matters concerning
the Trust and its affairs;
(n) obtain and keep in effect fidelity bonds and trustees and
officers/errors and omissions insurance policies for the Trust in
accordance with the requirements of Rules 17g-1 and 17d-1(7)
under the 1940 Act as such bonds and policies are approved by the
Trust's Board of Trustees;
(o) monitor and advise the Trust and its Portfolios on their
registered investment company status under the Internal Revenue
Code of 1986, as amended;
(p) perform all administrative services and functions of the Trust
and each Portfolio to the extent administrative services and
functions are not provided to the Trust or such Portfolio
pursuant to the Trust's or such Portfolio's investment advisory
agreement, distribution agreement, custodian agreement, transfer
agent agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other aspects
of the business and affairs of the Portfolios as the Trust and
the Administrator shall determine desirable; and
(r) prepare and file with the SEC the semi-annual report for the
Trust on Form N-SAR and all required notices pursuant to Rule
24f-2.
The Administrator shall perform such other services for the Trust that
are mutually agreed upon by the parties from time to time. Such services may
include performing internal audit examinations; mailing the annual reports of
the Portfolios; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the Trust
will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Trustees of the Trust
to perform services on behalf of the Trust.
(B) The Trust. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not otherwise allocated herein, including, without
limitation, organization costs, taxes, expenses for legal and auditing services,
the expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Trustees who are not
affiliated persons of the Administrator or the Investment Adviser to the Trust
or any affiliated corporation of the Administrator or the investment Adviser,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Trust.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Trust shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly. The Trust
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including the travel and lodging expenses incurred by officers and
employees of the Administrator in connection with attendance at Board meetings.
If this Agreement becomes effective subsequent to the first day
of a month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Survival of Compensation Rates. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable law which
cannot be waived or modified hereby. (As used in this Article 5, the term
"Administrator" shall include Trustees, officers, employees and other agents of
the Administrator as well as the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Trust assumes full responsibility and shall
indemnify the Administrator and hold it harmless from and against any and all
actions, suits and claims, whether groundless or otherwise, and from and against
any and all losses, damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities (including reasonable
investigation expenses) arising directly or indirectly out of said
administration, transfer agency, and dividend disbursing relationships to the
Trust or any other service rendered to the Trust hereunder. The indemnity and
defense provisions set forth herein shall indefinitely survive the termination
of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Administrator harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Trust, but failure to do so in good faith shall not affect the rights
hereunder.
The Trust shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Trust elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the Trust
and satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Trust elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Trust does not elect to assume the
defense of a suit, it will reimburse the Administrator for the reasonable fees
and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Trust at any time for instructions
and may consult counsel for the Trust or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employee or agent of the
Trust until receipt of written notice thereof from the Trust.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that trustees, officers, employees
and Shareholders of the Trust are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or otherwise
and that partners, officers and employees of the Administrator and its counsel
are or may be or become similarly interested in the Trust, and that the
Administrator may be or become interested in the Trust as a Shareholder or
otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 5
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Trustees of the Trust, and (ii) by the vote of a majority of the
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Trustees meeting called
for the purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Trust does not conflict with or violate any requirements of its
Declaration of Trust or then current prospectuses, or any rule, regulation or
requirement of any regulatory body.
ARTICLE 10. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Trust shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Trust and will be made available
to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Trust has
agreed to indemnify the Administrator against such liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Trust, at ; and to its Secretary at the following address:
3435 Stelzer Road, Columbus, Ohio 43219; and if to the Administrator at 3435
Stelzer Road, Columbus, Ohio 43219.
ARTICLE 13. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 14. Multiple Originals. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
REPUBLIC FUNDS
By: __________________________________
Attest: ______________________________
BISYS FUND SERVICES LIMITED
PARTNERSHIP
BY: BISYS FUND SERVICES, INC.,
GENERAL PARTNER
By: __________________________________
Attest: ______________________________
<PAGE>
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF _________________________
BETWEEN THE
REPUBLIC FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios of Republic Funds,
either now or hereafter created. The current portfolios of
Republic Funds, are set forth below: Republic Equity Fund,
Republic New York Tax Free Bond Fund, Republic New York Tax Free
Money Market Fund, Republic U.S. Government Money Market Fund,
Republic Fixed Income Fund and Republic International Equity Fund
(collectively, the "Portfolios").
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, each of the Funds
will pay the Administrator on the first business day of each
month, or at such time(s) as the Administrator shall request and
the parties hereto shall agree, a fee computed daily and paid as
specified below, subject to the fee minimums specified below:
Annual rate of ten one-hundredths of one percent (.10%) of
each Portfolio's average daily net assets up to $1
billion.
Annual rate of eight one-hundredths of one percent (.08%)
of each Portfolio's average daily net assets in excess of
$1 billion up to $2 billion.
Annual rate of seven one-hundredths of one percent (.07%)
of each Portfolio's average daily net assets in excess of
$2 billion.
Such fees shall be subject to such annual minimum fee amounts per
Portfolio as the parties may agree upon from time to time. The
fee for the period from the day of the month this Agreement is
entered into until the end of that month shall be prorated
according to the proportion which such period bears to the full
monthly period. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to
the full monthly period and shall be payable upon the date of
termination of this Agreement.
For the purpose of determining fees payable to the Administrator,
the value of the net assets of a particular Fund shall be
computed in the manner described in the Fund's Declaration of
Trust or in the Prospectus or Statement of Additional Information
respecting that Fund as from time to time is in effect for the
computation of the value of such net assets in connection with
the determination of the liquidating value of the shares of such
Fund.
The parties hereby confirm that the fees payable hereunder shall
be applied to each Portfolio as a whole, and not to separate
classes of shares within the portfolios.
Term: Pursuant to Article 7, the term of this Agreement shall commence
on _________, ____ and shall remain in effect through
_________________ ("Initial Term"). This Agreement shall be
renewed automatically for successive periods of two years after
the Initial Term, unless terminated by either party on not less
than 90 days prior written notice to the other party. In the
event of a material breach of this Agreement by either party, the
non-breaching party shall notify the breaching party in writing
of such breach and upon receipt of such notice, the breaching
party shall have 45 days to remedy the breach or the nonbreaching
party may immediately terminate this Agreement.
Notwithstanding the foregoing, after such termination for so long
as the Administrator, with the written consent of the Fund, in
fact continues to perform any one or more of the services
contemplated by this Agreement or any schedule or exhibit hereto,
the provisions of this Agreement, including without limitation
the provisions dealing with indemnification, shall continue in
full force and effect. Compensation due the Administrator and
unpaid by the Fund upon such termination shall be immediately due
and payable upon and notwithstanding such termination. The
Administrator shall be entitled to collect from the Fund, in
addition to the compensation described in this Schedule A, the
amount of all of the Administrator's cash disbursements for
services in connection with the Administrator's activities in
effecting such termination, including without limitation, the
delivery to the Fund and/or its designees of the Fund's property,
records, instruments and documents, or any copies thereof.
Subsequent to such termination, for a reasonable fee, the
Administrator will provide the Fund with reasonable access to any
Fund documents or records remaining in its possession.
If, for any reason, the Administrator is replaced as fund manager
and administrator, or if a third party is added to perform all or
a part of the services provided by the Administrator under this
Agreement (excluding any sub-administrator appointed by the
Administrator as provided in Article 7 hereof), then the Fund
shall make a one-time cash payment, as liquidated damages, to the
Administrator equal to the balance due the Administrator for the
remainder of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the Fund on
the date the Administrator is replaced, or a third party is
added, will remain constant for the balance of the contract term.
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees
Republic Funds:
We consent to the use of our reports, dated November 15, 1996 and December
6, 1996, incorporated herein by reference and to the references to our firm
under the captions "FINANCIAL HIGHLIGHTS" in the prospectus and "Independent
Auditors" in the statements of additional information included herein.
KPMG Peat Marwick LLP
Boston, Massachusetts
January 31, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000798290
<NAME> REPUBLIC FUNDS
<SERIES>
<NUMBER> 1
<NAME> REPUBLIC U.S. GOVERNMENT MONEY MARKET
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 248040355
<INVESTMENTS-AT-VALUE> 248040355
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<TOTAL-ASSETS> 248760244
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<OTHER-ITEMS-LIABILITIES> 978370
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<ACCUMULATED-NII-CURRENT> 23770
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<NUMBER-OF-SHARES-SOLD> 880109172
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<ACCUMULATED-NII-PRIOR> 21143
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<GROSS-EXPENSE> 1366356
<AVERAGE-NET-ASSETS> 219467337<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .049<F1>
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<PER-SHARE-DIVIDEND> .049<F1>
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<FN>
<F1>Class C Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000798290
<NAME> REPUBLIC FUNDS
<SERIES>
<NUMBER> 101
<NAME> REPUBLIC U.S. GOVERNMENT MONEY MARKET
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
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<TOTAL-ASSETS> 248760244
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<GROSS-EXPENSE> 1366356
<AVERAGE-NET-ASSETS> 1380385<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .012<F1>
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<PER-SHARE-NAV-END> 1.00<F1>
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class Y Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000798290
<NAME> THE REPUBLIC FUNDS
<SERIES>
<NUMBER> 071
<NAME> REPUBLIC NEW YORK TAX FREE MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 81810319
<INVESTMENTS-AT-VALUE> 81810319
<RECEIVABLES> 760213
<ASSETS-OTHER> 46619
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 82617151
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 309447
<TOTAL-LIABILITIES> 309447
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82307704
<SHARES-COMMON-STOCK> 78593998<F1>
<SHARES-COMMON-PRIOR> 52652477<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 82307704
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2436782
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<EXPENSES-NET> 370012
<NET-INVESTMENT-INCOME> 2066770
<REALIZED-GAINS-CURRENT> (5393)
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<NET-CHANGE-FROM-OPS> 2061377
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<DISTRIBUTIONS-OF-INCOME> 2008480<F1>
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<NUMBER-OF-SHARES-SOLD> 292716687<F1>
<NUMBER-OF-SHARES-REDEEMED> 268532668<F1>
<SHARES-REINVESTED> 1757502<F1>
<NET-CHANGE-IN-ASSETS> 29655227
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 104179
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 436934
<AVERAGE-NET-ASSETS> 79117914<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .030<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .030<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .54<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> Class C Shares
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000798290
<NAME> THE REPUBLIC FUNDS
<SERIES>
<NUMBER> 072
<NAME> REPUBLIC NEW YORK TAX FREE MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 81810319
<INVESTMENTS-AT-VALUE> 81810319
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<TOTAL-ASSETS> 82617151
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 309447
<TOTAL-LIABILITIES> 309447
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82307704
<SHARES-COMMON-STOCK> 3713706<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 82307704
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<INTEREST-INCOME> 2436782
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<EXPENSES-NET> 370012
<NET-INVESTMENT-INCOME> 2066770
<REALIZED-GAINS-CURRENT> (5393)
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<NET-CHANGE-FROM-OPS> 2061377
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 52897<F1>
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22377569<F1>
<NUMBER-OF-SHARES-REDEEMED> 18663863<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 29655227
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 104179
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 436934
<AVERAGE-NET-ASSETS> 4901699<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .010<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .010<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .35<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> Class Y Shares
</TABLE>
