COMMONWEALTH CASH RESERVE FUND, INC.
P.O. BOX 1192
RICHMOND, VA 23209-1192
(800) 338-3383
SEMI-ANNUAL REPORT TO SHAREHOLDERS
Message to our Shareholders:
We are pleased to present the semi-annual report for the Commonwealth
Cash Reserve Fund (the "Fund") for the period ended September 30, 1995.
This six month period has been marked by extreme volatility in short and
intermediate term interest rates continuing the decline begun as the calendar
year commenced. Much of the turbulence in the market has been caused by
conflicting economic reports. Positive economic reports were released
denoting low employment, a resurgence in housing and consumer purchasing, and
strong export growth. At the same time a number of releases portrayed
economic slowing with the manufacturing sector continuing to weaken, consumer
debt widening to historically high levels, and increasing uncertainty about
the outcome of the budget battle being waged in Washington. The Federal Open
Market Committee last lowered short-term interest rates on July 6, 1995
cutting the federal funds target to 5.75%, the first reduction in nearly 3
years. Since then, many market participants have anticipated further interest
rate cuts and have appeared to "price in" another 50 basis point (0.50%) cut
in short-term rates over the near term. As a result, the yield curve is now
inverted between three months and one year. The Fed however decided not to
act to lower rates at both its September 26 and November 15 meeting and it is
not clear when, if at all, it will lower rates. If economic growth proves to
be stronger than expected over the coming weeks, the Federal Reserve may even
be preempted from acting at all, which would almost certainly result in higher
short-term interest rates. On the other hand, a speedy resolution of the
budget crisis could lead to further Fed easing.
In this uncertain environment, we have focused our investment strategy
for the Fund on minimizing the possible impact of continued market volatility.
We have maintained a relatively short average maturity and have enhanced the
overall credit quality of the portfolio by increasing holdings of Federal
Agency securities. This short term bias also positions the portfolio to take
advantage of the traditional spike up in rates as year-end funding pressures
emerge.
We have focused much attention on the credit quality of the portfolio
during the past six months. Because of increasing concern about the credit
quality of Japanese banks which have shown poor financial performance in the
face of continued recession in Japan and problem loans, Public Financial
Management, Inc., ("PFM") the Fund's investment manager removed Japanese
bankers' acceptances from the approved list for all of its clients. PFM will
continue to evaluate the strength of the Japanese banks and will include these
securities in the Fund's portfolio only when the banks are back on solid
financial ground.
As always, the goal of PFM and the Fund's Board of Directors is to
ensure that the Commonwealth Cash Reserve Fund continues to be characterized
by quality, safety and stability. We look forward to the continued
opportunity to meet your investment needs.
Commonwealth Cash Reserve Fund
Financial Statements
For the Six Months Ended September 30, 1995
Commonwealth Cash Reserve Fund, Inc.
Statement of Net Assets
September 30, 1995
Face Amortized
Amount Cost
(000) (000)
______ _________
BANKERS' ACCEPTANCES (17.6%)
Fuji, NY
5,000 5.77% 10/5/95 4,997
Sumitomo, NY
5,000 5.77% 10/10/95 4,993
Industrial Bank of Japan, LTD LA
5,000 5.77% 10/17/95 4,987
Sanwa Bank, LTD. NY
5,000 5.78% 10/17/95 4,987
Mitsubishi Bank, LTD NY
3,550 5.74% 10/20/95 3,539
______
TOTAL BANKERS' ACCEPTANCES
(Cost $23,503) 23,503
______
COMMERCIAL PAPER (18.6%)
Goldman Sachs
5,000 5.77% 10/10/95 4,993
General Electric Corporation
5,000 5.73% 10/13/95 4,990
Morgan Stanley & Co.
5,000 5.80% 10/13/95 4,990
First Boston Corporation
5,000 5.74% 10/23/95 4,983
Bears Stearns & Co., Inc.
5,000 5.74% 10/25/95 4,981
______
TOTAL COMMERCIAL PAPER
(Cost $24,937) 24,937
______
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (18.9%)
Federal Farm Credit Bank Discount Notes:
2,610 5.67% 10/25/96 2,600
3,000 6.06% 3/12/96 2,918
Federal Home Loan Bank Discount Notes:
2,750 6.30% 10/2/95 2,749
5,000 5.70% 10/20/95 4,985
Federal Home Loan Mortgage Corporation
Discount Notes:
2,000 5.53% 12/13/95 1,977
Federal National Mortgage Association
Discount Notes:
425 5.60% 10/4/95 425
240 5.68% 10/4/95 240
8,445 5.95% 10/5/95 8,439
1,000 6.19% 12/18/95 987
______
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS ( Cost $25,320) 25,320
______
REPURCHASE AGREEMENTS (44.9%)
10,000 Morgan Stanley 10,000
5.75% 10/4/95
(Collateralized by GNMA Obligation
7.00%, 9/24/24, with a market
value of $1,616)
25,000 Prudential Securities 25,000
5.75% 10/6/95
(Collateralized by FNMA Obligation
5.579%, 11/1/239/24/24, with a market
value of $1,616)
25,000 Prudential Securities 25,000
5.75% 10/10/95
(Collateralized by GNMA Obligation
7.00%, 9/24/24, with a market
value of $1,616)
______
TOTAL REPURCHASE AGREEMENTS
(Cost $60,000) 60,000
_______
TOTAL INVESTMENTS (100.0%)
(Cost $133,760) 133,760
_______
OTHER ASSETS AND LIABILITIES
Accrued Interest 133
Cash 11
Distribution Fees Payable (2)
Audit Fees Payable (3)
Legal Fees Payable (15)
Custodian Fees Payable (12)
Other Accrued Expenses (26)
_______
86
_______
Net Assets (100%) 133,846
Applicable to 133,846,281 outstanding _______
shares of beneficial interest (unlimited
authorization - no par value )
NET ASSET VALUE PER SHARE $1.00
_______
The accompanying notes are an integral part of these financial statements.
Commonwealth Cash Reserve Fund, Inc.
Statement of Operations
Six Months Ended September 30, 1995
(000)
_______
INVESTMENT INCOME
Income
Interest $3,609
_____
Total Income 3,609
_____
Expenses
Management Fee 101
Management Fees Waived (93)
Legal 20
Custodian 15
Distribution 12b-1 Fees 17
Distribution 12b-1 Fees Waived (3)
Audit 5
Directors Fees and Expenses 4
Insurance -
Registration Fees 20
Miscellaneous 3
_____
Total Expenses 89
_____
Net Investment Income 3,520
Realized Net Gain (Loss) on Investment Securities 24
Unrealized Appreciation (Depreciation) of Investment Securities -
_____
Net Increase in Net Assets
Resulting From Operations $3,544
_____
The accompanying notes are an integral part of these financial statements.
Commonwealth Cash Reserve Fund, Inc.
Statement of Changes in Net Assets
Six Months Ended
September 30,
1995 1994
(000) (000)
_____ _____
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $3,520 $2,729
Net Realized and Unrealized Gain (Loss) on Investments 24 1
______ ______
Net Increase in Net Assets From Operations 3,544 2,730
______ ______
DISTRIBUTIONS (1)
Net Investment Income (3,520) (2,729)
Distribution from Realized Capital Gains (24) (1)
______ ______
Total Distributions (3,544) (2,730)
______ ______
CAPITAL SHARE TRANSACTIONS (at $1.00 per share):
Issued 130,815 154,932
Redeemed (131,453) (80,104)
Distributions Reinvested 6,302 3,544 2,730
_______ _______
Net Increase (Decrease) from Capital Share Transactions 2,906 77,558
_______ _______
Total Increase (Decrease) 2,906 77,558
NET ASSETS
Beginning of Year 130,940 69,422
_______ _______
End of Year $133,846 $146,980
_______ _______
(1)Income Dividends per Share $ .030 $ .021
_______ _______
The accompanying notes are an integral part of these financial statements.
<TABLE>
Commonwealth Cash Reserve Fund, Inc.
Financial Highlights
<CAPTION>
Six Months Year Ended March 31,
Ended 9/30
For a Share Outstanding
Throughout Each Year 1995 1995 1994 1993(1) 1992(1) 1991(1)
____ ____ ____ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
_____ _____ _____ _____ _____ _____
INVESTMENT ACTIVITIES
Net Investment Income 0.030 0.049 0.025 0.035 0.057 0.088
Net Realized and Unrealized Gain
(Loss) on Investments _ _ _ _ _ -
_____ _____ _____ _____ _____ _____
Total From Investment Activities 0.030 0.049 0.025 0.035 0.057 0.088
_____ _____ _____ _____ _____ _____
DISTRIBUTIONS
Net Investment Income (0.030) (0.049) (0.025) (0.035) (0.057) (0.088)
Realized Capital Gains _ _ _ _ _ -
_____ _____ _____ _____ _____ _____
Total Distributions (0.030) (0.049) (0.025) (0.035) (0.057) (0.088)
_____ _____ _____ _____ _____ _____
NET ASSET VALUE, END OF YEAR $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
_____ _____ _____ _____ _____ _____
Total Return 2.99% 5.01% 2.48% 3.59% 5.81% 9.11%
_____ _____ _____ _____ _____ _____
Ratios/Supplemental Data
Net Assets $133,846 $130,940 $69,422 $74,081 $7,831 $8,973
_______ _______ ______ ______ _____ _____
Ratio of Expenses to
Average Net Assets* 0.15% 0.15% 0.70% 0.63% 0.60% 0.59%
_____ _____ _____ _____ _____ _____
Ratio of Net Investment
Income to Average
Net Assets 2.97% 4.91% 2.49% 2.91% 4.57% 7.52%
_____ _____ _____ _____ _____ _____
</TABLE>
*Certain fees were voluntarily waived for the six months ended September 30,
1995 and in fiscal years ended March 31, 1995, 1992 and 1991. If these
fees had not been waived the ratio of expenses to average net assets would
have been .31% for the six months ended September 30, 1995 and 1.10% and .97%
respectively for the fiscal years ended March 31, 1995, 1992 and 1991.
** Public Financial Management, Inc. serves as the investment advisor to the
Fund under an agreement commencing March 15, 1994. Prior to March 15, 1994,
Jefferson National Bank served as the investment advisor to the Fund from
April 1, 1993. Prior to April 1, 1993 Dominion Trust Company served as the
investment advisor to the Fund.
(1) Restated.
The accompanying notes are an integral part of these financial statements
COMMONWEALTH CASH RESERVE FUND, INC.
Notes to Financial Statements
A. The Commonwealth Cash Reserve Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as a open-end, investment
company and was organized as a Virginia corporation on December 8, 1986.
The Fund provides comprehensive investment management, accounting and
arbitrage rebate calculation services to counties, cities, towns,
political subdivisions and public bodies. The Fund invests in short-
term debt instruments issued by the U.S. government or its agencies and
instrumentalities and by companies primarily operating in the banking
industry; the issuers' abilities to meet their obligations may be
affected by economic developments in such industry.
B. The following significant accounting policies of the Fund are in
conformity with generally accepted accounting principles and are
consistently followed in the preparation of financial statements.
1. Securities held are valued at amortized cost, which approximates
market value. Discounts and premiums on securities purchased are
accreted or amortized to interest income over the lives of the
respective securities.
2. Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains
and losses on sales of investment securities are those of specific
securities sold. Interest income is recorded using the accrual
method.
3. Dividends from net investment income are declared daily and
reinvested in each participant's account by the purchase of
additional shares of the Fund on the last business day of each
month.
4. The Fund invests cash in repurchase agreements secured by U.S.
Government and Agency obligations. Securities pledged as
collateral for repurchase agreements are held by the Fund's
custodian bank until maturity of the repurchase agreement.
Provisions of each agreement require that the market value of the
collateral, including accrued interest thereon, is sufficient in
the event of default; however, in the event of default or
bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
5. The Fund intends to continue to qualify as a regulated investment
company and distribute all of its taxable income. Accordingly, no
provision for federal income taxes is required in the financial
statements.
C. Public Financial Management, Inc. ("PFM"), a wholly-owned subsidiary of
Marine Midland Bank, provides investment advisory services,
administration, and transfer agent services under the provisions of a
contract expiring March 15, 1996. PFM waived $92,000 of its fees under
the advisory and administration agreements so that the aggregate
operating expenses of the Fund for the Fund's six months ended September
30, 1995 would not exceed .20 of 1% of the funds average net assets.
Management fees, after such waiver, for the year represented .03 of 1%
of average net assets and aggregate operating expenses represented .15
of 1% of average net assets.
The Fund has a Distribution Plan (the "Plan") pursuant to Rule 12b-1 of
the Investment Company Act of 1940 which was approved by a majority vote
of both the Board and the independent directors of August 23, 1990.
Commonwealth Financial Group, Inc. (the "Distributor") serves as the
Fund's Distributor pursuant to the distribution agreement with the Fund.
The President and a director of the Fund is the President and sole
shareholder of the Distributor. Under the Plan, all payments made to
the Distributor, broker-dealers and other persons assisting in the
distribution of Fund shares will be made directly by the Fund. The Plan
authorizes in any fiscal year payment by the Fund of up to .25% of the
average daily net asset value of the Fund on an annual basis for
distribution expenses. Any payments made under the Plan shall be made
only as determined from time to time by the Board of Directors. For the
six months ended September 30, 1995, total payments made to the
Distributor under the Plan were $10,700, after waiving fees of $3,000.
D. Under Governmental Accounting Standards ("GAS"), state and local
governments, including school districts and other municipal entities,
are required to classify their investments, excluding pools managed by
governments or investment funds similar to the Fund in prescribed
categories of credit risk. Although the Fund is not subject to GAS, its
September 30, 1995, investments have been classified for the information
of the participants as Category 1 investments. Category 1 includes
investments that are insured or registered or are held by the Fund or
its agent in the Fund's name. Category 2 includes uninsured and
unregistered investments held by the broker's or dealer's trust
department or agent in the Fund's name. Category 3 includes uninsured
and unregistered investments held by the broker's or dealer's trust
department or agent but not in the Fund's name.
