As filed with the Securities and Exchange Commission on May 30, 1996
1933 Act Registration No. 33-10754
1940 Act Registration No. 811-4933
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. ____ [ ]
POST-EFFECTIVE AMENDMENT NO. 12 [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT [X]
COMPANY ACT OF 1940
AMENDMENT NO. 14 [X]
COMMONWEALTH CASH RESERVE FUND, INC.
(Exact name of Registrant as specified in charter)
P.O. Box 1192
Richmond, Virginia 23209-1192
Registrant's Telephone Number
1-800-338-3383
_________________________________________
Jeffrey A. Laine
38 Cohasset Lane
Cherry Hill, NJ 08003
(Name and address of agent for service)
Copy to:
Barbara L. Fava
Public Financial Management, Inc.
2101 North Front Street, Building #3, Suite 200
Harrisburg, PA 17110
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485(b)
on (date) pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
X on (August 1, 1996) pursuant to Rule 485(a)
Commonwealth Cash Reserve Fund, Inc. registered an indefinite amount of
securities under the Securities Act of 1933 pursuant to Section 270.24f-2
of the Investment Company Act of 1940 and filed a Rule 24f-2 Notice for
the year ended March 31, 1996 on May 28, 1996.
COMMONWEALTH CASH RESERVE FUND, INC.
Cross Reference Sheet
(Pursuant to Rule 495)
N-1A Item No. Location
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page Cover Page
Item 2. Synopsis Fund Expenses and
Financial Highlights
Item 3. Condensed Financial Information Fund Expenses and
Financial Highlights
Item 4. General Description of Registrant The Fund; Investment
Objectives and Policies;
General Information
Item 5. Management of the Fund Management
Item 6. Capital Stock and other Securities General Information;
Dividend and Tax
Information
Item 7. Purchase of Securities Being Offered How to Invest in the
Fund; Net Asset Value
Item 8. Redemption or Repurchase How to Redeem Investments
Item 9. Pending Legal Proceedings Not Applicable
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information
Item 13. Investment Objectives and Policies Investment Policies
Item 14. Management of the Fund Additional Information
as to Management
Arrangements
Item 15. Control Persons and Principal Principal Holders
Holders of Securities of Securities
Item 16. Investment Advisory and Other Services Additional Information
as to Management
Arrangements
Item 17. Brokerage Allocation Investment Policies
Item 18. Capital Stock and Other Securities General Information
Item 19. Purchase, Redemption and Pricing of Amortized Cost
Securities Being Offered Valuation
Item 20. Tax Status Dividends and Tax
Information*
Item 21. Underwriters Distribution Plan
Item 22. Calculation of Yield Quotations of Yield Information
Money Market FundsMarket Funds
Item 23. Financial Statements Financial Information
Part C OTHER INFORMATION
Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C to this Registration
Statement.
* Included under referenced caption in the Prospectus
PROSPECTUS
August 1, 1996
COMMONWEALTH CASH RESERVE FUND, INC.
P.O. Box 1192
Richmond, Virginia 23209-1192
1-800-338-3383
The Commonwealth Cash Reserve Fund (the "Fund") is an open-end,
diversified management investment company incorporated under the laws of the
Commonwealth of Virginia. The investment objective of the Fund is to provide
investors with as high current income as is consistent with stability, safety
of principal and liquidity. As a "money market fund", the Fund is required to
maintain a dollar-weighted average portfolio maturity of 90 days or less, and
individual portfolio investments are limited to those with remaining
maturities of thirteen months or less.
Public Financial Management, Inc. ("PFM") serves as the Fund's
investment advisor and administrator. The Fund is designed and managed to
suit the special cash management needs of counties, cities, towns, political
subdivisions and public bodies of the Commonwealth of Virginia ("Governmental
Units"), and invests only in those instruments in which Governmental Units may
invest directly. Shares of the Fund are offered to these Governmental Units
as well as any other entity permitted to invest in a fund comprised of such
instruments (collectively, "Investors"). The Fund offers an alternative to a
direct investment in money market instruments which may reduce the time and
expense of money management and eliminate the need to schedule maturities of
investments to coincide with estimated cash flow requirements. In addition,
for Investor accounts in the Fund that represent the proceeds of borrowings
of Investors subject to the arbitrage rebate provisions of the Internal
Revenue Code of 1986, PFM will provide accounting and recordkeeping services
in accordance with IRS regulations. PFM will also assist Investors in making
calculations and reports required to comply with such provisions.
This Prospectus sets forth concisely the information about the Fund that
an Investor should know before investing. A Statement of Additional
Information (the "Additional Statement") dated August 1, 1996 containing
further information about the Fund, which may be of interest to Investors
considering investment in the Fund, has been filed with the Securities and
Exchange Commission, is incorporated herein by reference in its entirety, and
may be obtained without charge by calling or writing the Fund at the address
and telephone number printed above. This prospectus should be read and
retained for ready reference about the Fund.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. The Fund intends to maintain a stable net asset value of $1.00
per share although there can be no assurance that this value will be
maintained.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TO INVEST OR MAKE ADDITIONAL DEPOSITS IN THE FUND, TO REDEEM SHARES, OR FOR
YIELD INFORMATION OR GENERAL ACCOUNT INQUIRIES, CONTACT THE FUND'S TRANSFER
AGENT:
PUBLIC FINANCIAL MANAGEMENT, INC.
GOVERNOR'S PLAZA NORTH, 2101 NORTH FRONT STREET,
BUILDING 3, SUITE 200, HARRISBURG, PA 17110
(800-338-3383 [FAX 717-233-6073])
FOR GENERAL INFORMATION ON THE FUND, TO REQUEST NEW ACCOUNT APPLICATIONS OR TO
INVEST IN THE FUND, PLEASE CONTACT THE FUND'S DISTRIBUTOR, COMMONWEALTH
FINANCIAL GROUP, INC. AT 609-751-5220.
FUND EXPENSES AND FINANCIAL HIGHLIGHTS
Summary of Annual Fund Operating Expenses
(as a percentage of average net assets)
The purpose of the following information is to assist an Investor in
understanding the costs and expenses that an Investor in the Fund will bear
directly or indirectly.
Management Fees (after waivers) (1) .04%
12b-1 Fees (2) .02%
Other Expenses .09%
Total Fund Operating Expenses (3) .15%
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. PFM can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee is 0.17%.
(2) The Fund's Distribution Plan permits the Fund to expend up to .25% of its
average daily net asset value for distribution expenses. See "Management -
Distribution Plan." The actual fees and expenses payable to the Fund's
Distributor, which constitute a majority of the 12b-1 fees, are set forth in
the Statement of Additional Information, and vary in accordance with the
Fund's net asset value.
(3) The Total Fund Operating Expenses in the table above are based on actual
expenses incurred during the fiscal year ended March 31, 1996. Without the
waiver of advisory and administration fees the ratio of expenses to average
daily net assets would be approximately .29 %
Example:
Subject to the qualifications described below, an Investor would
pay the following expenses on a $1,000 investment in the Fund
assuming a 5% annual return:
1 year ................................... $ 2
3 years .................................. $ 5
5 years .................................. $ 8
10 years .................................. $19
The objective of the table is to provide a relatively simple means for
Investors to compare expense levels of funds with different fee structures.
This table should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
The following financial highlights have been audited by Price Waterhouse
LLP, independent accountants, whose report on the financial statements which
contain this data was unqualified. This information should be read in
conjunction with the Fund's financial statements and notes thereto, which
are incorporated by reference in the Statement of Additional Information
and this Prospectus, and which appear, along with the report of Price
Waterhouse LLP, in the Fund's 1996 Annual Report to Shareholders.
<TABLE>
Financial Highlights(a)
<CAPTION>
Fiscal Year Ending March 31
For a Share Outstanding
Throughout Each Year 1996 1995 1994 1993<F5> 1992<F5> 1991<F5> 1990 1989 1988<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
INVESTMENT ACTIVITIES
Net Investment Income 0.058 0.049 0.025 0.035 0.057 0.088 0.086 0.075 0.057
Net Realized and
Unrealized Gain (Loss)
on Investments _ _ _ _ _ _ _ _ _
Total From
Investment
Activities 0.058 0.049 0.025 0.035 0.057 0.088 0.086 0.075 0.057
DISTRIBUTIONS
Net Investment
Income (0.058) (0.049) (0.025) (0.035) (0.057) (0.088) (0.086) (0.075) (0.057)
Realized Capital
Gains _ _ _ _ _ _ _ _ _
Total Distributions (0.058) (0.049) (0.025) (0.035) (0.057) (0.088) (0.086) (0.075) (0.057)
NET ASSET VALUE,
END OF YEAR $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Total Return 5.90% 5.01% 2.48% 3.59% 5.81% 9.11% 10.67% 9.45% 7.77%<F4>
Ratios/Supplemental Data
Net Assets
(in thousands) $102,614 $130,940 $69,422 $74,081 $7,831 $8,973 $33,681 $54,061 $52,573
Ratio of Expenses to
Average Net Assets(c) 0.15% 0.15% 0.70% 0.63% 0.60% 0.59% 0.50% 0.56% 0.46%<F4>
Ratio of Net Investment
Income to Average
Net Assets 5.78% 4.91% 2.49% 2.91% 4.57% 7.52% 8.57% 7.48% 6.53%<F4>
<FN>
<F1>
PFM has served as the investment advisor to the Fund since 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.
<F2>
From April 30, 1987, the commencement of operations until March 31, 1988.
<F3>
Certain fees were voluntarily waived in fiscal years ended March 31, 1996,
1995, 1992 and 1991. If these fees had not been waived, the ratio of
expenses to average net assets would have been .29%, .29%, 1.10% and
.97%, respectively, and the ratio of net investment income to average net
assets would have been 5.65%, 4.77%, 4.07%, and 7.14% respectively, for
the fiscal years ended March 31, 1996, 1995, 1992 and 1991.
<F4>
Annualized.
<F5>
Restated
</FN>
</TABLE>
The Fund's "current yield" for the seven days ended March 31, 1996 was
5.23% and its "compounded effective yield" for that period was 5.36% .
"Current yield" is calculated as the net change in the value of a hypothetical
account containing one share at the beginning of the seven day period. The
Net Asset Value of this share will be $1.00 except under extraordinary
circumstances. Any capital changes, such as realized gains or losses from the
sale or redemption of securities or instruments and unrealized appreciation
and depreciation, are excluded from the calculation. The net change in the
account value during the period is then divided by the value of the account at
the beginning of the period (normally $1.00) and the resulting figure, the
base period return, is annualized by multiplying it by 365 and dividing it by
7, the number of days in the period.
"Compounded effective yield" represents an annualization of the current
yield with dividends reinvested daily. It is computed by compounding the
unannualized base period return by adding one to the base period return,
raising the sum to a power equal to 365 divided by 7 and subtracting 1 from
the result. See "Yield Information" in the Additional Statement for further
information on the methods of calculating these yields.
THE FUND
The Fund is an open-end, "no load", diversified, registered investment
company designed with the assistance of local Virginia government officials
specifically to suit the cash management and investment requirements and needs
of Governmental Units and other Investors. "Open-end" means that the Fund is
continuously available for investment or redemption. "No load" means that
there is no sales charge at any time for either sales or redemptions (although
the Fund has a distribution plan). "Diversified" means that the Fund meets
certain diversification requirements set forth in the Investment Company Act
of 1940. "Registered" means that it is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (which does not
involve supervision of management or investment practices and policies) and
must conform with various organizational and operational standards. The Fund
is owned exclusively by its shareholders. The Fund was incorporated in
Virginia on December 8, 1986 and is managed in a manner designed to comply
with the laws of Virginia.
Investments of unexpended and excess money of Governmental Units,
including proceeds of borrowings of Governmental Units, in open-end investment
funds such as the Fund is specifically authorized by Section 2.1-328.9 of the
Code of Virginia. This statute authorizes such investments, provided that the
Fund is registered under the Investment Company Act of 1940 or the Securities
Act of the Commonwealth of Virginia and that the investment of such funds is
restricted to investments otherwise permitted by Chapter 18 of Title 2.1 of
the Code of Virginia. The Fund is designed to meet all of these requirements
INVESTMENT OBJECTIVE AND POLICIES
The objective of the Fund is to provide Investors with as high current
income as is consistent with stability, safety of principal and liquidity.
The Fund seeks to achieve this objective through investment solely in those
short term "money market" instruments which are permitted investments for
funds that are not sinking funds under Section 2.1-327 through 2.1-329.1 of
the Code of Virginia. The foregoing investment objective and policy are
fundamental policies of the Fund and may not be changed without the
approval of the holders of a majority of the Fund's outstanding voting
securities, as that term is defined in the Investment Company Act of 1940.
Further information about the Fund's investment policies and restrictions is
set forth below and in the Fund Statement of Additional Information. No
assurance can be given that the Fund will achieve its objective.
To achieve its investment objective, the Fund invests in the following
authorized investments:
Obligations of the United States Government. These are U.S. Treasury
bills, notes and bonds, and securities unconditionally guaranteed as to
payment of principal and interest by the United States or any agency of the
United States. Examples of agencies of the United States include, but are not
limited to, the Federal National Mortgage Association, Federal Home Loan
Banks, Federal Farm Credit System, and Government National Mortgage
Association. Obligations of some of these agencies are supported only by the
credit of the agency issuing them, not by the United States. Others are
supported by the agency's right to borrow money from the U.S. Treasury under
some circumstances.
Obligations of International Bank for Reconstruction and Development,
Asian Development Bank and African Development Bank. Bonds and other
obligations issued, guaranteed or assumed by the International Bank for
Reconstruction and Development, bonds and other obligations issued, guaranteed
or assumed by the Asian Development Bank and bonds and other obligations
issued, guaranteed or assumed by the African Development Bank are currently
rated by the major financial rating services. The Fund will invest in such
instruments only when PFM is satisfied that the credit risk with respect to
the issuer is minimal.
Commercial Paper. The Fund will invest only in commercial paper of
corporations organized under the laws of the United States or any state
thereof, including paper issued by banks and bank holding companies, with a
maturity of 270 days or less. The paper, at the time of purchase, must meet
certain statutory criteria related to credit worthiness, including the
requirement that the paper be rated both Prime-1 by Moody's Investor's Service
("Moody's") and A-1 by Standard & Poor's Corporation ("S&P"). The Fund will
not invest more than 35% of its total assets in commercial paper and not more
than 5% of its assets will be invested in the commercial paper of any one
corporation. See "Investment Policies" in the Additional Statement for a
discussion of additional criteria which commercial paper must meet to be
eligible for investment by the Fund.
Corporate Notes or Bonds. The Fund is authorized to invest in bonds,
notes and other evidences of indebtedness or obligations issued by
corporations organized under the laws of the United States or any state with
an existing rating of at least Aa by Moody's and a rating of at least AA by
S&P with a maturity not to exceed 397 days from the date of purchase. Such
instruments may include variable and floating rate instruments, which may have
a stated maturity in excess of 13 months but will, in any event, permit the
Fund to demand payment of the principal of the instrument at least once every
13 months upon not more than 30 days' notice. Such instruments may include
variable amount master demand notes that permit the indebtedness thereunder to
vary in addition to providing for periodic adjustments in the interest rate.
Variable and floating rate instruments that cannot be disposed of within seven
days without taking a reduced price will be treated as illiquid.
Bankers Acceptances. These are time drafts or bills of exchange created
to finance trade goods and "accepted" by either a domestic bank or a foreign
bank with an agency domiciled in the United States.
Other Investment Policies
The Fund may invest in repurchase agreements provided that such
instruments are secured by U.S. Government obligations in which the Fund is
authorized to invest directly. A repurchase agreement occurs when, at the
time that the Fund purchases an instrument, the Fund also agrees to resell it
to the seller on a fixed future date and must deliver the instrument (or
instruments substituted for it) upon such date. The resale price is generally
in excess of the purchase price and reflects an agreed-upon market interest
rate effective for the term of the repurchase agreement. The Fund's risk is
limited to the ability of the seller to pay the agreed-upon sum upon the
delivery date. In the event of bankruptcy or other default by the seller,
there may be possible delays and expenses in liquidating the underlying
instruments, decline in their value and loss of interest. Repurchase
agreements may be considered to be loans by the Fund fully collateralized by
the underlying instruments. The Fund will enter into repurchase agreements
only with domestic banks, securities dealers or recognized financial
institutions, which, in the opinion of PFM, represent minimal financial risks.
In addition, the underlying instruments are marked to market every day to
ensure that the value of the "collateral" is at least equal to the value of
the loan, including the accrued interest thereon, plus sufficient additional
market value as is considered necessary to provide a margin of safety.
Additionally, PFM will regularly review the financial strength of all sellers
of repurchase agreements to the Fund.
The Fund may invest temporarily in securities of no load, open-end
management type investment companies registered under the Investment Company
Act of 1940 whose portfolios are limited to the obligations of the U.S.
Government in which the Fund could invest directly and which determine their
net asset value per share based on the amortized cost or penny-rounding method
of valuation. Securities of such other investment companies do not constitute
"U.S. Government obligations" even though their portfolios consist of U.S.
Government obligations. Such investment companies will normally pay
investment advisory fees and the yield to the Fund on any assets of the Fund
so invested will be net of any such fees. PFM does not intend to waive its
fee on assets so invested but anticipates that investments in other investment
companies will be made only on a temporary basis pending direct investment in
other investments for the Fund. Such investments, if made, will be within the
limits prescribed by the Investment Company Act of 1940.
NET ASSET VALUE
The Fund's Net Asset Value for the purpose of both purchase and
redemption is determined as of 11 a.m., Eastern Time, on each day the Fund's
Custodian is open for business, except Good Friday and Veteran's Day (a
"Business Day"). The Net Asset Value per share is determined by dividing the
value of the net assets of the Fund (i.e., the value of the assets less
liabilities exclusive of surplus) by the total number of shares outstanding.
The Fund seeks to maintain a constant Net Asset Value of $1.00 per share
and operates under a Rule of the Securities and Exchange Commission (the
"Rule") which permits it to value its portfolio on the basis of amortized
cost. The amortized cost method of valuation is accomplished by valuing a
security at its cost and thereafter assuming a constant amortization rate to
maturity of any discount or premium, and does not reflect the impact of
fluctuating interest rates on the market value of the security. This method
does not take into account unrealized gains and losses. However, under the
Rule, the Board of Directors must monitor to determine whether the Fund's Net
Asset Value calculated by using available market quotations deviates from the
Net Asset Value per share on amortized cost, and the Board of Directors must
take such action as it deems appropriate to eliminate or reduce to the extent
reasonably practicable any material dilution or other unfair results to
Investors or existing shareholders which might arise from any such deviation.
See the Statement of Additional Information for a more complete description of
the requirements of the Rule.
HOW TO INVEST IN THE FUND
The Fund's shares are offered on a continuous basis at the Net Asset
Value next determined after an order is entered and deemed effective on the
basis described below under "When Shares Are Purchased and Dividends Declared
And Paid." There is no sales charge. Subsequent investments may be made in
any amount. Shares may be purchased through the Transfer Agent or the
Distributor.
Opening Account(s)
A properly completed application (the "Application") must be sent to the
Transfer Agent at 2101 N. Front Street, Building 3, Suite 200, Harrisburg, PA
17110 upon opening a new account. A properly completed Application must be
received by the Fund before a redemption request will be honored.
Initial investments may be made in either of two convenient ways:
1. By Mail. Payment may be made by check, money order, Federal
Reserve draft, or negotiable bank draft payable to the order of the Fund for
your account and mailed to:
Central Fidelity National Bank
Attn: Commonwealth Cash Reserve Fund
1021 East Cary Street
P.O. Box 26587
Richmond, VA 23261
2. By Wire. Payment may be wired in Federal Funds (money credited to
a bank account with a Federal Reserve Bank) to the Fund's Custodian . To
insure prompt and proper crediting to its account, an Investor choosing to
place money in the Fund by wire should telephone the Transfer Agent in advance
at 1-800-338-3383. The Investor should instruct its bank to wire funds to:
Central Fidelity National Bank
Richmond, Virginia
ABA# 051000253
for credit to Commonwealth Cash Reserve Fund
Account No. 7911623867
Account Name and Number: The name in which the
Investor wishes the Fund to carry the investment.
Additional Investments
Additional investments may be made in any amount after an account has
been established by simply mailing directly to the Custodian (at the address
indicated above under "By Mail") a check, money order or negotiable bank
draft, made payable to the Fund, or by wiring funds (to the address indicated
above under "By Wire") after calling the Transfer Agent in advance, as
described above. In each case, the Investor should indicate its name and the
account number to insure prompt and proper crediting of the account.
When Shares Are Purchased And Dividends Declared And Paid
The Fund seeks to be as fully invested as possible at all times to
achieve high income. As the Fund will be investing in instruments which
normally require same day payment in Federal Funds, the Fund has adopted
certain procedures for the convenience of the Investor and to insure that the
Fund has investable funds available to it.
Payments which are "accepted" (see below) before 11:00 a.m., Eastern
Time, on any Business Day (see "Net Asset Value") and which are received in
or converted to Federal Funds on that Business Day will be invested in shares
(i.e., the purchase order will be effective) at the Net Asset Value per share
calculated as of 11 a.m. Eastern Time, on that Business Day. Payments which
are "accepted" (see below) after 11:00 a.m. Eastern Time on any Business Day
will be invested in shares at the Net Asset Value per share as of 11 a.m.
Eastern Time on the next Business Day. To be "accepted", the purchase order
must be in proper form and have been received and accepted by the Fund. Wire
payments not in Federal Funds will normally be converted into Federal Funds
on the next Business Day after receipt by the Custodian. Payments
transmitted by check will normally be converted to Federal Funds within one
day after receipt by the Custodian. All checks are accepted subject to
collection at full face value in United States funds and must be drawn in
United States dollars on a United States bank. Dividends are declared
starting on the day the purchase order is effective and are not declared on
the day on which the shares are redeemed. All dividends will be invested in
additional shares of the Fund unless specific instructions are received to
pay dividends in cash.
Confirmations
All purchases of shares will be confirmed and credited to the Investor
in an account maintained by the Fund in full and fractional shares of the Fund
(rounded to the nearest 1/1000 of a share). Share certificates will not be
issued.
The Fund reserves the right to reject any order for purchase of shares.
In addition, the offering of shares may be suspended at any time (although
this is not expected to occur) and resumed at any time thereafter.
HOW TO REDEEM INVESTMENTS
The Fund provides day to day liquidity on any Business Day. Investors
may withdraw their investment, in whole or in part, on any day on which the
Net Asset Value is calculated by redeeming their shares at the Net Asset Value
(see "Net Asset Value") after receipt by the Fund in the proper form (i.e.,
use of one of the redemption methods described below) of a redemption request.
Except for shares recently purchased by check, as discussed below, there is no
minimum time period for any investment in the Fund. There are no redemption
fees or withdrawal penalties. A completed Application must have been received
by the Fund before redemption requests of any kind will be honored.
Convenient Redemption Methods
An Investor has the flexibility of three redemption methods for easy and
convenient access to the Fund.
Under the first two methods, for security reasons, cash proceeds from
redemptions are sent by the Fund only to the predesignated bank account(s) of
the Investor. Such payments will be wired to the Investor's predesignated
bank account in accordance with the Investor's instructions.
1. By Mail. Redemptions may be requested by a letter of instruction
from the Investor indicating the account number, amount to be redeemed,
and payment directions sent to:
Commonwealth Cash Reserve Fund, Inc.
c/o Public Financial Management, Transfer Agent
Governor's Plaza North
2101 North Front Street
Building 3, Suite 200
Harrisburg, PA 17110
Such requests must be signed by an authorized signatory or signatories
of the Investor.
The mailed redemption should contain the following information:
* Account Number.
* Dollar amount or number of shares to be redeemed or a statement that
all of the shares are to be redeemed. Payment instructions
(redemption proceeds will be wired to an Investor's bank account
designated by the Investor in the Application and specified in the
redemption request).
* Authorized signatures of the Investor.
2. By Telephone. The Fund will accept telephone requests for
redemption for payment to predesignated bank accounts. Such requests
must be made by an authorized person. The account number and amount to
be redeemed must be supplied by the Investor. To redeem by telephone
call: 1-800-338-3383
If the telephone call is received prior to 11:00 a.m., Eastern Time,
funds will be wired to the Investor's designated account on that same
Business Day. Requests received after 11:00 a.m. will be processed on
the next day that Net Asset Value is determined. Funds will remain
invested in the Fund until the day that they are wired.
The commercial bank account information supplied to the Fund must be in
the exclusive name of the Investor. The Investor may at any time change
or add designated bank accounts by completing and returning a form
available from the Fund.
3. By Redemption Check. The Custodian will provide each Investor,
upon request and without charge, with a book of redemption checks. An
Investor wishing to use this redemption check procedure should notify
the Fund or so indicate on the Application and will thereupon be issued
redemption checks for this purpose. Redemption checks may be signed
only by those authorized on the Application.
The Investor will be subject to applicable rules and regulations,
but there is no charge to the Investor for the maintenance of this
redemption check writing privilege or for the clearance of any
redemption checks. An Investor may have a redemption checking privilege
for each separate account.
When a redemption check is presented to the Custodian for payment,
the Transfer Agent will cause the Fund to redeem a sufficient number of
full and fractional shares in the Investor's account to cover the amount
of the redemption check. The redemption check procedure enables the
Investor to continue receiving dividends on those shares which are equal
to the amount being redeemed by the redemption check until such time
that the redemption check is presented to the Custodian for payment.
An Investor should be certain that adequate Fund shares (which
were not recently purchased by check) are in the account to cover the
redemption check. See "Redemption Procedures" below for special
requirements as to Fund shares recently purchased by check. If
insufficient redeemable shares are in the account, the redemption check
will be returned marked "insufficient funds." Redemption checks may not
be used to close an account. This privilege may be modified or
terminated at any time by the Fund or the Custodian upon notice to
shareholders.
Redemption Procedures
Redemption of shares will occur at the next determined Net Asset Value
following the receipt of a request for redemption by the Fund. Except as set
forth below, those requests received by 11:00 a.m., Eastern Time, will be
processed that day and those received after 11 a.m., Eastern Time, will be
processed on the next day that Net Asset Value is determined. The Fund will
normally make payment for all shares redeemed on the day the redemption
request is processed, and except as set forth below, no more than seven days
after a proper request for redemption is received. Shares purchased by a check
(irrespective of whether the check is a regular check, cashier's or official
bank check) within the prior fifteen days may not be redeemed by the
redemption check procedure, and an Investor must not write a redemption check
if (i) it will be presented to the Custodian within 15 days of a share
purchased by check and (ii) the redemption check would cause the redemption of
some or all of those shares. However, the redemption may be permitted in less
than 15 days if the determination is made that the purchase funds are
collected in less than 15 days. Possible delays in redemptions can be
eliminated by using wire payments in Federal Funds or Federal Reserve Drafts
to pay for purchases.
If the Board of Directors of the Fund determines that it would be
detrimental to the best interest of the remaining Investors to make
payment wholly or partly in cash, the Fund may pay the redemption price
from the portfolio of the Fund, in lieu of cash, in conformity with the
rules of the Securities and Exchange Commission. It should be noted
that the management of the Fund considers the prospect highly remote
that the Fund would redeem shares using this "in kind" provision.
MANAGEMENT
Board of Directors and Advisory Board
The Board of Directors has overall responsibility for the business and
affairs of the Fund pursuant to the laws of Virginia. Pursuant to that
responsibility, the Board of Directors has approved contracts with various
financial organizations to provide, among other things, day-to-day management
services. These organizations are described below. In addition, the Board of
Directors has appointed an Advisory Board. Members of this Board will not and
may not be Directors or officers of the Fund but may be employees of Investors
or retired directors. The function of the Advisory Board to consult with and
advise the Board of Directors as to investment and any other matters relating
to the business of the Fund. The Advisory Board does not have the authority
to bind the Fund
The statement of Additional Information sets forth the identity and
other information about the Fund Directors and members of the Advisory Board.
Investment Advisory and Administration Arrangements
As noted above, PFM, the principal offices of which are located at
Governor's Plaza North, 2101 North Front Street, Suite 200, Harrisburg, PA
17110, serves as the Fund's investment advisor. Pursuant to the terms of its
advisory agreement with the Fund, ("Advisory Agreement"), PFM supervises the
investment program of the Fund and the composition of its portfolio and
computes the Net Asset Value of the Fund. PFM is registered as an investment
adviser under the Investment Advisers Act of 1940, and has acted as financial
adviser and/or investment adviser to more than 1,000 cities, townships,
boroughs, counties, school districts and authorities in 35 states, providing
its clients with financial, investment advisory, and cash management services.
As of January 1, 1996, PFM had more than $8.0 billion in funds under
management. PFM is also investment manager for the Pennsylvania Local
Government Investment Trust, the New Jersey Arbitrage Rebate Management
Program, the California Arbitrage Management Program, and the Massachusetts
Health and Educational Facilities Authority Short-Term Assets Reserve Fund, a
state-wide investment pool for health and educational institutions.
Under the Advisory Agreement PFM is responsible for providing to the
Fund, subject to the supervision of the Board of Directors, a continuous
investment program, including investment research and management, with respect
to all securities and investment and cash equivalents in the Fund's portfolio.
All expenses incurred by PFM in connection with the provision of such services
to the Fund will be paid by PFM other than the cost of securities (including
brokerage commissions, if any) purchased by the Fund. In addition, PFM has
agreed to pay all compensation of any Directors, officers and employees of the
Fund who are affiliated persons of PFM. The Advisory Agreement was initially
approved by the Fund's Board of Directors at a meeting held on October 26,
1995, and by the Fund's shareholders at a special meeting of shareholders held
on November 21, 1995.
As compensation for its services under the Advisory Agreement, PFM is
entitled to receive an annual fee, which is accrued daily and payable
monthly, at the rate of .12 of 1% of the Fund's average daily net assets.
During the fiscal year ended March 31, 1996, PFM received advisory fees
equal to .04% of the average net assets of the Fund. This fee reflects the
waiver of a portion of the management fee. PFM is not required to continue
to waive fees and can terminate this voluntary waiver at any time. Since
November 30, 1995, PFM has been a wholly-owned subsidiary of PFM Acquisition
Corp. PFM Acquisition Corp, a holding company organized as a Pennsylvania
corporation was formed in 1995 for the purpose of acquiring PFM. All of
the shares of PFM Acquisition Corp. are owned by the managing directors of
PFM. PFM was formerly a wholly-owned subsidiary of Marine Midland Bank.
PFM also serves as the Fund's Administrator under an Administration
Agreement dated November 21, 1995 (the "Administration Agreement"). Under the
Administration Agreement, PFM, provides all administrative services, other
than those relating to its investment portfolio and to the maintenance of its
financial records, office space and facilities, equipment and personnel
necessary for the operation of the Fund, including the payment of all
compensation of those of the Fund's Directors, officers and employees who are
affiliated persons of PFM. In addition, the PFM oversees the preparation of
tax returns, reports to shareholders and directors of the Fund, and filings
with the Securities and Exchange Commission and state "Blue Sky" authorities.
As compensation for its services under the Administration Agreement, PFM
is entitled to a fee, accrued daily and payable monthly, at the annual rate of
.05 of 1% of average daily net assets. For the fiscal year ended March 31,
1996, PFM waived its fees and received no compensation under the
Administration Agreement.
See the Statement of Additional Information for more information
concerning the Fund's investment advisory and administration arrangements.
Fund Expenses
All other expenses not expressly assumed by PFM under the respective
Agreements are paid by the Fund, including, among other things, legal and
audit expenses, fees and expenses of the Custodian, out-of-pocket costs of the
Transfer Agent, and bookkeeping (accounting agent), share issuance and
redemption costs and expenses of the Fund and its shares under federal and
state securities laws, and interest, taxes and other non-recurring expenses,
including litigation. The Fund bears the cost of the preparation and setting
in type of its prospectuses and reports to shareholders and the costs of
printing and distributing those copies of such prospectuses and reports sent
to shareholders. The Fund's total expenses as a percentage of average net
assets for the fiscal year ended March 31, 1996, were .15 of 1% after the
effect of waiving certain advisory, administration and distribution fees.
Distribution Plan
Shares in the Fund are offered on a continuous basis through
Commonwealth Financial Group, Inc. ("Distributor"), the Fund's Distributor,
pursuant to a separate Distribution Agreement with the Fund. Jeffrey A.
Laine, President and a Director of the Fund, is the President and sole
shareholder of the Distributor. The Fund has adopted an Amended and Restated
Distribution Plan (the "Plan") entered into pursuant to Rule 12b-1 of the
Investment Company Act of 1940 (the "Rule"). The Rule provides in substance
that an investment company may not engage directly or indirectly in the
financing of any activity which is primarily intended to result in the sale of
its shares except pursuant to a written plan adopted under the Rule. The Plan
is designed to protect the Fund against any claim that some of the expenses
which the Fund pays or may pay come within the purview of the Rule. The Plan
also authorizes payment of up to .25 of 1% of the Fund's average daily net
assets each year to the Fund's Distributor and to broker dealers and
shareholder servicing agents providing assistance in the distribution and
retention of Fund shares. For the fiscal year ended March 31, 1996, the Fund
paid $23,325, after waivers, in approved distribution expenses. See the
Statement of Additional Information for further information.
DIVIDEND AND TAX INFORMATION
Dividends
All of the Fund's net income will be declared daily as dividends. The
Fund will retain no "profit" or "reserve" except as may be approved by the
Board in the event of a material deviation between the Net Asset Value per
share based upon "available market quotations" and the Net Asset Value per
share based on amortized cost. See "When Shares are Purchased and Dividends
Declared and Paid" under "How to Invest in the Fund" as to when dividends are
declared.
All dividends declared are accrued throughout the month and are paid
(i.e. reinvested) normally on the first business day of the following month
(and always as of such day) in additional shares at the Net Asset Value
(ordinarily $1.00 per share). Each shareholder will receive monthly a summary
of his account(s), including information on dividends declared during the
month and the shares credited to the account(s) through reinvestment of
dividends. A shareholder who redeems all his shares receives on the next
dividend payment date the amount of all dividends declared for the month to
the date of redemption.
Daily dividends will be calculated as follows: the net income for
dividend purposes will be calculated immediately prior to the calculation of
the Net Asset Value and will include accrued interest and original issue and
market discount earned since the last evaluation, plus or minus any realized
gains or losses (which are not included in the Fund's yield), less the
estimated expenses of the Fund and amortized original issue and market premium
for the period. Under this dividend policy, the daily dividend declared on
the Fund's shares may fluctuate. Further, the calculation of the dividend
could change under certain circumstances under procedures adopted by the Board
relating to "amortized cost" valuation. See the Additional Statement for
further information on amortized cost valuation. All dividends will be
invested in additional shares of the Fund unless specific instructions are
received to pay dividends in cash.
Taxes
The Fund has qualified and expects to remain qualified under Subchapter
M of the Internal Revenue Code. If the Fund so qualifies, it will not pay
federal income taxes on earnings it distributes. If the Fund has any net
long-term capital gains it intends to pay a capital gains distribution in
accordance with the timing requirements imposed by the Code.
Dividends of net investment income and distributions of net realized
capital gains (except to the extent reduced by capital losses to the
shareholder) are taxable to shareholders (except tax-exempt shareholders)
whether they are received in cash or reinvested in shares of the Fund.
Shareholders will be notified annually as to the federal tax status of
dividends or distributions paid. Redemptions of Fund shares may result in
taxable gain to the redeeming shareholder if the redemption proceeds exceed
the shareholder's adjusted basis for the redeemed shares.
Federal income tax law requires the Fund to withhold tax at a rate of
20% from dividends and redemptions (including exchanges) that occur with
respect to shareholder accounts if the shareholder has not properly furnished
a certified correct taxpayer identification number and has not certified that
withholding does not apply.
The foregoing summarizes certain of the federal tax considerations
relating to taxation of the Fund and its shareholders. The summary does not
discuss all aspects of federal income taxation that may be relevant to a
particular shareholder based upon the shareholder's particular investment
circumstances or to certain types of holders subject to special treatment
under the federal income tax laws. It does not discuss any aspect of state,
local or foreign tax laws. Prospective shareholders should consult their tax
advisers with respect to the effects of this investment on them.
GENERAL INFORMATION
Capital Stock
The authorized capital stock of the Fund consists of 500,000,000 shares.
Each share is entitled to one vote on all matters voted on by shareholders,
with fractional shares being entitled to proportionate fractional votes.
Shares do not have cumulative voting rights. The Fund intends to hold an
annual meeting of shareholders. A more complete statement of the rights of
shares and shareholders is set forth in the Additional Statement.
Custodian and Transfer Agent
All funds and securities are deposited with Central Fidelity National
Bank, as Custodian. PFM serves as the Fund's transfer agent under a Transfer
Agency Agreement dated March 15, 1994. PFM is entitled to reimbursement of
its out-of-pocket expenses incurred under the Transfer Agency Agreement but is
not entitled to fees for services under that Agreement except as expressly
agreed to by the Fund. During the fiscal year ended March 31, 1996, PFM
received no compensation for such services.
Reports to Shareholders; Independent Accountants
Shareholders will receive annual reports containing financial statements
audited by independent accountants and semi-annual reports containing
unaudited statements. In addition, the Fund provides for each Investor account
(including multiple accounts): confirmations of all investment or redemption
transactions, individual monthly account statements, and individual account
information on request.
Price Waterhouse LLP, located at Thirty South Seventeenth Street,
Philadelphia, Pennsylvania 19103, currently serves as the Fund's independent
accountants.
APPLICATION TO OPEN AN ACCOUNT
Commonwealth Cash Reserve Fund, Inc.
c/o Public Financial Management, Inc., Transfer Agent
Governor's Plaza North
2101 North Front Street
Building 3, Suite 200
Harrisburg, PA 17110
Dated: , 19
The undersigned Investor hereby applies for shares of Commonwealth Cash
Reserve Fund, Inc. (the "Fund").
By execution of this form, which may be in confirmation of verbal
information already given, the Investor represents and warrants that the
Investor has the full power and authority to make investments, that the assets
being invested are not subject to any restrictions under an indenture or other
agreement that prohibits investment in the Fund, and that the funds invested
are not funds of a type not authorized for this investment as is described in
the Prospectus. The persons signing on behalf of an Investor warrant that
they are authorized to make investments on behalf of the Investor. All
persons signing represent that they have received and read the Fund's current
Prospectus. The Investor appoints Public Financial Management, Inc. as
Transfer Agent to record the receipt of dividends and distributions and
arrange for automatic reinvestment, and appoints Central Fidelity National
Bank as Custodian, to hold all instruments and money owned by the Investor in
the Fund and to receive interest and other income thereon.
The establishment of this account is subject to acceptance by the Fund
and is subject to the conditions under "How To Invest In The Fund" and "How To
Redeem The Investment" and other provisions contained in the Prospectus.
_______________________________________________________________
Authorized Signer/Title
INSTRUCTIONS For Account Service and Redemption
Call (1-800-338-3383)
THIS ACCOUNT SHOULD 1. LEGAL NAME:
BE RECORDED AS:
SHAREHOLDER 2. ADDRESS
INFORMATION ______________________________________________________
(Address MUST Street
be filled out) ______________________________________________________
City State Zip
METHOD OF A.CHECK ENCLOSED $______________________________
INVESTMENT
USE A or B Payable to: Commonwealth Cash Reserve Fund, Inc.
B.WIRED FUNDS $__________________________________
REDEMPTION From_________________________________________________
REQUESTS WILL Name of Bank
NOT BE HONORED _____________________________________________________
UNTIL COMPLETED Address of Bank - Street
APPLICATION IS
FILED WITH
THE FUND
PRIMARY CONTACT NAME:______________________________________________________
TITLE:_____________________________________________________________________
TELEPHONE NUMBER:__________________________________________________________
FAX NUMBER:________________________________________________________________
SECONDARY CONTACT NAME:____________________________________________________
TITLE:_____________________________________________________________________
TELEPHONE NUMBER:__________________________________________________________
SEND ACCOUNT STATEMENT SEND DUPLICATE STATEMENTS TO:
AND CONFIRMS TO:
_________________________________ ________________________________
_________________________________ ________________________________
_________________________________ ________________________________
_________________________________ ________________________________
WITHDRAWAL INSTRUCTIONS
REDEMPTION ______ Please establish a Redemption Checking Account at
CHECK Central Fidelity National Bank and send us a supply of
REDEMPTION Redemption Checks. We understand this checking
account will be subject to the rules and regulations
of Central Fidelity National Bank pertaining thereto,
as amended from time to time, except that there will
be no service fees or other charges imposed on the
Investor. We understand that checks may only be
signed by the authorized on this Application.
WIRE TRANSFER ______ Redemption by wire transfer is requested. Central
TO Fidelity National Bank is authorized to honor
PREDESIGNATED telephonic or written instructions without signature
BANKS guarantees from any person for redemption of any of
all Fund shares so long as redemption proceeds are
transmitted to one of the accounts identified below.
____________________________________________________________________
Name of Bank
____________________________________________________________________
Bank's ABA Routing Number
____________________________________________________________________
Title of Account at Bank (Must be the same as that in which
the Fund shares are recorded)
____________________________________________________________________
Account Number
____________________________________________________________________
Bank Address
*********
____________________________________________________________________
Name of Bank
____________________________________________________________________
Bank's ABA Routing Number
____________________________________________________________________
Title of Account at Bank (Must be the same as that in which
the Fund shares are recorded)
____________________________________________________________________
Account Number
____________________________________________________________________
Bank Address
*********
TAXPAYER If the information required by this section
IDENTIFICATION is not provided, Backup Withholding of 20%
NUMBER (TIN) of taxable dividends, capital gains distributions and
proceeds of redemptions and exchanges will be imposed
under federal tax regulations.
____________________________________________
Enter your TIN (Social Security number of individuals
Or Employer I.D. number of entities, including
corporations, partnerships, estates and trusts).
Check all applicable boxes:
[ ] I have not been notified by the IRS that I
am currently subject to Backup Withholding.
[ ] I am an exempt recipient.
[ ] I am neither a citizen nor a resident of
the United States.
All applicants must complete the signature section below.
SIGNATURE AUTHORIZATION
Public Financial Management, Inc. is hereby authorized to act as agent
for the recorded owner of the shares in effecting purchases and redemptions of
shares and is authorized to recognize the signature(s) below in payment of
funds resulting from such redemptions on behalf of the recorded owner of such
shares, including redemptions, if any, made by Redemption Check. Public
Financial Management, Inc. shall be liable only for its own negligence and not
for the default or negligence of its correspondents, or for losses in transit.
Under the penalties of perjury, I (we) certify that the information
provided in the TIN section of this Application is true, correct, and
complete.
I (we) certify to my (our) capacity to act in behalf of the entity named
above, to invest, and if applicable, to open a checking account based on
shares of the Fund.
___________________________________
Name of Investor, Trustee or other Fiduciary
Signatures Name (Print) Title
___________________ __________________ ____________
___________________ __________________ ____________
___________________ __________________ ____________
Number of signatures required for redemption requests ________
SIGNATURE OF APPLICANT
Date: ___________________, 19__
_______________________________
Name of Investor, Trustee or other Fiduciary
By ____________________________
Investment Adviser
Public Financial Management, Inc.
Governor's Plaza North
2101 North Front Street
Building 3, Suite 200
Harrisburg, Pennsylvania 17110
Distributor
Commonwealth Financial Group, Inc.
38 Cohasset Lane
Cherry Hill, New Jersey 08003
Custodian
Central Fidelity National Bank
1021 East Cary Street
P.O. Box 27602
Richmond, Virginia 27602
Administrator and Transfer Agent
Public Financial Management, Inc.
Governor's Plaza North
2101 North Front Street
Building 3, Suite 200
Harrisburg, Pennsylvania 17110
Independent Accountants
Price Waterhouse LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
Co-Counsel
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
901 E. Cary Street
Richmond, Virginia 23219
Laura Anne Corsell, Esq.
7307 Elbow Lane
Philadelphia, Pennsylvania 19119
TABLE OF CONTENTS Page
FUND EXPENSES AND FINANCIAL HIGHLIGHTS 3
THE FUND 5
INVESTMENT OBJECTIVE AND POLICIES 5
NET ASSET VALUE 6
HOW TO INVEST IN THE FUND 8
HOW TO REDEEM INVESTMENTS 9
MANAGEMENT 12
DIVIDEND AND TAX INFORMATION 13
GENERAL INFORMATION 14
COMMONWEALTH CASH RESERVE FUND, INC.
PROSPECTUS
Dated August 1, 1996
STATEMENT OF ADDITIONAL INFORMATION
COMMONWEALTH CASH RESERVE FUND, INC.
P.O. Box 1192
Richmond, Virginia 23209-1192
1-800-338-3383
This Statement of Additional Information (the "Additional Statement") is
not a prospectus and is only authorized for distribution when preceded or
accompanied by the Commonwealth Cash Reserve Fund, Inc. Prospectus (the
"Prospectus") dated August 1, 1996. This Additional Statement contains
additional and more detailed information than that set forth in the Prospectus
and should be read in conjunction with the Prospectus, additional copies of
which can be obtained from Commonwealth Cash Reserve Fund, Inc. (the "Fund")
at the address and telephone number printed above or from the Fund's
Distributor, Commonwealth Financial Group, Inc., 38 Cohasset Lane, Cherry
Hill, New Jersey 08003, 609-750-5220.
TABLE OF CONTENTS
Page
INVESTMENT POLICIES 2
INVESTMENT RESTRICTIONS 3
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS 5
YIELD INFORMATION 10
AMORTIZED COST VALUATION 11
GENERAL INFORMATION 12
The date of this Additional Statement is August 1, 1996.
INVESTMENT POLICIES
The following information supplements the discussion of investment
objectives and policies of the Fund found under "Investment Objective and
Policies" in the Prospectus.
Additional Requirements for Commercial Paper.
As stated in the Prospectus, the Fund may only purchase commercial paper
which either satisfies certain statutory requirements or is approved by the
Board of Directors of the Fund in accordance with certain statutory
procedures. Absent such Board approval, commercial paper must meet the
following statutory criteria:
(a) The issuing company must have a net worth of at least fifty
million dollars;
(b) The net income of the issuing company must have averaged three
million dollars per year for the five years immediately
previous to purchase; and
(c) All existing senior bonded indebtedness of the issuing company
must have been rated "A" or better by Moody's Investors
Service, Inc. and Standard & Poor's Corporation.
Ratings of Commercial Paper and Corporate Bonds.
Commercial paper with the greatest capacity for timely payment is rated
A by Standard & Poor's Corporation ("S&P"). Issues within this category are
further redefined with designations 1, 2 and 3 to indicate the relative degree
of safety: A-1, the highest of the three, indicates the degree of safety is
very strong; A-2 indicates that the capacity for timely repayment is strong;
A-3 indicates that capacity to repay is satisfactory but more vulnerable to
the adverse effects of changes in circumstances than obligations rated A-1 or
A-2. Moody's Investors Service, Inc. ("Moody's") employs the designations of
Prime-1, Prime-2 and Prime-3, to indicate the relative capacity of the issuers
to repay punctually. Prime-1 issues have a superior capacity for repayment.
Prime-2 issues have a strong capacity for repayment, but to a lesser degree
than Prime-1. Prime-3 issues have an acceptable capacity for repayment, but
the effects of industry characteristics and market competition may be more
pronounced.
Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in a small degree. Bonds rated
A have a strong capacity to pay principal and interest, although they are more
susceptible to adverse effects of changes in circumstances and economic
conditions.
Bonds rated Aaa by Moody's are judged by Moody's to be of the best
quality. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. Bonds rated Aa are judged to be of
high quality. They are rated lower than the best bonds because margins of
protection may not be as large or because fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. Bonds
which are rated A possess many favorable investment attributes and are to be
considered adequate but elements may be present which suggest a susceptibility
to impairment sometime in the future.
The ratings of Moody's and S&P represent their opinions as to the
quality of various securities. It should be emphasized, however, that ratings
are not absolute standards of quality.
Turnover and Portfolio Transactions
In general, the Fund will purchase instruments with the expectation of
holding them to maturity. However, the Fund may to some degree engage in
trading to attempt to take advantage of short-term market variations. The
Fund may also sell investments in order to meet redemptions or as a result of
revised management evaluations of the issuer. The Fund will have a high
annual portfolio turnover because of the short maturities of the instruments
held, but this should not affect the Net Asset Value or income, as brokerage
commissions are not usually paid on the purchase, sale, or maturity of the
instruments in which the Fund invests.
The Fund will seek to obtain the best net price (yield basis) and the
most favorable execution of orders. Purchases will be made directly from the
issuers or underwriters, or dealers or banks which specialize in the types of
instruments purchased by the Fund. Purchases from underwriters will reflect a
commission or concession paid by the issuer to the underwriter and purchases
from dealers may include the spread between the bid and the asked price. If
the execution and price offered by more than one dealer are comparable, the
order may be allocated by PFM to a dealer which has provided research advice
(including quotations on investments). By allocating transactions to obtain
research services, the Fund enables PFM to supplement its own research and
analyses with the views and information of others. Purchase and sale orders
for securities or instruments held by the Fund may be combined with those of
other investment companies or accounts which PFM manages in the interest of
the most favorable net results for all. When PFM determines that a particular
security or instrument should be bought or sold for the Fund and other
accounts managed by PFM, PFM undertakes to allocate those transactions among
the participants equitably, usually on the basis of the sizes of the
participating accounts.
INVESTMENT RESTRICTIONS
The Fund has adopted the investment restrictions set forth below Unless
otherwise expressly noted, each investment restriction is a fundamental policy
of the Fund and cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of the Fund. As defined in the
Investment Company Act of 1940, a majority of the Fund's outstanding voting
securities means the lesser of (a) 67 percent of the shares of the Fund at a
meeting where the holders of more than 50 percent of the outstanding shares
are present in person or by proxy; or (b) more than 50 percent of the
outstanding shares of the Fund.
(1) The Fund may not make any investments other than those permitted
under Virginia law for counties, cities, towns, political subdivisions and
public bodies of the Commonwealth of Virginia as those terms are used in
Section 2.1-327 through 2.1-329.1 of the Code of Virginia of 1950, as it may
be amended from time to time. The Fund may not buy any voting securities,
any instrument or security from any issuer which, by its nature, would
constitute characteristics of equity ownership and equity risks, any
commodities or commodity contracts, any mineral related programs or leases,
any warrants, or any real estate or any non-liquid interests in real estate
trusts. However, it may purchase marketable securities which are legal
investments even though the issuer invests in real estate or has interests in
real estate.
(2) The Fund may not purchase any securities if more than 25% of its
total assets (valued at market) would then be invested in the securities of
issuers in the same industry (exclusive of securities issued or guaranteed by
the United States Government, its agencies or instrumentalities and
obligations of domestic banks).
(3) The Fund may not buy the obligations of any issuer, other than the
United States Government, its agencies and instrumentalities, if more than 5%
of its total assets (valued at market value) would then be invested in
obligations of that issuer, except that such 5% limitation shall not apply to
repurchase agreements collateralized by obligations of the United States
Government, its agencies and instrumentalities.
(4) Although the Fund may not lend money or assets, it can buy those
debt obligations or use those deposit instruments in which it is permitted to
invest (see "Investment Objective and Policies" in the Prospectus). It can
also enter into repurchase agreements. However, as a matter of operating (but
not fundamental) policy, the Fund will not enter into repurchase agreements
maturing in more than seven days if thereafter more than 10% of the value of
its assets would then consist of such repurchase agreements.
(5) The Fund may not invest for the purpose of exercising control or
management of other issuers.
(6) The Fund may not sell securities short (i.e. sell securities that
it does not own) and may not buy securities on margin.
(7) The Fund may not engage in the business of underwriting securities
issued by other persons, except to the extent the Fund may technically be
deemed an underwriter under the Securities Act of 1933, as amended, in
disposing of investment securities. Also, it may not invest in restricted
securities. Restricted securities are securities which cannot be freely sold
for legal reasons.
(8) The Fund can only borrow from banks for temporary or emergency
purposes on an unsecured basis and only up to 20% of the value of its total
assets. The Fund will not borrow to increase its income but only to meet
redemptions. The Fund will not purchase any security or instrument at any
time when borrowings are 5% or more of its total assets.
(9) The Fund may not purchase securities of any other investment
company if (i) the Fund and any company or companies controlled by it would
then own, in the aggregate, more than 3% of the voting securities of such
investment company or (ii) more than 10% of the Fund's total assets would then
be invested in investment companies.
(10) The Fund may not issue senior securities or senior shares as
defined in the Investment Company Act of 1940, provided that the Fund may
borrow from banks to the extent and for the purposes set forth in restriction
(8) above.
It is the position of the Securities and Exchange Commission (and an
operating, although not a fundamental policy of the Fund) that an open-end
investment company such as the Fund should not make certain illiquid
investments if thereafter more than 10% of the value of its assets would be so
invested. The investments included in this 10% limit are (i) those which are
restricted, i.e., those which cannot be freely sold for legal reasons; (ii)
fixed time deposits subject to withdrawal penalties having a maturity of more
than seven days; (iii) repurchase agreements having a maturity of more than
seven days; and (iv) investments which are not readily marketable. The Fund
does not expect to own any investment which is not readily marketable but it
is possible that market quotations may not be readily available as to the
obligations of banks which are of relatively small size. Therefore, the
obligations of such smaller banks will be purchased only within the 10% limit
unless (i) they are payable at principal amount plus accrued interest within
seven days after purchase or on demand within seven days after demand; or (ii)
the Board of Directors determines that a readily available market exists for
such obligations. It should be noted that, should the Fund enter into
repurchase agreements maturing in more than seven days up to the full amount
permitted by restriction (4) above, it would not be able to make any of the
other investments discussed in this paragraph.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease beyond the specified limit resulting from a change
in values of net Fund assets will not be considered a violation of the above
percentage investment restrictions but the Fund shall then use prudence in
bringing all percentage restrictions back into conformity.
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Board of Directors
The members of the Board of Directors of the Fund are elected annually
at the annual meeting of shareholders. Directors serve for a term of one year
or until their successors are appointed and qualified. Vacancies on the Board
may be filled by the remaining Board members until the next shareholders'
meeting, subject to restrictions described below
The Directors and officers of the Fund, their affiliations, if any, with
PFM or the Distributor, and their principal occupations during at least the
past five years are set forth below. Directors who are "interested persons"
of the Fund as that term is defined in the Investment Company Act of 1940, are
designated with an (*) asterisk. As of the date of this Statement of
Additional Information, none of the Directors or officers owned any of the
outstanding shares of the Fund.
ROBERT J. FAGG, JR., Director, 1605 Westcastle Drive, Richmond, Virginia
23233
Director of the Annual Giving Program, Virginia Commonwealth University,
since 1981, Development Officer, 1974-1981; Account Executive, Dupont Glore
Forgan, 1973-1974; Registered Representative, Wheat, First Securities, Inc.,
1970-1973; Registered Representative, Abbott, Proctor and Paine, 1968-1969.
Mr. Fagg is 55 years old.
*JEFFREY A. LAINE, Director, President, and Treasurer, 38 Cohasset Lane,
Cherry Hill, New Jersey 08003
President, Commonwealth Financial Group, Inc., (the Fund's Distributor)
1994-present; President, Laine Financial Group, Inc., 1992-present; Senior
Vice President and Chief Financial Officer of J. C. Thompson & Associates,
Inc., 1989-1994; Senior Vice President of Commonwealth Financial Group, Inc.,
1993-1994; Executive Vice President and Chief Financial Officer of
Institutional Capital Management Corporation, 1987-1990; Treasurer, Van Lieu
Securities, 1989-1991; Senior Vice President, Treasurer and Chief Financial
Officer of Mariner Funds Services, 1987-1992; Vice-President and Treasurer of
Mariner Funds Trust, 1987-1992; CPA with Bowman & Company, certified public
accountants, 1982-1987; Member of Comptroller's Staff, Texaco, Inc., 1981-
1982; Accountant, RCA Corporation, 1981. Mr. Laine is 38 years old.
THE FOLLOWING DIRECTORS ARE EXPECTED TO BE NOMINATED BY THE BOARD OF DIRECTORS
AND ELECTED BY THE SHAREHOLDERS
ROBERT R. SEDIVY, Director, 3804 Wellesley Terrace Circle, Richmond, Virginia
23233
Vice President-Finance and Treasurer, Collegiate School, Richmond, Virginia,
1988 - present; Deputy Director, Science Museum of Virginia, 1986 - 1988;
Administrator, Science Museum of Virginia, 1985 - 1986; Treasurer, Trinity
College, Washington, D.C., 1983 - 1985; Director of Resource Management,
Loyola College, Baltimore, Maryland, 1978 - 1983. Member Virginia Association
of Independent Schools, Financial Officers Group. Mr. Sedivy is ___ years
old.
*MARTY MARGOLIS, Director, 345 Quarry Road, Wellsville, Pennsylvania 17365
Managing Director, Public Financial Management, Inc., (the Funds Investment
Advisor) 1987 - present; Partner, Financial Management Services, Inc., 1978 -
1987. Mr. Margolis is 51 years old.
GILES DODD, Director, 921 Lindsley Drive, Virginia Beach, Virginia 23454
Finance Assistant to City Manager, City of Greenville, South Carolina, 1995 -
1996; Finance Director, City of Greenville, South Carolina, 1994 - 1995;
Municipal Consultant, 1991 - 1993; Director of Finance, City of Virginia
Beach, Virginia 1963 - 1993. Member International City Management
Association; Virginia Local Government Management Association, Government
Finance Officers Association; Past President Virginia Government Finance
Officers Association. Mr. Dodd is ___ years old.
ARTHUR E. ANDERSON, II, Secretary, One James Center, 901 East Cary Street,
Richmond, VA 23219-4030
For more than the last five years, Mr. Anderson has been a partner of the
law firm of McGuire Woods Battle & Boothe. Mr. Anderson is 37 years old.
The Fund does not pay fees to Directors who are "interested persons" or
to any of the Fund's officers. Directors who are not "interested persons" of
the Fund receive from the Fund an annual retainer of $1,000 plus $250 per
meeting attended. For the fiscal year ended March 31, 1996, such fees
totaled $4,500. The Fund does not provide any additional compensation to the
Directors. No officer of the Fund received any remuneration as an officer or
employee of the Fund during the Fund's fiscal year ended March 31, 1996, nor
does the Fund intend to pay any remuneration to any officer during the current
fiscal year. McGuire Woods Battle & Boothe, L.L.P., the law firm of Arthur E.
Anderson, II, the Fund's Secretary, received an aggregate of $19,026 in
payment for legal services during the Fund's last fiscal year. Commonwealth
Financial Group, Inc., the Fund's Distributor, of which Mr. Laine, the Fund's
President, is the president and sole shareholder, received an aggregate of
$23,325 of which $11,325 were reimbursements of actual expenses and the
remainder was compensation during the Fund's last fiscal year for serving as
the Fund's Distributor.
Advisory Board
The Board of Directors of the Fund has appointed an Advisory Board to
provide consultation and advice to the Fund from time to time. Members of the
Advisory Board receive no compensation from the Fund. The following
individuals were serving on the Advisory Board as of June 30, 1996.
ROGER W. MITCHELL, JR., 15269 Reva Road, Reva, Virginia 22735
Treasurer, Town of Culpepper, Virginia, 1991 - present;
Controller/Administrator, Sivaco Fastening Systems, Inc., 1989 - 1992;
Accountant, Ford New Holland, Inc., 1987 - 1989; Head Internal Auditor, Omni
Services, Inc. 1984 - 1987; Accountant, Young, Nicholas & Mills, 1982 - 1984;
Member of the Virginia Treasurers Association. Mr. Mitchell is _______years
old.
J. JEFFREY LUNSFORD, 240 Tanglewood Drive, Christiansburg, Virginia 24703.
Assistant County Administrator, Montgomery County, Virginia, 1994-
present; Director of Fiscal Management, Montgomery County, Virginia, 1985 -
1994; Senior Budget Analyst, Virginia Department of Taxation, 1984 - 1985;
Manager - Office of Management and Budget, Henrico County, Virginia, 1982 -
1984; Budget Analyst, Henrico County, Virginia, 1979 - 1982; Member of
Government Finance Officers Association, past President Virginia Government
Finance Officers Association. Mr. Lunsford is _______years old.
DOUGLAS. W. BROWN, 207 Grainville Drive, Newport News, Virginia 23606
Treasurer, Newport News, Virginia, 1985 - present; Former Treasurer of
City of Newport News Office of Human Affairs; Former Treasurer of City of
Newport News Retirement Fund. Member of the Virginia Treasurers Association.
Mr. Brown is _____ years old.
JAMES D. GRISSO, 1103 Overland Road SW, Roanoke, Virginia 24015
Director of Finance, City of Roanoke, Virginia, 1993 - present; Deputy
Director of Finance, City of Roanoke, Virginia, 1977 - 1993; Administrator of
Accounting Services, City of Roanoke, Virginia, 1976 - 1977; Assistant
Municipal Auditor, City of Roanoke, 1974 - 1976; Member of the American
Institute of Certified Public Accountants, the Virginia Society of Certified
Public Accountants, the Government Finance Officers Association; President,
Virginia Government Finance Officers Association, 1991 - 1992; Treasurer,
Hotel Roanoke Conference Center Commission. Mr. Grisso is _____ years old.
LARRY W. DAVENPORT, 1944 Ravencroft Lane, Virginia Beach, Virginia 23454
Financial Analyst, City of Virginia Beach, Virginia, 1977-present; Cash
Management Analyst, City of Norfolk, 1973-1977; First Virginia Bank, 1972-
1977; United States Army, 1969-1971. Mr. Davenport is ____ years old.
CHRISTOPHER E. MARTINO, 1 County Complex Court, Prince William, Virginia 22192
Director of Finance, Prince William County, Virginia, February 1996 - present;
Controller, City of Rye, New York, 1988 - 1996; Deputy Commissioner of
Finance, City of White Plains, New York, 1984 - 1988; Senior Auditor, Ernst &
Whinney, 1981 - 1984; Certified Public Accountant, Member of the Government
Finance Officers Association. Mr. Martino is _____ years old.
DENNIS W. KERNS, 11800 Marquis Terrace, Richmond, Virginia 23233
Director of Finance, County of Henrico, Virginia, 1992 - present; Director,
Office of Management and Budget, County of Henrico, Virginia, 1983 - 1992;
Deputy Director of Finance, County of Henrico, Virginia 1982 - 1983; Member
of the Government Finance Officers Association; Past President of the Virginia
Government Finance Officers Association.
PRINCIPAL HOLDERS OF SECURITIES
TO BE SUPPLIED BY AMENDMENT
Additional Information as to PFM and the Advisory Agreement
In addition to the provisions of the Advisory Agreement between the Fund
and PFM described in the Prospectus, the Advisory Agreement contains the
provisions described below.
The Advisory Agreement, which first became effective on November 1, 1995,
provides that, in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, PFM is not
liable for any error of judgment, mistake of law or loss in connection with
PFM's performance of the Advisory Agreement and permits PFM to act as an
investment adviser for any other organization, firm, corporation or person.
The Advisory Agreement, which first became effective on November 30,
1995, was approved by the Board of Directors, including a majority of those
Directors who are not parties to the Advisory Agreement or "interested
persons" as defined in the Investment Company Act of 1940 ("Independent
Directors"), at a meeting of the Board of Directors held on October 26,
1995, and was approved by the holders of a majority of the outstanding
voting securities of the Fund at a meeting held on November 21, 1995. The
Advisory Agreement will remain in effect for two years from its effective
date, unless earlier terminated. Thereafter, it will continue in effect from
year to year if approved annually (i) by the Directors or by a majority of the
shares outstanding and entitled to vote and (ii) by a majority of the
Independent Directors. The Advisory Agreement will terminate automatically in
the event of its assignment (as defined in the Investment Company Act of 1940)
and may be terminated at any time without penalty by PFM upon 60 days'
written notice to the Fund. The Advisory Agreement may be terminated by the
Fund at any time without penalty, provided that such termination by the Fund
shall be directed or approved by the vote of a majority of its Directors or by
the holders of a majority of its shares at the time outstanding and entitled
to vote.
For the fiscal year ended March 31, 1994, fees were payable to Jefferson
National Bank, the Fund's former investment advisor, in the amount of $83,018.
Those fees were based upon compensation at an annual rate of .25% of 1% of the
first $500 million of average daily net assets.
For the fiscal years ended March 31, 1995 fees were payable to PFM in the
amount of $154,043 of which $111,860 were waived. Fees for fiscal years ended
March 31, 1996 and 1995 were payable at an annual rate of .12% of 1% of the
$200 million of average daily net assets. For the fiscal year ended March 31,
1996, fees were payable to PFM in the amount of $141,858 of which $95,518
were waived.
Additional Information as to the Administration Agreement.
In addition to the provisions of the Administration Agreement (the
"Administration Agreement") between PFM and the Fund described in the
Prospectus, the Administration Agreement contains the provisions described
below.
As part of its duties under the Administration Agreement, PFM (i)
maintains the Fund's books and records (other than financial books and
records); oversees its insurance relationships; prepares all required tax
returns, proxy statements, reports to its shareholders and Directors, and
reports to and other filings with the Securities and Exchange Commission and
any other governmental agency; (ii) prepares, on the Fund's behalf, such
applications and reports as may be necessary to register or maintain the
Fund's registration and/or registration of its shares under the securities or
"Blue Sky" laws of the Commonwealth of Virginia and other states where shares
may be sold; (iii) responds to all inquiries or other communications of
shareholders and broker-dealers, if any; and (iv) oversees all relationships
between the Fund and its Custodian and accountants, including the negotiation
of agreements in relation thereto and the supervision of the performance of
such agreements and oversees all administrative matters which are necessary or
desirable in connection with the issue or redemption of shares in the Fund.
The Administration Agreement was last approved by the Fund's Board on
October 26, 1995. For its services under the Administrative Agreement, PFM is
entitled to receive an annual fee of .05 of 1% of average daily net assets of
the Fund. The Administration Agreement will remain in effect for a two year
period unless earlier terminated. Thereafter, it will continue in effect from
year to year if approved annually by the Directors, including a majority of
the Independent Directors. The Administration Agreement may be terminated at
any time without penalty by PFM upon 60 days' written notice to the Fund. It
may be terminated by the Fund at any time without penalty upon 60 days'
written notice to PFM, provided that such termination by the Fund shall be
directed or approved by the vote of a majority of its Directors, including a
majority of the Independent Directors.
For the fiscal year ended March 31, 1994 fees were earned by J.C.
Thompson and Associates, Inc., the Fund's prior administrator, in the amount
of $83,018. For the fiscal year ended March 31, 1995 and March 31, 1996 fees
of $64,185 and $59,108 respectively, were payable to PFM; however, PFM
voluntarily waived all administration fees.
Fund Expenses
All expenses not borne by PFM under the Advisory Agreement or the
Administration Agreement are paid by the Fund. Examples of such expenses
include the cost of preparing, printing and distributing its prospectuses and
reports to shareholders; legal and audit expenses, costs and expenses of any
custodian, shareholder servicing agent or bookkeeping (accounting) agent;
share issuance and redemption costs; certain printing costs, registration
costs and expenses of the Fund and its shares under federal and state
securities laws, interest, taxes and non-recurring expenses including
litigation. Since PFM keeps the Fund's financial records, PFM computes the
Net Asset Value per share at PFM's expense. The expenses under the Fund's
Distribution Plan are paid by the Fund. See "Distribution Plan."
DISTRIBUTION PLAN
The Fund has adopted an Amended and Restated Distribution Plan (the
"Distribution Plan") under Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, which permits the Fund to bear certain expenses in
connection with the distribution of its shares, provided the requirements of
the Rule are met.
Under the Distribution Plan, the Fund is authorized to pay (i) all fees
and expenses relating to the qualification of the Fund and/or its shares under
the securities or state "Blue Sky" law of Virginia and any other states in
which the Fund may sell shares; (ii) all fees under the Securities Act of 1933
and the Investment Company Act of 1940, including fees in connection with any
application for exemption relating to or directed toward the sale of the
Fund's shares; (iii) all fees and assessments of the Investment Company
Institute or any successor organization, irrespective of whether some of its
activities are designed to provide sales assistance; and (iv) all fees and
costs incurred in conjunction with any activity reasonably determined by the
Fund's Board of Directors to be primarily intended and reasonably calculated
to result in the sale of shares of the Fund.
The Distribution Plan further authorizes the Fund to reimburse the
Distributor for expenses incurred by the Distributor in connection with the
sale, promotion and distribution of Fund shares, in an amount not to exceed
.25% of the Fund's average daily net asset value in any year. The
Distribution Plan does not authorize reimbursement of expenses incurred by the
Distributor or others assisting in the distribution of Fund shares in one
fiscal year from amounts available to the Fund under such plan in subsequent
fiscal years. Therefore, if expenses of distribution incurred by the
Distributor and others in any fiscal year exceed .25% of the average daily net
asset value of the Fund for such fiscal year, the amount of such excess
expenses will not be reimbursed by the Fund. Further, payments or
reimbursement made under the Distribution Plan may be made only as determined
from time to time by the Board of Directors. Expenses for which the
Distributor may seek reimbursement include advertising and direct mail
expenses, costs of printing and mailing prospectuses and sales literature to
prospective Investors, payments to third parties who sell shares of the Fund
and compensation of brokers, dealers and other intermediaries, general
administrative overhead of the Fund's distributor (including payment of
compensation to sales personnel involved in the sale of Fund shares),
administrative support allocable to efforts to sell Fund shares, sales
promotion expenses and shareholder servicing expenses (trail commissions) and
any other costs of effectuating the Distribution Plan. The Distribution Plan
also authorizes the Fund to make direct payments to registered broker-dealers
and other persons, including banks, who assist the Fund in distributing or
promoting the sale of Fund shares or who enter into shareholder processing and
service agreements pursuant to which services directly resulting in the sale
of Fund shares are provided.
For the fiscal year ended March 31, 1996, 1995 and 1994, the Fund paid
$23,325, $20,325, and $6,639, respectively, pursuant to the Distribution Plan.
All of these amounts were paid in accordance with the Distribution Agreement,
described below, to Commonwealth Financial Group, Inc., of which Jeffrey A.
Laine, the Fund's President, is the President and sole shareholder. Carter,
Kaplan and Company received a fee of $3,000 for serving as the Fund's
Distributor from March 15, 1994 through June 12, 1994. This amount was paid
in full prior to the end of the fiscal year ended March 31, 1994.
The Distribution Plan has been approved: (i) by a vote of the Board of
Directors of the Fund and of those Directors who are not "interested persons"
of the Fund as defined in the Investment Company Act of 1940 and have no
direct or indirect financial interest in the operation of the Distribution
Plan or in any agreements related to the Distribution Plan (the "Qualified
Directors"), cast in person at a meeting held on August 23, 1990 called for
the purpose of voting on the Distribution Plan; and (ii) by a vote of holders
of at least a majority of the outstanding shares of the Fund at a meeting held
on November 29, 1990.
Unless terminated as indicated below, the Distribution Plan shall
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund and of those Directors who are not "interested persons" of the fund
as defined in the Investment Company Act of 1940 and have no direct or
indirect financial interest in the operation of the Distribution Plan or in
any agreements related to the Distribution Plan ("Qualified Directors") cast
in person at a meeting held for the purpose of voting on the Distribution
Plan. The Distribution Plan may be terminated at any time by a vote of a
majority of the Qualified Directors or by the vote of the holders of a
majority of the outstanding shares of the Fund. The Distribution Plan may not
be amended to increase materially the amount of payments to be made without
shareholder approval and all amendments must be by the Board of Directors
including the Qualified Directors. The Distribution Agreement will terminate
automatically in the event of its assignment (as defined in the Investment
Company Act of 1940) and may be terminated by the Fund on 14 days' written
notice to the Distributor and by the Distributor on 60 days' written notice to
the Fund
As stated in the Prospectus, shares of the Fund are offered on a
continuous basis through Commonwealth Financial Group, Inc., the Fund's
Distributor, pursuant to a Distribution Agreement effective June 13, 1994.
The Distribution Agreement was last approved for continuance by the Fund's
Directors on April 27, 1996, and by the shareholders of the Fund on July 6,
1994. The Distribution Agreement provides that the Fund will pay (or will
enter into arrangements providing that persons other than the Fund will pay)
for all expenses of the offering of its shares, including but not limited to,
the following: (i) the registration of the Fund and/or its shares under
federal and state securities laws, (ii) the preparation, printing and
distribution of the Fund's prospectuses, statements of additional information,
proxy statements, notices and reports and actions required by federal and
state securities laws, (iii) the preparation, printing and distribution of
advertising and sales literature for use in the offering of the Fund's shares
and the printing and distribution of reports to shareholders used as sales
literature, and (iv) the issuance of the Fund's shares (including any stock
issue and transfer tax).
As compensation for its activities under the Distribution Agreement, in
addition to any expense reimbursement received by the Distributor pursuant to
the Distribution Plan, the Distributor receives a monthly asset-based fee at
an annual rate calculated in accordance with the following schedule:
Monthly Average of Daily Asset Based Fee
Net Assets (Annual Rate)
under $100mm $12,000
over $100mm - $200mm $18,000
over $200mm - $300mm $24,000
over $300mm - $400mm $30,000
over $400mm - $500mm $36,000
over $500mm - $600mm $42,000
over $600mm - $700mm $48,000
Under the Distribution Agreement, the Distributor pays from its own
resources (or will enter into arrangements providing that persons other than
the Distributor or the Fund shall pay) or promptly reimburse the Fund for all
other expenses in connection with its offering for sale and the sale of the
Fund's shares which are not allocated to the Fund under the Distribution
Agreement.
YIELD INFORMATION
There are two methods by which the Fund's yield for a specified period of
time is calculated. The first method, which results in an amount referred to
as the "current yield," assumes an account containing exactly one share at the
beginning of the period. The Net Asset Value of this share will be $1.00
except under extraordinary circumstances. The net change in the value of the
account during the period is then determined by subtracting this beginning
value from the value of the account at the end of the period. However,
capital changes, if any, are excluded from the calculation (i.e., realized
gains and losses from the sale or redemption of securities or instruments and
unrealized appreciation and depreciation). So that the change will not
reflect the capital changes to be excluded, the dividends used in the yield
computation may not be the same as the dividends actually declared, as the
capital changes in question may affect the dividends declared. See "Dividend
and Tax Information" in the Prospectus. Instead, the dividends used in the
yield calculation will be those which would have been declared if the capital
changes had not affected the dividends.
This net change in the account value is then divided by the value of the
account at the beginning of the period (i.e., normally $1.00, as discussed
above), and the resulting figure (referred to as the "base period return") is
then annualized by multiplying it by 365 and dividing it by the number of days
in the period. The result is the "current yield". Normally, a seven day
period will be used in determining yields (both the current yield and the
effective yield discussed below) in published or mailed communications.
The second method results in an amount referred to as the compounded
"effective yield". This represents an annualization of the current yield
with dividends reinvested daily. This effective yield for a seven day
period would be computed by compounding the unannualized base period return by
adding one to the base period return, raising the sum to a power equal to 365
divided by 7 and subtracting 1 from the result, the computation to be made to
the nearest 1/100 of 1 percent.
Since the calculations of both kinds of yields do not take into
consideration any realized or unrealized gains or losses on the Fund's
portfolio securities or instruments, which may have an effect on dividends,
the dividends declared during a period may not be the same on an annualized
basis as either kind of calculated yield for that period.
The Fund's current yield for the seven days ended March 31, 1996 was
5.23% and its effective yield for that period was 5.36%.
The Fund's performance, or the performance of securities in which it
invests, may be compared to:
* IBC/Donoghue's Money Fund Average, which are average yields of
various types of money market funds that include the effect of
compounding distributions and are reported in IBC/Donoghue's Money
Fund Report; the average yield reported by the Bank Rate Monitor
National Index for money market deposits accounts offered by the 100
leading banks and thrifts institutions in the ten largest standard
metropolitan statistical areas;
* other mutual funds, especially to those with similar investment
objectives. These comparisons may be based on data published by
IBC/Donoghue's Money Fund Report, The Wall Street Journal, Barron's,
Lipper Analytical Services, Inc., CDA Investment Technology, Inc. or
Bloomberg Financial Markets, a financial information network;
* yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by
Telerate, a financial information network, by Bloomberg Financial
Markets or by broker-dealers;
* and to other fixed-income investments such as Certificates of Deposit
(CDs).
Yield information may be useful to Investors in reviewing the Fund's
performance. However, a number of factors should be taken into account before
using yield information as a basis for comparison with alternative
investments. The Fund's yield is not guaranteed. It may fluctuate slightly
on a daily basis. The yield for any given past period is not an indication or
representation by the Fund of future yields or rates of return on its shares
and, therefore, it cannot be compared to yields on direct investment
alternatives which often provide a guaranteed fixed yield for a stated period
of time. However, some of such alternative investments may have substantial
penalties on their yield in the case of early withdrawal, may have different
yields for different balance levels, may have minimum balance requirements,
which may earn less than the balance above the minimum, in order to earn the
stated yield, or may require relatively large single investments to get
comparable yields at all, none of which is the case with the Fund. All of the
Fund's shares earn dividends at the same rate.
AMORTIZED COST VALUATION
As noted in the Prospectus, the Fund values its portfolio on the basis of
amortized cost. While the amortized cost method provides certainty in
valuation, there may be periods during which value, as determined by amortized
cost, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
the Fund's shares may tend to be lower than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates for market prices for all of its portfolio instruments
and changing its dividends based on these changing prices. The converse would
be true in a period of rising interest rates. The Board of Directors has
established procedures (the "Procedures") designed to monitor the difference,
if any between the Fund's Net Asset Value per share determined in accordance
with the amortized cost method of valuation and the value that would be
obtained if the Fund's portfolio were "marked to market" i.e. price based on
available market quotations. "Available market quotations" may include actual
market quotations (valued at the mean between the bid and asked prices),
estimates of market value reflecting current market conditions based on
quotations or estimates of market value for individual portfolio instruments,
or values obtained from yield data relating to a directly comparable class of
securities published by reputable sources.
Under the Procedures, if the extent of any deviation between the mark to
market net asset value per share and the net asset value per share based on
amortized cost exceeds one-half of 1%, the Board must promptly consider what
action, if any, will be initiated. When the Board believes that the extent of
any deviation may result in material dilution or other unfair results to
Investors or existing shareholders, it is required to take such action as it
deems appropriate to eliminate or reduce to the extent reasonably practicable
such dilution or other unfair results. Such actions could include the sale of
portfolio securities prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity, withholding dividends or payment of
distributions from capital or capital gains, redemptions of shares in kind, or
establishing a net asset value per share using available market quotations.
GENERAL INFORMATION
Further Information About Redemptions
As is stated in the Prospectus, if the Directors determine that it would
be detrimental to the interests of the remaining Investors to redeem shares
wholly or partly in cash, the Fund may pay the redemption price in whole or in
part by the distribution in kind of investments from the portfolio of the
Fund, in lieu of cash and in conformity with the applicable rules of the
Securities and Exchange Commission. The Fund, however, has elected to be
governed by Rule 18f-1 under the Investment Company Act of 1940, pursuant to
which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the Net Asset Value of the Fund during any 90 day period
for any one Investor. Should redemptions by an Investor exceed such
limitation, the Fund will have the option of redeeming the excess in cash or
in kind. If shares are redeemed in kind, the redeeming Investors might incur
brokerage costs in converting the assets into cash. The method of valuing
investments used to make redemptions in kind will be the same as the method of
valuing portfolio investments under "Net Asset Value" in the Prospectus and
such valuation will be made as of the same time the redemption price is
determined. It should be noted that the management of the Fund considers the
prospect highly remote for redeeming shares in the Fund using the "in-kind"
provision.
The right of redemption may be suspended or the date of payment may be
postponed: (i) during periods when the New York Stock Exchange is closed for
other than weekends and holidays or when trading on such Exchange is
restricted as determined by the Securities and Exchange Commission by rule or
regulation; (ii) during periods in which an emergency, as determined by the
Securities and Exchange Commission, exists making disposal of portfolio
securities or instruments or determination of the net assets of the Fund not
reasonably practical; or (iii) for such other periods as the Securities and
Exchange Commission may permit. Redemption by any method (including but not
limited to redemption by redemption check) of shares which were recently
purchased by check may be delayed until the check given in purchase has
cleared, which may be up to fifteen days.
Financial Statements
The following financial statements of the Fund, together with the report
of Price Waterhouse LLP, independent accountants, are included in the Annual
Report to Shareholders which accompanies this Additional Statement and are
incorporated herein by reference:
Statement of Net Assets as of March 31, 1996
Statement of Operations for the year ended March 31, 1996
Statements of Changes in Net Assets for each of the years ended March 31,
1995 and March 31, 1996
Financial Highlights
Notes to Financial Statements
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Included in Part A:
Financial Highlights
Included in Part B by incorporation by reference to the Annual
Report to Shareholders:
(i) Report of Independent Accountants
(ii) Statement of Net Assets as of March 31, 1996
(iii) Statement of Operations for the year ended March 31, 1996
(iv) Statements of Changes in Net Assets for each of the years
ended March 31, 1995 and March 31, 1996
(v) Financial Highlights
(vi) Notes to Financial Statements
Included in Part C:
None.
(b) Exhibits.
* (1)(a) Copy of Articles of Incorporation is incorporated herein by
reference to Exhibit (1) of Registrant's Registration Statement
filed on December 11, 1986.
* (1)(b) Copy of Amendment to Articles of Incorporation effective May
31, 1989 is incorporated by reference to Exhibit (1)(b) of
Registrant's Post-Effective Amendment No. 3 filed on July 24,
1989.
* (2) Copy of Amended and Restated Bylaws of the Registrant.
(3) Not applicable.
(4) Specimen copy of share certificate for shares of the Registrant
is incorporated by reference to Exhibit (4) of Registrant's
Pre-Effective Amendment No. 2 filed on April 22, 1987.
* (5)(a) Investment Advisory Agreement between the Registrant
and Public Financial Management, Inc. dated November 30, 1995.
* (5)(b) Administration Agreement between the Registrant and
Public Financial Management, Inc. dated November 30, 1995.
(6) Form of Distribution Agreement between the Registrant and
Commonwealth Financial Group, Inc. dated June 13, 1994 is
incorporated by reference to Exhibit (6) of Registrant's Post-
Effective Amendment No. 10, filed on July 26, 1994.
(7) Not Applicable.
(8) Form of Custody Agreement between the Registrant and Central
Fidelity National Bank dated March 15, 1994 is incorporated by
reference to Exhibit (8) of Registrant's Post-Effective
Amendment No. 9, filed on May 27, 1994.
(9) Form of Transfer Agency Agreement between the Registrant and
Public Financial Management, Inc. dated March 15, 1994 is
incorporated by reference to Exhibit (9) of Registrant's Post-
Effective Amendment No. 9, filed on May 27, 1994.
(10) Opinion of Counsel as to legality of shares and Consent of
Counsel is incorporated by reference to Exhibit (10) of
Registrant's Pre-Effective Amendment No. 2 filed on April 22,
1987.
* (11) Consent of Independent Accountants
(12) Not Applicable.
(13) Agreement relating to initial capitalization of the Registrant
is incorporated by reference to Exhibit (13) of Registrant's
Pre-Effective Amendment No. 2 filed on April 22, 1987.
(14) Not Applicable.
(15) Amended and Restated Distribution Plan is incorporated by
reference to Exhibit (15) of Registrant's Post-Effective
Amendment No. 5 filed on November 29, 1990.
(16) Schedule for Computation and Performance Quotation is
incorporated by reference to Exhibit (16) of Registrant's Post-
Effective Amendment No. 4 filed on July 30, 1990.
*Filed herewith
Item 25. Persons Controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
TO BE SUPPLIED BY AMENDMENT
Item 27. Indemnification.
TO BE SUPPLIED BY AMENDMENT
Item 28. Business and other Connections of Investment Adviser.
(a) Public Financial Management, Inc. ("PFM") is the investment
adviser of the Registrant. PFM and its affiliates and
predecessor organization have been in the business of managing
the investments of government entities and other accounts
since 1980.
Item 29. Principal Underwriters.
(a) Commonwealth Financial Group, Inc. is the Distributor for
the Registrant's securities. Commonwealth Financial Group,
Inc. does not serve as principal underwriter, depositor or
investment advisor for any other investment company.
(b) The table below sets forth certain information as to the
Distributor's directors and officers:
Positions and
Name and Principal Positions and Offices Offices with
Business Address with the Distributor the Registrant
Jeffrey A. Laine President, Director and President, Treasurer
38 Cohasset Lane Sole Shareholder and Director
Cherry Hill, NJ 08003
(c) Carter, Kaplan and Company earned a total fee of $3,000 for serving
as the Fund's Distributor from March 15, 1994 through June 12, 1994. This
amount was paid in full prior to the end of the fiscal year ended March 31,
1994.
Item 30. Location of Accounts and Books.
(a) Public Financial Management, Inc. (records relating to its
functions as investment adviser, administrator and transfer
agent).
(b) McGuire Woods Battle & Boothe, L.L.P. (Registrant's Articles
of Incorporation, Bylaws and corporate records).
(c) Commonwealth Financial Group, Inc. (records relating to its
functions as distributor).
(d) Central Fidelity National Bank (records relating to its
function as custodian).
Item 31. Management Services.
Other than as set forth under the captions "Management" in the Prospectus
and "Additional Information as to Management Arrangements" in the Additional
Statement constituting Part A and Part B, respectively, of this Registration
Statement, Registrant is not a party to any management-related service
contract.
Item 32. Undertakings.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Richmond, and the State of Virginia the 30th
day of May, 1996.
COMMONWEALTH CASH RESERVE FUND, INC.
(Registrant)
By /s/ Jeffrey Laine
Jeffrey Laine, President
(Principal Executive officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
/s/ Jeffrey Laine Director and President May 30, 1996
Jeffrey Laine (Principal Financial
Officer)
Charles B. Whitehurst, Sr.
/s/ Robert J. Fagg, Jr. Director May 30, 1996
Robert J. Fagg, Jr.
1933 Act Registration No. 33-10754
1940 Act Registration No. 811-4933
_____________________________________________________________________
_______________________ ____________________________________
Securities and Exchange Commission
Washington, D.C. 20549
______________________________
EXHIBITS
to
Post-Effective Amendment No.12
on
FORM N-1A
Registration Statement
Under
The Investment Company Act of 1940
and
The Securities Act of 1933
______________________________
COMMONWEALTH CASH RESERVE FUND, INC.
_____________________________________________________________________
_______________________ ____________________________________
COMMONWEALTH CASH RESERVE FUND, INC.
Index to Exhibits to Post-Effective Amendment No. 12
to Form N-1A Registration Statement
Ref. Description of Exhibit
1) Articles of Incorporation
2) Amendment to Articles of Incorporation
3) Certificate of Amendment
4) Amended and Restated Bylaws
5) Advisory Agreement
6) Administration Agreement
7) Consent of Independent Accountants
ARTICLES OF INCORPORATION
OF
VIRGINIA LOCAL GOVERNMENT INVESTMENT FUND, INC.
We hereby associate to form a corporation under Chapter 9 of Title 13.1
of the Code of Virginia (1950).
ARTICLE I
The name of the Corporation is Virginia Local Government Investment
Fund, Inc.
ARTICLE II
The Corporation is authorized to issue 500,000,000 shares.
ARTICLE III
The Corporation's initial registered office is 6722 Patterson Avenue,
Richmond, Virginia, which is in Henrico County, Virginia. The Corporation's
initial registered agent is E. Olen Culler who is a member of the Virginia
Bar, and whose business address is the same as the registered office of the
Corporation.
ARTICLE IV
The initial director of the Corporation, who has consented to serve as
Director, and his address is:
John C. Thompson 15 Larsen Park Drive
Medford, NJ 08055
ARTICLE V
No holder of shares of the capital stock of the Corporation shall, as
such holder, have any right to purchase and subscribe for any shares of the
capital stock of the Corporation which the Corporation may issue or sell
(whether consisting of shares of capital stock authorized by these Articles of
Incorporation, or shares of capital stock of the Corporation acquired by it
after the issue thereof, or other shares) other than any right which the Board
of Directors of the Corporation, in its discretion, may determine.
ARTICLE VI
In addition to those powers set forth in the Code of Virginia in Section
13.1-627 as they may be hereafter changed, the Corporation shall have to power
to issue, sell, purchase, redeem, acquire, hold, resell, reissue, retire or
cancel (all without the vote or consent of the shareholders of the
Corporation) shares of its capital stock in any manner and to the extent now
or hereafter permitted by the laws of the Commonwealth of Virginia and these
Articles of Incorporation and authorized by its Board of Directors.
ARTICLE VII
The Corporation shall, subject to legal requirements and limitations,
redeem any of its issued and outstanding shares of stock at the option of any
shareholder upon the terms and conditions determined from time to time by the
Board of Directors for a consideration not exceeding the proportionate
interest of such shares of stock in the assets of the Corporation or in the
cash equivalent of the proportionate interest of such shares of stock in the
assets of the Corporation.
ARTICLE VIII
Except to the extent necessary to satisfy any requirements of the
Investment Company Act of 1940, any action to be taken or authorized, which
would otherwise require approval by the affirmative vote of more than a
majority of the outstanding shares of the capital stock of the Corporation,
that action shall be valid if taken or authorized by the affirmative vote of
the holders of a majority of the total number of shares entitled to thereon.
ARTICLE IX
No provisions of these Articles shall be effective to require a waiver
of compliance with any provision of the Securities Act of 1933 or the
Investment Company Act of 1940 or any valid rule, regulation or order of the
Securities and Exchange Commission thereunder.
ARTICLE X
The Board of Directors from time to time may authorize the Corporation
to enter into one or more custodial agreements or arrangements whereby assets
of the Corporation are deposited in the custody of one or more banks, trust
companies or other persons, firms or corporations qualified to perform such
services.
ARTICLE XI
The Board of Directors from time to time may authorize the Corporation
to enter into one or more agreements or arrangements whereby various services
including, without limitation, investment adviser, underwriter, broker,
dealer, depository, registrar, transfer agent, and divided disbursing agent
are performed by other persons, firms or corporations qualified to perform
such services.
ARTICLE XII
Except as may be necessary to satisfy the requirements of the Investment
Company Act of 1940, the Corporation's authorized shares of stock shall be
sold, issued, transferred, held, and titled solely to Virginia cities,
counties, towns, and other Virginia public bodies, public officers, municipal
corporations and political subdivisions.
Date: December 2, 1986
E. Olen Culler
ARTICLES OF AMENDMENT
VIRGINIA LOCAL GOVERNMENT INVESTMENT FUND, INC.
Pursuant to Section 13.1-710 of the Code of Virginia, the corporation hereby
adopts the following amendment to the Articles of Incorporation:
1. The name of this corporation is Virginia Local Government
Investment Fund, Inc.
2. The text of the amendment is:
a) The name of this corporation is changed to COMMONWEALTH CASH
RESERVE FUND, INC.
b) Article XII of the Articles of Incorporation be amended so
as to read in its entirety as follows:
Except as required by the Investment Company Act of 1940, the
Corporation's authorized shares of stock shall be sold, issued,
transferred, held and titled solely to Virginia cities, counties,
towns, and other Virginia public bodies, public officers, municipal
corporations, and political subdivisions and to such other persons or
entities as the Board of Directors may, from time to time approve.
3. The amendment was Proposed by the Board of Directors and submitted
to the shareholders pursuant to Section 13.7-710 of the Code of Virginia.
4. The total number of outstanding shares and the total number of
shares entitled to vote were 35,722,500.92.
5. The total number of votes on the above amendments were as follows:
(a) For: 31,626,573.64
Against: -0-
Vote Withheld: -0-
(b) For: 29,876,986.39
Against: 1,749,587.25
Vote Withheld -0-
4. The amendment was adopted April 21, 1989.
VIRGINIA LOCAL GOVERNMENT
INVESTMENT FUND, INC.
BY:
President
Exhibit 1 (a)
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
May 31, 1989
The State Corporation Commission has found the accompanying articles submitted
on behalf of
COMMONWEALTH CASH RESERVE FUND. INC,
to comply with the requirements of law, and confirms payment of all related
fees.
Therefore, it is ORDERED that this
CERTIFICATE OF AMENDMENT
be issued and admitted to record with the articles of amendment in the Office
of the Clerk of the Commission, effective May 31, 1989.
The corporation is granted the authority conferred on it by law in accordance
with the articles, subject to the conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By
Commissioner
A TRUE COPY
TESTE:
George W. Bryant, Jr.
Clerk of the Commission
AMENACPT
CIS20436
89-05-23-0150
COMMONWEALTH CASH RESERVE FUND, INC.
AMENDED AND RESTATED BYLAWS
(as of July 27, 1995)
Article 1
Shareholders
Place of Meetings. Meetings of Shareholders of the Commonwealth
Cash Reserve Fund, Inc. (the "Fund") shall be held at such place within or
without Virginia as the Board of Directors may determine or, in the absence of
such a determination, at the place specified in the notice of meeting.
Annual Meetings. The annual meeting of Shareholders shall be held
at any time after the end of the Fund's fiscal year at such time and on such
day as may be specified by the Board of Directors for the purpose of electing
Directors and for the transaction of any other business that may properly come
before the meeting; provided, however, that no annual meeting is required in
any year in which the election of directors is not required to be held under
the federal Investment Company Act of 1940, as amended (the "Investment
Company Act").
Special Meetings. Special meetings of Shareholders to be held for
any purpose may be called by the President or the Board of Directors and shall
be called by the Secretary upon receipt of (i) a written dated request stating
the purpose of the proposed meeting signed by holders of record of the
outstanding shares of the Fund having at least 20% of the votes which could be
cast at any such meeting and (ii) the payment by such Shareholders of the
reasonably estimated cost of preparing and mailing notice of such meeting. No
special meeting need be called upon the request of the holders of shares
entitled to cast less than a majority of all votes entitled to be cast at such
meeting to consider any matter which is substantially the same as a matter
voted upon at any special meeting of Shareholders held during the preceding
twelve-month period. No business shall be transacted at a special meeting
except matters coming within the purposes stated in the notice.
Record Dates. The Board of Directors shall fix in advance a
record date for the purpose of determining Shareholders entitled to notice of,
or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order to
make a determination of Shareholders for any other proper purpose. Such date
in any case shall be not more than 70 days and not less than 10 days prior to
the date on which the particular action requiring such determination of
Shareholders is to be taken.
Notice of Meeting. At least 10 and not more than 60 days before
each meeting of Shareholders, the Secretary shall give to each Shareholder
entitled to vote at such meeting (and to any nonvoting shareholder as required
by law), written notice of the time, date, place and, in the case of a special
meeting, the purpose or purposes of the meeting; provided that notice of a
Shareholder's meeting to act on (i) an amendment to the Articles of
Incorporation; (ii) a plan of merger or share exchange; (iii) the dissolution
of the Fund; or (iv) a proposed sale, lease, exchange or other disposition of
all or substantially all of the assets of the Fund other than in the ordinary
course of business shall be given not less than 25 nor more than 60 days
before the meeting date. Such notice shall be given either personally or by
mail, telephone, telecopy or similar communication, or private courier. If
mailed, such notice shall be deemed effective when deposited in first class
United States mail, postage prepaid, addressed to the Shareholder at his
address as it appears on the share transfer books of the Fund.
Quorum and Voting. Except as otherwise provided by law or the
Articles of Incorporation of the Fund, at any meeting of Shareholders, the
presence in person or by proxy of the holders of record of outstanding shares
of the Fund entitled to cast one-third of the votes thereat, without
distinction as to class, shall constitute a quorum at that meeting. Except as
otherwise required by law, the Articles of Incorporation or these bylaws, a
majority of the votes cast at a meeting of Shareholders at which a quorum is
present shall be sufficient to take or authorize action upon any matter which
may properly come before the meeting.
Conduct of Meetings. Each meeting of Shareholders shall be
presided over by the President, or if he is not present, by any Vice
President, or if none of them is present by a presiding officer to be elected
at the meeting. The Secretary shall act as secretary of the meeting, or if he
is not present an Assistant Secretary shall so act. If neither the Secretary
nor an Assistant Secretary is present, the presiding officer of the meeting
shall appoint a secretary. The order of business at all meetings shall be
determined by the presiding officer. The proxies and ballots shall be
received and taken in charge, and all questions relating to the qualifications
of votes, the validity of proxies and the acceptance or rejection of votes
shall be decided by one or more inspectors, who need not be Shareholders,
appointed by the Board of Directors before the meeting, or if no such
appointment shall have been made, the presiding officer of the meeting shall
make the appointment. In the event of failure, refusal or inability of an
inspector previously appointed to serve, the presiding officer may appoint any
person to fill such vacancy.
Directors
Powers. The business and affairs of the Fund shall be managed by
or under the direction of the Board of Directors, which may exercise all
powers of the Fund and do all lawful acts and things that are not by law, the
Articles of Incorporation or these bylaws directed or required to be done by
the Shareholders.
Number and Tenure. The initial number of Directors may be
increased or decreased by a vote of a majority of the Board of Directors from
time to time, provided that this number shall not be less than three nor more
than eleven and provided that no decrease in the number of Directors shall
affect the term of any Director in office. Each Director shall hold office
until a successor is elected and qualified or until his earlier resignation or
removal. Directors need not be residents of the Commonwealth of Virginia. No
more than one director may be affiliated as an officer, employee or elected or
appointed official with any one Virginia city, county, or town (including a
municipal agency or instrumentality thereof) or with any one agency or
instrumentality of the Commonwealth of Virginia; provided that in the event
that an incumbent director changes his affiliation so that the foregoing
provision would be violated, such incumbent director may serve the remainder
of his term.
Vacancies. Subject to Section 2.14, vacancies in the Board of
Directors for any cause, including an increase in the authorized number of
Directors, may be filled by a majority of the Directors then in office;
provided, however, that immediately after the filling of any such vacancy at
least two-thirds of the directors then holding office shall have been elected
to such office by the Shareholders at a meeting or meetings called for that
purpose. In the event that at any time after the first meeting of
Shareholders less than a majority of the directors have been so elected by the
Shareholders, a special meeting of the Shareholders shall be held as promptly
as possible (and in any event within sixty days) for the purpose of electing
directors to fill existing vacancies.
Removal of Directors. At any meeting of Shareholders called for
such purpose, the Shareholders may, by the affirmative vote of a majority of
all shares entitled to vote in the election of directors, remove any Director
from office, either with or without cause, and may, by the vote normally
required to elect Directors, elect a successor to fill any resulting vacancy
for the unexpired term of the Director so removed.
Place of Meetings. Meetings of the Board of Directors, whether
regular or special, may be held at any place within or without Virginia as the
Board of Directors may determine and the presence of any Director at any such
meeting may be established as permitted by law, subject to the provisions of
Section 2.8 (relating to quorum requirements).
Regular Meetings. Regular meetings of the Board of Directors
shall be held at the conclusion of each annual meeting of the Shareholders and
at the same place as such Shareholders' meeting, or at any other times and
places fixed by the Board of Directors from time to time; provided that such
meetings shall be held not less than four times a year, as determined by the
Board. No notice of regular meetings shall be required, except that for the
first regular meeting following the establishment of or a change in the date
or time of such regular meeting, the notice requirement applicable to special
meetings shall apply.
Special Meetings. Special meetings of the Board of Directors may
be called at any time by the President or two or more Directors. Written
notice of the time and place of any special meeting shall be mailed to each
Director at least five days in advance of such meeting or delivered personally
or by telephone at least two days in advance of such meeting. Such notice
need not state the purpose of such meeting.
Quorum. The presence at any meeting of one-third of the total
number of Directors shall constitute a quorum for the transaction of business;
provided that a quorum shall in no case be less than two Directors; and
provided further that at any of the four regularly scheduled annual meetings
required by Section 2.6, no director whose presence is established solely by
telephone shall count for purposes of obtaining a quorum (but once a quorum is
established, such director may participate fully in such meeting for any other
purpose, including maintenance of a quorum for purposes of continuing such
meeting). If at any time during a meeting of the Board of Directors there
shall be less than a quorum present, a majority of those present may adjourn
the meeting until a quorum shall have been obtained. Except as otherwise
provided by law, the Articles of Incorporation or these bylaws, the act of a
majority of the Directors present at any meeting at which there is a quorum
shall be act of the Board of Directors.
Committees. The Board of Directors may, by resolution passed by a
majority of the Board of Directors, designate an executive committee and other
committees composed of two or more Directors, and the members thereof, to the
extent permitted by law, and each committee shall have the powers, authority
and duties specified in the resolution creating the same and permitted by law.
Compensation of Directors. The Board of Directors may authorize
reasonable compensation to Directors for their services as Directors and as
members of committees of the Board of Directors and may authorize the
reimbursement of reasonable expenses incurred by Directors in connection with
rendering those services.
Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board of Directors or such
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the records of the Fund.
Dissent. A Director of the Fund who is present at a meeting of
the Board of Directors at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered
mail to the Secretary of the Corporation within 24 hours after the adjournment
of the meeting. Such right to dissent shall not apply to a Director who voted
in favor of such action or failed to make his dissent known at such meeting.
Waiver of Notice. A Director waives the right to notice of any
meeting of the Board of Directors or any committee thereof if he attends the
meeting or executes, before or after the meeting, a written waiver of the
notice which is filed with the records of the Fund.
Nominations. At any time when the Fund has in effect a plan
pursuant to Rule 12b-1 under the Investment Company Act, if there shall occur
any vacancy on the Board of Directors and if such vacancy is to be filled by a
person who will not be an "interested person" of the Corporation within the
meaning of the Investment Company Act, the person appointed by the Directors
pursuant to Section 2.3 or nominated by the Directors to fill such vacancy
shall be a person selected in the discretion of those Directors who are not
themselves "interested persons".
Advisory Board. The Board shall have the power in its discretion
to appoint one or more members to an "advisory board" within the meaning of
the Investment Company Act who shall serve at the pleasure of the Board. The
members of such board shall not be or have the powers of Directors under the
Articles of Incorporation or these bylaws.
Officers
Election and Removal. As soon as practicable after any meeting of
Shareholders at which Directors are elected, the Board of Directors shall
elect a President, a Secretary and a Treasurer. The Board of Directors may
also in its discretion from time to time elect a Chairman and Vice Chairman of
the Board, one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers, agents and employees. The Chairman and Vice
Chairman of the Board, if any, and the President shall be selected from among
the Directors. Any two or more offices, except those of President and Vice
President, may be held by the same person. The Board of Directors may fill
any vacancy that may occur in any office. All officers shall hold office at
the pleasure of the Board of Directors, and any officer may be removed from
office at any time with or without cause by the vote of a majority of the
Board of Directors.
Power and Duties.
The President shall be the chief executive officer of the
Fund. He shall have all general power to manage the business, affairs and
property of the Fund and shall see that all orders and resolutions of the
Board of Directors are carried out. He shall preside at meetings of the Board
of Directors and the Shareholders, unless unavailable.
The Vice Presidents shall respectively have such powers and
perform such duties as may be assigned to them by the Board of Directors or
the President. In the absence of the President, the Vice Presidents, in the
order determined by the Board of Directors, shall perform the duties and
exercise the powers of the President.
Except as otherwise provided in these bylaws, all deeds,
mortgages, bonds, contracts, and other instruments of transfer, reports and
other instruments may be executed on behalf of the Fund by the President or
any Vice President or by any officer or agent authorized to act in such
matters, whether by law, the Articles of Incorporation, these bylaws, or any
general or special authorization of the Board of Directors.
The Secretary shall keep minutes of all meetings of the
Shareholders and the Board of Directors, shall perform all duties commonly
incident to that office and as provided by law and shall perform such other
duties and have such other powers as the Board of Directors shall from time to
time designate. In his absence, any Assistant Secretary or secretary pro-
tempore shall perform his duties. If the corporate seal is required, it shall
be affixed by the Secretary or any Assistant Secretary. The corporate seal
shall have inscribed thereon the name of the Fund and the word "seal."
The Treasurer shall, subject to the direction of the Board
of Directors and in accordance with any agreements or arrangements made by the
Fund relating to the performance of management, administrative or advisory
services of any custodian, transfer agent, disbursing agent or plan agent,
have the care and custody of the money, funds, securities, valuable papers and
documents of the Fund; keep or cause to be kept accurate books of account of
the Fund's transactions; and exercise all other powers and duties commonly
incident to this office and as provided by law. In his absence, any Assistant
Treasurer shall perform his duties.
Unless otherwise ordered by the Board of Directors, the
President or any Vice President, the Treasurer or any Assistant Treasurer,
shall have full power and authority to attend, and act and vote at, any
meeting of shareholders of any corporation in which the Fund may hold shares,
and at any such meeting may exercise any and all the rights and powers
incident to the ownership of such share. Any of such officers may execute
proxies to vote shares of other corporations in the name of the Fund.
Indemnification
Definitions. In this Article:
"Applicant" means the person seeking indemnification pursuant to
this Article.
"Disabling Conduct" means willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties involved in the conduct of office.
"Indemnitee" means person to be indemnified.
"Expenses" include counsel fees.
"Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including any excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding.
"Official capacity" means (i) when used with respect to a
director, the office of director in the Corporation; or (ii) when used with
respect to an individual other than a director, the office in the Corporation
held by the officer or employment or agency relationship undertaken by the
employee or agent on behalf of the Corporation. "Official capacity" does not
include service for any other foreign or domestic corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise.
"Party" includes an individual who was, is or is threatened to be
made a named defendant or respondent in a proceeding.
"Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal.
Indemnification. To the extent permitted by law, and with the
restrictions set forth below, the Corporation shall indemnify any person who
was or is a party to any proceeding including a proceeding by or in the right
of the Corporation to procure a judgment in its favor, by reason of the fact
that he is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, trustee, partner or
officer of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability incurred by him in connection with such
proceeding if (i) he believed, in the case of conduct in his official
capacity, that his conduct was in the best interests of the Corporation, and
in all other cases that his conduct was at least not opposed to its best
interest, and, in the case of any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful, and (ii) he was not guilty of gross
negligence or willful misconduct.
Nothing contained in this Article IV shall be construed to
protect any Director or officer of the Fund against any liability to the Fund
or its security holders to which he would otherwise be subject by reason of
Disabling Conduct. The means for determining whether indemnification shall be
made shall be (i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the Indemnitee was not liable by
reason of Disabling Conduct, or (ii) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the
Indemnitee was not liable by reason of Disabling Conduct, by (A) the vote of a
majority of a quorum of Directors who are neither "interested persons" of the
Fund nor parties to the proceeding ("Disinterested Non-Party Directors"), or
(B) an independent legal counsel in a written opinion.
Nothing contained in this Article shall be construed to
permit the advancement of legal expenses for the defense of a proceeding
brought by the Fund or its security holders against a Director or officer of
the Fund unless an undertaking is furnished by or on behalf of the Indemnitee
to repay the advance unless it is ultimately determined that he is entitled to
indemnification, and the Indemnitee complies with at least one of the
following conditions: (i) the Indemnitee shall provide a security for his
undertaking; (ii) the Fund shall be insured against losses arising by reason
of any lawful advances, or (iii) a majority of a quorum of the Disinterested
Non-Party Directors, or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is a reason to believe that the
Indemnitee ultimately will be found entitled to indemnification.
Presumptions. The termination of any proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the applicant did
not meet the standard of conduct described in Section 4.2.
Improper Benefits. Notwithstanding the provisions of Section 4.2,
no indemnification shall be made in connection with any proceeding charging
the applicant with improper benefit to himself, whether or not involving
action in his official capacity, in which he was adjudged liable on the basis
that personal benefit was improperly received by him and there was a finding
of gross negligence or willful misconduct.
Successful Defense. To the extent that the applicant has been
successful on the merits or otherwise in defense of any proceeding referred to
in Section 4.2, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses actually and reasonably incurred by him in
connection therewith.
Determination of Indemnification. Any indemnification under
Section 4.2 (unless ordered by a court) to the extent not covered by Section
4.2(a) or (b), shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the applicant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 4.2 and 4.4.
The determination shall be made:
By the Board of Directors by a majority vote of a quorum
consisting of Directors not at the time parties to the proceeding;
If a quorum cannot be obtained under Subsection (a) of this
Section, by majority vote of a committee duly designated by the Board of
Directors (in which designation Directors who are parties may
participate), consisting solely of two or more Directors not at the time
parties to the proceeding;
By special legal counsel:
Selected by the Board of Directors or its committee in the
manner prescribed in Subsection (a) or (b) of this Section; or
If a quorum of the Board of Directors cannot be obtained
under Subsection (a) of this Section and a committee cannot be
designated under Subsection (b) of this Section, selected by
majority vote of the full Board of Directors, in which selection
Directors who are parties may participate; or
By the Shareholders, but shares owned by or voted under the
control of Directors who are at the time parties to the proceeding may
not be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under Subsection
(c) of this Section to select counsel.
Reimbursement of Expenses.
To the extent not covered by Section 4.2(a) or (b), the
Corporation may pay for or reimburse the reasonable expenses incurred by any
applicant who is a party to a proceeding in advance of final disposition of
the proceeding if:
The applicant furnishes the Corporation a written statement
of his good faith belief that he has met the standard of conduct
described in Sections 4.2 and 4.4;
The application furnishes the Corporation a written undertaking,
executed personally or on his behalf to repay the advance if it is
ultimately determined that he did not meet the standard of conduct; and
A determination is made that the facts then known to those
making the determination would not preclude indemnification under this
Article.
The undertaking required by paragraph (ii) of Subsection (a) of
this Section shall be an unlimited general obligation of the applicant but
need not be secured and may be accepted without reference to financial ability
to make repayment.
Determinations and authorizations of payments under this
Section shall be made in the manner specified in Section 4.6.
Indemnification of Others. The Board of Directors is hereby
empowered, by majority vote of a quorum of disinterested Directors, to cause
the Corporation to indemnify or contract in advance to indemnify any person
not specified in Section 4.2 who was or is a party to any proceeding, by
reason of the fact that he is or was an employee or agent of the Corporation,
or is or was serving at the request of the Corporation as an employee or agent
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprises, to the same extent as if such person were specified
as one to whom indemnification is granted in Section 4.2. The provisions of
Sections 4.3 through 4.7 shall be applicable to any indemnification provided
hereafter pursuant to this Section.
Insurance. The Corporation may purchase and maintain insurance to
indemnify it against the whole or any portion of the liability assumed by it
in accordance with this Article and may also procure insurance, in such
amounts as the Board of Directors may determine, on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against any liability asserted against or
incurred by him in any such capacity or arising from his status as such,
whether or not the Corporation would have power to indemnify him against such
liability under the provisions of this Article.
Limit on Liability. (a) In every instance in which the Virginia
Stock Corporation Act, as it exists on the date hereof or may hereafter be
amended, permits the limitation or elimination of liability of directors or
officers of a corporation to the corporation or its shareholders, the
directors and officers of the Fund shall not be liable to the extent thereof
to the Fund or its shareholders.
(b) Subject to paragraph (a), in any proceeding brought by or in the
right of the Fund or by or on behalf of shareholders of the Fund, the damages
assessed against an officer or director arising out of a single transaction,
occurrence or course of conduct shall not exceed the amount of cash
compensation received by the officer or director from the corporation during
the twelve months immediately preceding the act or omission for which
liability was imposed, provided that the limitation described in this sentence
shall not apply to damages assessed against any officer or director for (i)
willful misconduct or misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office; or (ii) a
knowing violation of the criminal law or of any federal or state securities
law, including without limitation violations of the Investment Company Act or
federal laws relating to unlawful insider trading or manipulation of the
market for any security.
General. Every reference herein to directors, officers,
employees, or agents, shall include former directors, officers, employees and
agents and their respective heirs, executors and administrators. The
indemnification hereby provided and provided hereafter pursuant to the power
hereby conferred on the Board of Directors shall not be exclusive of any other
rights to which any person may be entitled, including any right under policies
of insurance that may be purchased and maintained by the Corporation or
others, with respect to claims, issues or matters in relation to which the
Corporation would not have the power to indemnify such person under the
provisions of this Article.
Purchases, Redemptions and Transfers
Calculation of Net Asset Value. Except as may be otherwise
provided by the Board of Directors, the net asset value of the Fund's shares
shall be determined at 4:00 o'clock p.m., Virginia time, on each day when the
New York Stock Exchange is open for trading and on every other day when there
is sufficient trading in the securities and instruments held by the Fund to
materially affect such net asset value, provided that Virginia banks are open
on any such day. For this purpose, unless the Board of Directors shall
determine otherwise, the value of securities or instruments for which current
market quotations are available shall be the last sale price or bid quotation
and that of other securities or instruments, and of any other assets, shall be
fair value as determined in good faith by or under the direction of the Board
of Directors. Notwithstanding the foregoing, unless the Board of Directors
determines otherwise, debt securities or instruments having a remaining
maturity of 60 days or less shall be valued on an amortized cost basis.
Minimum Purchase Orders. Except as may be otherwise provided by
the Board of Directors, there shall be no minimum purchase requirements. The
Fund shall have the right to redeem shares and close any account having a
balance of less than $500.
Purchase and Redemption Prices. Except as may be otherwise
provided by the Board of Directors, all purchases of shares from the Fund and
redemptions of shares shall be effected at the net asset value computed after
the Fund or its designated agent receives a complete purchase order (including
payment), or redemption request (including a completed redemption request in
form approved by the Board of Directors) together with such other
documentation as the Board of Directors or appropriate officers of the Fund
may require. The Fund shall have the unconditional right to refuse any
purchase order, and no redemption request relating to shares purchased by
check shall be deemed to be complete until such check has cleared the banking
system.
Payment of Redemption Price. Except as may be otherwise provided
by the Board of Directors, payments pursuant to redemption requests shall be
by wire transfer or check and, except to the extent that the right of
redemption may be suspended as provided in the Articles of Incorporation,
within seven days after receipt in proper form of a complete redemption
request, as described in Section 5.3.
Transfer of Shares; Form of Share Certificates. Shares shall be
transferable on the books of the Fund by the holder thereof in person or by
his duly authorized attorney or legal representative, duly instructed or
accompanied by proper instruments of transfer, with such proof of the
authenticity of the signature as the Fund or its agent may reasonably require,
solely to the Fund, unless the Board of Directors determines the transferee is
ineligible to hold stock in the Fund pursuant to the Articles of Incorporation
or these bylaws.
Shares need not be represented by certificates.
Investment Programs. The Board of Directors may authorize one or
more plans for continuous investment, dividend reinvestment, systematic
withdrawal and similar purpose under which shares of the Fund may be issued
and held in Shareholders' accounts without the actual delivery of
certificates.
Fractional Shares. The Fund may issue, sell, repurchase, or
otherwise deal in fractional denominations to the same extent as whole shares,
and fractional shares shall have proportionately all the rights of whole
shares, including without limitation the right to vote, the right to receive
dividends and other distributions and the right to participate in any
liquidation of the Fund.
General Provisions
Annual Statement. The President or the Treasurer shall prepare or
cause to be prepared annually within 120 days after the end of each fiscal
year of the Fund and in any event not later than any annual meeting of
Shareholders a full and correct statement of the affairs of the Fund,
including a balance sheet and a financial statement of operations for such
fiscal year. Such statement shall be provided to the Shareholders not later
than the next succeeding annual meeting of Shareholders and shall be filed at
the principal office of the Fund. Notwithstanding anything to the contrary
contained in this Section, the requirements of this Section shall be deemed to
have been satisfied in all respects by the preparation, distribution and
filing of such reports as are required by Section 30 of the Investment Company
Act, and the rules and regulations promulgated thereunder.
Amendment of Bylaws. These bylaws may be altered, amended, added
to or repealed by the affirmative vote of Shareholders holding a majority of
all outstanding shares entitled to vote thereon or by the Board of Directors,
provided that the Board of Directors may not amend these bylaws to permit it
not remove any Director without cause or to change this Section.
Fiscal Year. The fiscal year of the Fund shall be fixed by the
Board of Directors.
Custody of Assets. Securities and instruments owned by the Fund
and cash representing the proceeds from sales or redemptions of securities or
instruments held by the Fund and of shares issued by the Fund, payments of
principal upon securities and instruments held by the Fund or capital
distributions in respect of securities and instruments held by the Fund shall
be held by a custodian or trustee which shall be a bank or trust company
having not less than $5,000,000 aggregate capital, surplus and undivided
profits, provided such a custodian or trustee can be found ready and willing
to act. The Fund shall, upon the resignation or inability to serve of the
custodian or trustee, (i) use its best efforts to obtain a successor custodian
or trustee, (ii) require that the cash, securities and instruments held by the
Fund be delivered directly to the successor custodian or trustee and (iii) in
the event that no successor custodian or trustee can be found, submit to the
Shareholders, before permitting delivery of the cash, securities and
instruments held by the Fund to other than a successor custodian or trustee,
the question of whether such Fund shall be liquidated or shall function
without a qualified custodian or trustee.
Disbursement of Funds. All checks, drafts, orders or instruments
for the payment of money and all notes of the Fund shall be signed by such
officer or officers of such other person or persons as the Board of Directors
may from time to time designate.
ADVISORY AGREEMENT
AGREEMENT, made as of November 21, 1995 between COMMONWEALTH CASH
RESERVE FUND, INC. (herein called the "Company"), and PUBLIC FINANCIAL
MANAGEMENT, INC. (the "Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, the Company desires to appoint the Adviser as investment
adviser to its investment portfolio (the "Fund");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Delivery of Documents. The Company has furnished the Adviser with
copies properly certified or authenticated of each of the following:
(a) The Company's Articles of Incorporation, as filed with the
Clerk of the State Corporation Commission of the Commonwealth of
Virginia on December 8, 1986 and all amendments thereto (such Articles
of Incorporation, as presently in effect and as it shall from time to
time be amended, is herein called the "Articles of Incorporation");
(b) The Company's Bylaws, and amendments thereto (such Bylaws,
as presently in effect and as it shall from time to time be amended, is
herein called the "Bylaws");
(c) Resolution of the Company's Board of Directors authorizing
the appointment of the Adviser and approving this Agreement;
(d) The Company's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission
("SEC") on December 11, 1986 and all amendments thereto;
(e) The Company's Registration Statement on Form N-1A under the
Securities Act of 1933 as amended ("1933 Act") (File No.33-10754) and
under the 1940 Act as filed with the SEC on December 11, 1987, and all
amendments thereto; and
(f) The Company's most recent Prospectus and Statement of
Additional Information (such Prospectus, and Statement of Additional
Information as presently in effect and all amendments and supplements
thereto are herein called the "Prospectus").
The Company will furnish the Adviser from time to time with copies of
all amendments of or supplements to the foregoing.
2. Services. The Company hereby appoints the Adviser to act as
investment adviser to the Fund for the period and on the terms set forth in
this Agreement. Intending to be legally bound, the Adviser accepts such
appointment and agrees to furnish the services required herein to the Fund
with compensation as hereinafter provided.
Subject to the supervision of the Company's Board of Directors the
Adviser will provide with respect to the Fund a continuous investment program,
including investment research and management with respect to all securities
and investments and cash equivalents in such Fund. The Adviser will compute
the Net Asset Value and daily net income of the Fund at the times and in the
manner set forth in the Prospectus and resolutions of the Company's Board of
Directors applicable to the Fund. The Adviser will determine from time to
time what securities and other investments will be purchased, retained or sold
by the Fund. The Adviser will provide the services under this Agreement in
accordance with the Fund's investment objective, policies and restrictions as
stated in the Prospectus and resolutions of the Company's Board of Directors
applicable to the Fund.
3. Covenants by Adviser. The Adviser agrees with respect to the
services provided to the Fund that it:
(a) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission;
(b) will use the same skill and care in providing such services
as it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(c) will not make loans to any person to purchase or carry Fund
shares, or make loans to the Fund;
(d) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers and dealers, the Adviser will
attempt to obtain the best net price and the most favorable execution of
its orders. Consistent with this obligation, when the execution and
price offered by two or more brokers or dealers are comparable, the
Adviser may, in its discretion, purchase and sell portfolio securities
from and to brokers and dealers who provide the Company with research
advice and other services. In no instance will portfolio securities be
purchased from or sold to the Adviser, any sub-advisor, the
Administrator, the Distributor, or an affiliated person of the Fund, the
Adviser, any sub-adviser, or the Distributor;
(e) will maintain all books and records with respect to the
securities transactions for the Fund to the extent agreed upon between
the Company and the Advisor, keep the Company's books of account with
respect to the Fund and furnish the Company's Board of Directors with
such periodic and special reports as the Board may reasonably request
with respect to the Fund;
(f) will treat confidentially and as proprietary information of
the Company all records and other information relative to the Company
and prior, present or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder (except after prior notification
to and approval in writing by the Company, which approval shall not be
unreasonably withheld and may not be withheld and will be deemed granted
where the Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Company).
4. Services Not Exclusive. The services furnished by the Adviser
hereunder are deemed not to be exclusive, and the Adviser shall be free to
furnish similar services to others so long as its services under this
Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Adviser hereby agrees that all records which
it maintains for the Company are the property of the Company and further
agrees to surrender promptly to the Company any of such records upon the
Company's request. The Adviser further agrees to maintain the records
required by the following sections of Rule 31 under the Investment Company
Act of 1940:
31a-l(a);
31a-l(b)(1), (2), (3), (5), through (12);
31a-2(a)(1) except as it refers to 31a-l(b)(4);
31a-2(a)(2);
31a-2(e);
31a-3.
6. Expenses. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund.
For the services provided and the expenses assumed with respect to
the Fund pursuant to this Agreement, the Company will pay the Adviser from the
assets belonging to the Fund and the Adviser will accept as full compensation
therefor a fee, computed daily and paid monthly, at an annual rate of .12 of
1% of the first $200 million of average daily net assets of the Fund, .10 of
1% of the average daily net assets over $200 million but under $400 million,
.09 of 1% of the average daily net assets over $400 million but under $600
million, and .08 of 1% of the average daily net assets over $600 million.
If in any fiscal year the aggregate expenses of the Fund (as
defined under the securities regulations of any state having jurisdiction over
the Company) exceed the expense limitations of any such state, the Adviser
will waive fees to the extent required to attain compliance. The obligation
of the Adviser to waive fees to the Company hereunder is limited in any fiscal
year to the amount of its fee hereunder for such fiscal year, provided,
however, that notwithstanding the foregoing, the Adviser shall waive or
reimburse the Company for such excess expenses regardless of the amount of
fees paid to it during such fiscal year to the extent that the securities
regulations of any state having jurisdiction over the Company so require.
Such expense waiver or reimbursement, if any, will be estimated, reconciled
and paid on a monthly basis.
7. Limitation of Liability. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company
in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Adviser in the performance of
its duties or from reckless disregard by it of its obligations and duties
under this Agreement. Any person, even though also an officer, partner,
employee, or agent of the Adviser, who may be or become an officer,
Director, employee or agent of the Company, shall be deemed, when rendering
service to the Company or acting on any business of the Company (other than
services or business in connection with Adviser's duties as investment
adviser hereunder), to be rendering such services to or acting solely, for
the Company and not as an officer, partner, employee or agent or one under
the control or direction of the Adviser even though paid by it.
8. Duration and Termination. This Agreement will become effective as
of the date first written above, and shall continue in effect for a period
of two years. Thereafter if not terminated, this Agreement shall continue
in effect with respect to the Fund for successive annual periods, provided
such continuance is specifically approved at least annually (a) by the
vote of a majority of those members of the Company's Board of Directors who
are not interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval; (b) and by
a majority of the Company's Board or by vote of a majority of the
outstanding voting securities of the Fund. Notwithstanding the foregoing,
this Agreement may be terminated at any time, without the payment of any
penalty, by the Company (by vote of the Company's Board of Directors or by
vote of a majority of the outstanding voting securities of the Fund), or by
the Adviser on sixty days' written notice. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the
terms "majority of the outstanding voting securities," "interested persons"
and "assignment" shall have the same meaning of such terms in the 1940 Act.)
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, except by an instrument in writing
signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No material amendment of this
Agreement shall be effective with respect to the Fund until approved by
vote of a majority of the outstanding voting securities of the Fund.
10. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and shall be governed by Virginia law.
11. Names. The names "Commonwealth Cash Reserve Fund, Inc." and
"Directors of Commonwealth Cash Reserve Fund, Inc." refer respectively to
the Company created and the Directors as Directors but not individually or
personally, acting from time to time under the Articles of Incorporation
dated December 2, 1986, which is hereby referred to and a copy of which is
on file at the office of the Clerk of the State Corporation Commission of
the Commonwealth of Virginia and the principal office of the Company. The
obligations of "Commonwealth Cash Reserve Fund, Inc." entered into in the
name or on behalf thereof by any of the Directors, representatives or
agents are made not individually, but in such capacities, and are not
binding upon any of the Directors, Shareholders, or representatives of the
Directors personally, but bind only the Company's Property, and all persons
dealing with any class of shares of the Company must look solely to the
Company's Property belonging to such class for the enforcement of any
claims against the Company.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their Officers designated below as of the day and year first above
written.
COMMONWEALTH CASH RESERVE FUND, INC.
BY: /s/ Jeffrey A. Laine
Jeffrey A. Laine, President
PUBLIC FINANCIAL MANAGEMENT, INC.
BY: /s/ Martin Margolis
Martin Margolis, Managing Director
ADMINISTRATION AGREEMENT
AGREEMENT, made this 21 day of Nov., 1995, between COMMONWEALTH CASH
RESERVE FUND, INC., a Virginia corporation (the "Company") and PUBLIC
FINANCIAL MANAGEMENT, INC., a Pennsylvania corporation (the "Administrator").
WITNESSETH:
WHEREAS, the Company is registered as an open-end, diversified, management
investment company under the Investment Act of 1940, as amended ("1940 Act");
and
WHEREAS the Company desires to appoint the Administrator to perform
certain administrative services for the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Delivery of Documents. The Company has furnished the Administrator
with copies properly certified or authenticated of each of the following:
(a) The Company's Articles of Incorporation, as filed with the
Clerk of the State Corporation Commission of the Commonwealth of Virginia
on December 8, 1986, and all amendments thereto (such Articles of
Incorporation, as presently in effect and as it shall from time to time be
amended, is herein called the "Articles of Incorporation");
(b) The Company's ByLaws and amendments thereto (such ByLaws, as
presently in effect and as they shall from time to time be amended, are
herein called the "ByLaws");
(c) Resolutions of the Company's Board of Directors authorizing
the appointment of the Administrator and approving this Agreement;
(d) The Company's Notification of Registration on form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission ("SEC")
on December 11, 1986 and all amendments thereto;
(e) The Company's Registration Statement on form N-1A under the
Securities Act of 1933 as amended ("1933 Act") and under the 1940 Act as
filed with the SEC on December 11, 1986, and all amendments thereto; and
(f) The Company's most recent Prospectus and Statement of
Additional Information (such Prospectus and Statement of Additional
Information as presently in effect and all amendments and supplements
thereto are herein called the "Prospectus").
The Company will furnish the Administrator, from time to time, executed
copies of all amendments and supplements to the foregoing.
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. In General.
The Administrator agrees, all as more fully set forth herein, to
perform, at its own expense, the functions set forth herein for the Fund.
2. Duties and Obligations of the Administrator with respect to the Company.
(a) Subject to the succeeding provisions of this section and subject to the
direction and control of the Board of Directors of the Company, the
Administrator shall provide all administrative services to the Company,
other than those relating to the Fund's investment portfolio and the
maintenance of its financial records. As part of such duties, the
Administrator shall:
(i) provide office space and equipment in connection
with the maintenance of the headquarters of the Company;
(ii) maintain the Company's books and records (other than
accounting books and records), oversee the insurance relationships of the
Company, and prepare (or assist counsel and auditors in the preparation
of) for the Company all required tax returns, proxy statements and reports
to the Company's shareholders and Directors and, at the Administrator's
expense to the extent that they are not paid for directly by the Company,
reports to and other filings with the Securities and Exchange Commission
and any other governmental agency;
(iii) arrange for the preparation, on behalf of the Company
(at the Administrator's expense to the extent they are not paid for
directly by the Company), of such applications and reports as may be
necessary to register or maintain the registration of the Company and/or
the shares of the Company under the securities or "blue-sky" laws of the
Commonwealth of Virginia and such other states in which the shares of the
Company may be offered for sale;
(iv) respond to all inquiries or other communications of
shareholders of the Company and brokerdealers, if any;
(v) oversee all relationships between the Company and its
custodian, including such administrative matters as are applicable to the
issuance or redemption of the Company's shares; and
(vi) Liaison with the Company's independent public
accountant;
(vii) make for each shareholder of the Company, if applicable,
the required calculations, computations and reports required from time to
time as necessary pursuant to Section 148(f) of the Internal Revenue Code
of 1986, calculating the bond yield on the bond issue related to such
shareholder's bond proceeds invested in the Company's shares, calculating
the amounts earned on such bond proceeds by reason of investment in such
shares, and calculating and preparing estimated interim rebate reports and
formal rebate reports; Administrator also shall send a notice to the
shareholder prior to any expenditure test date contained in the Code
related to any exception from rebate requirements and shall prepare an
exception compliance report applicable thereto.
(b) All activities performed by the Administrator under this
Section shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the 1940 Act and of any
rules or regulations in force thereunder; and (2) any other applicable
provisions of law; and (3) the provisions of the Articles of Incorporation
and ByLaws of the Company as amended from time to time; and (4) any
policies and determinations of the Board of Directors of the Company; and
(5) the fundamental investment policies of the Company, as reflected in
the Company's registration statement under the 1940 Act, or as amended by
the shareholders of the Company.
(c) Nothing in this Agreement shall prevent the Administrator or
any officer thereof from acting as investment adviser or manager for any
person, firm or corporation and this Agreement shall not in any way limit
or restrict the Administrator or any of its partners, officers,
stockholders or employees from buying, selling or trading any securities
for its own or their own accounts or for the accounts of others for whom
it or they may be acting; provided, however, that the Administrator
expressly represents that it will undertake no activities which, in its
judgment will adversely affect the performance of its obligations to the
Company under this Agreement.
3. Office Space and Facilities.
The Administrator agrees that it will, at its own expense, provide
office space and facilities, equipment and personnel for the performance
of its functions hereunder.
4. Compensation of the Administrator.
The Company agrees to pay the Administrator, and the Administrator
agrees to accept as full compensation for all services rendered hereunder,
an annual fee relating to the Company payable monthly and computed on the
net asset value of the Company at the end of each business day at the
annual rate of .05 of 1% the average daily net assets.
5. Duration and Termination.
(a) This Agreement shall go into effect on the date it is approved
by the Board of Directors of the Company and its implementation is
authorized by the Board of Directors of the Company, provided that all
regulatory requirements have been met, and shall, unless terminated as
hereinafter provided, continue in effect for a period of two years.
Thereafter, if not terminated, this Agreement shall continue in effect
for successive annual periods, but only so long as such continuance is
specifically approved at least annually by the Company's Board of
Directors, including the vote of a majority of the Directors who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of any such party cast in person at a meeting called for the purpose
of voting on such approval.
(b) This Agreement may be terminated by the Administrator at any
time without penalty upon giving the Company sixty (60) days' written
notice (which notice may be waived by the Company) and may be terminated
by the Company at any time without penalty upon giving the Administrator
sixty (60) days' written notice (which notice may be waived by the
Administrator) provided that such termination by the Company shall be
directed or approved by the vote of a majority of all of its Directors in
office at the time, including a majority of the Directors who are not
interested persons (as defined in the 1940 Act) of the Company.
6. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
7. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and shall be governed by Virginia law.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunto affixed.
COMMONWEALTH CASH RESERVE FUND, INC.
BY: /s/ Jeffrey A. Laine
Jeffrey A. Laine, President
PUBLIC FINANCIAL MAMANGEMENT, INC.
BY: /s/ Martin Margolis
Martin Margolis, Managing Director
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the prospectus and
the Statement of Additional Information constituting parts of this
Post-Effective Amendment No. 12 to the Registration Statement of Form N-1A
(the "Registration Statement"), of our report dated May 1, 1996, relating
to the financial statements, including the financial highlights appearing
in the March 31, 1996 Annual Report to Shareholders of the Commonwealth
Cash Reserve Fund, Inc., which is also incorporated by reference into this
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and "General Information" in the Prospectus
and "Financial Statements" in the Statement of Additional Information.
Price Waterhouse, LLP
Philadelphia, Pennsylvania
May 29, 1996
