<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1999
FILE NO. 33-7647
FILE NO. 811-4782
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 65
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 66
REPUBLIC FUNDS
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219-3035
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
(614) 470-8000
Walter B. Grimm
3435 Stelzer Road, Columbus, Ohio 43219-3035
(Name and address of agent for service of process)
Copy to:
Allan S. Mostoff, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W., Washington, D.C. 20006
--------------------------------
It is proposed that this filing will become effective on April 1, 1999 pursuant
to paragraph (b) 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. 1997) on
December 23, 1997; Fund, Republic Equity Fund, Republic Bond Fund, Republic
Overseas Equity Fund and Republic Opportunity Fund for their fiscal years ended
October 31, 1997 on January 27, 1998.
<PAGE> 2
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
PART A; INFORMATION REQUIRED IN PROSPECTUS
ITEM NUMBER PROSPECTUS CAPTION
<S> <C> <C>
Item 1. Front and Back Cover Page Front and Back Cover Page
Item 2. Risk/Return Summary: Investments, Risk/Return Summary and
Risks and Performance Fund Expenses
Item 3. Risk/Return Summary: Fee Table Risk/Return Summary and
Fund Expenses
Item 4. Investment Objectives, Principal Investment Objectives and
Investment Strategies, and Related Risks Strategies; Investment Risks
Item 5 Management's Discussion Not Applicable
of Fund Performance
Item 6. Management, Organization, and Fund Management
Capital Structure
Item 7. Shareholder Information Shareholder Information
Item 8. Distribution Arrangements Distribution Arrangements/
Sales Charges
Item 9. Financial Highlights Information Financial Highlights
PART B; INFORMATION REQUIRED IN STATEMENT /OF ADDITIONAL INFORMATION
STATEMENT OF ADDITIONAL
ITEM NUMBER INFORMATION CAPTION
Item 10. Cover Page and Table of Contents Cover Page and Table of Contents
Item 11. Fund History Capitalization
Item 12. Description of the Fund and Its Investment Objective, Policies
Investments and Risks and Restrictions
Item 13. Management of the Fund Management of the Trust
Item 14. Control Persons and Principal Other Information
Holders of Securities
Item 15. Investment Advisory and Management of the Trust
Other Securities Investment Adviser
Item 16. Brokerage Allocation Portfolio Transactions
Item 17. Capital Stock and Other Securities Other Information
Item 18. Purchase, Redemption and Pricing Purchase of Shares; Redemption
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
of Shares of Shares; Determination of Net
Asset Value
Item 19. Taxation of the Fund Taxation
Item 20. Underwriters Management of the Trust -
Administrator, Distributor and
Sponsor
Item 21. Calculation of Performance Date Performance Information
Item 22. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be in Part C is set forth under the appropriate
items, so numbered, in Part C of this Registration Statement.
<PAGE> 4
EXPLANATORY NOTE
This post-effective amendment no. 65 (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 the Republic Money Market Fund, Republic U.S. Government Money
Market Fund, and Republic New York Tax-Free Money Market Fund. This
post-effective amendment discloses the addition of a new class of shares for
each Fund and an increase in the shareholder servicing fee with respect to
existing Class A Shares. The Amendment does not affect any other series of the
Registrant, which are the subject of other post-effective amendments to the
Registration Statement.
<PAGE> 5
REPUBLIC
MONEY MARKET FUND
REPUBLIC
U.S. GOVERNMENT
MONEY MARKET FUND
PROSPECTUS
- --------------
APRIL 1, 1999
REPUBLIC
NEW YORK TAX-FREE
MONEY MARKET FUND
[LOGO] REPUBLIC FAMILY OF FUNDS
The Securities and Exchange Commission has not
approved these securities or passed upon the
adequacy of this prospectus. Any representations
to the contrary is a criminal offense.
<PAGE> 6
REPUBLIC FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
Carefully review this 3 Republic Money Market Fund
important section, which 7 Republic U.S. Government Money Market Fund
summarizes each Fund's 13 Republic New York Tax-Free Money Market Fund
investments, risks, past
performance, and fees.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
LOGO
LOGO
Review this section for 20 Republic Money Market Fund
information on investment 21 Republic U.S. Government Money Market Fund
strategies and risks. 22 Republic New York Tax-Free Money Market Fund
FUND MANAGEMENT
LOGO
LOGO
Review this section 26 The Investment Adviser
for details on 26 The Distributor and Administrator
the people and
organization who provide
services to the Funds.
SHAREHOLDER INFORMATION
LOGO
LOGO
Review this section for 27 Pricing of Fund Shares
details on how 28 Purchasing and Adding to Your Shares
shares are valued, 31 Selling Your Shares
how to purchase, 33 General Policies on Selling Shares
sell and exchange shares. 35 Distribution Arrangements/Sales Charges
This section also describes 37 Exchanging Your Shares
related charges, and 40 Dividends, Distributions and Taxes
payments of dividends
and distributions.
FINANCIAL HIGHLIGHTS
logo
LOGO
Review this section 42 Republic U.S. Government Money Market Fund
for details on selected 45 Republic New York Tax-Free Money Market Fund
financial statements
of the Funds.
</TABLE>
2
<PAGE> 7
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
The following is a summary of certain key information about the Funds. You
will find additional information about the Funds, including a detailed
description of the risks of an investment in the Funds, after this summary.
REPUBLIC MONEY MARKET FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The investment objective of the 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.
PRINCIPAL The Fund seeks to achieve the investment
INVESTMENT STRATEGIES objective by investing the assets of the
Fund in a portfolio of high quality money
market instruments with maturities of 397
days or less and a dollar-weighted average
portfolio maturity of 90 days or less, and
repurchase agreements with respect to these
types of obligations.
The Fund invests primarily in bank
certificates of deposit, bankers'
acceptances, prime commercial paper,
corporate obligations, municipal
obligations, and U.S. government securities.
The Fund may invest without limit in the
banking industry and in commercial paper and
short-term corporate obligations of
financial institutions.
PRINCIPAL INVESTMENT RISKS AN INVESTMENT IN THE FUND IS NOT A DEPOSIT
OF REPUBLIC NATIONAL BANK OF NEW YORK AND IS
NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS
TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE PRICE, IT IS POSSIBLE TO
LOSE MONEY BY INVESTING IN THE FUND.
Market Risk: The Fund's performance per
share will change daily based on many
factors, including the quality of the
instruments in the Fund's investment
portfolio, national and international
economic conditions and general market
conditions.
Interest Rate Risk: Changes in interest
rates will affect the yield or value of the
Fund's investments in debt securities. If
interest rates rise, the value of the Fund's
investments may fall. Conversely, if
interest rates fall, the value of the Fund's
investments may rise.
</TABLE>
3
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Are seeking preservation of capital
- Have a low risk tolerance
- Are willing to accept lower potential
returns in exchange for a high degree of
safety
- Are investing for a short-term
This Fund will not be appropriate for
anyone:
- Seeking high total returns
- Pursuing a long-term goal or investing for
retirement
The investment objective and strategies of
the Fund are not fundamental and may be
changed without approval of Fund
shareholders. If there is a change in the
investment objective and strategies of the
Fund, shareholders should consider whether
the Fund remains an appropriate investment
in light of their then current financial
position and needs.
The Fund only commenced operations on
November 12, 1998. Accordingly, annual
return information is not yet available for
the Fund. For current yield information on
the Fund, call 1-888-525-5757.
</TABLE>
[PHOTO OF CLOCK]
4
<PAGE> 9
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C> <C> <C>
SHAREHOLDER
FEES
(FEES PAID DIRECTLY A B C D Y
FROM YOUR INVESTMENT) SHARES SHARES SHARES SHARES SHARES
Maximum sales
charge (load) on
purchases None None None None None
Maximum
deferred sales
charge (load)
on redemptions None 4.00% 1.00% None None
ANNUAL FUND
OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM FUND A B C D Y
ASSETS) SHARES SHARES SHARES SHARES SHARES
Management fee .20% .20% .20% .20% .20%
Distribution
(12b-1) fee .00%* .75% .75% .00%* None
Other expenses: .80% .45% .45% .45% .20%
Shareholder
servicing fees .60% .25% .25% .25% None
Other operating
expenses .20% .20% .20% .20% .20%
Total Fund
operating
expenses** 1.00% 1.40% 1.40% .65% .40%
</TABLE>
MONEY MARKET FUND
As an investor in the
Money Market Fund, you
may pay the following
fees and expenses if you
buy and hold shares of
the Fund. Shareholder
fees are paid from your
account. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price.
The Fund offers five
different types of
shares:
CLASS A SHARES (or
"Investor Shares") are
offered to the public,
customers of Shareholder
Servicing Agents and
certain securities
brokers on a continuous
basis with no sales
charge on purchases.
CLASS B AND CLASS C
SHARES are not offered
for sale but are only
offered as an exchange
option. See "Exchanging
your Shares."
CLASS D SHARES (or
"Private Investor
Shares") are identical
to Class A Shares,
except that Class D
Shares are offered only
to domestic private
banking clients and are
subject to lower
operating expenses.
CLASS Y SHARES (or
"Adviser Shares") are
continuously offered for
sale only to customers of Shareholder Servicing Agents. At present, the only
Shareholder Servicing Agents for Class Y Shares are the Investment Adviser
("Republic") and its affiliates.
The Fund's Statement of Additional Information contains more detailed
discussion of the different classes of shares.
* There is a 12b-1 plan for Class A and Class D Shares, which authorizes
payments up to .25% of the Fund's assets. To date, no payments under the
12b-1 Plan have been made.
** Class D Shares were not offered prior to April 1, 1999. The total fund
operating expenses for Class D Shares are based on fees historically paid by
Class A Shares.
5
<PAGE> 10
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
This Example is intended
to help you compare the
cost of investing in the
Fund with the cost of
investing in other
mutual funds. It
illustrates the amount
of fees and expenses you
would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the
end of each period
(unless otherwise
indicated)
- no changes in the
Fund's operating
expenses
Because this example is
hypothetical and for
comparison only, your
actual costs may be
higher or lower.
EXAMPLE
<TABLE>
<S> <C> <C>
1 3
MONEY MARKET FUND YEAR YEARS
CLASS A SHARES $102 $318
CLASS B SHARES
Assuming Redemption $543 $643
Assuming no Redemption $143 $443
CLASS C SHARES
Assuming Redemption $243 $443
Assuming no Redemption $143 $443
CLASS D SHARES* $ 66 $208
CLASS Y SHARES $ 41 $128
</TABLE>
* Class D Shares were not offered prior to April 1, 1999. The estimated costs
of Class D Shares are based on fees historically paid by Class A Shares.
[PHOTO OF CLOCK]
6
<PAGE> 11
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
REPUBLIC U.S. GOVERNMENT MONEY MARKET FUND
<TABLE>
<S> <C>
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.
PRINCIPAL The Fund seeks to achieve this investment
INVESTMENT STRATEGIES objective by investing in obligations issued
or guaranteed by the U.S. Government, its
agencies or instrumentalities with
maturities of 397 days or less and a
dollar-weighted average portfolio maturity
of 90 days or less, and repurchase
agreements with respect to such obligations.
The Fund invests primarily in issues of the
U.S. Treasury, such as bills, notes and
bonds, and issues of U.S. Government
agencies and instrumentalities established
under the authority of an Act of Congress.
PRINCIPAL AN INVESTMENT IN THE FUND IS NOT A DEPOSIT
INVESTMENT RISKS OF REPUBLIC NATIONAL BANK OF NEW YORK AND IS
NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS
TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
Market Risk: The Fund's performance per
share will change daily based on many
factors, including national and
international economic conditions and
general market conditions.
Interest Rate Risk: Changes in interest
rates will affect the yield or value of the
Fund's investments in debt securities. If
interest rates rise, the value of the Fund's
investments may fall. Conversely, if
interest rates fall, the value of the Fund's
investments may rise.
</TABLE>
7
<PAGE> 12
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Are seeking preservation of capital
- Have a low risk tolerance
- Are willing to accept lower potential
returns in exchange for a high degree of
safety
- Are investing for a short-term
This Fund will not be appropriate for
anyone:
- Seeking high total returns
- Pursuing a long-term goal or investing for
retirement
The investment objective and strategies of
the Fund are not fundamental and may be
changed without approval of Fund
shareholders. If there is a change in the
investment objective and strategies of the
Fund, shareholders should consider whether
the Fund remains an appropriate investment
in light of their then current financial
position and needs.
</TABLE>
[PHOTO OF CLOCK]
8
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
The bar chart on this
page shows the U.S.
Government Money Market
Fund's annual returns
and how its performance
has varied from year to
year. The bar chart
assumes reinvestment of
dividends and
distributions.
The returns for Class B,
Class C, Class D and
Class Y Shares will
differ from the Class A
returns shown in the bar
chart because of
differences in expenses
of each class.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR
TOTAL RETURNS
AS OF 12/31
FOR CLASS A
SHARES
<TABLE>
<CAPTION>
<S> <C>
'1991' 5.59
'92' 3.29
'93' 2.78
'94' 3.96
'95' 5.44
'96' 4.84
'97' 4.95
'98' 4.86
</TABLE>
Of course, past performance does not
indicate how the Fund will perform in the
future.
Best quarter: Q1 March 91 +1.60%
Worst quarter: Q1 March 93 +0.64%
9
<PAGE> 14
RISK/RETURN SUMMARY AND FUND EXPENSES
logo
logo
The table below lists the average annual total return for each class of
shares for various time periods.
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST SINCE
DATE YEAR 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
---------------------------------------------
CLASS A May 3, 1990 4.86% 4.80% 4.72%
---------------------------------------------
CLASS B
(WITH APPLICABLE CDSC) Mar. 31, 1998 N/A N/A N/A+
---------------------------------------------
CLASS C
(WITH APPLICABLE CDSC) Nov. 9, 1998 N/A N/A N/A+
---------------------------------------------
CLASS D Apr. 1, 1999 N/A N/A N/A+
---------------------------------------------
CLASS Y July 1, 1996 5.13% N/A 5.14%
--------------------------------------------------------------------------
</TABLE>
As of December 31, 1998 the 7-day yields of the Fund's Class A, B, C, D and Y
shares were 4.33%, 3.49%, 3.55%*, N/A and 4.59%, respectively. For current
yield information on the Fund, call 1-888-525-5757. The U.S. Government Money
Market Fund's yield appears in the Wall Street Journal each Thursday.
+ Average annual return information is not provided because Class B, Class C
and Class D shares were outstanding for less than one year.
* There were no Class C shareholders prior to December 31, 1998. The yield
for Class C shares is an estimate, based upon the Class A Share yield,
adjusted for differences in expenses.
10
<PAGE> 15
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C> <C> <C>
SHAREHOLDER
FEES
(FEES PAID
DIRECTLY FROM A B C D Y
YOUR INVESTMENT) SHARES SHARES SHARES SHARES SHARES
Maximum sales
charge (load)
on purchase None None None None None
Maximum deferred
sales charge
(load) on
redemptions None 4.00% 1.00% None None
ANNUAL FUND
OPERATING
EXPENSES
(EXPENSES THAT
ARE DEDUCTED
FROM FUND A B C D Y
ASSETS) SHARES SHARES SHARES SHARES SHARES
Management fee .20% .20% .20% .20% .20%
Distribution
(12b-1) fee .00%* .75% .75% .00%* None
Other expenses: .80% .45% .45% .45% .20%
Shareholder
servicing fees .60% .25% .25% .25% None
Other
operating
expenses .20% .20% .20% .20% .20%
Total Fund
operating
expenses** 1.00% 1.40% 1.40% .65% .40%
</TABLE>
U.S. GOVERNMENT MONEY
MARKET FUND
As an investor in the
U.S. Government Money
Market Fund, you may pay
the following fees and
expenses if you buy and
hold shares of the Fund.
Shareholder fees are
paid from your account.
Annual Fund operating
expenses are paid out of
Fund assets, and are
reflected in the share
price.
The Fund offers five
different types of
shares:
CLASS A SHARES (or
"Investor Shares") are
offered to the public,
customers of Shareholder
Servicing Agents and
certain securities
brokers on a continuous
basis with no sales
charge on purchases.
CLASS B AND CLASS C
SHARES are not offered
for sale but are only
offered as an exchange
option. See "Exchanging
your Shares."
CLASS D SHARES (or
"Private Investor
Shares") are identical
to Class A Shares,
except that Class D
Shares are offered only
to domestic private
banking clients and are
subject to lower
operating expenses.
CLASS Y SHARES (or "Adviser Shares") are continuously offered for sale only
to customers of Shareholder Servicing Agents. At present, the only
Shareholder Servicing Agents for Class Y Shares are the Investment Adviser
("Republic") and its affiliates.
The Fund's Statement of Additional Information contains more detailed
discussion of the different classes of shares.
* There is a 12b-1 plan for Class A and Class D Shares, which authorizes
payments up to .25% of the Fund's assets. To date, no payments under the
12b-1 Plan have been made.
** Class D Shares were not offered prior to April 1, 1999. The total fund
operating expenses for Class D Shares are based on fees historically paid by
Class A Shares.
11
<PAGE> 16
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
This Example is intended
to help you compare the
cost of investing in the
Fund with the cost of
investing in other
mutual funds. It
illustrates the amount
of fees and expenses you
would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the
end of each period
(unless otherwise
indicated)
- no changes in the
Fund's operating
expenses
Because this example is
hypothetical and for
comparison only, your
actual costs may be
higher or lower.
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT 1 3 5 10
MONEY MARKET FUND YEAR YEARS YEARS YEARS
CLASS A SHARES $102 $318 $ 552 $1,225
CLASS B SHARES
Assuming Redemption $543 $643 $ 766 $1,286
Assuming no
Redemption $143 $443 $ 766 $1,286
CLASS C SHARES
Assuming Redemption $243 $443 $ 766 $1,680
Assuming no
Redemption $143 $443 $ 766 $1,680
CLASS D SHARES* $ 66 $208 $ 362 $ 810
CLASS Y SHARES $ 41 $128 $ 224 $ 505
</TABLE>
* Class D Shares were not offered prior to April 1, 1999. The estimated costs
of Class D Shares are based on fees historically paid by Class A Shares.
[PHOTO OF CLOCK]
12
<PAGE> 17
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
REPUBLIC NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES 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 that is
exempt from federal, New York State and New
York City personal income taxes as is
consistent with the preservation of capital.
PRINCIPAL INVESTMENT The Fund seeks to achieve this investment
STRATEGIES objective by investing the assets of the
Fund primarily in a non-diversified
portfolio of short-term, high quality,
tax-exempt money market instruments.
The Fund invests primarily in high-quality
commercial paper, municipal bonds, and
municipal notes, including tax and revenue
authorization notes, tax anticipation notes,
bond anticipation notes and revenue
anticipation notes, that are exempt from
federal, New York State, and New York City
personal income tax.
The Fund may invest more than 25% of the
Fund's assets in participation interests
issued by banks in industrial development
bonds and other Municipal Obligations if
such investments meet the prescribed quality
standards for the Fund (rated AA or higher
by a Nationally Recognized Statistical
Rating Organization or of comparable
quality).
</TABLE>
13
<PAGE> 18
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
<TABLE>
<S> <C>
PRINCIPAL AN INVESTMENT IN THE FUND IS NOT A DEPOSIT
INVESTMENT RISKS OF REPUBLIC NATIONAL BANK OF NEW YORK AND IS
NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS
TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
Market Risk: The Fund's performance per
share will change daily based on many
factors, including the quality of the
instruments in the Fund's investment
portfolio, national and international
economic conditions and general market
conditions.
Interest Rate Risk: Changes in interest
rates will affect the yield or value of the
Fund's investments in debt securities. If
interest rates rise, the value of the Fund's
investments may fall. Conversely, if
interest rates fall, the value of the Fund's
investments may rise.
Concentration Risk: Because the Fund will
concentrate its investments in New York
obligations and may invest a significant
portion of its assets in the securities of a
single issuer or sector, the Fund's assets
could lose significant value due to the poor
performance of a single issuer or sector.
Credit Risk: Historically, New York State
and other issuers of New York Municipal
Obligations have experienced periods of
financial difficulty. Because a significant
share of New York State's economy depends on
financial and business services, any change
in market conditions that adversely affect
these industries could affect the ability of
New York and its localities to meet its
financial obligations. If such difficulties
arise in the future, you could lose money on
your investment.
Tax Risk: The Fund may invest up to 20% of
its total assets in obligations the interest
income on which is subject to federal, New
York State and New York City personal income
tax. In addition, interest on certain
securities could subject a shareholder to
the alternative minimum tax.
</TABLE>
14
<PAGE> 19
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Are seeking tax-free income
- Are seeking preservation of capital
- Have a low risk tolerance
- Are willing to accept lower potential
returns in exchange for a high degree of
safety
- Are investing for a short-term
- Live in New York
This Fund will not be appropriate for
anyone:
- Seeking high total returns
- Pursuing a long-term goal or investing for
retirement
- Investing through a tax-advantaged
retirement plan
</TABLE>
The investment objective and strategies of
the Fund are not fundamental and may be
changed without approval of Fund
shareholders. If there is a change in the
investment objective and strategies of the
Fund, shareholders should consider whether
the Fund remains an appropriate investment in
light of their then current financial
position and needs.
[PHOTO OF CLOCK]
15
<PAGE> 20
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
The bar chart on this
page shows the New York
Tax-Free Money Market
Fund's annual returns
and how its performance
has varied from year to
year. The bar charts
assumes reinvestment of
dividends and
distributions.
The returns for Class B,
Class C, Class D and
Class Y Shares will
differ from the Class A
returns shown in the bar
chart because of
differences in expenses
of each class.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR
TOTAL RETURNS
AS OF 12/31
FOR CLASS A
SHARES*
<TABLE>
<CAPTION>
<S> <C>
'1995' 3.46
'96' 2.94
'97' 3.06
'98' 2.83
</TABLE>
Of course, past performance does not
indicate how the Fund will perform in the
future.
Best quarter: Q2 June 95 +0.92%
Worst quarter: Q4 Dec. 98 +0.65%
16
<PAGE> 21
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
The table below lists the average annual total return for each class of
shares for various time periods.
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST SINCE
DATE YEAR 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
-------------------------------------------
CLASS A Nov. 17, 1994 2.83% N/A 3.09%
-------------------------------------------
CLASS B Feb. 1, 1998 N/A N/A N/A+
(with applicable CDSC)
-------------------------------------------
CLASS C Nov. 9, 1998 N/A N/A N/A+
(with applicable CDSC)
-------------------------------------------
CLASS D Apr. 1, 1999 N/A N/A N/A+
-------------------------------------------
CLASS Y July 1, 1996 3.29% N/A 3.19%
------------------------------------------------------------------------
</TABLE>
As of December 31, 1998 the 7-day yields of the Fund's Class A, B, C, D and Y
shares were 2.79%, 2.05%*, 2.05%*, N/A and 3.05%, respectively. As of
December 31, 1998 the 7-day tax-equivalent yields of the Fund's Class A, B,
C, D and Y shares were 4.62%, 3.39%*, 3.39%*, N/A and 5.49%, respectively.
For current yield information on the Fund, call 1-888-525-5757. The New York
Tax Free Money Market Fund's yield appears in the Wall Street Journal each
Thursday.
+ Average annual return information is not provided because Class B, Class C
and Class D shares were outstanding for less than one year.
* There were no Class B and Class C shareholders prior to December 31, 1998.
The yields for Class B and Class C Shares are estimates, based upon Class A
Share yields, adjusted for differences in expenses.
17
<PAGE> 22
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C> <C> <C>
SHAREHOLDER
FEES
(FEES PAID
DIRECTLY FROM A B C D Y
YOUR INVESTMENT) SHARES SHARES SHARES SHARES SHARES
Maximum sales
charge (load)
on purchase None None None None None
Maximum deferred
sales charge
(load) on
redemptions None 4.00% 1.00% None None
ANNUAL FUND
OPERATING
EXPENSES
(EXPENSES THAT
ARE DEDUCTED
FROM FUND A B C D Y
ASSETS) SHARES SHARES SHARES SHARES SHARES
Management fee .15% .15% .15% .15% .15%
Distribution
(12b-1) fee .00%* .75% .75% .00%* None
Other expenses: .85% .50% .50% .50% .25%
Shareholder
servicing fees .60% .25% .25% .25% None
Other
operating
expenses .25% .25% .25% .25% .25%
Total Fund
operating
expenses** 1.00% 1.40% 1.40% .65% .40%
</TABLE>
NEW YORK TAX-FREE MONEY
MARKET FUND
As an investor in the
New York Tax Free Money
Market Fund, you may pay
the following fees and
expenses if you buy and
hold shares of the Fund.
Shareholder fees are
paid from your account.
Annual Fund operating
expenses are paid out of
Fund assets, and are
reflected in the share
price.
The Fund offers five
different types of
shares:
CLASS A SHARES (or
"Investor Shares") are
offered to the public,
customers of Shareholder
Servicing Agents and
certain securities
brokers on a continuous
basis with no sales
charge on purchases.
CLASS B AND CLASS C
SHARES are not offered
for sale but are only
offered as an exchange
option. See "Exchanging
your Shares."
CLASS D SHARES (or
"Private Investor
Shares") are identical to Class A Shares, except that Class D Shares are
offered only to domestic private banking clients and are subject to lower
operating expenses.
CLASS Y SHARES (or "Adviser Shares") are continuously offered for sale only
to customers of Shareholder Servicing Agents. At present, the only
Shareholder Servicing Agents for Class Y Shares are the Investment Adviser
("Republic") and its affiliates.
The Fund's Statement of Additional Information contains more detailed
discussion of the different classes of shares.
* There is a 12b-1 plan for Class A and Class D Shares, which authorizes
payments up to .25% of the Fund's assets. To date, no payments under the
12b-1 Plan have been made.
** Class D Shares were not offered prior to April 1, 1999. The total fund
operating expenses for Class D Shares are based on fees historically paid by
Class A Shares.
18
<PAGE> 23
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
This Example is intended
to help you compare the
cost of investing in the
Fund with the cost of
investing in other
mutual funds. It
illustrates the amount
of fees and expenses you
would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the
end of each period
(unless otherwise
indicated)
- no changes in the
Fund's operating
expenses
Because this example is
hypothetical and for
comparison only, your
actual costs may be
higher or lower.
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
NEW YORK TAX-FREE 1 3 5 10
MONEY MARKET FUND YEAR YEARS YEARS YEARS
CLASS A SHARES $102 $318 $552 $1,225
CLASS B SHARES
Assuming Redemption $543 $643 $766 $1,286
Assuming no
Redemption $143 $443 $766 $1,286
CLASS C SHARES
Assuming Redemption $243 $443 $766 $1,680
Assuming no
Redemption $143 $443 $766 $1,680
CLASS D SHARES* $ 66 $208 $362 $ 810
CLASS Y SHARES $ 41 $128 $224 $ 505
</TABLE>
* Class D Shares were not offered prior to April 1, 1999. The estimated costs
of Class D Shares are based on fees historically paid by Class A Shares.
[PHOTO OF CLOCK]
19
<PAGE> 24
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
LOGO
LOGO
REPUBLIC MONEY MARKET FUND
TICKER SYMBOLS: CLASS A: REAXX CLASS B: N/A CLASS C: N/A
CLASS D: N/A CLASS Y: RMYXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the 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 Money Market Fund seeks to achieve this investment objective by investing
in a portfolio of high quality debt obligations with maturities of 397 days
or less and a dollar-weighted average portfolio maturity of 90 days or less,
and repurchase agreements with respect to these types of obligations. The
Fund primarily invests in bank certificates of deposit, bankers' acceptances,
prime commercial paper, corporate obligations and U.S. government securities.
Consistent with its investment objectives, the Money Market Fund:
- will attempt to maximize yields by portfolio trading and by buying and
selling portfolio investments in anticipation of or in response to
changing economic and money market conditions and trends.
- will invest to take advantage of temporary disparities in yields of
different segments of the high-grade money market or among particular
instruments within the same segment of the market.
- may invest without limit in commercial paper of foreign issuers and in
bank certificates of deposit and bankers' acceptances payable in U.S.
dollars and issued by foreign banks or by foreign branches of U.S. banks.
- may invest without limit in the banking industry and in commercial paper
and short-term corporate obligations of issuers in the personal credit
institution and business credit institution industries. The Fund will
invest no more than 25% of its assets in such obligations and may do so
only when, in the opinion of the Fund's investment adviser, the yield,
marketability and availability of investments in those industries justify
any additional risks associated with the concentration of the Fund's
assets in those industries.
- may lend portfolio securities amounting to not more than 25% of its
assets to broker-dealers. These transactions will be fully collateralized
at all times with cash and short-term high-quality debt obligations.
20
<PAGE> 25
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
LOGO
LOGO
REPUBLIC U.S. GOVERNMENT MONEY MARKET FUND
TICKER SYMBOLS: CLASS A: FTRXX CLASS B: N/A CLASS C: N/A
CLASS D: N/A CLASS Y: RGYXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
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 U.S. Government Money Market Fund seeks to achieve this investment
objective by investing at least 65% of 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 a dollar-weighted
average portfolio maturity of 90 days or less, and repurchase agreements with
respect to these types of obligations.
Consistent with the Fund's investment objectives, the U.S. Government Money
Market Fund will invest in:
- issues of the U.S. Treasury, such as bills, notes and bonds.
- issues of U.S. Government agencies and instrumentalities established
under the authority of an Act of Congress, including obligations:
- supported by the "full faith and credit" of the United States (e.g.,
obligations guaranteed by the Export-Import Bank of the United
States).
- supported by the right of the issuer to borrow from the U.S. Treasury
(e.g., obligations of the Federal National Mortgage Association).
- supported only by the credit of the agency or instrumentality (e.g.,
obligations of the Student Loan Marketing Association).
21
<PAGE> 26
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
LOGO
LOGO
REPUBLIC NEW YORK TAX-FREE MONEY MARKET FUND
TICKER SYMBOLS: CLASS A: RNTXY CLASS B: N/A CLASS C: N/A
CLASS D: N/A CLASS Y: RYYXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
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 New York Tax-Free Money Market Fund seeks to achieve this investment
objective 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 and a dollar-weighted average portfolio
maturity of 90 days or less.
The Fund will primarily invest in municipal bonds, notes and commercial paper
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 these types of obligations.
Consistent with the Fund's investment objectives, the New York Tax-Free Money
Market Fund:
- will invest at least 80% of its assets in tax-exempt obligations, and at
least 65% of the Fund's assets in New York Municipal Obligations
(however, market conditions may from time to time limit the availability
of these obligations).
- 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 alternative minimum tax.
- may invest in taxable securities (such as U.S. Government obligations or
certificates of deposit of domestic banks), but only if such securities
are of comparable quality and credit risk with the Municipal Obligations
described above.
- may invest more than 25% of the Fund's assets in participation interests
issued by banks in industrial development bonds and other Municipal
Obligations if such investments meet the prescribed quality standards for
the Fund.
- may acquire stand-by commitments from banks with respect to municipal
obligations purchased on behalf of the Fund. The Fund intends to acquire
the stand-by commitments to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
22
<PAGE> 27
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
LOGO
LOGO
GENERAL RISK FACTORS: ALL MONEY MARKET FUNDS
The Funds expect to maintain a net asset value of $1.00 per share, but there
is no assurance that the Funds will be able to do so on a continuous basis.
The Funds' performance per share will change daily based on many factors,
including fluctuation in interest rates, the quality of the instruments in
each Fund's investment portfolio, national and international economic
conditions and general market conditions.
An investment in the Funds is neither insured nor guaranteed by the U.S.
Government. Shares of a Fund are not deposits or obligations of, or
guaranteed or endorsed by, Republic National Bank of New York 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 investment objectives of each Fund will be
achieved. In addition, each Fund's investment policies, as well as the
relatively short maturity of obligations purchased by the Funds, may result
in frequent changes in each Fund's portfolio, which may give rise to taxable
gains and reduce investment returns.
The Funds may also be subject to credit risks. The Funds could lose money if
the issuer of a security owned by the Fund is unable to meet its financial
obligations.
YEAR 2000
Like other funds and business organizations around the world, the Funds could
be adversely affected if the computer systems used by the Adviser and the
Funds' other service providers do not properly process and calculate
date-related information for the year 2000 and beyond. In addition, Year 2000
issues may adversely affect companies in which the Funds invest where, for
example, such companies incur substantial costs to address Year 2000 issues
or suffer losses caused by the failure to adequately or timely do so.
The Funds have been assured that the Adviser and the Funds' other service
providers (i.e., Administrator, Transfer Agent, Fund Accounting Agent,
Custodian and Distributor) have developed and are implementing clearly
defined and documented plans intended to minimize risks to services critical
to the Funds' operations associated with Year 2000 issues. Internal efforts
include a commitment to dedicate adequate staff and funding to identify and
remedy Year 2000 issues, and specific actions such as inventorying software
systems, determining inventory items that may not function properly after
December 31, 1999, reprogramming or replacing such systems, and retesting for
Year 2000 readiness. The Funds' Adviser and service providers are likewise
seeking assurances from their respective vendors and suppliers that such
entities are addressing any Year 2000 issues, and each provider intends to
engage, where appropriate, in private and industry or "streetwide" interface
testing of systems for Year 2000 readiness.
23
<PAGE> 28
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
LOGO
In the event that any systems upon which the Funds are dependent are not Year
2000 ready by December 31, 1999, administrative errors and account
maintenance failures would likely occur.
While the ultimate costs or consequences of incomplete or untimely resolution
of Year 2000 issues by the Adviser or the Funds' service providers cannot be
accurately assessed at this time, the Funds currently have no reason to
believe that the Year 2000 plans of the Adviser and the Funds' service
providers will not be completed by December 31, 1999, or that the anticipated
costs associated with full implementation of their plans will have a material
adverse impact on either their business operations or financial condition or
those of the Funds. The Funds and the Adviser will continue to closely
monitor developments relating to this issue, including development by the
Adviser and the Funds' service providers of contingency plans for providing
back-up computer services in the event of a systems failure or the inability
of any provider to achieve Year 2000 readiness. Separately, the Adviser will
monitor potential investment risk related to Year 2000 issues.
SPECIFIC RISK FACTORS: MONEY MARKET FUND
The Money Market Fund may invest in U.S. dollar-denominated foreign
securities. Foreign investments subject the Fund to investment risks
different from those associated with domestic investments. Foreign
investments may be riskier than U.S. investments because of unstable
international political and economic conditions, foreign controls on
investment, withholding taxes, or a lack of adequate company information, or
government regulation.
SPECIFIC RISK FACTORS: NEW YORK TAX-FREE MONEY MARKET FUND
Because this Fund will concentrate its investments in New York and may
concentrate a significant portion of its assets in the securities of a single
issuer or sector, investment in this Fund may pose investment risks greater
than those posed by a more broadly diversified portfolio. Consequently,
unlike a more diversified portfolio, the value of the Fund's assets could
lose significant value due to the poor performance of a single issuer or
sector.
The Fund may also be subject to credit risks. Historically, New York State
and other issuers of New York Municipal Obligations have experienced periods
of financial difficulty. Because a significant share of New York State's
economy depends on financial and business services, any change in market
conditions that adversely affect these industries could affect the ability of
New York and its localities to meet its financial obligations. The financial
stability of New York State is closely related to the financial stability of
its localities, particularly New York City, which has required and continues
to require significant financial assistance from New York State. For Example,
in 1975, the State took action to restore the financial health of New York
City by establishing, among other things, a supervisory system that monitored
the City's finances. To the extent that New
24
<PAGE> 29
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
LOGO
York City and other New York localities require the State's assistance, the
ability of the State to meet its own obligations as they come due or to
obtain additional financing could be adversely affected. If this occurs, you
could lose money on your investment.
The purchase of participation interests 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.
The Fund may invest in a limited degree in stand-by commitments. Stand-by
commitments are also subject to certain risks, which include the ability of
the issuer to pay when the commitment is exercised, the fact that the
commitment is not marketable, and the fact that the maturity of the
underlying obligation generally differs from that of the commitment.
While the interest on bonds issued to finance essential state and local
government operations is generally tax-exempt, interest on certain municipal
bonds may be treated as a tax preference item for purposes of the alternative
minimum tax. Thus, the interest on these securities could subject a
shareholder, to, or increase liability under, the alternative minimum tax,
depending on the shareholder's tax situation.
25
<PAGE> 30
FUND MANAGEMENT
logo
logo
THE INVESTMENT ADVISER
Republic National Bank of New York ("Republic" or the "Adviser"), 452 Fifth
Avenue, New York, New York 10018, is the investment adviser for the Funds,
pursuant to an Investment Advisory Contract with the Republic Funds. Republic
is a wholly owned subsidiary of Republic New York Corporation, a registered
bank holding company. As of September 30, 1998, Republic was the 17th largest
commercial bank in the United States as measured by assets. Republic
currently provides investment advisory services for individuals, trusts,
estates and institutions. Republic manages more than $31.9 billion in assets,
including $1.39 billion in the Republic Family of Funds.
Through its portfolio management team, Republic makes the day-to-day
investment decisions and continuously reviews, supervises and administers the
Funds' investment programs.
For these advisory services, the Funds are paid a management fee as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 10/31/98
<S> <C>
------------------------------
MONEY MARKET FUND .20%*
------------------------------
U.S. GOVERNMENT MONEY MARKET FUND .10%**
------------------------------
NEW YORK TAX-FREE MONEY MARKET FUND .08%**
------------------------------
</TABLE>
* The Money Market Fund did not commence operations until November 9, 1998.
This percentage does not reflect any waiver of fees by the advisor.
** Republic waived a portion of its contractual fees with the Funds for the
most recent fiscal year. Contractual fees (without waivers) are: U.S.
Government Money Market Fund, .20%; and New York Tax-Free Money Market Fund,
.15%.
THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services ("BISYS"), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as the Fund's administrator. Management and
administrative services of BISYS include providing office space, equipment
and clerical personnel to the Fund and supervising custodial, auditing,
valuation, bookkeeping, legal and dividend dispersing services.
BISYS also serves as the distributor of the Fund's shares. BISYS may provide
financial assistance to the Funds in connection with pre-approved seminars,
conferences and advertising to the extent permitted by applicable state or
self-regulatory agencies, such as the National Association of Securities
Dealers.
Each Fund's Statement of Additional Information has more detailed information
about the Adviser, Distributor and Administrator, and other service
providers.
26
<PAGE> 31
SHAREHOLDER INFORMATION
logo
logo
PRICING OF FUND SHARES
-----------------------
HOW NAV IS CALCULATED
The NAV is calculated
by adding the total
value of a Fund's
investments and other
assets, subtracting its
liabilities and then
dividing that figure by
the number of
outstanding shares of
the Fund:
NAV =
Total Assets -
Liabilities
-----------------------
Number of Shares
Outstanding
-----------------------
MONEY MARKET FUNDS
The net asset value per share (NAV) of
the Money Market Fund, the U.S.
Government Money Market Fund, and the
New York Tax-Free Money Market Fund
(collectively, the "Money Market Funds"
or "Funds") is determined daily at the
close of regular trading on the New York
Stock Exchange, normally at 4 p.m.
Eastern time on days the Exchange is
open. The New York Stock Exchange is
open every weekday except for the days
on which national holidays are observed.
The Funds value their securities at
their amortized cost. This method
involves valuing an instrument at its
cost and thereafter applying a constant
amortization to maturity of any discount
or premium, regardless of the impact of
fluctuating interest rates on the market
value of the investment.
Your order for purchase, sale or
exchange of shares is priced at the next
NAV calculated after your order is
received by the Fund (whether by mail,
overnight service, or telephone). This
is what is known as the offering price.
If you sell Class B Shares or Class C
Shares, a contingent deferred sales load
may apply, which would reduce the amount
of money paid to you by the Fund, as
noted in the section on "Distribution
Arrangements/Sales Charges."
27
<PAGE> 32
SHAREHOLDER INFORMATION
logo
logo
You may purchase Funds
through the Republic
Funds Distributor or
through banks, brokers
and other investment
representatives, which
may charge additional
fees and may require
higher minimum
investments or impose
other limitations on
buying and selling
shares. If you purchase
shares through an
investment
representative, that
party is responsible for
transmitting orders by
close of business and
may have an earlier
cut-off time for
purchase and sale
requests. Consult your
investment
representative or
institution for specific
information.
PURCHASING AND ADDING TO YOUR SHARES
<TABLE>
<CAPTION>
MINIMUM
INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
CLASS A AND CLASS D
SHARES
-----------------------------------------------
Regular $ 1,000 $ 100
(non-retirement)
-----------------------------------------------
Retirement (IRA) $ 250 $ 100
-----------------------------------------------
Automatic Investment
Plan $ 250 $ 25
-----------------------------------------------
CLASS Y SHARES $1,000,000 $ N/A
</TABLE>
All purchases must be in U.S. dollars.
A fee will be charged for any checks
that do not clear. Third-party checks
are not accepted.
A Fund may waive its minimum purchase
requirement, and the Distributor may
reject a purchase order if the
Distributor considers it in the best
interest of the Fund and its
shareholders.
Class B Shares and Class C Shares of
the Funds are not offered for sale but
are only offered as an exchange option
for Class B and Class C Shareholders of
the Trust's other investment
portfolios.
AVOID 31% TAX WITHHOLDING
The Funds are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Funds with their certified taxpayer identification number in compliance with
IRS rules, or if you have been notified by the IRS that you are subject to
backup withholding. Backup withholding is not an additional tax; rather, it
is a way in which the IRS ensures it will collect taxes otherwise due. Any
amounts withheld may be credited against your U.S. federal income tax
liability. To avoid tax withholding, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
28
<PAGE> 33
SHAREHOLDER INFORMATION
logo
logo
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
logoBY REGULAR MAIL OR BY OVERNIGHT SERVICE
Initial Investment:
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Funds and
he or she will take care of the necessary documentation. For all other
purchases, follow the instructions below.
1. Carefully read, complete, and sign the account application. Establishing
your account privileges now saves you the inconvenience of having to add
them later.
2. Make check, bank draft or money order payable to "Republic Funds" and
include the name of the appropriate Fund(s) on the check.
Mail to: Republic Funds, PO Box 182845, Columbus, Ohio 43218-2845.
Subsequent:
1. Use the investment slip attached to
your account statement.
Or, if unavailable,
2. Include the following information in
writing:
- Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your
check.
Mail investment slip and check to: Republic Funds, PO Box 182845, Columbus,
Ohio 43218-2845.
logoELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be
a United States Bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
1-800-782-8183. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-782-8183 to arrange a transfer from your bank account.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow
financial institutions to
send funds to each other,
almost instantaneously. With
an electronic purchase or
sale, the transaction is
made through the Automated
Clearing House (ACH) and may
take up to eight days to
clear. There is generally no
fee for ACH transactions.
logoBY WIRE TRANSFER
For information on how to request a wire transfer, call 1-800-782-8183.
29
<PAGE> 34
SHAREHOLDER INFORMATION
logo
logo
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in the
Funds from your bank account, through
payroll deduction or from your federal
employment, Social Security or other
regular government checks. Automatic
investments can be as little as $25, once
you've invested the $250 minimum required
to open the account.
To invest regularly from your bank
account:
Complete the Automatic Investment Plan
portion on your Account Application.
Make sure you note:
J Your bank name, address and account
number
J The amount you wish to invest
automatically (minimum $25)
J How often you want to invest (every
month, 4 times a year, twice a year
or once a year)
J Attach a voided personal check.
To invest regularly from your paycheck or
government check:
Call 1-800-782-8183 for an enrollment
form.
DIRECTED DIVIDEND OPTION
By selecting the appropriate
box in the Account
Application, you can elect to
receive your distributions in
cash (check) or have
distributions (capital gains
and dividends) reinvested in
another Republic Fund without
a sales charge. You must
maintain the minimum balance
in each Fund into which you
plan to reinvest dividends or
the reinvestment will be
suspended and your dividends
paid to you. The Fund may
modify or terminate this
reinvestment option without
notice. You can change or
terminate your participation
in the reinvestment option at
any time.
-----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Class A Shares than for Class B and C Shares,
because Class A Shares have lower distribution expenses. Class D Shares
receive a higher dividend than Class A Shares because Class D Shares have
lower operating expenses. Class Y Shares receive the highest dividends,
because they have the lowest operating expenses. Capital gains are
distributed at least annually.
Distributions are made on a per share basis regardless of how long you've
owned your shares. Therefore, if you invest shortly before the distribution
date, some of your investment will be returned to you in the form of a
distribution, which may be taxable.
-----------------------------------------------------------------------------
30
<PAGE> 35
SHAREHOLDER INFORMATION
logo
logo
SELLING YOUR SHARES
You may sell your shares at
any time. Your sales price
will be the next NAV after
your sell order is accepted
by the Fund, its transfer
agent, or your investment
representative. Normally
you will receive your
proceeds within a week
after your request is
received. See section on
"General Policies on
Selling Shares" below.
WITHDRAWING MONEY FROM YOUR FUND
INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you
request a withdrawal in cash. This is
also known as redeeming shares or a
redemption of shares.
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B or C shares, you
will be charged a fee for any shares
that have not been held for a sufficient
length of time. These fees will be
deducted from the money paid to you. See
the sections on "Distribution
Arrangements/Sales Charges" and
"Exchanging your Shares" below for
details.
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your financial adviser or broker, ask him or
her for redemption procedures. Your adviser and/or broker may have
transaction minimums and/or transaction times which will affect your
redemption. For all other sales transactions, follow the instructions below.
logoBY TELEPHONE
(unless you have declined telephone sales privileges)
1. Call 1-800-782-8183 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer). (See "General Policies on
Selling Shares -- Verifying Telephone Redemptions" below)
logoBY MAIL OR OVERNIGHT SERVICE
(See "General Policies on Selling Shares -- Redemptions in Writing Required"
below)
1. Call 1-800-782-8183 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to: Republic Funds PO Box 182845, Columbus, Ohio 43218-2845.
31
<PAGE> 36
SHAREHOLDER INFORMATION
logo
logo
SELLING YOUR SHARES
CONTINUED
logoWIRE TRANSFER
You must indicate this option on your account application.
Call 1-800-782-8183 to request a wire transfer.
If you call by 12:00 a.m. Eastern time, your payment will normally be wired
to your bank on the same business day. If you call by 4 p.m. Eastern time,
your payment will normally be wired to your bank on the next business day.
Otherwise, it will normally be wired on the second business day after your
call.
The Fund may charge a wire transfer fee.
NOTE: Your financial institution may also charge a separate fee.
logoELECTRONIC REDEMPTIONS
Call 1-800-782-8183 to request an electronic redemption.
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
If you call by 12:00 a.m. Eastern time, the NAV of your shares will normally
be determined on the same day and the proceeds credited within 7 days.
Your bank may charge for this service.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum withdrawal is $50. To activate this
feature:
- Make sure you've checked the appropriate box on the Account Application,
or call 1-800-782-8183.
- Include a voided personal check.
- Your account must have a value of $10,000 or more to start withdrawals.
- If the value of your account falls below $1,000, you may be asked to add
sufficient funds to bring the account back to $1,000, or the Fund may
close your account and mail the proceeds to you.
32
<PAGE> 37
SHAREHOLDER INFORMATION
logo
logo
SELLING YOUR SHARES
CONTINUED
CHECK REDEMPTION SERVICE
You may write checks in amounts of $250 or more on your account in the Money
Market Funds. To obtain checks, complete the signature card section of the
Account Application or contact the Funds to obtain a signature card.
Dividends and distributions will continue to be paid up to the day the check
is presented for payment. The check writing feature may be modified or
terminated upon 30-days written notice. You may not close your Money Market
Fund account by writing a check.
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which include each of
the following:
- Redemptions over $10,000
- Your account registration or the name(s) in your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another Fund account
with a different registration.
You must obtain a signature guarantee from members of the STAMP (Securities
Transfer Agents Medallion Program), MSP (New York Stock Exchange Signature
Program) or SEMP (Stock Exchanges Medallion Program). Members are subject to
dollar limitations which must be considered when requesting their guarantee.
The Transfer Agent may reject any signature guarantee if it believes the
transaction would otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Funds make every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Transfer Agent may be liable for losses due to
unauthorized transactions.
33
<PAGE> 38
SHAREHOLDER INFORMATION
logo
logo
SELLING YOUR SHARES
CONTINUED
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you cannot redeem any
portion of it until the Transfer Agent is satisfied that the check has
cleared (which may require up to 15 business days). You can avoid this delay
by purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders.
CLOSING OF SMALL ACCOUNTS
If your account falls below $50 due to redemptions, the Fund may ask you to
increase your balance. If it is still below $50 after 30 days, the Fund may
close your account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash, if
distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in
the Fund.
34
<PAGE> 39
SHAREHOLDER INFORMATION
logo
logo
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
This section describes the sales charges and fees you will pay as an investor
in different share classes offered by the Funds.
<TABLE>
<S> <C> <C> <C>
CLASS A SHARES CLASS D SHARES CLASS Y SHARES
Sales Charge (Load) No front-end No front-end No front-end
sales charge. sales charge. sales charge.
Distribution (12b-1) Subject to Subject to No distribution
and Service Fees aggregate annual aggregate annual or service fees.
distribution and distribution and
shareholder shareholder
servicing fees servicing fees
of up to .60% of of up to .25% of
the Fund's total the Fund's total
assets. assets.
Fund Expenses Lower annual Lower annual Lower annual
expenses than expenses than expenses than
Class B or C Class A, B or C Class A, B, C or
shares. shares. D shares.
</TABLE>
CLASS B SHARES AND CLASS C SHARES
Class B Shares and Class C Shares are not being sold but are only offered as
an exchange option for Class B shareholders and Class C shareholders of other
funds in the Republic Family of Funds who wish to exchange some or all of
those shares for Class B Shares or Class C Shares, respectively, of the Money
Market Funds. Although Class B Shares and Class C Shares are not subject to a
sales charge when a shareholder exchanges Class B Shares and Class C Shares
of another Trust portfolio, they may be subject to a contingent deferred
sales charge (CDSC) when redeemed. See "Exchanging Your Shares" below. In
addition, Class B and Class C Shares are subject to an aggregate annual
distribution and shareholder servicing fees of up to 1.00% of the Funds'
assets. Shareholders of Class B Shares and Class C Shares pay higher annual
expenses than shareholders of Class A Shares, Class D Shares and Class Y
Shares.
35
<PAGE> 40
SHAREHOLDER INFORMATION
logo
logo
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
DISTRIBUTION (12b-1) AND SHAREHOLDER SERVICE FEES
The Funds have adopted 12b-1 plans for Class A, Class B, Class C and Class D
Shares. 12b-1 fees compensate the Distributor and other dealers and
investment representatives for services and expenses relating to the sale and
distribution of the Funds' shares and/or for providing shareholder services.
12b-1 fees are paid from Fund assets on an ongoing basis, and will decrease
the return on your investment.
- The 12b-1 fees vary by share class as follows:
- Class A Shares may pay a 12b-1 fee of up to .25% of the average daily
net assets of the applicable Fund.
- Class B and Class C Shares pay a 12b-1 fee of up to .75% of the
average daily net assets of the applicable Fund. This will cause
expenses for Class B and Class C Shares to be higher and dividends to
be lower than for Class A Shares, Class D Shares, and Class Y Shares.
- Class D Shares may pay a 12b-1 fee of up to .25% of the average daily
net assets of the applicable Fund.
- Class Y Shares do not pay a 12b-1 fee.
- The higher 12b-1 fees on Class B and Class C Shares, together with the
CDSC, help the Distributor sell Class B and Class C Shares without an
"up-front" sales charge. In particular, these fees help to defray the
Distributor's costs of advancing brokerage commissions to investment
representatives.
- In addition to the 12b-1 fees, Class A Shares are subject to a
shareholder servicing fee of up to .60%. Class B, Class C and Class D
Shares are subject to a shareholder servicing fee of up to .25%.
- The aggregate of the 12b-1 fees and shareholder servicing fees will not
exceed .60% for the Class A Shares, 1.00% for the Class B and Class C
Shares, and .25% for Class D Shares.
Long-term Class B and Class C shareholders may pay indirectly more than the
equivalent of the maximum permitted front-end sales charge due to the
recurring nature of 12b-1 distribution and service fees.
36
<PAGE> 41
SHAREHOLDER INFORMATION
logo
logo
EXCHANGING YOUR SHARES
You can exchange your shares in one Fund for shares of the same class of
another Republic Fund, usually without paying additional sales charges (see
"Notes on Exchanges" below). No transaction fees are charged for exchanges.
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.
Exchanges may be made by sending a written request to Republic Funds, PO Box
182845, Columbus, Ohio 43218-2845 or by calling 1-800-782-8183. Please
provide the following information:
X Your name and telephone number
X The exact name on your account and account number
X Taxpayer identification number (usually your Social Security number)
X Dollar value or number of shares to be exchanged
X The name of the Fund from which the exchange is to be made
X The name of the Fund into which the exchange is being made.
See "Selling your Shares" for important information about telephone
transactions.
To prevent disruption in the management of the Funds, due to market timing
strategies, exchange activity may be limited.
NOTES ON EXCHANGES
When exchanging from a Fund that has no sales charge or a lower sales charge
to a Fund with a higher sales charge, you will pay the difference.
The registration and tax identification numbers of the two accounts must be
identical.
The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
Be sure to read the Prospectus carefully of any Fund into which you wish to
exchange shares.
Class B Shares of the Republic Income Funds (currently, the Republic Bond
Fund and Republic Fixed-Income Fund) or Republic Equity Funds (currently, the
Republic Equity Fund, Republic Overseas Equity Fund and Republic Opportunity
Fund) may be exchanged for Class D Shares of the Money Market Funds only if
you are otherwise eligible to receive them. In all other cases, you will
receive Class A Shares of the Money Market Funds in exchange for your Class B
Shares of the Republic Income or Republic Equity Funds.
37
<PAGE> 42
SHAREHOLDER INFORMATION
logo
logo
EXCHANGING YOUR SHARES
CONTINUED
CLASS B SHARES
Investors purchasing shares of the Funds will ordinarily purchase either
Class A Shares, Class D Shares or Class Y Shares. Investors will only receive
Class B Shares or Class C Shares by exchanging from the Class B Shares or
Class C Shares of other Republic Funds. If you exchange shares of other
Republic funds for shares of the Funds and wish to sell your shares, Class B
Shares may be subject to a contingent deferred sales charge ("CDSC").
Specifically, Class B Shares of the Fund will be subject to a declining CDSC
if Class B Shares of any of the Republic Income Funds (currently, the
Republic Bond Fund and Republic New York Tax-Free Bond Fund) are exchanged
for Class B Shares of any of the Money Market Funds and redeemed within 3
years. In such cases, the CDSC will be:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
---------------------------------------------------------------------
<S> <C>
0-1 3.00%
1-2 2.00%
2-3 1.00%
more than 3 None
</TABLE>
In addition, Class B Shares of the Fund will be subject to a declining CDSC
if Class B Shares of any of the Republic Equity Funds (currently, the
Republic Equity Fund, Republic Overseas Equity Fund and Republic Opportunity
Fund) are exchanged for Class B Shares of any of the Money Market Funds and
redeemed within 4 years. The CDSC will be:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
---------------------------------------------------------------------
<S> <C>
0-1 4.00%
1-2 3.00%
2-3 2.00%
3-4 1.00%
more than 4 None
</TABLE>
The CDSC will be based upon the lower of the NAV at the time of purchase or
the NAV at the time of redemption. There is no CDSC on reinvested dividends
or distributions.
If you sell some but not all of your Class B Shares, shares not subject to
the CDSC (i.e., shares purchased with reinvested dividends) will be redeemed
first, followed by shares subject to the lowest CDSC (typically shares held
for the longest time).
38
<PAGE> 43
SHAREHOLDER INFORMATION
logo
logo
EXCHANGING YOUR SHARES
CONTINUED
CONVERSION FEATURE -- CLASS B SHARES
- Class B Shares of the Money Market Funds will convert automatically to
Class A of the same Fund (or Class D Shares, depending on your
eligibility), after either five years (Income Funds) or six years (Equity
Funds) from the beginning of the calendar month in which the Class B
Shares were originally purchased.
- After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A Shares (or Class D
Shares) which will increase your investment return compared to the Class
B Shares.
- You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
- If you purchased Class B Shares of one Fund which you exchanged for Class
B Shares of another Fund, your holding period will be calculated from the
time of your original purchase of Class B Shares. The dollar value of
Class A Shares (or Class D Shares) you receive will equal the dollar
value of the B shares converted.
CLASS C SHARES
Similarly, if you exchange Class C Shares of other Republic Funds for Class C
Shares of the Funds and wish to sell your shares, your redemption may be
subject to a 1.00% CDSC if the shares are redeemed less than one year after
the original purchase of the Class C Shares. The CDSC will be assessed the
lesser of the current NAV or the NAV at the time of purchase.
Unlike Class B Shares, Class C Shares have no conversion feature.
WAIVER OF SALES CHARGES -- CLASS B SHARES AND CLASS C SHARES
The following qualify for waivers of sales charges:
- Distributions following the death or disability of a Shareholder.
- Redemptions representing the minimum distribution from an IRA or a
Custodial Account to a Shareholder who has reached age 70 1/2.
- Redemptions representing the minimum distribution from 401(k) retirement
plans where such redemptions are necessary to make distributions to plan
participants.
39
<PAGE> 44
SHAREHOLDER INFORMATION
logo
logo
DIVIDENDS, DISTRIBUTIONS AND TAXES
- Any income a Fund receives in the form of interest and dividends is paid
out, less expenses, to its shareholders. Shares begin accruing interest
and dividends on the day they are purchased.
- Dividends on all Funds are paid monthly. Capital gains for all Funds are
distributed at least annually. Unless a shareholder elects to receive
dividends in cash, dividends will be automatically invested in additional
shares of the Fund.
- Dividends and distributions are treated in the same manner for federal
income tax purposes whether you receive them in cash or in additional
shares.
- Dividends are taxable as ordinary income; however, distributions of tax-
exempt interest income earned by the New York Tax-Free Money Market Fund
are expected to be exempt from the regular federal income tax. Taxation
on capital gains will vary with the length of time a Fund has held the
security -- not how long the shareholder has held the Fund Shares.
- Dividends are taxable in the year in which they are paid, even if they
appear on your account statement the following year. If a Fund declares a
dividend in October, November, or December of a year and distributes the
dividend in January of the next year, you may be taxed as if you received
it in the year declared rather than the year received.
- There may be tax consequences to you if you dispose of your shares in a
Fund, for example, through redemption, exchange or sale. The amount of
any gain or loss and the rate of tax will depend mainly upon how much you
pay for the shares, how much you sell them for, and how long you held
them.
- You will be notified in January each year about the federal tax status of
distributions made by the Funds. The notice will tell you which dividends
and redemptions must be treated as taxable ordinary income and which (if
any) are short-term or long-term capital gain. Depending on your
residence for tax purposes, distributions also may be subject to state
and local taxes, including withholding taxes.
- Foreign shareholders may be subject to special withholding requirements.
- If you invest through a tax-deferred retirement account, such as an IRA,
you generally will not have to pay tax on dividends or capital gains
until they are distributed from the account. These accounts are subject
to complex tax rules, and you should consult your tax adviser about
investment through a tax-deferred account.
- There is a penalty on certain pre-retirement distributions from
retirement accounts.
- Because everyone's tax situation is unique, always consult your tax
professional about federal, state, and local tax consequences.
40
<PAGE> 45
FINANCIAL HIGHLIGHTS
LOGO
LOGO
The financial highlights tables are intended to help you understand the
Fund's financial performance for the past five years, or, if shorter, the
period of the Fund's operations. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information
has been derived from information audited by KPMG Peat Marwick, LLP, whose
report, along with the Fund's financial statements, are included in the
annual report, which is available upon request.
Financial information for the Money Market Fund is not shown because shares
of the Fund were not offered prior to November 9, 1998. Financial information
for Class C Shares of the U.S. Government Money Market Fund and the New York
Tax-Free Money Market Fund is not shown because Class C Shares were not
offered prior to November 9, 1998. Financial information for Class D Shares
of all the Republic Money Market Funds is not shown because Class D Shares
were not offered prior to April 1, 1999.
41
<PAGE> 46
FINANCIAL HIGHLIGHTS
LOGO
LOGO
REPUBLIC U.S. GOVERNMENT MONEY MARKET FUND
CLASS A SHARES
<TABLE>
<CAPTION>
ONE MONTH
PERIOD ENDED YEARS ENDED SEPTEMBER 30,
OCTOBER 31, ----------------------------------------------------
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.004 0.048 0.048 0.049 0.052 0.035
Net gains on securities
(realized) 0.000* 0.000* 0.000* -- -- --
---------------------------------------------------------------------------------------------
Total from
investment
operations 0.004 0.048 0.048 0.049 0.052 0.035
---------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net
investment income) (0.004) (0.048) (0.048) (0.049) (0.052) (0.035)
Distributions (from
capital gains) 0.000 0.000* -- -- -- --
---------------------------------------------------------------------------------------------
Total distributions (0.004) (0.048) (0.048) (0.049) (0.052) (0.035)
---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------
Total return 0.39%(a) 5.00% 4.89% 4.98% 5.27% 3.51%
RATIOS/ SUPPLEMENTAL
DATA:
Net assets, end of
period (000's) $1,055,163 $988,236 $505,702 $246,368 $113,218 $100,443
Ratio of expenses to
average net assets 0.50%(b) 0.52% 0.59% 0.57% 0.58% 0.24%
Ratio of net income to
average net assets 4.40%(b) 4.89% 4.80% 4.80% 5.17% 3.50%
Ratio of expenses to
average net assets
(excluding fee
waivers and expense
reimbursements) 0.60%(b) 0.62% 0.71% 0.75% 0.78% 0.67%
Ratio of net income to
average net assets
(excluding fee
waivers and expense
reimbursements) 4.30%(b) 4.79% 4.68% 4.62% 4.97% 3.08%
</TABLE>
(a) Not annualized.
(b) Annualized.
* Less than $0.001 per share.
See notes to financial statements.
42
<PAGE> 47
FINANCIAL HIGHLIGHTS
LOGO
LOGO
REPUBLIC U.S. GOVERNMENT MONEY MARKET FUND
CLASS B SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 2, 1998
ONE MONTH (COMMENCEMENT
PERIOD ENDED OF OFFERING) TO
OCTOBER 31, 1998 SEPTEMBER 30, 1998(C)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
----------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.003 0.002
Net gains on securities (realized) 0.000* 0.000
----------------------------------------------------------------------------------
Total from investment operations 0.003 0.002
----------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income) (0.003) (0.002)
Distributions (from capital gains) 0.000 0.000
----------------------------------------------------------------------------------
Total distributions (0.003) (0.002)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
----------------------------------------------------------------------------------
Total return 0.32%(a) 0.22%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 113 $ 113
Ratio of expenses to average net
assets 1.25%(b) 1.27%(b)
Ratio of net income to average net
assets 3.65%(b) 4.14%(b)
Ratio of expenses to average net
assets (excluding fee waivers and
expense reimbursements) 1.35%(b) 1.37%(b)
Ratio of net income to average net
assets (excluding fee waivers and
expense reimbursements) 3.55%(b) 4.04%(b)
</TABLE>
(a) Not annualized.
(b) Annualized.
(c) The class began earning income and accruing expenses on September 11,
1998.
* Less than $0.001 per share.
See notes to financial statements.
43
<PAGE> 48
FINANCIAL HIGHLIGHTS
LOGO
LOGO
REPUBLIC U.S. GOVERNMENT MONEY MARKET FUND
CLASS Y SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED JULY 1, 1996
ONE MONTH SEPTEMBER 30, (COMMENCEMENT
PERIOD ENDED ----------------- OF OFFERING) TO
OCTOBER 31, 1998 1998 1997 SEPTEMBER 30, 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.004 0.058 0.050 0.012
Net gains on securities
(realized) 0.000 0.000* 0.000* --
----------------------------------------------------------------------------------------
Total from investment
operations 0.004 0.058 0.050 0.012
----------------------------------------------------------------------------------------
Less distributions:
Dividends (from investment
income) (0.004) (0.058) (0.050) (0.012)
Distributions (from capital
gains) 0.000 0.000* -- --
----------------------------------------------------------------------------------------
Total distributions (0.004) (0.058) (0.050) (0.012)
----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------------------------------
Total return 0.41%(b) 5.27% 5.15% 1.24%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) $34,617 $29,023 $16,180 $1,413
Ratio of expenses to
average net assets 0.25%(a) 0.27% 0.33% 0.43%(a)
Ratio of net income to
average net assets 4.65%(a) 5.14% 5.06% 4.90%(a)
Ratio of expenses to
average net assets
(excluding fee waivers
and expense
reimbursements) 0.35%(a) 0.37% 0.45% 0.61%(a)
Ratio of net income to
average net assets
(excluding fee waivers
and expense
reimbursements) 4.55%(a) 5.04% 4.94% 4.72%(a)
</TABLE>
(a) Annualized.
(b) Not annualized.
* Less than $0.001 per share.
See notes to financial statements.
44
<PAGE> 49
FINANCIAL HIGHLIGHTS
LOGO
LOGO
REPUBLIC NEW YORK TAX-FREE MONEY MARKET FUND
CLASS A SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 17, 1994
FOR THE YEAR ENDED OCTOBER 31, (COMMENCEMENT
-------------------------------- OF OFFERING) TO
1998 1997 1996 OCTOBER 31, 1995
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.029 0.030 0.030 0.033
Net losses on securities
(realized) 0.000* 0.000* -- --
----------------------------------------------------------------------------------
Total from investment
operations 0.029 0.030 0.030 0.033
----------------------------------------------------------------------------------
Less dividends:
Dividends to shareholders
(from net investment
income) (0.029) (0.030) (0.030) (0.033)
----------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------------------------
Total return 2.95% 3.01% 3.04% 3.31%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) $153,592 $123,324 $78,594 $52,652
Ratio of expenses to
average net assets 0.58% 0.60% 0.54% 0.41%(a)
Ratio of net income to
average net assets 2.90% 2.98% 2.97% 3.45%(a)
Ratio of expenses to
average net assets
(excluding fee waivers
and expense
reimbursements) 0.66% 0.72% 0.63% 0.65%(a)
Ratio of net income to
average net assets
(excluding fee waivers
and expense
reimbursements) 2.82% 2.86% 2.88% 3.20%(a)
</TABLE>
(a) Annualized.
(b) Not annualized.
* Less than $0.001 per share.
See notes to financial statements.
45
<PAGE> 50
FINANCIAL HIGHLIGHTS
LOGO
LOGO
REPUBLIC NEW YORK TAX-FREE MONEY MARKET FUND
CLASS B SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 29, 1998
(COMMENCEMENT
OF OFFERING) TO
OCTOBER 31, 1998
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.012
Net losses on securities (realized) 0.000*
--------------------------------------------------------------------------------
Total from investment operations 0.000
--------------------------------------------------------------------------------
Less dividends:
Dividends (from net investment income) (0.012)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00
--------------------------------------------------------------------------------
Total return 1.24%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $ 10
Ratio of expenses to average net assets 1.33%(a)
Ratio of net income to average net assets 2.15%(a)
Ratio of expenses to average net assets (excluding fee
waivers and expense reimbursements) 1.41%(a)
Ratio of net income to average net assets (excluding fee
waivers and expense reimbursements) 2.07%(a)
</TABLE>
(a) Annualized.
(b) Not annualized.
* Less than $0.001 per share.
See notes to financial statements.
46
<PAGE> 51
FINANCIAL HIGHLIGHTS
LOGO
LOGO
REPUBLIC NEW YORK TAX-FREE MONEY MARKET FUND
CLASS Y SHARES
<TABLE>
<CAPTION>
ADVISER SHARES
--------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED JULY 1, 1996
OCTOBER 31, (COMMENCEMENT
------------------ OF OFFERING) TO
1998 1997 OCTOBER 31, 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.031 0.032 0.010
Net losses on securities (realized) 0.000* 0.000* --
--------------------------------------------------------------------------------
Total income from investment
operations 0.031 0.032 0.010
--------------------------------------------------------------------------------
Less dividends:
Dividends (from net investment
income) (0.031) (0.032) (0.010)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------------------------
Total return 3.21% 3.27% 1.03%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $10,759 $ 8,674 $3,714
Ratio of expenses to average net
assets 0.33% 0.35% 0.35%(a)
Ratio of net income to average net
assets 3.15% 3.23% 3.12%(a)
Ratio of expenses to average net
assets (excluding fee waivers and
expense reimbursements) 0.41% 0.47% 0.45%(a)
Ratio of net income to average net
assets (excluding fee waivers and
expense reimbursements) 3.07% 3.13% 3.02%(a)
</TABLE>
(a) Annualized.
(b) Not annualized.
* Less than $0.001 per share.
See notes to financial statements.
47
<PAGE> 52
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during its last fiscal year.
STATEMENTS OF ADDITIONAL INFORMATION (SAIS):
The SAIs provide more detailed information about the Funds, including their
operations and investment policies. They are incorporated by reference and
legally considered a part of this prospectus.
YOU CAN GET FREE COPIES OF REPORTS AND THE SAIS, PROSPECTUSES OF OTHER MEMBERS
OF THE REPUBLIC FAMILY OF FUNDS, OR REQUEST OTHER INFORMATION AND DISCUSS YOUR
QUESTIONS ABOUT THE FUNDS, BY CONTACTING A BROKER OR BANK THAT SELLS THE FUNDS.
OR CONTACT THE FUNDS AT:
REPUBLIC FUNDS
PO BOX 182845
COLUMBUS, OHIO 43218-2845
TELEPHONE: 1-800-782-8183
You can review the Funds' reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
X For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
X Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-4782.
RFFRC (3/99)
<PAGE> 53
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 "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 eight 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 five separate classes, Class A (the "Class A Shares"), Class B (the
"Class B Shares"), Class C (the "Class C Shares"), Class D (the "Class D
Shares"), and Class Y (the "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 (the "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.
Class A Shares, Class D Shares and Class Y 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. Class B Shares and Class C
Shares may be acquired only through an exchange of shares from the corresponding
class of other funds of the Trust.
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 April 1, 1999 (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.
April 1, 1999
<PAGE> 54
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS...................................................................3
Variable Rate Interests and Participation Interests......................................................5
Interest Rates...........................................................................................8
"When Issued" Municipal Obligations......................................................................8
Stand-By Commitments.....................................................................................9
Taxable Securities.......................................................................................9
Repurchase Agreements...................................................................................10
General.................................................................................................10
Portfolio Transactions..................................................................................11
Special Factors Affecting New York State................................................................12
Investment Restrictions.................................................................................12
Non-Fundamental Restrictions............................................................................14
Percentage and Rating Restrictions......................................................................15
Risk Factors Affecting Investments in New York Municipal Obligations....................................15
PERFORMANCE INFORMATION..........................................................................................16
MANAGEMENT OF THE TRUST..........................................................................................18
Trustees and Officers...................................................................................18
Compensation Table......................................................................................20
Investment Adviser......................................................................................20
Distribution Plans ---- Class A, Class B, Class C, and Class D Shares Only..............................22
The Distributor and Sponsor.............................................................................23
Administrative Services Plan............................................................................23
Administrator...........................................................................................24
Transfer Agent..........................................................................................24
Custodian...............................................................................................25
Shareholder Servicing Agents............................................................................25
Expenses................................................................................................26
DETERMINATION OF NET ASSET VALUE.................................................................................26
PURCHASE OF SHARES...............................................................................................27
Exchange Privilege......................................................................................28
Automatic Investment Plan...............................................................................29
Purchases Through a Shareholder Servicing Agent or a Securities Broker..................................29
REDEMPTION OF SHARES.............................................................................................29
Systematic Withdrawal Plan..............................................................................30
Redemption of Shares Purchased Directly Through the Distributor.........................................30
Check Redemption Service................................................................................31
Contingent Deferred Sales Charge ("CDSC") ---- Class B Shares and Class C Shares........................31
Conversion Feature......................................................................................33
</TABLE>
i
<PAGE> 55
<TABLE>
<S> <C>
DIVIDENDS AND DISTRIBUTIONS......................................................................................33
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES.............................................................34
TAXATION.........................................................................................................35
Federal Income Tax......................................................................................35
Alternative Minimum Tax.................................................................................37
Special Tax Considerations..............................................................................38
OTHER INFORMATION................................................................................................38
Capitalization..........................................................................................38
Independent Auditors....................................................................................38
Counsel.................................................................................................38
Registration Statement..................................................................................38
Financial Statements....................................................................................39
Shareholder Inquiries...................................................................................39
</TABLE>
ii
<PAGE> 56
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The following information supplements the discussion of the investment
objective, strategies and risks of the Fund discussed 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.
The Trust seeks to achieve the investment objective of the 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 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 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 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
3
<PAGE> 57
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.
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. 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.
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
4
<PAGE> 58
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 or the securities of other regulated investment companies.
There can be no assurance that the investment objectives of the Fund
will be achieved. The investment objective and strategies of the Fund are not
fundamental and may be changed by the Board of Trustees of the Trust without
the approval of Fund shareholders. If there is a change, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current financial position and needs.
VARIABLE RATE INTERESTS AND PARTICIPATION INTERESTS
Variable rate instruments that the Trust may purchase on behalf of the
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 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.
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
5
<PAGE> 59
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.
In view of the possible "concentration" of the 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.
Because of the variable rate nature of the instruments, during periods
when prevailing interest rates decline, the Fund's yield will decline. On the
other hand, during periods when prevailing interest rates increase, the Fund's
yield will increase. 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.
6
<PAGE> 60
INTEREST RATES
The value of the securities in the Fund's portfolio can be expected to
vary inversely with changes in prevailing interest rates. Although the Fund's
investment policies are designed to minimize these changes and to maintain a net
asset value of $1.00 per share, there is no assurance that these policies will
be successful. Withdrawals by shareholders could require the sale of portfolio
investments at a time when such a sale might not otherwise be desirable.
"WHEN ISSUED" MUNICIPAL OBLIGATIONS
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 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.
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).
7
<PAGE> 61
STAND-BY COMMITMENTS
When the Trust purchases Municipal Obligations on behalf of the 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 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 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.
The stand-by commitments that the Trust may enter into on behalf of the
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.
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)
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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
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 the 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 the Fund. The Trust may enter into
repurchase agreements on behalf of the Fund 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 the
Fund's assets in repurchase obligations are designed to minimize the Fund's risk
of losses from those investments. Repurchase agreements are considered
collateralized 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. 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.
GENERAL
The Trust may, in the future, seek to achieve the investment objective
of the 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, the 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 the 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.
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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. 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
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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 STATE
The fiscal stability of New York State 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 16, 1998, Standard & Poor's gave New York City's outstanding
general obligation bonds a rating of A-.
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
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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, or (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
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investment objective and policies and substantially the same investment
restrictions as those with respect to the Fund; and
(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
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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. Additionally, if
such later change results in the Fund holding more than 10% of its net assets in
illiquid securities, the Fund will take such action as is necessary to reduce
the percentage of the Fund's net assets invested in illiquid securities to 10%
or less.
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.
RISK FACTORS AFFECTING INVESTMENTS IN NEW YORK MUNICIPAL OBLIGATIONS
The Trust intends to invest a high proportion of the 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
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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.
Subject to the fundamental policy, the Trust is authorized to invest on
behalf of the 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.
PERFORMANCE INFORMATION
From time to time the Trust may provide annualized "yield," "effective
yield" and "tax equivalent yield" quotations for the 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. Specifically, the yield 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. 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. Specifically, the "effective yield" quotation of the Fund 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 seven-day
period ended December 31, 1998, the yield of the Fund was 2.79% for Class A
Shares, 2.05% for Class B Shares, 2.05% for Class C Shares, and 3.05% for Class
Y Shares. There were no Class B and Class C Shareholders prior to December 31,
1998. The yield for Class B and Class C Shares is an estimate, based upon the
Class A Share yield, adjusted for differences in expenses. Class D Shares were
not offered prior to April 1, 1999.
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-
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exempt. For the seven-day period ended December 31, 1998, the tax equivalent
yield of the Fund (assuming a 39.6% tax rate) was 4.62% for Class A Shares,
3.39% for Class B Shares, 3.39% for Class C Shares, and 5.49% for Class Y
Shares. There were no Class B and Class C Shareholders prior to December 31,
1998. The yield for Class B and Class C Shares is an estimate, based upon the
Class A Share yield, adjusted for differences in expenses. Class D Shares were
not offered prior to April 1, 1999.
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 of the first day of such
period, and (b) subtracting 1 from the results. 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 A Shares of the Fund for the
one-year period ended October 31, 1998 was 2.95%, and the average annual total
rate of return of the Class A Shares of the Fund for the period from November
17, 1994 (commencement of operations) to October 31, 1998 was 3.11%. The total
rate of return for Class Y Shares of the Fund for the one-year period ended
October 31, 1998 was 3.21% and the average annual total rate of return of the
Class Y Shares for the period from July 1, 1996 (commencement of operations) to
October 31, 1998 was 3.22%. Class B Shares were not offered prior to February 1,
1998 and Class C Shares were not offered prior to November 9, 1998. Class D
Shares were not offered prior to April 1, 1999.
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. Assuming a 39.6% tax rate, the tax equivalent total
rate of return of the Class A Shares of the Fund for the one-year period ended
October 31, 1998 was 4.88%, and the tax equivalent average annual total rate of
return of the Class A Shares of the Fund for the period from November 17, 1994
(commencement of operations) to October 31, 1998 was 5.15%. The tax equivalent
total rate of return of the Class Y Shares of the Fund for the one-year period
ended October 31, 1998 was 5.31% and the tax equivalent average annual total
rate of return of the Class Y Shares for the period from July 1, 1996
(commencement of operations) to October 31, 1998 was 5.33%. Class B Shares were
not offered prior to February 1, 1998 and Class C Shares were not offered prior
to November 9, 1998. Class D Shares were not offered prior to April 1, 1999.
Since these yield and effective yield quotations are based on
historical earnings and reflect only the performance of a hypothetical
investment in the Fund during the particular time period on which the
calculations are based, and since a Fund's yield and effective yield fluctuate
from day to day, these quotations should not be considered as an indication or
representation of a Fund's yield or effective 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.
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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.
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
Fund, which will have the effect of reducing the net return on the investment of
customers of that Shareholder Servicing Agent or that securities broker.
Specifically, 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.
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 Fund, 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.
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.
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<PAGE> 71
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).
WALTER B. GRIMM*, President and Secretary
Employee of BISYS Fund Services, Inc., June, 1992 to present; prior to
June, 1992 President of Leigh Investments Consulting (investment firm).
ANTHONY J. FISCHER*, Vice President
Employee of BISYS Fund Services, Inc., April, 1998 to present; Employee
of SEI Investments and Merrill Lynch prior to April 1998.
JAMES L. SMITH*, Vice President
Employee of BISYS Fund Services, Inc., October 1996 to present;
Employee of Davis Graham Stubbs, October 1995 to October 1996; Director of Legal
and Compliance, ALPS Mutual Fund Services, Inc., June 1991 to October 1995.
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.
ELLEN STOUTAMIRE*, Secretary
Employee of BISYS Fund Services, Inc., April, 1997 to present; Attorney
in private practice prior to April 1997.
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. Grimm, Fischer, Smith and Waters and Mss. Grandominico, Brady,
Stoutamire and Metz also are officers of certain other investment companies of
which BISYS or an affiliate is the administrator.
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<PAGE> 72
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Total Compensation
Compensation from Retirement Annual Benefits From Fund
Trust Benefits Accrued Upon Retirement Complex* to
as Part of Fund Trustees
Expenses
- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Larry M. Robbins $2,900 none none $11,600
Alan S. Parsow $2,400 none none $ 9,600
Frederick C. Chen $2,400 none none $ 9,600
Michael Seely $2,400 none none $ 9,600
</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 December 31, 1998. 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 $1,500 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 $1,750 for each meeting attended.
As of January 6, 1999, 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):
ADVISOR CLASS:
Kinco & Co. 68.66%
c/o Securities Services
One Hanson Place - Lower Level
Brooklyn, NY, 11243
Kinco & Co. 31.24%
c/o Republic National Bank
One Hanson Place - Lower Level
Brooklyn, NY, 11243
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 positions as
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 serves as
investment adviser to the Fund. The Adviser manages the investment and
reinvestment of the assets of the Fund and continuously
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<PAGE> 73
reviews, supervises and administers the investments of the Fund pursuant to an
Investment Advisory Contract (the "Investment Advisory Contract"). 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. Subject to such policies as the Board of Trustees may
determine, the Adviser places orders for the purchase and sale of the Fund's
investments directly with brokers or dealers selected by it in its discretion.
See "Portfolio Transactions" above. 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 Fund at the annual rate of
0.15% of the Fund's average daily net assets.
Republic is a wholly owned subsidiary of Republic New York Corporation,
a registered bank holding company, and 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 Fund,
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 Fund Services. There is no restriction on the amount or type of U.S.
Government or Municipal obligations available to be purchased for the Fund. 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.
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.
Based upon the advice of counsel, Republic believes that the
performance of investment advisory and other services for the Fund 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 Fund. If Republic were prohibited from acting as investment adviser to the
Fund, it is expected that the Board of Trustees would recommend to shareholders
of the Fund 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 Fund, the Trust would seek alternative means
of providing such services.
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.
20
<PAGE> 74
The Investment Advisory Contract will continue in effect 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 $77,1777, of which the
entire amount was waived. For the years ended October 31, 1996 and October 31,
1997, investment advisory fees aggregated $104,179 and $147,161, respectively,
of which $32,202 and $101,227, respectively, was waived. For the year ended
October 31, 1998, the Fund accrued investment advisory fees of $217,204, of
which $116,131 was waived.
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.
DISTRIBUTION PLANS ---- CLASS A, CLASS B, CLASS C, AND CLASS D SHARES ONLY
Four Distribution Plans have been adopted by the Trust (the
"Distribution Plans") with respect to the Class A Shares (the "Class A Plan"),
the Class B Shares (the "Class B Plan"), Class C Shares (the "Class C Plan"),
and Class D Shares (the "Class D Plan"). The Distribution Plans provide that
they may not be amended to increase materially the costs which either the Class
A Shares, Class B Shares, Class C Shares and Class D Shares may bear pursuant
to the Class A Plan, Class B Plan, Class C Plan and Class D Plan without
approval by shareholders of the Class A Shares, Class B Shares, Class C Shares
and Class D Shares, respectively, and that any material amendments of the
Distribution Plans 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 Plans 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 Plans
have been approved, and are 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 Plans. In adopting the
Class A Plan, Class B Plan, Class C Plan and Class D Plan, the Trustees
considered alternative methods to distribute the Class A Shares, Class B
Shares, Class C Shares and Class D Shares and to reduce each class's expense
ratio and concluded that there was a reasonable likelihood that each
Distribution Plan will benefit their respective class and that class's
shareholders. The Distribution Plans are terminable with respect to the Class A
Shares, Class B Shares, Class C Shares or Class D Shares at any time by a vote
of a majority of the Qualified Trustees or by vote of the holders of a majority
of that class.
21
<PAGE> 75
The Fund did not incur expenses pursuant to the Distribution Plans
during the fiscal period ended October 31, 1997 and October 31, 1998.
THE DISTRIBUTOR AND SPONSOR
BISYS Fund Services ("BISYS"), whose address is 3435 Stelzer Road,
Columbus, Ohio 43219-3035, acts as sponsor and distributor to the 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 the Distribution Plans adopted by the Trust, the
Distributor is reimbursed from the Fund monthly for costs and expenses incurred
by the Distributor in connection with the distribution of Class A Shares, Class
B Shares, Class C Shares and Class D Shares of the Fund and for the provision of
certain shareholder services with respect to these 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 Class A Shares, Class B Shares, Class C Shares and Class D Shares
of the Fund 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. Pursuant to the Class A
and Class D Plan, the amount of their reimbursement from the Fund may not exceed
on an annual basis 0.25% of the average daily net assets of the Fund represented
by Class A Shares outstanding during the period for which payment is being made.
Pursuant to the Class B Plan and Class C Plan, respectively, such payments by
the Distributor to broker-dealers may be in amounts on an annual basis of up to
0.75% of the Fund's average daily net assets as presented by Class B Shares and
Class C Shares, respectively, outstanding during the period for which payment is
being made. The aggregate fees paid to the Distributor pursuant to the Class B
Plan and Class C Plan, respectively, and to Shareholder Servicing Agents
pursuant to the Administrative Services Plan will not exceed on an annual basis
1.00% of the Fund's average daily net assets represented by Class B Shares and
Class C Shares, respectively, outstanding during the period for which payment is
being made. Pursuant to the Class D Plan, the amount of their reimbursement from
the Fund may not exceed on an annual basis 0.25% of the average daily net assets
of the Fund represented by Class D 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 Fund made pursuant to the Distribution Plans is contingent upon the Board of
Trustees' approval. The Fund is not liable for distribution and shareholder
servicing expenditures made by the Distributor in any given year in excess of
the maximum amount payable under the Distribution Plans 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,
custodian, and one or more Shareholder Servicing Agents,
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<PAGE> 76
and may enter into agreements providing for the payment of fees for such
services. The Administrative Services Plan 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 the Class A, Class B Shares, Class C Shares, Class D 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 the Class A Shares, Class B Shares, Class C
Shares, Class D 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.
ADMINISTRATOR
Pursuant to an Administration Agreement, BISYS provides the Trust with
general office facilities and supervises the overall administration of the Trust
and the Fund. 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 Fund fees payable monthly at an annual rate equal to 0.10% of
the first $1 billion of the 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.
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 October 31, 1996, the Fund accrued administration
fees equal to $104,179, of which $34,720 was waived. For the year ended October
31, 1997, the Fund accrued administration fees equal to $98,117, none of which
was waived. For the year ended October 31, 1998, the Fund accrued administration
fees equal to $144,706, none of which was waived.
TRANSFER AGENT
The Trust has entered into Transfer Agency Agreements with Investors
Bank & Trust Company ("IBT") and BISYS, pursuant to which IBT acts as transfer
agent for the Fund with respect to the Class A Shares, Class D Shares and Class
Y Shares and BISYS acts as transfer agent for the Fund with respect to the Class
B Shares and Class C Shares (the "Transfer Agents"). The Transfer Agents
maintain an account for each shareholder of the Fund (unless such account is
maintained by the shareholder's securities-broker, if applicable, or Shareholder
Servicing Agent), performs other transfer agency functions, and act as dividend
disbursing agent for the Fund. The principal business address of IBT is 200
Clarendon Street,
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<PAGE> 77
Boston, Massachusetts 02117. The principal business address of BYSIS is 3435
Stelzer Road, Columbus, OH 43219.
Pursuant to an agreement, as of April 1, 1999, BISYS will provide all
services with respect to each class of shares of the Fund.
CUSTODIAN
Pursuant to a Custodian Agreement, Republic also acts as the custodian
of the Fund's assets (the "Custodian"). The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
fund accounting and other required books and accounts in order to calculate the
daily net asset value of Shares of the Fund. Securities held for the Fund may be
deposited into the Federal Reserve-Treasury Department Book Entry System or the
Depository Trust Company. The Custodian does not determine the investment
policies of the Fund or decide which securities will be purchased or sold for
the Fund. For its services, Republic 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, exchanges and redemptions of
Class A, Class B, Class C, Class D and Class Y Shares of the Fund may be
effected and certain other matters pertaining to the Fund; 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 the Fund's shareholders; receives, tabulates
and transmits to the Trust proxies executed by shareholders with respect to
meetings of shareholders of the Fund or the Trust; and provides such other
related services as the Trust or a shareholder may request. With respect to
Class A, Class B, Class C, and Class D Shares, each Shareholder Servicing Agent
receives a fee from the 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.
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
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<PAGE> 78
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
Fund 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 Fund. The Trust engages banks as Shareholder
Servicing Agents on behalf of the Fund 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 Fund shareholders, and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Fund 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 Fund would suffer any adverse financial consequences as a
result of these occurrences.
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
the Class A Shares, Class B Shares, Class C Shares and Class D Shares must
include payments made pursuant to their respective 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 Fund.
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, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
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
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<PAGE> 79
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. It is anticipated that the net asset value of each
class of shares will remain constant at $1.00, although no assurance can be
given that the net asset value will remain constant on a continuing basis.
PURCHASE OF SHARES
Class A Shares, Class D Shares and Class Y Shares of the Fund are
continuously offered for sale by the Distributor at net asset value (normally
$1.00 per share) with no front-end 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"). Class A Shares,
Class D Shares and Class Y 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"). At present, the only Shareholder Servicing Agents for Class Y Shares
of the Fund are Republic and its affiliates.
Class B Shares and Class C Shares of the Fund are not offered for sale
but are only offered as an exchange option for Class B shareholders and Class C
shareholders of the Trust's other investment portfolios who wish to exchange
some or all of those Class B shares or Class C shares for Class B Shares or
Class C Shares, respectively, of the Fund. Although Class B Shares and Class C
Shares of the Fund are not subject to a sales charge when a shareholder
exchanges Class B shares or Class C shares of another Trust portfolio for Class
B Shares or Class C Shares of the Fund, they may be subject to a contingent
deferred sales charge when they are redeemed. See "Contingent Deferred Sales
Charge ("CDSC") -- Class B Shares and Class C Shares" below.
Purchases of Class A Shares, Class D Shares and Class Y Shares are
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. The Trust intends the Fund to be as fully invested at all
times as is reasonably
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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 Class A Shares and Class D
Shares, the Distributor may receive fees from the Fund. See "Management of the
Trust -- The Distributor and Sponsor" above. Other funds which have investment
objectives similar to those of the Fund 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 Class A Shares and Class D 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 Class Y 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: Republic U.S. Government Fund, Republic Bond Fund, Republic Overseas
Equity Fund, Republic Opportunity Fund, Republic New York Tax-Free Bond Fund,
Republic New York Tax-Free 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 (the "Republic Funds"). An investor
will receive Class A Shares of the Money Market Funds in exchange for Class A
shares of the Republic Funds, unless the investor is eligible to receive Class D
Shares of the Money Market Funds, in which case the investor will receive Class
D Shares of a Money Market Fund in exchange for Class A shares of a Republic
Fund. Class B Shares, Class C Shares and Class Y Shares may be exchanged for
shares of the same class of one or more of the Republic Funds at net asset value
without a front-end sales charge provided that the amount to be exchanged meets
the applicable minimum investment requirements and the exchange is made in
states where it is legally authorized. Holders of the Fund's Class B Shares may
not exchange their Shares for shares of any other class. Exchanges of Fund
Investor Shares for Investor shares of one or more Republic Funds may be made
upon payment of the applicable sales charge, unless otherwise exempt.
Shareholders of Class A and Class D Shares of the Fund who are shareholders as
of December 31, 1997 will be grandfathered with respect to the Republic Funds
and will be exempt from having to pay a sales charge on any new purchases of
Class A or Class D Shares of the Fund. An exchange of Class B Shares or Class C
Shares will not affect the holding period of the Class B Shares or Class C
Shares for purposes of determining the CDSC, if any, upon redemption. 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.
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An exchange is considered a sale of shares and may result in a capital
gain or loss for federal income tax purposes. A Shareholder wishing to exchange
his or her Shares may do so by contacting the Trust at 888-525-5757, by
contacting his or her broker-dialer or by providing written instruction to the
Distributor.
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 the 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 the 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 BISYS 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).
PURCHASES THROUGH A SHAREHOLDER SERVICING AGENT OR A SECURITIES BROKER
Class A Shares and Class D Shares of the 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.
Class Y Shares of the 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.
Shareholder Servicing Agents and securities brokers may transmit
purchase payments on behalf of their customers by wire directly to the 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.
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. Class
A Shares, Class D Shares and Class Y Shares may be redeemed without charge while
Class B Shares and Class C Shares may be subject to a contingent deferred sales
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charge (CDSC). See "Contingent Deferred Sales Charge ("CDSC") -- Class B Shares
and Class C Shares" above. 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 the 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, provided that such involuntary
redemptions will not result from fluctuations in the value of Fund Shares. 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 he redeems 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 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. The 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.
Redemption by wire or telephone. An investor may redeem Class A or
Class D 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
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<PAGE> 83
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 Class A or Class D Shares by means of a Check
Redemption Service. If Class A or Class D 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 Class A or Class D
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.
Class A Shares and Class D 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 Class A Shares and Class D Shares of the 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 the Fund
account is changing on a daily basis, the total value of the Fund account cannot
be determined in advance and the Fund account cannot be closed or entirely
redeemed by check.
CONTINGENT DEFERRED SALES CHARGE ("CDSC") ---- CLASS B SHARES AND CLASS C SHARES
Class B Shares
There is no sales charge imposed upon an exchange for Class B Shares of
the Fund, but investors may be subject to a CDSC when Class B Shares are
redeemed.
The CDSC will be based on the lesser of the net asset value at the time
of original purchase of the Class B shares of the Income Fund(s) and/or the
Equity Fund(s) which were exchanged for the Fund Class B Shares now being
redeemed or the net asset value of such Fund Class B Shares at the time of
redemption. Accordingly, a CDSC will not be imposed on amounts representing
increases in net asset value above the net asset value at the time of purchase.
In addition, a CDSC will not be assessed on Class B Shares purchased through
reinvestment of dividends or capital gains distributions, or that are purchased
by "Institutional Investors" such as corporations, pension plans, foundations,
charitable institutions, insurance companies, banks and other banking
institutions, and non-bank fiduciaries.
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Solely for purposes of determining the amount of time which has elapsed
from the time of purchase of any Income Fund or Equity Fund Class B shares, all
purchases during a month will be aggregated and deemed to have been made on the
last day of the month. In determining whether a CDSC is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of Class B Shares held for more than three years that
were exchanged from Income Fund Class B shares, Class B Shares held more than
four years for Class B Shares that were exchanged from Equity Fund Class B
shares or Class B Shares acquired pursuant to reinvestment of dividends or
distributions.
For example, assume an investor purchased 100 Class B Shares of an
Equity Fund with a net asset value of $8 per share (i.e., at an aggregate net
asset value of $800) and in the eleventh month after purchase, the net asset
value per share is $10 and, during such time, the investor has acquired five
additional Class B shares of the Equity Fund through dividend reinvestment. If
at such time the investor exchanges all of his Equity Fund Class B shares for
Class B Shares of one of the Funds, the investor will have 1,050 Class B Shares
(assuming a net asset value of $1.00 per share for the Fund). Assume twelve
months later the investor acquires 50 additional Class B Shares of the Fund
through dividend reinvestments. If at such time the investor makes his first
redemption of 500 Fund Class B Shares (producing proceeds of $500), 100 of such
Shares would not be subject to the charge because they were acquired through
dividend reinvestment. With respect to the remaining 400 Class B Shares being
redeemed, the CDSC would be applied only to 320 Class B Shares (representing the
original cost of $8 per share for the Equity Fund) and not to the remaining 80
Class B Shares (representing the increase in net asset value of $2 per share for
the Equity Fund).
The CDSC is waived on redemptions of Class B Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a Shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an IRA or a Custodial Account
under Code Section 403(b)(7) to a Shareholder who has reached age 70 1/2, and
(iii) to the extent the redemption represents the minimum distribution from
retirement plans under Code Section 401(a) where such redemptions are necessary
to make distributions to plan participants.
Class C Shares
There is no sales charge imposed upon an exchange for Class C Shares of
the Fund, but investors may be subject to a CDSC when Class C Shares are
redeemed. When Class C shares of one of the other investment portfolios of the
Republic Funds are exchanged for Class C Shares of the Fund and those shares are
redeemed less than one year after the original purchase of the Class B shares of
the other Republic Fund (calculated from the last day of the month in which the
shares were purchased), those Class C Shares of the Fund will be subject to a
1.0% CDSC in most cases. The CDSC will be assessed on an amount equal to the
lesser of the current market value or the cost of the shares being redeemed. The
CDSC will not be imposed in the circumstances set forth above in the section
"Class B Shares." Class C Shares are subject to an annual 12b-1 fee of up to
1.0% of the average daily net assets of the Class. Unlike Class B shares, Class
C Shares have no conversion feature and, accordingly, an investor that purchases
Class C Shares will be subject to 12b-1 fees applicable to Class C Shares for an
indefinite period subject to annual approval by the Fund's Board of Trustees and
regulatory limitations. The higher fees mean a higher expense ratio, so Class C
Shares pay correspondingly lower dividends and may have a lower net asset value
than Investor Shares. Broker-dealers and other financial intermediaries whose
clients have purchased Class C Shares may receive a trailing commission equal to
[%] of the average daily net asset value of such shares on an annual basis held
by their clients more than one year from the
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date of purchase. Trailing commissions will commence immediately with respect to
shares eligible for exemption from the CDSC normally applicable to Class C
Shares.
CONVERSION FEATURE
Five years after the original purchase of Income Fund Class B shares
which have been exchanged for Class B Shares of the Fund and six years after the
original purchase of Equity Fund Class B shares which have been exchanged for
Class B Shares of the Fund, Class B Shares of the Fund will convert
automatically to Class A or Class D Shares, depending upon whether the investor
is eligible for Class D Shares. The purpose of the conversion is to relieve a
holder of Class B Shares of the higher ongoing expenses charged to those Shares,
after enough time has passed to allow the Distributor to recover approximately
the amount it would have received if a front-end sales charge had been charged.
The conversion from Class B Shares to Class A or Class D Shares takes place at
net asset value, as a result of which an investor receives dollar-for-dollar the
same value of Class A or Class D Shares as he or she had of Class B Shares. For
Class B Shares that were exchanged from Income Fund Class B shares, the
conversion occurs five years after the beginning of the calendar month in which
the Income Fund Class B shares were purchased. For Class B shares that were
exchanged from Equity Fund Class B shares, the conversion occurs six years after
the beginning of the calendar month in which the Equity Fund Class B shares were
purchased. As a result of the conversion, the converted Shares are relieved of
the Rule 12b-1 fees borne by Class B Shares, although they are subject to the
Rule 12b-1 fees borne by Investor Shares.
DIVIDENDS AND DISTRIBUTIONS
The net income of the 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 the 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 the 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 the 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 the Fund is declared as a dividend each time
the net income of the Fund is determined, the net asset value per share of the
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
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shareholder's investment in the Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of Shares in his account.
It is expected that the Fund will have a positive net income at the
time of each determination thereof. If, for any reason, the net income of the
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.
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 Class A Shares, Class B Shares, Class C
Shares, Class D and Class Y 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 of the Trust participate equally in the
earnings, dividends and assets of the particular series. Currently, the Trust
has eight 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, the Fund is divided into five classes of shares.
Each share of each class of the Fund 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. 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. 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
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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.
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.
Shareholders of the Fund 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 the 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 Fund 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.
TAXATION
FEDERAL INCOME TAX
The following is a summary of certain U.S. federal income tax issues
concerning the Fund and its shareholders. The Fund may also be subject to state,
local, foreign or other taxes not discussed below. This discussion does not
purport to be complete or to address all tax issues relevant to each
shareholder. Prospective investors should consult their own tax advisors with
regard to the federal, state, foreign and other tax consequences to them of the
purchase, ownership or disposition of Fund shares. This discussion is based upon
present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial and administrative
authorities, all of which are subject to change, which change may be retroactive
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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), 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.
Distributions of net capital gains, whether received in cash or
reinvested in Fund shares, will generally be taxable to shareholders as either
"20% Gain" or "28% Gain," depending upon the Fund's holding period for the
assets sold. "20% Gains" arise from sales of assets held by the Fund for more
than 18 months and are subject to a maximum tax rate of 20%, "28% Gains" arise
from sales of assets held by the Fund for more than one year but not more than
18 months and are subject to a maximum tax rate of 28%. Net capital gains from
assets held for one year or less will be taxed as ordinary income. Distributions
will be subject to these capital gains rates regardless of how long a
shareholder has held Fund shares.
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.
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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.
Upon the sale or exchange of shares, a shareholder generally will
realize a taxable gain or loss depending upon his or her basis in the shares.
Such gain or loss will be treated as a capital gain or loss if the shares are
capital assets in the shareholder's hands. Gain will generally be subject to a
maximum tax rate of 20% if the shareholder's holding period for the shares is
more than 18 months, and a maximum tax rate of 28% if the shareholder's holding
period for the shares is more than one year but not more than 18 months. Gain
from the disposition of shares held not ore than one year will be taxed as
short-term capital gain.
Any loss realized from a disposition of Fund shares that were held for
six months or less will be disallowed to the extent that dividends received from
the Fund are designated as exempt-interest dividends. Any loss realized on a
sale or exchange of Fund shares also will be disallowed to the extent that the
shares disposed of are replaced (including replacement through reinvesting of
dividends and capital gain distributions in the Fund) within a period of 61 days
beginning 30 days before and ending 30 days after the disposition of the shares.
In such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss, to the extent not disallowed, realized on a
disposition of shares of the Fund with respect to which long-term capital gain
distributions have been paid will, to the extent of those dividends, be treated
as a long-term capital loss if the shares have been held for six months or less
at the time of their disposition.
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.
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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.
INDEPENDENT AUDITORS
The Board of Trustees has appointed KPMG Peat Marwick LLP as
independent auditors 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, 1775 Eye Street, N.W., Washington, D.C. 20006,
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.
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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, 1998
are hereby incorporated herein by reference from the Annual Report of the Fund
dated October 31, 1998 as filed with the Securities and Exchange Commission.
Copies of the report will be provided without charge to each person receiving
this Statement of Additional Information.
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)
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APPENDIX A
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 August 15, 1997.
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
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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 14 million jobs added nationally since early
1992. Since late 1992, the State has added approximately 300,000 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
1997 was forecast to be practically identical to the "consensus" of a widely
followed survey of national economic forecasters. Growth in the real gross
domestic product during 1997 was projected to be 3.6 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 2.6 percent due to improved productivity
and foreign competition. Personal income and wages were projected to increase by
6.0 percent and 6.7 percent respectively.
The forecast of the State's economy showed modest expansion during the
first half of calendar 1997. Although industries that export goods and services
are expected to continue to do well, growth was expected to be moderated 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
1996 rate. Personal income was expected to record moderate gains in 1997. 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 1997-98 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, hints of accelerating inflation 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 declines in banking employment and
the direction of employment change that is likely to accompany
telecommunications and energy 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.
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The State's fiscal year, which commenced on April 1, 1997, and ends on
March 31, 1998, is referred to herein as the State's 1997-98 fiscal year.
The State's budget for the 1997-98 fiscal year was enacted by the
Legislature on August 4, 1997, more than four 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 1997-98 fiscal
year was formulated on August 11, 1997, and is based on the State's budget as
enacted by the Legislature, as well as actual results for the first quarter of
the current fiscal year. The State Financial Plan will be updated in October and
January.
The adopted 1997-98 budget projects an increase in General Fund
disbursements of 5.2 percent over 1996-97. State Funds (excluding federal
grants) disbursements are projected to increase by 5.4 percent from the prior
fiscal year. All Governmental Funds projected disbursements increase by 7.0
percent over the prior fiscal year.
The 1997-98 State Financial Plan is projected to be balanced on a cash
basis. As compared to the Governor's proposed budget as amended in February
1997, the State's adopted budget for 1997-98 increases General Fund spending by
$1.7 billion, primarily from increases for local assistance ($1.3 billion).
Resources used to fund these additional expenditures include increased revenues
projected for the 1997-98 fiscal year, increased resources produced in the
1996-97 fiscal year that will be utilized in 1997-98, re-estimates of social
service, fringe benefit and other spending, and certain non-recurring resources.
Resources used to fund these additional expenditures include increased
revenues projected for the 1997-98 fiscal year, increased resources produced in
the 1996-97 fiscal year that will be utilized in 1997-98, re-estimates of social
service, fringe benefit and other spending, and certain non-recurring resources.
The total amount of non-recurring resources included in the 1997-98 State budget
is projected to be $270 million, or 0.7 percent of total General Fund receipts.
The 1997-98 Financial Plan also includes: a projected General Fund
reserve of $530 million; a projected balance of $332 million in the Tax
Stabilization Reserve Fund, and a projected $65 million balance in the
Contingency Reserve Fund.
The projections do not include any subsequent actions that the Governor
may also take to exercise his line-item veto (or vetoing any companion
legislation) before signing the 1997-98 budget appropriation bills into law.
Under the Constitution, the Governor may veto any additions to the Executive
Budget within 10 days after the submission of appropriation bills for his
approval. If the Governor were to take such action, the resulting impact on the
Financial Plan would be positive.
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
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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 1997-98
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 1997-98 fiscal year, the General Fund is expected to account for
approximately 48 percent of total governmental-funded disbursements and 71
percent of total State Funds 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 1997-98 fiscal year projects General Fund
receipts, including transfers from other funds, of $35.09 billion, an increase
of $2.05 billion from the total receipts in the prior fiscal year. This total
includes $31.68 billion in tax receipts, $1.48 billion in miscellaneous
receipts, and $1.94 billion in transfers from other funds.
The projected $2 billion increase in receipts exaggerates the
underlying year-to-year growth in State tax revenues. This increase is largely
the result of actions undertaken by the State to utilize the $1.4 billion
1996-97 budget surplus reported by the Department of the Budget to finance costs
in the State's 1997-98 fiscal year. This transaction reduced reported receipts
in the 1996-97 fiscal year and increased projected receipts in the State's
1997-98 fiscal year. Conversely, the incremental cost of tax reductions newly
effective in 1997-98 and the impact of new earmarking statutes which divert
receipts from the General Fund to other funds work to depress apparent growth
below the underlying growth in the receipts base attributable to expansion of
the State's economy. After adjusting for these actions, tax receipts are
projected to grow by approximately 5 percent in 1997-98.
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 approximately
$4 billion in the 1997-98 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 6.85 percent for 1997 and
thereafter. On a current law basis, 1997 income tax liability is expected to
fall slightly, reflecting the tax cut. On a constant law basis, liability growth
during taxable year 1997 would be between 6 and 7 percent.
The projected net collections of personal income tax in the 1997-98
fiscal year of $18.87 billion is over half of all General Fund receipts and an
increase of $2.5 billion from reported collections in the State's 1996-97 fiscal
year. Virtually all of the projected annual growth in this category, however, is
provided by tax refund and refund reserve transactions which affect reported
receipt levels in the 1995-96
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through 1997-98 fiscal years. Without these transactions between years, income
tax receipts in 1997-98 would be virtually flat.
Receipts in user taxes and fees in the State's 1997-98 fiscal year are
expected to total $7 billion, an increase of $204 million from reported 1996-97
results. The sales tax component of this category accounts for all of the
projected 1997-98 growth in this category, as receipts from all other sources
are projected to decline by $3 million. The yield of most of the excise taxes in
this category show a long-term declining trend, particularly cigarette and
alcoholic beverage taxes. These declines in the 1997-98 fiscal year are
projected to be offset by an increase in anticipated motor vehicle fees arising,
in large part, from legislative actions that raise additional receipts from this
source.
Total business tax collections in 1997-98 are now projected to be $4.83
billion, $253 million less than received in the prior fiscal year. The
year-over-year decline in projected receipts in this category is a function of
both statutory changes between the two years -- 1997 is the first "surcharge
free" taxable period in this decade -- and a number of essentially one-time
transactions that increased receipts in the base year, including unusually large
audit receipts under the bank tax. Business taxes include franchise taxes based
generally on net income of general business, bank and insurance corporations, as
well as gross-receipts-based taxes on utilities and gallonage-based petroleum
business taxes. Beginning in 1994, a 15 percent surcharge on these levies began
to be phased out and, for most taxpayers, there will be no surcharge liability
for taxable periods ending in 1997 and thereafter.
Total receipts from other taxes and miscellaneous receipts in the
State's 1997-98 fiscal year are projected at $2.462 billion, nearly $700 million
less than in the preceding year. This figure masks the significant increase in
estate tax collections during the first four months of the fiscal year, and
results largely from the dedication of the proceeds of the real estate transfer
tax to meet debt service obligations on the new Clean Water/Clean Air bond act
and from the full-year impact of the repeal of the real property gains tax. The
reduction also reflects a significant diminution in the amount of non-recurring
resources used in the 1997-98 State Financial Plan as compared to 1996-97.
Additionally, transfers from other funds to the General Fund consisting
primarily of tax revenues in excess of debt service requirements (particularly
the 1% sales tax used to support payments to the LGAC) are projected to be $1.48
billion, or $58 million more than in the 1996-97 fiscal year. All other
transfers are projected to increase by $237 million, primarily reflecting the
non-recurring transfer of $200 million for retroactive reimbursement to the
state of certain social services claims from the federal government.
General Fund Disbursements
Disbursements from grants to local governments are projected to total
$23.63 billion in the 1997-98 State Financial Plan, an increase of $750 million
from 1996-97 levels. This category of the State Financial Plan includes $11.57
billion in aid for elementary, secondary, and higher education. This category of
the financial plan is affected by the reclassification of costs formerly
budgeted as City University local assistance that are now included in the
transfers for debt service category. This has the effect of decreasing
disbursements in this category by a projected $262 million, and raising
projected transfers by the same amount.
General Fund disbursements and transfers to capital, debt service and
other funds are projected at $34.60 billion, an increase of $1.7 billion (5
percent) from 1996-97 fiscal year levels. Over the last two years, spending
growth for most State agencies and programs has been negative or flat, producing
an
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overall decline in General Fund spending during that period. The 1997-98 adopted
budget reflects negotiated increases for State employee salaries, increased
transfers for debt service, and other mandated increases, as well as increased
investments in school aid, higher education, mental health, and public
protection.
Grants to local governments is the largest category of General Fund
disbursements, and accounts for approximately 68 percent of overall General Fund
spending. Disbursements from this category are projected to total $23.63 billion
in the 1997-98 State Financial Plan, an increase of $750 million (3.3 percent)
from 1996-97 levels. This includes $11.57 billion in aid for elementary,
secondary, and higher education, accounting for 49 cents of every dollar spent
in this category. On a school year basis, school aid increases by $750 million,
including formula-based elementary and secondary education aid increases of $650
million. This category of the Financial Plan is affected by the reclassification
of costs formerly budgeted as City University local assistance that are now
included in the transfers for debt service category. This has the effect of
decreasing disbursements in this category by a projected $262 million, and
raising projected transfers by the same amount.
General Fund payments for Medicaid are projected to be $5.42 billion,
virtually unchanged from the level of $5.38 billion in 1996-97. This slow growth
is due primarily to continuation of cost containment measures enacted in 1995-96
and 1996-97, new reforms included in the 1997-98 adopted budget and forecasts
for slower underlying growth. Other social service spending is forecast to
increase by only $115 million to $3.15 billion in 1997-98. This slow growth
stems from continued State efforts to reduce welfare fraud, declining caseloads,
and changes produced by federal welfare legislation enacted in 1996.
Remaining disbursements primarily support community-based mental
hygiene programs, community and public health programs, local transportation
programs, and revenue sharing payments to local governments. Revenue sharing and
other general purpose aid is projected at $802 million, an increase of
approximately $54 million from 1996-97.
State operations spending reflects the administrative costs of
operating the State's agencies, including the prison system, mental hygiene
institutions, the State University system ("SUNY"), the Legislature, and the
court system. Personal service costs account for approximately 71 percent of
this category. Since January 1995, the State's workforce has been reduced by
about 10 percent, and is projected to reach a level of approximately 191,000
persons by the end of the 1997-98 fiscal year. Collective bargaining agreements
have been ratified by employee bargaining units representing most State
employees subject to such agreements, and the 1997-98 projections reflect salary
increases under these agreements. For more information on the State's workforce,
see the section entitled "State Organization -- State Government Employment."
Disbursements for State operations are projected at $6.22 billion, an
increase of $441 million or 7.6 percent over the 1996-97 fiscal year. About $200
million of this increase results from approved collective bargaining agreements
and the impact of binding arbitration settlements. Other major increases include
growth in SUNY operations, increased mental hygiene costs resulting from
increased assessments on State-operated programs, public protection agency
spending, which is increasing to reflect the impact of sentencing reforms and
prison expansion, and higher spending by the Judiciary and Legislature.
General State charges primarily reflect the costs of providing fringe
benefits for State employees, including contributions to pension systems, the
employer's share of social security contributions, employer contributions toward
the cost of health insurance, and the costs of providing worker's
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compensation and unemployment insurance benefits. This category also reflects
certain fixed costs such as payments in lieu of taxes, and payments of judgments
against the State or its public officers.
Disbursements for General State charges are projected to total $2.18
billion in the 1997-98 State Financial Plan virtually unchanged from 1996-97
levels. Pension costs are projected to grow moderately year over year, while
most of the projected growth in fixed costs is related to increased payments to
localities for State-owned lands. These increases are fully offset by continued
savings from health care and worker's compensation reforms, which account for
most of the cost containment savings in this area.
Debt service paid from the General Fund for 1997-98 reflects only the
$11 million interest cost of the State's commercial paper program. This is
approximately the same level as last year, reflecting projections for stable
interest rates for the balance of the fiscal year. Debt service on long-term
obligations is paid from Debt Service Funds as described below.
Finally, in addition to disbursements previously outlined, transfers to
other funds from the General Fund are made primarily to finance certain portions
of State capital project spending and debt service on long-term bonds, where
these costs are not funded from other sources. Transfers to other funds for debt
service are projected at $2.07 billion in 1997-98, an increase of $496 million.
This reflects the increased debt service impact of prior year bond sales (net of
refunding savings), the reclassification of City University debt service costs
that had been previously included in grants to local governments, and the
inclusion of costs associated with the 1996-97 bonding of previous pension
liabilities at lower interest rates. This action has the effect of adding $159
million in costs that would have otherwise been included with general State
charges.
Transfers for capital projects provide General Fund support for
projects not otherwise financed through bond proceeds, dedicated taxes and other
revenues and federal grants. These transfers are projected at $184 million for
1997-98, an increase of $46 million. The 1997-98 State Financial Plan also
includes $299 million for subsidies or transfers to other State funds, a
decrease of $30 million from last year's level.
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
1997-98, the State Financial Plan projects disbursements of $28.22 billion from
these funds, an increase of $2.51 billion over 1996-97 levels. Disbursements
from federal funds, primarily the federal share of Medicaid and other social
services programs, are projected to total $21.19 billion in the 1997-98 fiscal
year. Remaining projected spending of $7.26 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 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 various other
capital funds established to
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<PAGE> 99
distinguish specific capital construction purposes supported by other revenues.
Disbursements from the Capital Projects Funds in 1997-98 are projected
at $3.70 billion, an increase of $154 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 $3.17 billion in the 1997-98 fiscal year, an
increase of $641 million from 1996-97. The transfer from the General Fund of
$2.07 billion is expected to finance 65 percent of these payments. The remaining
payments are expected to be financed by pledged revenues, including $2.03
billion in taxes and $601 million in dedicated fees, and other miscellaneous
receipts. After required impoundment for debt service, $3.77 billion is expected
to be transferred to the General Fund and other funds in support of State
operations. The largest transfer -- $1.86 billion -- is made to the Special
Revenue fund type in support of operations of the mental hygiene agencies.
Another $1.47 billion in excess sales taxes is expected to be transferred to the
General Funds following payment of projected debt service on LGAC bonds.
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 five fiscal years, the State recorded balanced budgets on a cash basis,
with positive fund balances in each year.
1996-97 Fiscal Year
The State ended its 1996-97 fiscal year on March 31, 1997 in balance on
a cash basis, with a General Fund cash surplus as reported by the Division of
the Budget of approximately $1.4 billion. The cash surplus was derived primarily
from higher-than-expected revenues and lower-than-expected spending for social
services programs. The Governor in his Executive Budget applied $1.05 billion of
the cash surplus amount to finance the 1997-98 Financial Plan, and the
additional $373 million is available for use in financing the 1997-98 Financial
Plan when enacted by the State Legislature.
The General Fund closing fund balance was $433 million. Of that amount,
$317 million was in the Tax Stabilization Reserve Fund "TSRF," after a required
deposit of $15 million and an additional deposit of $65 million in 1996-97. The
TSRF can 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
remains on deposit in the CRF. This fund assists the State in financing any
extraordinary litigation costs during the fiscal year. The remaining $75 million
reflects amounts on deposit in the Community Projects Fund. This fund was
created to fund certain legislative initiatives. The General Fund closing fund
balance does not include $1.86 billion in the tax refund reserve account, of
which $521 million was made available as a result of the Local Government
Assistance Corporation ("LGAC") financing program and was required to be on
deposit as of March 31, 1997.
General Fund receipts and transfers from other funds for the 1996-97
fiscal year totaled $33.04
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<PAGE> 100
billion, an increase of 0.7 percent from the previous fiscal year (excluding
deposits into the tax refund reserve account). General Fund disbursements and
transfers to other funds totaled $32.90 billion for the 1996-97 fiscal year, an
increase of 0.7 percent from the 1995-96 fiscal 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
exceeded 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 "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
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included savings from a hiring freeze, halting the development of certain
services, and the suspension of non-essential capital projects.
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.
In order to help the City to avoid exceeding its State Constitutional general
debt limit, the state created the New York City Transitional Finance Authority
to finance a portion of the City's capital program. Despite this additional
financing mechanism, the City currently projects that, if no further action is
taken, it will reach its debt limit in City fiscal year 1999-2000. On June 2,
1997, an action was commenced seeking a declaratory judgment declaring the
legislation establishing the Transitional Finance Authority to be
unconstitutional. If such legislation were voided, projected contracts for City
capital projects would exceed the City's debt limit during fiscal year 1997-98.
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, while economic recovery in New
York City has been slower than in other regions of the country, a surge in Wall
Street profitability resulted in increased tax revenues and generated a
substantial surplus for the City in City fiscal year 1996-97. Although several
sectors of the City's economy have expanded recently, especially tourism and
business and professional services, City tax revenues remain heavily dependent
on the continued profitability of the securities industries and the course of
the national economy. These reports have also indicated that recent City
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budgets have been balanced 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 expenditure growth in
line with recurring revenue growth; and that the City is therefore likely to
continue to face substantial gaps between forecast revenues and expenditures in
future years that must be closed with reduced expenditures and/or increased
revenues. In addition to these monitoring agencies, the Independent Budget
Office ("IBO") has been established pursuant to the City Charter to provide
analysis to elected officials and the public on relevant fiscal and budgetary
issues affecting the City.
OTHER LOCALITIES
In addition to the City, certain localities have experienced financial
problems leading to requests for additional State assistance during the last
several state fiscal years. The potential impact on the State of any future
requests by localities for additional assistance is not included in the
projections of the State's receipts and disbursements for the State's 1997-98
fiscal year.
Fiscal difficulties experienced by the City of Yonkers resulted in the
re-establishment of the Financial Control Board for the City of Yonkers by the
State in 1984. That Board is charged with oversight of the fiscal affairs of
Yonkers. Future actions taken by the State to assist Yonkers could result in
increased State expenditures for extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the City
of Troy in 1994. The Supervisory Board's powers were increased in 1995, when
Troy MAC was created to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the City of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued
.bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the
1996 legislative session through $50 million in special appropriations targeted
for distressed cities, aid that was largely continued in 1997. Twenty-eight
municipalities are scheduled to share the more than $32 million in targeted
unrestricted aid allocated in the 1997-98 budget. An additional $21 million will
be dispersed among all cities, towns and villages, a 3.97 percent increase in
General Purpose State Aid.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1995, the total indebtedness of all
localities in the State other than New York City was approximately $19.0
billion. A small portion (approximately $102.3 million) of that indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant to
State enabling legislation. State law requires the Comptroller to review and
make recommendations concerning the budgets of those local government units
other than New York City authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding. Eighteen
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1995.
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,
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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, including refunding bonds, of all State public
authorities was $75.4 billion, only a portion of which constitutes
state-supported or state-related debt.
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 1997-98 State fiscal year, total State
assistance to the MTA is estimated at approximately $1.2 billion.
State legislation accompanying the 1996-97 adopted State budget
authorized the MTA, Triborough Bridge and Tunnel Authority, and TA to issue an
aggregate of $6.5 billion in bonds to finance a portion of a new $12.17 billion
MTA capital plan for the 1995 through 1999 calendar years (the "1995-99 Capital
Program"), and in July 1997 the Capital Program Review Board approved the
1995-99 Capital Program. This plan supersedes 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 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.
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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 eight 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 five separate classes, Class A (the "Class A Shares"), Class B (the
"Class B Shares"), Class C (the "Class C Shares"), Class D (the "Class D
Shares") and Class Y (the "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.
Class A Shares, Class D Shares and Class Y 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. Class B Shares and Class C
Shares may be acquired only through an exchange of shares from the corresponding
class of other funds of the Trust.
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 APRIL 1, 1999 (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.
April 1, 1999
<PAGE> 105
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS...................................................................3
Interest Rates...........................................................................................3
Repurchase Agreements....................................................................................3
General..................................................................................................4
Portfolio Transactions...................................................................................4
Investment Restrictions..................................................................................5
Non-Fundamental Restriction..............................................................................7
Percentage and Rating Restrictions.......................................................................8
PERFORMANCE INFORMATION...........................................................................................8
MANAGEMENT OF THE TRUST..........................................................................................10
Trustees and Officers...................................................................................10
Compensation Table......................................................................................11
Investment Adviser......................................................................................12
Distribution Plans ---- Class A, Class B, Class C and Class D Shares Only...............................13
The Distributor and Sponsor.............................................................................14
Administrative Services Plan............................................................................15
Administrator...........................................................................................15
Transfer Agent..........................................................................................16
Custodian...............................................................................................16
Shareholder Servicing Agents............................................................................16
Expenses................................................................................................17
DETERMINATION OF NET ASSET VALUE.................................................................................18
PURCHASE OF SHARES...............................................................................................18
Exchange Privilege......................................................................................19
Automatic Investment Plan...............................................................................20
Purchases Through a Shareholder Servicing Agent or a Securities Broker..................................20
Systematic Withdrawal Plan..............................................................................21
Redemption of Shares Purchased Directly Through the Distributor.........................................22
Check Redemption Service................................................................................22
Contingent Deferred Sales Charge ("CDSC") ---- Class B Shares and Class C Shares........................23
Conversion Feature......................................................................................24
DIVIDENDS AND DISTRIBUTIONS......................................................................................24
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES.............................................................25
RETIREMENT PLANS.................................................................................................27
Individual Retirement Accounts..........................................................................27
</TABLE>
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<TABLE>
<S> <C>
Defined Contribution Plans..............................................................................27
Section 457 Plan, 401(k) Plan, 403(b) Plan..............................................................27
TAXATION.........................................................................................................27
OTHER INFORMATION................................................................................................29
Capitalization..........................................................................................29
Independent Auditors....................................................................................30
Counsel.................................................................................................30
Registration Statement..................................................................................30
Financial Statements....................................................................................30
Shareholder Inquiries...................................................................................30
</TABLE>
ii
<PAGE> 107
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The following information supplements the discussion of the investment
objective, strategies and risks of the Fund discussed 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 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.
The 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.
The Fund follows investment and valuation policies designed to maintain
a stable net asset value of $1.00 per share. There is no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per share. In
addition, there can be no assurance that the investment objectives of the Fund
will be achieved. The investment objective and strategies of the Fund are not
fundamental and may be changed by the Board of Trustees of the Trust without
the approval of Fund shareholders. If there is a change, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current financial position and needs.
INTEREST RATES
The value of the securities in the Fund's portfolio can be expected to
vary inversely with changes in prevailing interest rates. Although the Fund's
investment policies are designed to minimize these changes and to maintain a net
asset value of $1.00 per share, there is no assurance that these policies will
be successful. Withdrawals by shareholders could require the sale of portfolio
investments at a time when such a sale might not otherwise be desirable.
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
3
<PAGE> 108
purchased obligation. Obligations serving as collateral for each repurchase
agreement are delivered to the 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 the Fund.
The Trust may enter into repurchase agreements on behalf of the Fund 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 the Fund's assets in repurchase obligations are
designed to minimize the 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 the 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, the 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 the 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.
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.
4
<PAGE> 109
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.
5
<PAGE> 110
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;
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<PAGE> 111
(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 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
7
<PAGE> 112
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
From time to time the Trust may provide annualized "yield" and
"effective yield" quotations for the Fund in advertisements, shareholder reports
or other communications to shareholders and prospective investors. The methods
used to calculate a Fund's yield, and effective 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. Specifically, the yield 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. 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. Specifically, the "effective
yield" quotation of the Fund 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
December 31, 1998 was 4.33% for Class A Shares, 3.49% for Class B Shares, 3.55%
for Class C Shares, and 4.59% for Class Y Shares. There were no Class C
Shareholders prior to December 31, 1998. The yield for Class C Shares is an
estimate, based upon the Class A Share yield, adjusted for differences in
expenses. Class D Shares were not offered prior to April 1, 1999.
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 of the first day of such
period, and (b) subtracting 1 from the results. 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.
8
<PAGE> 113
The average annual total return of the Class A Shares of the Fund for
the one-year period and five-year period ended September 30, 1998 was 5.00% and
7.73%, respectively, and the average annual total rate of return of the Class A
Shares of the Fund for the period from May 3, 1990 (commencement of operations)
to September 30, 1998 was 4.73%. The total rate of return for Class Y Shares of
the Fund for the one-year period ended September 30, 1998 was 5.27% and the
average annual total rate of return of the Class Y Shares for the period from
July 1, 1996 (commencement of operations) to September 30, 1998 was 5.19%. No
Class B Shares were issued prior to March 31, 1998 and Class C Shares were not
offered prior to November 9, 1998. Class D Shares were not offered prior to
April 1, 1999.
Since these yield and effective yield quotations are based on
historical earnings and reflect only the performance of a hypothetical
investment in the Fund during the particular time period on which the
calculations are based, and since a Fund's yield and effective yield fluctuate
from day to day, these quotations should not be considered as an indication or
representation of a Fund's yield or effective 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.
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.
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
Fund, which will have the effect of reducing the net return on the investment of
customers of that Shareholder Servicing Agent or that securities broker.
Specifically, 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.
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 Fund, which will have
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<PAGE> 114
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.
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).
WALTER B. GRIMM*, President and Secretary
Employee of BISYS Fund Services, Inc., June, 1992 to present; prior to
June, 1992 President of Leigh Investments Consulting (investment firm).
ANTHONY J. FISCHER*, Vice President
Employee of BISYS Fund Services, Inc., April, 1998 to present; Employee
of SEI Investments and Merrill Lynch prior to April 1998.
JAMES L. SMITH*, Vice President
Employee of BISYS Fund Services, Inc., October 1996 to present;
Employee of Davis Graham Stubbs, October 1995 to October 1996; Director of Legal
and Compliance, ALPS Mutual Fund Services, Inc., June 1991 to October 1995.
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.
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<PAGE> 115
ELLEN STOUTAMIRE*, Secretary
Employee of BISYS Fund Services, Inc., April, 1997 to present; Attorney
in private practice prior to April 1997.
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. Grimm, Fischer, Smith and Waters and Mss. Grandominico, Brady,
Stoutamire and Metz also are officers of certain other investment companies of
which BISYS or an affiliate is the administrator.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Total Compensation
Compensation Retirement Annual Benefits From Fund
from Trust Benefits Accrued Upon Retirement Complex* to
as Part of Fund Trustees
Expenses
- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Larry M. Robbins $2,900 none none $11,600
Alan S. Parsow $2,400 none none $ 9,600
Frederick C. Chen $2,400 none none $ 9,600
Michael Seely $2,400 none none $ 9,600
</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 December 31, 1998. 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 $1,500 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 $1,750 for each meeting attended.
As of January 6, 1999, 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):
<TABLE>
<CAPTION>
<S> <C>
INVESTOR CLASS
Republic National Bank of New York 81.75%
10 East 40th Street - 10th Floor
New York, NY 10018
BHC Securities, Inc. 7.44%
Twelve Hundred
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212
ADVISOR CLASS
Kinco & Co. 79.13%
c/o Securities Services
One Hanson Place - Lower Level
Brooklyn, NY 11243
Kinco & Co. 7.99%
Republic National Bank
One Hanson Place - Lower Level
Brooklyn, NY 11243
Wachovia Bank Trust 8.35%
FBO Republic Profit Sharing and
Savings Plan Clearing Account
301 North Main Street
PO Box 3073
Winston-Salem, NC 27150
</TABLE>
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<PAGE> 116
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 positions as
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 serves as
investment adviser to the Fund. The Adviser manages the investment and
reinvestment of the assets of the Fund and continuously reviews, supervises and
administers the investments of the Fund pursuant to an Investment Advisory
Contract (the "Investment Advisory Contract"). 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.
Subject to such policies as the Board of Trustees may determine, the Adviser
places orders for the purchase and sale of the Fund's investments directly with
brokers or dealers selected by it in its discretion. See "Portfolio
Transactions" above. 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 Fund at the annual rate of 0.20% of the Fund's average
daily net assets.
Republic is a wholly owned subsidiary of Republic New York Corporation,
a registered bank holding company, and 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 Fund,
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 Fund Services. There is no restriction on the amount or type of U.S.
Government or Municipal obligations available to be purchased for the Fund. 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.
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
12
<PAGE> 117
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.
Based upon the advice of counsel, Republic believes that the
performance of investment advisory and other services for the Fund 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 Fund. If Republic were prohibited from acting as investment adviser to the
Fund, it is expected that the Board of Trustees would recommend to shareholders
of the Fund 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 Fund, the Trust would seek alternative means
of providing such services.
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 continue in effect 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, 1996, the Fund accrued investment
advisory fees of $365,782 to Republic, of which $182,891 was waived. For the
year ended September 30, 1997, the Fund accrued investment advisory fees of
$734,759 to Republic, of which $367,379 was waived. For the year ended September
30, 1998, the Fund accrued investment advisory fees of $1,534,571, of which
$767,275 was waived. For the one month period ended October 31, 1998, the Fund
accrued investment advisory fees of $172, 190, of which $86,095 was waived.
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.
DISTRIBUTION PLANS ---- CLASS A, CLASS B, CLASS C AND CLASS D SHARES ONLY
Four Distribution Plans have been adopted by the Trust (the
"Distribution Plans") with respect to the Class A Shares (the "Class A Plan"),
the Class B Shares (the "Class B Plan"), the Class C Shares (the "Class C Plan")
and Class D Shares (the "Class D Plan"). The Distribution Plans provide that
they may not be amended to increase materially the costs which either the
Class A Shares, Class B Shares, Class C and Class D Shares may bear pursuant to
the Class A Plan, Class B Plan, Class C Plan and Class D Plan without approval
by shareholders of the Class A Shares, Class B Shares, Class C Shares and
Class D Shares, respectively, and that any material amendments of the
Distribution Plans must be approved by the
13
<PAGE> 118
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 Plans 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 Plans have been approved, and are 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 Plans. In adopting
the Class A Plan, Class B Plan, Class C Plan and Class D Plan, the Trustees
considered alternative methods to distribute the Class A Shares, Class B Shares,
Class C Shares and Class D Shares and to reduce each class's expense ratio and
concluded that there was a reasonable likelihood that each Distribution Plan
will benefit their respective class and that class's shareholders. The
Distribution Plans are terminable with respect to the Class A Shares, Class B
Shares, Class C Shares or Class D Shares at any time by a vote of a majority of
the Qualified Trustees or by vote of the holders of a majority of that class.
The Fund did not incur expenses pursuant to the Distribution Plans
during the fiscal period ended September 30, 1997, September 30, 1998 and the
one month period ended October 31, 1998.
THE DISTRIBUTOR AND SPONSOR
BISYS Fund Services ("BISYS"), whose address is 3435 Stelzer Road,
Columbus, Ohio 43219-3035, acts as sponsor and distributor to the 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 the Distribution Plans adopted by the Trust, the
Distributor is reimbursed from the Fund monthly for costs and expenses incurred
by the Distributor in connection with the distribution of Class A Shares, Class
B Shares, Class C Shares and Class D Shares of the Fund and for the provision of
certain shareholder services with respect to these 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 Class A Shares, Class B Shares, Class C Shares and Class D Shares
of the Fund 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. Pursuant to the Class A
Plan, the amount of their reimbursement from the Fund may not exceed on an
annual basis 0.25% of the average daily net assets of the Fund represented by
Class A Shares outstanding during the period for which payment is being made.
Pursuant to the Class B Plan and Class C Plan, respectively, such payments by
the Distributor to broker-dealers may be in amounts on an annual basis of up to
0.75% of the Fund's average daily net assets as presented by Class B Shares and
Class C Shares, respectively, outstanding during the period for which payment is
being made. The aggregate fees paid to the Distributor pursuant to the Class B
Plan and Class C Plan, respectively, and to Shareholder Servicing Agents
pursuant to the Administrative Services Plan will not exceed on an annual basis
1.00% of the Fund's average daily net assets represented by Class B Shares and
Class C Shares, respectively, outstanding during the period for which payment is
being made. Pursuant to the Class D Plan, the amount of their reimbursement from
the Fund may not exceed on an annual basis 0.25% of the average daily net assets
of the Fund represented by Class D 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 Fund made pursuant to the Distribution Plans is contingent upon the Board of
Trustees' approval. The Fund is not
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liable for distribution and shareholder servicing expenditures made by the
Distributor in any given year in excess of the maximum amount payable under the
Distribution Plans 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,
custodian, and one or more Shareholder Servicing Agents, and may enter into
agreements providing for the payment of fees for such services. The
Administrative Services Plan 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 the Class A, Class B Shares, Class C Shares, Class D 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 the Class A Shares, Class B Shares, Class C
Shares, Class D 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.
ADMINISTRATOR
Pursuant to an Administration Agreement, BISYS provides the Trust with
general office facilities and supervises the overall administration of the Trust
and the Fund. 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 Fund fees payable monthly at an annual rate equal to 0.10% of
the first $1 billion of the 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.
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, 1996, the Fund accrued administration
fees equal to $365,782, of which $148,783 was waived. For the year ended
September 30, 1997, the Fund accrued administration fees equal to $368,176 none
of which was waived. For the year ended September 30, 1998, the Fund accrued
administration fees equal to $767,296, none of which was waived. For the one
month period ended October 31, 1998 the Fund accrued administration fees equal
to $86,095, none of which was waived.
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TRANSFER AGENT
The Trust has entered into Transfer Agency Agreements with Investors
Bank & Trust Company ("IBT") and BISYS, pursuant to which IBT acts as transfer
agent for the Fund with respect to the Class A Shares, Class D Shares and Class
Y Shares and BISYS acts as transfer agent for the Fund with respect to the Class
B Shares and Class C Shares (the "Transfer Agents"). The Transfer Agents
maintain an account for each shareholder of the Fund (unless such account is
maintained by the shareholder's securities-broker, if applicable, or Shareholder
Servicing Agent), performs other transfer agency functions, and act as dividend
disbursing agent for the Fund. The principal business address of IBT is 200
Clarendon Street, Boston, Massachusetts 02117. The principal business address of
BYSIS is 3435 Stelzer Road, Columbus, OH 43219.
Pursuant to an agreement, as of April 1, 1999, BISYS will provide all
services with respect to each class of shares of the Fund.
CUSTODIAN
Pursuant to a Custodian Agreement, Republic also acts as the custodian
of the Fund's assets (the "Custodian"). The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
fund accounting and other required books and accounts in order to calculate the
daily net asset value of Shares of the Fund. Securities held for the Fund may be
deposited into the Federal Reserve-Treasury Department Book Entry System or the
Depository Trust Company. The Custodian does not determine the investment
policies of the Fund or decide which securities will be purchased or sold for
the Fund. For its services, Republic 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, exchanges and redemptions of
Class A Shares, Class B Shares, Class C Shares, Class D Shares and Class Y
Shares of the Fund may be effected and certain other matters pertaining to the
Fund; 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 the Fund's shareholders; receives, tabulates
and transmits to the Trust proxies executed by shareholders with respect to
meetings of shareholders of the Fund or the Trust; and provides such other
related services as the Trust or a shareholder may request. With respect to
Class A Shares, Class B Shares, Class C Shares and Class D Shares, each
Shareholder Servicing Agent receives a fee from the 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.
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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
Fund 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 Fund. The Trust engages banks as Shareholder
Servicing Agents on behalf of the Fund 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 Fund shareholders, and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Fund 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 Fund would suffer any adverse financial consequences as a
result of these occurrences.
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
the Class A Shares, Class B Shares, Class C Shares and Class D Shares must
include payments made pursuant to their respective 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 Fund.
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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, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
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. It is anticipated that the net asset value of each
class of shares will remain constant at $1.00, although no assurance can be
given that the net asset value will remain constant on a continuing basis.
PURCHASE OF SHARES
Class A Shares, Class D Shares and Class Y Shares of the Fund are
continuously offered for sale by the Distributor at net asset value (normally
$1.00 per share) with no front-end 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"). Class A Shares,
Class D Shares and Class Y 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"). At present, the only Shareholder Servicing Agents for Class Y Shares
of the Fund are Republic and its affiliates.
Class B Shares and Class C Shares of the Fund are not offered for sale
but are only offered as an exchange option for Class B shareholders and Class C
shareholders of the Trust's other investment portfolios who wish to exchange
some or all of those Class B shares or Class C shares for Class B Shares or
Class C Shares, respectively, of the Fund. Although Class B Shares and Class C
Shares of the Fund are not subject to a sales charge when a shareholder
exchanges Class B shares or Class C shares of another
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<PAGE> 123
Trust portfolio for Class B Shares or Class C Shares of the Fund, they may be
subject to a contingent deferred sales charge when they are redeemed. See
"Contingent Deferred Sales Charge ("CDSC") -- Class B Shares and Class C Shares"
below.
Purchases of Class A Shares, Class D Shares and Class Y Shares are
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. The Trust intends the Fund 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 Class A Shares, Class D
Shares and the Distributor may receive fees from the Fund. See "Management of
the Trust -- The Distributor and Sponsor" above. Other funds which have
investment objectives similar to those of the Fund 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 Class A Shares and Class D 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 Class Y 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: Republic U.S. Government Fund, Republic Bond Fund, Republic Overseas
Equity Fund, Republic Opportunity Fund, Republic New York Tax-Free Bond Fund,
Republic New York Tax-Free 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 (the "Republic Funds"). An investor
will receive Class A Shares of the Money Market Funds in exchange for Class A
Shares of the Republic Funds, unless the investor is eligible to receive Class D
Shares of the Money Market Funds, in which case the investor will receive Class
D Shares of a Money Market Fund in exchange for Class A shares of a Republic
Fund. Class B Shares, Class C Shares and Class Y Shares may be exchanged for
shares of the same class of one or more of the Republic Funds at net asset value
without a front-end sales charge provided that the amount to be exchanged meets
the applicable minimum investment requirements and the exchange is made in
states where it is legally authorized. Holders of the Fund's Class B Shares may
not exchange their Shares for shares of any other class. Exchanges of Fund
Investor Shares for Investor shares of one or more Republic Funds may be made
upon payment of the applicable sales charge, unless otherwise exempt.
Shareholders of Class A or Class D Shares of the Fund who are shareholders as of
December 31, 1997 will be grandfathered with respect to the Republic Funds and
will be exempt from having to pay a sales charge on any new purchases of Class A
Shares or Class D Shares of the Fund. An exchange of Class B Shares or Class C
Shares will not affect the holding period of the Class B Shares or Class C
Shares for purposes of determining the CDSC, if any, upon redemption. 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.
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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.
An exchange is considered a sale of shares and may result in a capital
gain or loss for federal income tax purposes. A Shareholder wishing to exchange
his or her Shares may do so by contacting the Trust at 888-525-5757, by
contacting his or her broker-dialer or by providing written instruction to the
Distributor.
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 the 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 the 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 BISYS 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).
PURCHASES THROUGH A SHAREHOLDER SERVICING AGENT OR A SECURITIES BROKER
Class A or Class D Shares of the 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. Class Y
Shares of the 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.
Shareholder Servicing Agents and securities brokers may transmit
purchase payments on behalf of their customers by wire directly to the 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.
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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. Class
A Shares, Class D Shares and Class Y Shares may be redeemed without charge while
Class B Shares and Class C Shares may be subject to a contingent deferred sales
charge (CDSC). See "Contingent Deferred Sales Charge ("CDSC") -- Class B Shares
and Class C Shares" above. 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 the 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, provided that such involuntary
redemptions will not result from fluctuations in the value of Fund Shares. 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 he redeems 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 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. The 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
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(currently known as "STAMP", "SEMP", or "NYSE MPS"). Corporations, partnerships,
trusts or other legal entities may be required to submit additional
documentation.
Redemption by wire or telephone. An investor may redeem Class A or
Class D 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 Class A or Class D Shares by means of a Check
Redemption Service. If Class A Shares or Class D 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 Class A 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.
Class A and Class D 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 Class A and Class D Shares of the 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 the Fund
account is changing on a daily basis, the total value of the Fund account cannot
be determined in advance and the Fund account cannot be closed or entirely
redeemed by check.
CONTINGENT DEFERRED SALES CHARGE ("CDSC") ---- CLASS B SHARES AND CLASS C SHARES
Class B Shares
There is no sales charge imposed upon an exchange for Class B Shares of
the Fund, but investors may be subject to a CDSC when Class B Shares are
redeemed.
The CDSC will be based on the lesser of the net asset value at the time
of original purchase of the Class B shares of the Income Fund(s) and/or the
Equity Fund(s) which were exchanged for the Fund Class B Shares now being
redeemed or the net asset value of such Fund Class B Shares at the time of
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redemption. Accordingly, a CDSC will not be imposed on amounts representing
increases in net asset value above the net asset value at the time of purchase.
In addition, a CDSC will not be assessed on Class B Shares purchased through
reinvestment of dividends or capital gains distributions, or that are purchased
by "Institutional Investors" such as corporations, pension plans, foundations,
charitable institutions, insurance companies, banks and other banking
institutions, and non-bank fiduciaries.
Solely for purposes of determining the amount of time which has elapsed
from the time of purchase of any Income Fund or Equity Fund Class B shares, all
purchases during a month will be aggregated and deemed to have been made on the
last day of the month. In determining whether a CDSC is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of Class B Shares held for more than three years that
were exchanged from Income Fund Class B shares, Class B Shares held more than
four years for Class B Shares that were exchanged from Equity Fund Class B
shares or Class B Shares acquired pursuant to reinvestment of dividends or
distributions.
For example, assume an investor purchased 100 Class B Shares of an
Equity Fund with a net asset value of $8 per share (i.e., at an aggregate net
asset value of $800) and in the eleventh month after purchase, the net asset
value per share is $10 and, during such time, the investor has acquired five
additional Class B shares of the Equity Fund through dividend reinvestment. If
at such time the investor exchanges all of his Equity Fund Class B shares for
Class B Shares of one of the Funds, the investor will have 1,050 Class B Shares
(assuming a net asset value of $1.00 per share for the Fund). Assume twelve
months later the investor acquires 50 additional Class B Shares of the Fund
through dividend reinvestments. If at such time the investor makes his first
redemption of 500 Fund Class B Shares (producing proceeds of $500), 100 of such
Shares would not be subject to the charge because they were acquired through
dividend reinvestment. With respect to the remaining 400 Class B Shares being
redeemed, the CDSC would be applied only to 320 Class B Shares (representing the
original cost of $8 per share for the Equity Fund) and not to the remaining 80
Class B Shares (representing the increase in net asset value of $2 per share for
the Equity Fund).
The CDSC is waived on redemptions of Class B Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a Shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an IRA or a Custodial Account
under Code Section 403(b)(7) to a Shareholder who has reached age 70 1/2, and
(iii) to the extent the redemption represents the minimum distribution from
retirement plans under Code Section 401(a) where such redemptions are necessary
to make distributions to plan participants.
Class C Shares
There is no sales charge imposed upon an exchange for Class C Shares of
the Fund, but investors may be subject to a CDSC when Class C Shares are
redeemed. When Class C shares of one of the other investment portfolios of the
Republic Funds are exchanged for Class C Shares of the Fund and those shares are
redeemed less than one year after the original purchase of the Class B shares of
the other Republic Fund (calculated from the last day of the month in which the
shares were purchased), those Class C Shares of the Fund will be subject to a
1.0% CDSC in most cases. The CDSC will be assessed on an amount equal to the
lesser of the current market value or the cost of the shares being redeemed. The
CDSC will not be imposed in the circumstances set forth above in the section
"Class B Shares." Class C Shares are subject to an annual 12b-1 fee of up to
1.0% of the average daily net assets of the Class. Unlike Class B shares, Class
C Shares have no conversion feature and, accordingly, an investor that purchases
Class C Shares will be subject to 12b-1 fees applicable to Class C Shares for an
indefinite
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period subject to annual approval by the Fund's Board of Trustees and regulatory
limitations. The higher fees mean a higher expense ratio, so Class C Shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A Shares. Broker-dealers and other financial intermediaries whose clients have
purchased Class C Shares may receive a trailing commission equal to [%] of the
average daily net asset value of such shares on an annual basis held by their
clients more than one year from the date of purchase. Trailing commissions will
commence immediately with respect to shares eligible for exemption from the CDSC
normally applicable to Class C Shares.
CONVERSION FEATURE
Five years after the original purchase of Income Fund Class B shares
which have been exchanged for Class B Shares of the Fund and six years after the
original purchase of Equity Fund Class B shares which have been exchanged for
Class B Shares of the Fund, Class B Shares of the Fund will convert
automatically to Class A Shares or Class D Shares, depending upon whether the
investor is eligible for Class D Shares. The purpose of the conversion is to
relieve a holder of Class B Shares of the higher ongoing expenses charged to
those Shares, after enough time has passed to allow the Distributor to recover
approximately the amount it would have received if a front-end sales charge had
been charged. The conversion from Class B Shares to Class A or Class D Shares
takes place at net asset value, as a result of which an investor receives
dollar-for-dollar the same value of Class A or Class D Shares as he or she had
of Class B Shares. For Class B Shares that were exchanged from Income Fund Class
B shares, the conversion occurs five years after the beginning of the calendar
month in which the Income Fund Class B shares were purchased. For Class B shares
that were exchanged from Equity Fund Class B shares, the conversion occurs six
years after the beginning of the calendar month in which the Equity Fund Class B
shares were purchased. As a result of the conversion, the converted Shares are
relieved of the Rule 12b-1 fees borne by Class B Shares, although they are
subject to the Rule 12b-1 fees borne by Investor Shares.
DIVIDENDS AND DISTRIBUTIONS
The net income of the 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 the 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 the 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 the Fund is higher or lower than the price the Fund
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<PAGE> 129
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 the Fund is declared as a dividend each time
the net income of the Fund is determined, the net asset value per share of the
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 the Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of Shares in his account.
It is expected that the Fund will have a positive net income at the
time of each determination thereof. If, for any reason, the net income of the
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.
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 Class A Shares, Class B Shares, Class C
Shares, Class D Shares and Class Y 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 of the Trust participate equally in the
earnings, dividends and assets of the particular series. Currently, the Trust
has eight 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, the Fund is divided into five classes of shares.
Each share of each class of the Fund 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. 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
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<PAGE> 130
by the holders of not less than 10% of the outstanding shares of the Trust.
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.
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.
Shareholders of the Fund 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 the 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 Fund 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.
RETIREMENT PLANS
Class A and Class D Shares of the 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. The tax law governing tax-deferred retirement plans is
complex and changes frequently. Before investing in the Fund through one or more
of these plans, an investor should consult his or her tax adviser.
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<PAGE> 131
INDIVIDUAL RETIREMENT ACCOUNTS
Class A and Class D Shares of the 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 BYSIS 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, in whole or in part, 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 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 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.
TAXATION
The following is a summary of certain U.S. federal income tax issues
concerning the Fund and its shareholders. The Fund may also be subject to state,
local, foreign or other taxes not discussed below. This discussion does not
purport to be complete or to address all tax issues relevant to each
shareholder. Prospective investors should consult their own tax advisors with
regard to the federal, state, foreign and other tax consequences to them of the
purchase, ownership or disposition of Fund shares. This discussion is based upon
present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial and administrative
authorities, all of which are subject to change, which change may be
retroactive.
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 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.
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<PAGE> 132
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, whether received in cash or
reinvested in Fund shares, will generally be taxable to shareholders as either
"20% Gain" or "28% Gain," depending upon the Fund's holding period for the
assets sold. "20% Gains" arise from sales of assets held by the Fund for more
than 18 months and are subject to a maximum tax rate of 20%; "28% Gains" arise
from sales of assets held by the Fund for more than one year but not more than
18 months and are subject to a maximum tax rate of 28%. Net capital gains from
assets held for one year or less will be taxed as ordinary income. Distributions
will be subject to these capital gains rates regardless of how long a
shareholder has held Fund shares. 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. Gain will generally be subject to
a maximum tax rate of 20% if the shareholder's holding period for the shares is
more than 18 months, and a maximum tax rate of 28% if the shareholder's holding
period for the shares is more than one year but not more than 18 months. Gain
from the disposition of shares held not more than one year will be taxed as
short-term capital gain. 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
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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 for purposes of Massachusetts law.
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.
INDEPENDENT AUDITORS
The Board of Trustees has appointed KPMG Peat Marwick LLP as
independent auditors 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, 1775 Eye Street, N.W., Washington, D.C. 20006,
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.
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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, 1998 and
October 31, 1998 are hereby incorporated herein by reference from the Annual
Report of the Fund dated September 30, 1998 and October 31, 1998 as filed with
the Securities and Exchange Commission. Copies of the report will be provided
without charge to each person receiving this Statement of Additional
Information.
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)
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REPUBLIC 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 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 eight 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 five separate classes, Class A (the "Class A Shares"), Class B (the
"Class B Shares"), Class C (the "Class C Shares"), Class D (the "Class D Shares)
and Class Y (the "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 a portfolio of high quality
money market instruments with maturities of 397 days or less, and repurchase
agreements with respect to such obligations.
Class A Shares, Class D. Shares and Class Y 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. Class B Shares and Class C
Shares may be acquired only through an exchange of shares from the corresponding
class of other funds of the Trust.
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 APRIL 1, 1999 (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.
April 1, 1999
<PAGE> 136
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS...................................................................3
Selection of Investments.................................................................................4
Foreign Investments......................................................................................4
Interest Rates...........................................................................................5
Concentration............................................................................................5
Securities Lending.......................................................................................5
Repurchase Agreements....................................................................................5
General..................................................................................................6
Portfolio Transactions...................................................................................6
Investment Restrictions..................................................................................7
Non-Fundamental Restriction..............................................................................9
Percentage and Rating Restrictions.......................................................................9
PERFORMANCE INFORMATION..........................................................................................10
MANAGEMENT OF THE TRUST..........................................................................................11
Trustees and Officers...................................................................................11
Compensation Table......................................................................................12
Investment Adviser......................................................................................13
Distribution Plans ---- Class A, Class B, and Class C and Class D Shares Only...........................15
The Distributor and Sponsor.............................................................................15
Administrative Services Plan............................................................................16
Administrator...........................................................................................16
Transfer Agent..........................................................................................17
Custodian...............................................................................................17
Shareholder Servicing Agents............................................................................17
Expenses................................................................................................19
DETERMINATION OF NET ASSET VALUE.................................................................................19
PURCHASE OF SHARES...............................................................................................20
Exchange Privilege......................................................................................20
Automatic Investment Plan...............................................................................21
Purchases Through a Shareholder Servicing Agent or a Securities Broker..................................21
REDEMPTION OF SHARES.............................................................................................22
Systematic Withdrawal Plan..............................................................................23
Redemption of Shares Purchased Directly Through the Distributor.........................................23
Check Redemption Service................................................................................23
Contingent Deferred Sales Charge ("CDSC") ---- Class B and Class C Shares...............................24
Conversion Feature......................................................................................25
DIVIDENDS AND DISTRIBUTIONS......................................................................................26
</TABLE>
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<TABLE>
<S> <C>
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES.............................................................26
TAXATION.........................................................................................................28
OTHER INFORMATION................................................................................................30
Capitalization..........................................................................................30
Independent Auditors....................................................................................30
Counsel.................................................................................................30
Registration Statement..................................................................................30
Financial Statements....................................................................................30
Shareholder Inquiries...................................................................................31
</TABLE>
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INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The following information supplements the discussion of the investment
objective, strategies and risks of the Fund discussed 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 a portfolio of high quality
money market instruments with maturities of 397 days or less, and repurchase
agreements with respect to such obligations.
Examples of these instruments include:
- bank certificates of deposit (CDs): negotiable certificates
issued against funds deposited in commercial bank for a
definite period of time and earning a specified return.
- bankers' acceptances: negotiable drafts or bills of exchange
that have been "accepted" by a bank, meaning, in effect, that
the bank has unconditionally agreed to pay the face value of
the instrument on maturity.
- prime commercial paper: high-grade, short-term obligations
issued by banks, corporations and other issuers.
- corporate obligations: high-grade, short-term corporate
obligations other than prime commercial paper.
- municipal obligations: high-grade, short-term municipal
obligations.
- government securities: marketable securities issued or
guaranteed as to principal and interest by the U.S. government
or by its agencies or instrumentalities.
- repurchase agreements: with respect to U.S. Treasury or U.S.
government agency obligations.
The Fund will invest only in high-quality securities that the Adviser
believes present minimal credit risk. High-quality securities are securities
rated at the time of acquisition in one of the two highest categories by at
least two nationally recognized rating services (or, if only one rating service
has rated the security, by that service) or, if the security is unrated, judged
to be of equivalent quality by the Adviser. The Fund will maintain a
dollar-weighted average maturity of 90 days or less and will not invest in
securities with remaining maturities of more than 397 days. The Fund may invest
in variable or floating rate securities which bear interest at rates subject to
periodic adjustment or which provide for periodic recovery of principal on
demand. Under certain conditions, these securities may be deemed to have
remaining maturities equal to the time remaining until the next interest
adjustment date or the date on which principal can be recovered on demand. The
Fund follows investment and valuation policies designed to maintain a stable net
asset value of $1.00 per share. There is no assurance that the Fund will be able
to maintain a stable net asset value of $1.00 per share.
There can be no assurance that the investment objectives of the Fund
will be achieved. The investment objective and strategies of the Fund are not
fundamental and may be changed by the Board of Trustees of the Trust without
the approval of Fund shareholders. If there is a change, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current financial position and needs.
3
<PAGE> 139
SELECTION OF INVESTMENTS
The Fund may invest in bank certificates of deposit and bankers'
acceptances issued by banks having deposits in excess of $2 billion (or the
foreign currency equivalent) at the close of the last calendar year. Should the
Trustees decide to reduce this minimum deposit requirement, shareholders would
be notified and this prospectus supplemented.
Securities issued or guaranteed as to principal and interest by the
U.S. government include a variety of Treasury securities, which differ in their
interest rates, maturities and dates of issue. Securities issued or guaranteed
by agencies or instrumentalities of the U.S. government may or may not be
supported by the full faith and credit of the United States or by the right of
the issuer to borrow from the Treasury.
Considerations of liquidity and preservation of capital mean that the
Fund may not necessarily invest in money market instruments paying the highest
available yield at a particular time. Consistent with its investment objective,
the Fund will attempt to maximize yields by portfolio trading and by buying and
selling portfolio investments in anticipation of or in response to changing
economic and money market conditions and trends. The Fund will also invest to
take advantage of what the Adviser believes to be temporary disparities in
yields of different segments of the high-grade money market or among particular
instruments within the same segment of the market. These policies, as well as
the relatively short maturity of obligations purchased by the Fund, may result
in frequent changes in the Fund's portfolio. Portfolio turnover may give rise to
taxable gains. The Fund does not usually pay brokerage commissions in connection
with the purchase or sale of portfolio securities.
FOREIGN INVESTMENTS
The Fund may invest without limit in U.S. dollar-denominated commercial
paper of foreign issuers and in bank certificates of deposit and bankers'
acceptances payable in U.S. dollars and issued by foreign banks (including U.S.
branches of foreign banks) or by foreign branches of U.S. banks. These foreign
investments involve certain special risks described below.
There may be less information publicly available about a foreign issuer
than about a U.S. issuer, and foreign issuers are not generally subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. The securities of some foreign issuers are less
liquid and at times more volatile than securities of comparable U.S. issuers.
Foreign brokerage commissions and other fees are also generally higher than in
the United States. Foreign settlement procedures and trade regulations may
involve certain risks (such as delay in payment or delivery of securities or in
the recovery of the fund's assets held abroad) and expenses not present in the
settlement of investments in U.S. markets.
In addition, the Fund's foreign investments may be subject to the risk
of nationalization or expropriation of foreign deposits, foreign withholding
taxes, confiscatory taxation, political or financial instability and diplomatic
developments which could affect the value of the Fund's investments in certain
foreign countries. Dividends or interest on, or proceeds from the sale of,
foreign securities may be subject to foreign withholding taxes, and special U.S.
tax considerations may apply.
Legal remedies available to investors in certain foreign countries may
be more limited than those available with respect to investments in the United
States or in other foreign countries.
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<PAGE> 140
INTEREST RATES
The value of the securities in the Fund's portfolio can be expected to
vary inversely with changes in prevailing interest rates. Although the Fund's
investment policies are designed to minimize these changes and to maintain a net
asset value of $1.00 per share, there is no assurance that these policies will
be successful. Withdrawals by shareholders could require the sale of portfolio
investments at a time when such a sale might not otherwise be desirable.
CONCENTRATION
The Fund may invest without limit in the banking industry and in
commercial paper and short-term corporate obligations of issuers in the personal
credit institution and business credit institution industries when, in the
opinion of the Adviser, the yield, marketability and availability of investments
meeting the Fund's quality standards in those industries justify any additional
risks associated with the concentration of the Fund's assets in those
industries. The Fund, however, will invest more than 25% of its assets in the
personal credit institution or business credit institution industries only when,
to the Adviser's knowledge, the yields then available on securities issued by
companies in such industries and otherwise suitable for investment by the Fund
exceed the yields then available on securities issued by companies in the
banking industry and otherwise suitable for investment by the Fund.
SECURITIES LENDING
The Fund may lend portfolio securities amounting to not more than 25%
of its assets to broker-dealers. These transactions must be fully collateralized
at all times with cash and short- term debt obligations. These transactions
involve some risk to the Fund if the other party should default on its
obligation and the Fund is delayed or prevented from recovering the collateral.
The Fund may also enter into repurchase agreements. See "Repurchase Agreements"
below.
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 the 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 the Fund. The Trust may enter into
repurchase agreements on behalf of the Fund 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 the
Fund's assets in repurchase obligations are designed to minimize the Fund's risk
of losses from those investments. Repurchase agreements are considered
collateralized loans under the 1940 Act.
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<PAGE> 141
GENERAL
The Trust may, in the future, seek to achieve the investment objective
of the 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, the 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 the 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.
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.
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<PAGE> 142
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;
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<PAGE> 143
(3) underwrite securities issued by other persons, except insofar
as the Trust may technically be deemed an underwriter under the 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 interests but
excluding securities secured by real estate interests therein), interests in
oil, gas or mineral leases, or commodity contracts in the ordinary course of
business the Trust reserves the freedom of action to hold and to sell for the
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 it is deemed
appropriate for the achievement of the Fund's investment objective, up to 25% of
the assets of the Fund (taken at value at the time of each investment) may be
invested in any one;
(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.);
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<PAGE> 144
(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 invest more than 10%
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.
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<PAGE> 145
PERFORMANCE INFORMATION
From time to time the Trust may provide annualized "yield" and
"effective yield" quotations for the Fund in advertisements, shareholder reports
or other communications to shareholders and prospective investors. The methods
used to calculate a Fund's yield, and effective 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. Specifically, the yield 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. 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. Specifically, the "effective
yield" quotation of the Fund 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.
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 of the first day of such
period, and (b) subtracting 1 from the results. 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.
Since these yield and effective yield quotations are based on
historical earnings and reflect only the performance of a hypothetical
investment in the Fund during the particular time period on which the
calculations are based, and since a Fund's yield and effective yield fluctuate
from day to day, these quotations should not be considered as an indication or
representation of a Fund's yield or effective 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.
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.
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<PAGE> 146
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
Fund, which will have the effect of reducing the net return on the investment of
customers of that Shareholder Servicing Agent or that securities broker.
Specifically, 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.
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 Fund, 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.
Performance information for the Fund has not been provided because the
Fund did not offer its shares prior to November 9, 1998. Performance information
provided in the future will be done so in the manner described above.
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.
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<PAGE> 147
MICHAEL SEELY, Trustee
405 Lexington Avenue, Suite 909, New York, New York 10174 - President
of Investor Access Corporation (investor relations consulting firm).
WALTER B. GRIMM*, President and Secretary
Employee of BISYS Fund Services, Inc., June, 1992 to present; prior to
June, 1992 President of Leigh Investments Consulting (investment firm).
ANTHONY J. FISCHER*, Vice President
Employee of BISYS Fund Services, Inc., April, 1998 to present; Employee
of SEI Investments and Merrill Lynch prior to April 1998.
JAMES L. SMITH*, Vice President
Employee of BISYS Fund Services, Inc., October 1996 to present;
Employee of Davis Graham Stubbs, October 1995 to October 1996; Director of Legal
and Compliance, ALPS Mutual Fund Services, Inc., June 1991 to October 1995.
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.
ELLEN STOUTAMIRE*, Secretary
Employee of BISYS Fund Services, Inc., April, 1997 to present; Attorney
in private practice prior to April 1997.
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. Grimm, Fischer, Smith and Waters and Mss. Grandominico, Brady,
Stoutamire and Metz also are officers of certain other investment companies of
which BISYS or an affiliate is the administrator.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Total Compensation
Compensation Retirement Annual Benefits From Fund
from Trust Benefits Accrued Upon Retirement Complex* to
as Part of Fund Trustees
Expenses
- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Larry M. Robbins $2,900 none none $11,600
Alan S. Parsow $2,400 none none $ 9,600
Frederick C. Chen $2,400 none none $ 9,600
Michael Seely $2,400 none none $ 9,600
</TABLE>
- ---------------
*The Fund Complex includes the Trust, Republic Advisor Funds Trust, and
Republic Portfolios.
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<PAGE> 148
The compensation table above reflects the fees received by the Trustees
for the year ended December 31, 1998. 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 $1,500 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 $1,750 for each meeting attended.
As of December 31, 1998, the Trustees and officer of the Trust, as a
group, owned less than 1% of the outstanding shares of the Fund. As of the same
date, no 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).
As of January 6, 1999, 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):
<TABLE>
<CAPTION>
<S> <C>
INVESTOR CLASS
Republic National Bank of New York 77.39%
10 East 40th Street - 10th Floor
New York, NY 10018
BHC Securities, Inc. 6.21%
Twelve Hundred
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212
Kinco & Co. 11.12%
c/o Republic National Bank
One Hanson Place - Lower Level
Brooklyn, NY 11243
</TABLE>
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 positions as
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 serves as
investment adviser to the Fund. The Adviser manages the investment and
reinvestment of the assets of the Fund and continuously reviews, supervises and
administers the investments of the Fund pursuant to an Investment Advisory
Contract (the "Investment Advisory Contract"). 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.
Subject to such policies as the Board of Trustees may determine, the Adviser
places orders for the purchase and sale of the Fund's investments directly with
brokers or dealers selected by it in its discretion. See "Portfolio
Transactions" above. The Adviser does not place orders with the
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Distributor. For its services under the Investment Advisory Contract, the
Adviser receives fees, payable monthly, from the Fund at the annual rate of
0.20% of the Fund's average daily net assets.
Republic is a wholly owned subsidiary of Republic New York Corporation,
a registered bank holding company, and 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 Fund,
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 Fund Services. There is no restriction on the amount or type of U.S.
Government or Municipal obligations available to be purchased for the Fund. 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.
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.
Based upon the advice of counsel, Republic believes that the
performance of investment advisory and other services for the Fund 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 Fund. If Republic were prohibited from acting as investment adviser to the
Fund, it is expected that the Board of Trustees would recommend to shareholders
of the Fund 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 Fund, the Trust would seek alternative means
of providing such services.
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 continue in effect 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
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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.
The Fund did not incur expenses pursuant to the Investment Advisory
Contract prior to November 9, 1998 because the Fund had not commenced offering
its Shares prior to that date.
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.
DISTRIBUTION PLANS -- CLASS A, CLASS B, CLASS C AND CLASS D SHARES ONLY
Four Distribution Plans have been adopted by the Trust (the
"Distribution Plans") with respect to the Class A Shares (the "Class A Plan"),
the Class B Shares (the "Class B Plan"), the Class C Shares (the "Class C
Plan"), and Class D Shares (the "Class D Plan"). The Distribution Plans provide
that they may not be amended to increase materially the costs which either
the Class A Shares, Class B Shares, Class C Shares and Class D Shares may bear
pursuant to the Class A Plan, Class B Plan, Class C Plan, and Class D Plan
without approval by shareholders of the Class A Shares, Class B Shares, Class C
Shares, and Class D Shares, respectively, and that any material amendments of
the Distribution Plans 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 Plans 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 Plans
have been approved, and are 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 Plans. In adopting the
Class A Plan, Class B Plan, Class C Plan and Class D Plan, the Trustees
considered alternative methods to distribute the Class A Shares, Class B
Shares, Class C Shares and Class D Shares and to reduce each class's expense
ratio and concluded that there was a reasonable likelihood that each
Distribution Plan will benefit their respective class and that class's
shareholders. The Distribution Plans are terminable with respect to the Class A
Shares, Class B Shares, Class C Shares or Class D Shares at any time by a vote
of a majority of the Qualified Trustees or by vote of the holders of a majority
of that class.
The Fund did not incur expenses pursuant to the Distribution Plans
prior to November 9, 1998 because the Fund had not commenced offering its shares
prior to that date.
THE DISTRIBUTOR AND SPONSOR
BISYS Fund Services ("BISYS"), whose address is 3435 Stelzer Road,
Columbus, Ohio 43219-3035, acts as sponsor and distributor to the 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.
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Pursuant to the Distribution Plans adopted by the Trust, the
Distributor is reimbursed from the Fund monthly for costs and expenses incurred
by the Distributor in connection with the distribution of Class A Shares, Class
B Shares, Class C Shares and Class D Shares of the Fund and for the provision of
certain shareholder services with respect to these 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 Class A Shares, Class B Shares, Class C Shares and Class D Shares
of the Fund 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. Pursuant to the Class A
Plan, the amount of their reimbursement from the Fund may not exceed on an
annual basis 0.25% of the average daily net assets of the Fund represented by
Class A Shares outstanding during the period for which payment is being made.
Pursuant to the Class B Plan and Class C Plan, respectively, such payments by
the Distributor to broker-dealers may be in amounts on an annual basis of up to
0.75% of the Fund's average daily net assets as presented by Class B Shares and
Class C Shares, respectively, outstanding during the period for which payment is
being made. The aggregate fees paid to the Distributor pursuant to the Class B
Plan and Class C Plan, respectively, and to Shareholder Servicing Agents
pursuant to the Administrative Services Plan will not exceed on an annual basis
1.00% of the Fund's average daily net assets represented by Class B Shares and
Class C Shares, respectively, outstanding during the period for which payment is
being made. Pursuant to the Class D Plan, the amount of their reimbursement from
the Fund may not exceed on an annual basis 0.25% of the average daily net assets
of the Fund represented by Class D 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 Fund made pursuant to the Distribution Plans is contingent upon the Board of
Trustees' approval. The Fund is not liable for distribution and shareholder
servicing expenditures made by the Distributor in any given year in excess of
the maximum amount payable under the Distribution Plans 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,
custodian, and one or more Shareholder Servicing Agents, and may enter into
agreements providing for the payment of fees for such services. The
Administrative Services Plan 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 the Class A, Class B Shares, Class C Shares, Class D 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 the Class A Shares, Class B Shares, Class C
Shares, Class D 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.
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ADMINISTRATOR
Pursuant to an Administration Agreement, BISYS provides the Trust with
general office facilities and supervises the overall administration of the Trust
and the Fund. 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 Fund fees payable monthly at an annual rate equal to 0.10% of
the first $1 billion of the 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.
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.
The Fund did not incur expenses pursuant to the Administration
Agreement prior to November 9, 1998 because the Fund had not commenced offering
its Shares prior to that date.
TRANSFER AGENT
The Trust has entered into Transfer Agency Agreements with Investors
Bank & Trust Company ("IBT") and BISYS, pursuant to which IBT acts as transfer
agent for the Fund with respect to the Class A Shares, Class D Shares and Class
Y Shares and BISYS acts as transfer agent for the Fund with respect to the Class
B Shares and Class C Shares (the "Transfer Agents"). The Transfer Agents
maintain an account for each shareholder of the Fund (unless such account is
maintained by the shareholder's securities-broker, if applicable, or Shareholder
Servicing Agent), performs other transfer agency functions, and act as dividend
disbursing agent for the Fund. The principal business address of IBT is 200
Clarendon Street, Boston, Massachusetts 02117. The principal business address of
BYSIS is 3435 Stelzer Road, Columbus, OH 43219.
Pursuant to an agreement, as of April 1, 1999, BISYS will provide all
services with respect to each class of shares of the Fund.
CUSTODIAN
Pursuant to a Custodian Agreement, Republic also acts as the custodian
of the Fund's assets (the "Custodian"). The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
fund accounting and other required books and accounts in order to calculate the
daily net asset value of Shares of the Fund. Securities held for the Fund may be
deposited into the Federal Reserve-Treasury Department Book Entry System or the
Depository Trust Company. The Custodian does not determine the investment
policies of the Fund or decide which securities will be purchased or sold for
the Fund. For its services, Republic receives such compensation as may from time
to time be agreed upon by it and the Trust.
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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, exchanges and redemptions of
Class A, Class B, Class C, Class D and Class Y Shares of the Fund may be
effected and certain other matters pertaining to the Fund; 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 the Fund's shareholders; receives, tabulates
and transmits to the Trust proxies executed by shareholders with respect to
meetings of shareholders of the Fund or the Trust; and provides such other
related services as the Trust or a shareholder may request. With respect to
Class A, Class B, Class C, and Class D Shares, each Shareholder Servicing Agent
receives a fee from the 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.
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
Fund 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 Fund. The Trust engages banks as Shareholder
Servicing Agents on behalf of the Fund 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 Fund shareholders, and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Fund 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
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bank. The Trustees of the Trust do not expect that shareholders of the Fund
would suffer any adverse financial consequences as a result of these
occurrences.
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
the Class A Shares, Class B Shares, Class C Shares and Class D Shares must
include payments made pursuant to their respective 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 Fund.
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, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
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. It
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is anticipated that the net asset value of each class of shares will remain
constant at $1.00, although no assurance can be given that the net asset value
will remain constant on a continuing basis.
PURCHASE OF SHARES
Class A Shares, Class D Shares and Class Y Shares of the Fund are
continuously offered for sale by the Distributor at net asset value (normally
$1.00 per share) with no front-end 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"). Class A Shares,
Class D Shares and Class Y 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"). At present, the only Shareholder Servicing Agents for Class Y Shares
of the Fund are Republic and its affiliates.
Class B Shares and Class C Shares of the Fund are not offered for sale
but are only offered as an exchange option for Class B shareholders and Class C
shareholders of the Trust's other investment portfolios who wish to exchange
some or all of those Class B shares or Class C shares for Class B Shares or
Class C Shares, respectively, of the Fund. Although Class B Shares and Class C
Shares of the Fund are not subject to a sales charge when a shareholder
exchanges Class B shares or Class C shares of another Trust portfolio for Class
B Shares or Class C Shares of the Fund, they may be subject to a contingent
deferred sales charge when they are redeemed. See "Contingent Deferred Sales
Charge ("CDSC") -- Class B Shares and Class C Shares" below.
Purchases of Class A Shares, Class D Shares and Class Y Shares are
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. The Trust intends the Fund 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 Class A Shares and Class D
Shares, the Distributor may receive fees from the Fund. See "Management of the
Trust -- The Distributor and Sponsor" above. Other funds which have investment
objectives similar to those of the Fund 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 Class A Shares and Class D 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 Class Y 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: Republic U.S. Government Fund, Republic Bond Fund, Republic Overseas
Equity Fund, Republic Opportunity Fund, Republic New York Tax-Free Bond Fund,
Republic
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New York Tax-Free 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 (the "Republic Funds"). An investor will
receive Class A Shares of the Money Market Funds in exchange for Class A Shares
of the Republic Funds, unless the investor is eligible to receive Class D Shares
of the Money Market Funds, in which case the investor will receive Class D
Shares of a Money Market Fund in exchange for Class A Shares of a Republic Fund.
Class B Shares, Class C Shares and Class Y Shares may be exchanged for shares of
the same class of one or more of the Republic Funds at net asset value without a
front-end sales charge provided that the amount to be exchanged meets the
applicable minimum investment requirements and the exchange is made in states
where it is legally authorized. Holders of the Fund's Class B Shares may not
exchange their Shares for shares of any other class. Exchanges of Fund Investor
Shares for Investor shares of one or more Republic Funds may be made upon
payment of the applicable sales charge, unless otherwise exempt. Shareholders of
Class A and Class D Shares of the Fund who are shareholders as of December 31,
1997 will be grandfathered with respect to the Republic Funds and will be exempt
from having to pay a sales charge on any new purchases of Class A or Class D
Shares of the Fund. An exchange of Class B Shares or Class C Shares will not
affect the holding period of the Class B Shares or Class C Shares for purposes
of determining the CDSC, if any, upon redemption. 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.
An exchange is considered a sale of shares and may result in a capital
gain or loss for federal income tax purposes. A Shareholder wishing to exchange
his or her Shares may do so by contacting the Trust at 888-525-5757, by
contacting his or her broker-dialer or by providing written instruction to the
Distributor.
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 the 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 the 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 BISYS 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).
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PURCHASES THROUGH A SHAREHOLDER SERVICING AGENT OR A SECURITIES BROKER
Class A and Class D Shares of the 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. Class Y
Shares of the 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.
Shareholder Servicing Agents and securities brokers may transmit
purchase payments on behalf of their customers by wire directly to the 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.
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. Class
A Shares, Class D Shares and Class Y Shares may be redeemed without charge while
Class B Shares and Class C Shares may be subject to a contingent deferred sales
charge (CDSC). See "Contingent Deferred Sales Charge ("CDSC") -- Class B Shares
and Class C Shares" above. 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 the 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, provided that such involuntary
redemptions will not result from fluctuations in the value of Fund Shares. 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
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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 he redeems 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 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. The 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.
Redemption by wire or telephone. An investor may redeem Class A or
Class D 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 Class A or Class D Shares by means of a Check
Redemption Service. If Class A or Class D 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 Class A or Class D
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.
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Class A and Class D 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 Class A and Class D Shares of the 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 the Fund
account is changing on a daily basis, the total value of the Fund account cannot
be determined in advance and the Fund account cannot be closed or entirely
redeemed by check.
CONTINGENT DEFERRED SALES CHARGE ("CDSC") -- CLASS B AND CLASS C SHARES
Class B Shares
There is no sales charge imposed upon an exchange for Class B Shares of
the Fund, but investors may be subject to a CDSC when Class B Shares are
redeemed.
The CDSC will be based on the lesser of the net asset value at the time
of original purchase of the Class B shares of the Income Fund(s) and/or the
Equity Fund(s) which were exchanged for the Fund Class B Shares now being
redeemed or the net asset value of such Fund Class B Shares at the time of
redemption. Accordingly, a CDSC will not be imposed on amounts representing
increases in net asset value above the net asset value at the time of purchase.
In addition, a CDSC will not be assessed on Class B Shares purchased through
reinvestment of dividends or capital gains distributions, or that are purchased
by "Institutional Investors" such as corporations, pension plans, foundations,
charitable institutions, insurance companies, banks and other banking
institutions, and non-bank fiduciaries.
Solely for purposes of determining the amount of time which has elapsed
from the time of purchase of any Income Fund or Equity Fund Class B shares, all
purchases during a month will be aggregated and deemed to have been made on the
last day of the month. In determining whether a CDSC is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of Class B Shares held for more than three years that
were exchanged from Income Fund Class B shares, Class B Shares held more than
four years for Class B Shares that were exchanged from Equity Fund Class B
shares or Class B Shares acquired pursuant to reinvestment of dividends or
distributions.
For example, assume an investor purchased 100 Class B Shares of an
Equity Fund with a net asset value of $8 per share (i.e., at an aggregate net
asset value of $800) and in the eleventh month after purchase, the net asset
value per share is $10 and, during such time, the investor has acquired five
additional Class B shares of the Equity Fund through dividend reinvestment. If
at such time the investor exchanges all of his Equity Fund Class B shares for
Class B Shares of one of the Funds, the investor will have 1,050 Class B Shares
(assuming a net asset value of $1.00 per share for the Fund). Assume twelve
months later the investor acquires 50 additional Class B Shares of the Fund
through dividend reinvestments. If at such time the investor makes his first
redemption of 500 Fund Class B Shares (producing proceeds of $500), 100 of such
Shares would not be subject to the charge because they were acquired through
dividend reinvestment. With respect to the remaining 400 Class B Shares being
redeemed, the CDSC would be applied only to 320 Class B Shares (representing the
original cost of $8
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per share for the Equity Fund) and not to the remaining 80 Class B Shares
(representing the increase in net asset value of $2 per share for the Equity
Fund).
The CDSC is waived on redemptions of Class B Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a Shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an IRA or a Custodial Account
under Code Section 403(b)(7) to a Shareholder who has reached age 70 1/2, and
(iii) to the extent the redemption represents the minimum distribution from
retirement plans under Code Section 401(a) where such redemptions are necessary
to make distributions to plan participants.
Class C Shares
There is no sales charge imposed upon an exchange for Class C Shares of
the Fund, but investors may be subject to a CDSC when Class C Shares are
redeemed. When Class C shares of one of the other investment portfolios of the
Republic Funds are exchanged for Class C Shares of the Fund and those shares are
redeemed less than one year after the original purchase of the Class B shares of
the other Republic Fund (calculated from the last day of the month in which the
shares were purchased), those Class C Shares of the Fund will be subject to a
1.0% CDSC in most cases. The CDSC will be assessed on an amount equal to the
lesser of the current market value or the cost of the shares being redeemed. The
CDSC will not be imposed in the circumstances set forth above in the section
"Class B Shares." Class C Shares are subject to an annual 12b-1 fee of up to
1.0% of the average daily net assets of the Class. Unlike Class B shares, Class
C Shares have no conversion feature and, accordingly, an investor that purchases
Class C Shares will be subject to 12b-1 fees applicable to Class C Shares for an
indefinite period subject to annual approval by the Fund's Board of Trustees and
regulatory limitations. The higher fees mean a higher expense ratio, so Class C
Shares pay correspondingly lower dividends and may have a lower net asset value
than Class A Shares. Broker-dealers and other financial intermediaries whose
clients have purchased Class C Shares may receive a trailing commission equal to
[%] of the average daily net asset value of such shares on an annual basis held
by their clients more than one year from the date of purchase. Trailing
commissions will commence immediately with respect to shares eligible for
exemption from the CDSC normally applicable to Class C Shares.
CONVERSION FEATURE
Five years after the original purchase of Income Fund Class B shares
which have been exchanged for Class B Shares of the Fund and six years after the
original purchase of Equity Fund Class B shares which have been exchanged for
Class B Shares of the Fund, Class B Shares of the Fund will convert
automatically to Class A or Class D Shares depending upon whether the investor
is eligible for Class D Shares. The purpose of the conversion is to relieve a
holder of Class B Shares of the higher ongoing expenses charged to those Shares,
after enough time has passed to allow the Distributor to recover approximately
the amount it would have received if a front-end sales charge had been charged.
The conversion from Class B Shares to Class A Shares or Class D takes place at
net asset value, as a result of which an investor receives dollar-for-dollar the
same value of Class A Shares as he or she had of Class B Shares. For Class B
Shares that were exchanged from Income Fund Class B shares, the conversion
occurs five years after the beginning of the calendar month in which the Income
Fund Class B shares were purchased. For Class B shares that were exchanged from
Equity Fund Class B shares, the conversion occurs six years after the beginning
of the calendar month in which the Equity Fund Class B shares were purchased. As
a result of the conversion, the converted Shares are relieved of the Rule 12b-1
fees borne by Class B Shares, although they are subject to the Rule 12b-1 fees
borne by Investor Shares.
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DIVIDENDS AND DISTRIBUTIONS
The net income of the 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 the 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 the 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 the 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 the Fund is declared as a dividend each time
the net income of the Fund is determined, the net asset value per share of the
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 the Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of Shares in his account.
It is expected that the Fund will have a positive net income at the
time of each determination thereof. If, for any reason, the net income of the
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.
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 Class A Shares, Class B Shares, Class C
Shares, Class D and Class Y 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 of the Trust participate equally in the
earnings, dividends and assets of the particular series.
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Currently, the Trust has eight 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, the Fund is divided into five
classes of shares.
Each share of each class of the Fund 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. 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. 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.
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.
Shareholders of the Fund 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 the Fund,
shareholders of the Fund would be entitled to share pro rata in the net assets
of the Fund available for distribution to shareholders.
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The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Fund 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.
TAXATION
The following is a summary of certain U.S. federal income tax issues
concerning the Fund and its shareholders. The Fund may also be subject to state,
local, foreign or other taxes not discussed below. This discussion does not
purport to be complete or to address all tax issues relevant to each
shareholder. Prospective investors should consult their own tax advisors with
regard to the federal, state, foreign and other tax consequences to them of the
purchase, ownership or disposition of Fund shares. This discussion is based upon
present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial and administrative
authorities, all of which are subject to change, which change may be
retroactive.
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 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, whether received in cash or
reinvested in
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Fund shares, will generally be taxable to shareholders as either "20% Gain" or
"28% Gain," depending upon the Fund's holding period for the assets sold. "20%
Gains" arise from sales of assets held by the Fund for more than 18 months and
are subject to a maximum tax rate of 20%; "28% Gains" arise from sales of assets
held by the Fund for more than one year but not more than 18 months and are
subject to a maximum tax rate of 28%. Net capital gains from assets held for one
year or less will be taxed as ordinary income. Distributions will be subject to
these capital gains rates regardless of how long a shareholder has held Fund
shares. 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. Gain will generally be subject to
a maximum tax rate of 20% if the shareholder's holding period for the shares is
more than 18 months, and a maximum tax rate of 28% if the shareholder's holding
period for the shares is more than one year but not more than 18 months. Gain
from the disposition of shares held not more than one year will be taxed as
short-term capital gain. 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 for purposes of Massachusetts law.
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
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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.
INDEPENDENT AUDITORS
The Board of Trustees has appointed KPMG Peat Marwick LLP as
independent auditors 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, 1775 Eye Street, N.W., Washington, D.C. 20006,
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.
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FINANCIAL STATEMENTS
Financial Statements for the Fund have not been prepared because the
Fund did not offer Shares prior to November 9, 1998.
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)
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PART C
ITEM 23. EXHIBITS
(a)(1) Amended and Restated Declaration of Trust, with establishments
and designations of series and further amendments. 1
(a)(2) Establishment and designation of series for Republic Taxable
Bond Fund, Republic Overseas Equity Fund and Republic
Opportunity Fund. 7
(b) By-Laws. 1
(c) Specimen certificate of shares of beneficial interest of
Republic Funds. 1
(d)(1) 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
(d)(2) Amended and Restated Second Master Investment Advisory
Contract, with supplement regarding Republic U.S. Government
Money Market Fund. 1
(d)(3) Subadvisory Agreement between Alliance Capital Management L.P.
and Republic National Bank of New York regarding Republic
Equity Fund. 9
(d)(4) Subadvisory Agreement between Brinson Partners, Inc. and
Republic National Bank of New York regarding Republic Equity
Fund. 9
(e) 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. 9
(f) Not applicable.
(g)(1) Custodian Agreement - IBT. 1
(g)(2) Transfer Agency and Service Agreement - IBT. 1
(g)(3) Form of Custodian Agreement - Republic. 13
(g)(4) Form of Transfer Agency and Service Agreement - BISYS. 11
(g)(5) Transfer Agency Agreement - BISYS. 13
(h)(1) Form of Service Agreement. 1
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(h)(2) 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
(h)(3) Amended and Restated Administrative Services Plan. 6
(h)(4) Administration Agreement between Republic Funds and BISYS. 13
(h)(5) Fund Accounting Agreement - BISYS. 13
(i) Opinion of Counsel. 2
(j) Consent of Independent Auditors.
(k) Not applicable.
(l)(1) Initial Investor Representation letter regarding Republic
International Equity Fund and Republic Fixed Income Fund. 3
(l)(2) Initial Investor Representation letter regarding Republic
Equity Fund. 2
(m) 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
(n)(1) Schedule of Performance Computations. 1
(n)(2) Financial Data Schedules.
(o) Multiple Class Plan. 5
(p)(1) Powers of Attorney of Trustees and Officers of Registrant and
Republic Portfolios. 8
(p)(2) Power of Attorney for Adrian Waters. 10
(p)(3) Power of Attorney for Walter B. Grimm.
------------------------------------
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.
<PAGE> 169
4. Incorporated herein by reference from post-effective amendment No.
36 to the Registration Statement as filed with the SEC on March 1, 1996.
5. Incorporated herein by reference from post-effective amendment No.
37 to the Registration Statement as filed with the SEC on April 4, 1996.
6. Incorporated herein by reference from post-effective amendment No.
39 to the Registration Statement as filed with the SEC on June 17, 1996.
7. Incorporated herein by reference from post-effective amendment No.
40 to the Registration Statement as filed with the SEC on November 27, 1996.
8. Incorporated herein by reference from post-effective amendment No.
42 to the Registration Statement filed with the SEC on January 31, 1997.
9. Incorporated herein by reference from post-effective amendment No.
46 to the Registration Statement as filed with the SEC on February 28, 1997.
10. Incorporated herein by reference from post-effective amendment No.
50 to the Registration Statement as filed with the SEC on January 2, 1998.
11. Incorporated herein by reference from post-effective amendment No.
52 to the Registration Statement as filed with the SEC on March 12, 1998.
12. Incorporated herein by reference from post-effective amendment No.
54 to the Registration Statement as filed with the SEC on August 24, 1998.
13. Incorporated herein by reference from post-effective amendment No.
63 to the Registration Statement as filed with the SEC on March 1, 1999.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
<PAGE> 170
ITEM 25. 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS
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.
<PAGE> 171
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.
<PAGE> 172
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 27. 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).
<PAGE> 173
ITEM 28. 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 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. 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.
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 on the 25th day of March, 1999.
REPUBLIC FUNDS
By WALTER B. GRIMM**
- ---------------------------
Walter B. Grimm
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 March 25, 1999.
<PAGE> 174
WALTER B. GRIMM**
- ------------------------------
Walter B. Grimm
President
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/ CATHERINE BRADY
- ------------------------------
Catherine Brady, as attorney-in-fact pursuant to powers of attorney filed as
Exhibit 19 to post-effective amendment No. 40, Exhibit 19 to post-effective
amendment No. 46 and Exhibit 19 to post-effective amendment No. 52.
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
<PAGE> 175
Funds (the "Trust") to be signed on its behalf by the undersigned, thereto duly
authorized on the 25th day of March, 1999.
REPUBLIC PORTFOLIOS
By WALTER B. GRIMM**
--------------------------
Walter B. Grimm
President
Pursuant to the requirements of the Securities Act of 1933, the
post-effective amendment to the Trust's Registration Statement has been signed
below by the following persons in the capacities indicated on March 25, 1999.
WALTER B. GRIMM**
- ----------------------------
Walter B. Grimm
President
ADRIAN WATERS**
- ----------------------------
Adrian Waters
Treasurer and Principal Accounting and Financial Officer of the Portfolio Trust
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
<PAGE> 176
*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.
** /S/CATHERINE BRADY
--------------------------
Catherine Brady, as attorney-in-fact pursuant to powers of attorney filed as
Exhibit 19 to post-effective amendment No. 40, Exhibit 19 to post-effective
amendment No. 46 and Exhibit 19 to post-effective amendment No. 52.
<PAGE> 177
EXHIBIT LIST
------------
Exhibit Number Name of Exhibit
- -------------- ---------------
(j) Consent of Independent Auditors.
(n)(2) Financial Data Schedules.
(p)(3) Power of Attorney for Walter B. Grimm
<PAGE> 1
Exhibit (j)
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees and shareholders
Republic Funds:
We consent to the use of our reports, dated November 20, 1998 and December 18,
1998 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.
KPMG Peat Marwick LLP
Boston Massachusetts
March 25, 1999
<PAGE> 1
Exhibit (p)(3)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints each of Catherine Brady, Adrian Waters, Brecke Sweeting
and Jim Smith to act as attorney-in-fact and agent, with power of substitution
and resubstitution, for the undersigned in any and all capacities to sign the
Registration Statement of Republic Funds, Republic Advisor Funds Trust, and
Republic Portfolios, and pre- or post-effective amendments thereto, and to file
the same with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, whereby ratifying and conforming
all that said attorney-in-fact, or his or her substitute of substitutes, may do
or cause to be done by virtue hereof.
/s/ Walter B. Grimm
---------------------------
Walter B. Grimm
Date: March 25, 1999
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