As filed with the Securities and Exchange Commission on June 3, 1997
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. 15 [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT [X]
COMPANY ACT OF 1940
AMENDMENT NO. 17 [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 (August 1, 1996) pursuant to Rule 485(b)
X 60 days after filing pursuant to Rule 485(a)
on (date) 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, 1997 on May 29, 1997.
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 Funds Market 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, 1997
COMMONWEALTH CASH RESERVE FUND, INC.
P.O. Box 1192
Richmond, Virginia 23209-1192
1-800-338-3383
The investment objective of The Commonwealth Cash Reserve Fund (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 institutions, such as municipalities,
universities and hospitals (collectively "Investors') and invests only in
instruments appropriate for such investors. Used as an alternative to a
direct investment in money market instruments, an investment in the Fund may
reduce the time and expense associated with 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 Statement of Additional Information) dated August 1, 1997 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 inquires, 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) 0.05%
12b-1 Fees (after waivers)(2) 0.02%
Other Expenses 0.08%
Total Fund Operating Expenses (after waivers)(3) 0.15%
(1) Management fees include both the advisory and administration fees payable
to PFM. Figures shown have been reduced to reflect the voluntary waiver of
a portion of these fees for the current fiscal year. PFM can terminate this
voluntary waiver at any time at its sole discretion. Maximum management fees
are 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, 1997. Without the
waiver of advisory and administration fees the ratio of expenses to average
daily net assets would be approximately .28%
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
prospective investors and shareholders too compare expense levels of funds
with different fee structures. This example 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 1997 Annual Report to Shareholders.
<TABLE>
Financial Highlights(a)
<CAPTION>
Fiscal Year Ending March 31
For a Share Outstanding
Throughout Each Year 1997 1996 1995 1994 1993<F5> 1992<F5> 1991<F5> 1990 1989 1988<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
BEGINNING OF THE YEAR
INVESTMENT ACTIVITIES
Net Investment Income 0.053 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 0.053 0.058 0.049 0.025 0.035 0.057 0.088 0.086 0.075 0.057
DISTRIBUTIONS
Net Investment Income (0.053) (0.058) (0.049) (0.025) (0.035) (0.057) (0.088) (0.086) (0.075) (0.057)
Realized Capital Gains _ _ _ _ _ _ _ _ _
Total Distributions (0.053) (0.058) (0.049) (0.025) (0.035) (0.057) (0.088) (0.086) (0.075) (0.057)
NET ASSET VALUE, $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
END OF YEAR
Total Return 5.43% 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) $116,185 $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<F3> 0.15% 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 5.31% 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, 1997, 1996, 1995, 1992 and 1991. If
these fees had not been waived, the ratio of expenses to average net assets would have been .28%, .29%, .29%,
1.10% and .97%, respectively, and the ratio of net investment income to average net assets would have been
5.18%, 5.64%, 4.77%, 4.07%, and 7.14% respectively, for the fiscal years ended March 31, 1997, 1996, 1995,
1992 and 1991.
<F4>
Annualized.
<F5>
Restated
</FN>
</TABLE>
PERFORMANCE
The Fund's "current yield" for the seven days ended March 31, 1997 was 5.37%
and its "compounded effective yield" for that period was 5.52% . "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 Statement of Additional
Information for further information on the methods of calculating these yields.
INVESTMENT OBJECTIVE AND POLICIES
The objective of the Fund is to provide its shareholders with as high current
income as is consistent with stability, safety of principal and liquidity.
This objective together with certain investment restrictions set forth in
the Statement of Additional Information 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.. 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 and 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 INVESTMENTS
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 by PFM 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. PFM regularly reviews 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.
LEGALITY OF THE USE OF THE FUND BY GOVERNMENTAL UNITS IN VIRGINIA
Investments of unexpended and excess money of counties, cities, towns, political
subdivisions and public bodies of the Commonwealth of Virginia, including
proceeds of borrowing of these entities, in open-end investment companies
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
company is registered under the Investment Company Act of 1940 or the
Securities Act of the Commonwealth of Virginia and that investments made by
such companies are 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.
NET ASSET VALUE
The Fund's Net Asset Value for the purpose of both purchase and redemption is
determined as of 11:00 a.m., Eastern Time, Monday through Friday exclusive of
federal holidays, except Good Friday (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 which permits
the Fund to value its portfolio on the basis of amortized cost. Under the
amortized cost method of valuation, securities held in the Fund's portfolio
are valued at cost, and thereafter assuming a constant amortization rate to
maturity of any discount or premium. Accordingly, this valuation method
does not reflect the impact of fluctuating interest rates on the market value
of the security.
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 11:00 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 11:00 a.m. Eastern
Time on the next Business Day. In order for the purchase order to be accepted,
the Fund must have received an acknowledged notification (written or verbal)
and completed registration forms by 11:00 AM Eastern time. 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 11:00 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 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 investments 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, 1997, 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
Asset 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, a continuous
investment program, for the Fund.. 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.
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, 1997, PFM received advisory fees equal to .037% 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.
PFM also serves as the Fund's Administrator under an Administration Agreement
dated November 21, 1995 (the "Administration Agreement") and Transfer Agent.
Under the Administration Agreement, PFM, provides all administrative services,
other than those relating to the Fund's investment portfolio and 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, 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, 1997,
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 its agreements with the
Fund are paid by the Fund, including, among other things, legal and audit
expenses, fees and expenses of the Custodian, 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, 1997, were .15 of 1% after the effect of
waiving certain advisory, administration and distribution fees.
Distributor and Other Service Providers
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"). Under the Plan the Fund may pay of up to .25 of 1% of its
average daily net assets each year to the Fund's Distributor and/or to broker
dealers and shareholder servicing agents who provide assistance in the
distribution and retention of Fund shares. For the fiscal year ended March
31, 1997, the Fund paid $22,670, after waivers, in approved distribution
expenses. See the Statement of Additional Information for further information.
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, 1997. PFM received
no reimbursement for its expenses.
DIVIDEND, TAX AND RELATED INFORMATION
Dividends
All of the Fund's net income will be declared daily as dividends. All
dividends declared are accrued throughout the month and are paid monthly,
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). All dividends will be invested in additional shares of the Fund unless
specific instructions are received to pay dividends in cash. 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.
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.
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.
HISTORY OF THE FUND
The Fund was incorporated in the Commonwealth of Virginia on December 8, 1986
and is classified as an open-end, "no load," diversified, registered investment
company. "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 and must conform with various organizational
and operational standards.
Since the inception, the fund's purpose has been to provide a cash management
vehicle that would meet the conservative investment requirements of
municipalities, other governmental agencies and political subdivisions
(collectively, "governmental units") that, like the Fund, are located in
Virginia. Accordingly, the Fund invests only in those instruments in which
governmental units are permitted to invest directly under Sections 2.1-327
through 2.1-329 of the Code of Virginia. These instruments are summarized in
this prospectus under the heading "Investment Objectives & Policies."
Particularly when combined with the specialized cash management features
available to shareholders through the Fund, an investment in the Fund is also
suitable, however, for institutions, such as universities and hospitals, that
must manage investments conservatively so as to assure the ability to meet
changing cash flow needs. These features include the ability, without charge,
to establish multiple accounts, the availability of detailed individual account
information on request, assistance in complying with specialized accounting
and record keeping required under certain provisions of the Internal Revenue
Code of 1986, such as the U.S. code's arbitrage rebate provisions. PFM will
also assist the Fund's shareholders in making calculations and reports required
by to comply with such provisions.
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 is not required to hold and may
not hold annual meetings of shareholders.
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,.. 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 INFORMATION 2. ADDRESS
(Address MUST be filled out) Street
City State Zip
METHOD OF INVESTMENT A. CHECK ENCLOSED $
USE A or B Payable to:
Commonwealth Cash Reserve Fund, Inc.
B. WIRED FUNDS $
REDEMPTION From
REQUESTS WILL Name of Bank
NOT BE HONORED Address of Bank - Street
UNTIL COMPLETED
APPLICATION IS FILED
WITH THE FUND
PRIMARY CONTACT NAME:
TITLE:
TELEPHONE NUMBER:
FAX NUMBER:
SECONDARY CONTACT NAME:
TITLE:
TELEPHONE NUMBER:
SEND ACCOUNT STATEMENT AND CONFIRMS TO: SEND DUPLICATE STATEMENTS TO:
WITHDRAWAL INSTRUCTIONS
CHECK REDEMPTION ______ Please establish a Redemption Checking Account at
Central Fidelity National Bank and send us a supply of 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 TO PREDESIGNATED BANKS ______ Redemption by wire
transfer is requested. Central Fidelity National Bank is authorized to honor
telephonic or written instructions without signature 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 IDENTIFICATION NUMBER (TIN) If the information required by this
section is not provided, Backup Withholding of 20% 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 ____________________________
Table of Contents
Section Page
Summary 1
Fund Expenses, and Financial Highlights 3
Investment Objectives and Policies 6
Investment Policies 7
Legality of the Use of the Fund by
Government Units in Virginia 8
Net Asset Value 8
How to Invest in the Fund 8
How to Redeem Investments 10
Management 13
Dividend, Tax and Related Information 15
History of the Fund 17
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
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 (Statement of Additional Information")
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, 1997. 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 4
YIELD INFORMATION 10
AMORTIZED COST VALUATION 11
GENERAL INFORMATION 12
The date of this Additional Statement is August 1, 1997.
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 or subject to put in more than seven days if thereafter more than
10% of the value of its total 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 money market funds 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
Each of the members of the Board of Directors of the Fund were elected by the
Fund's shareholders. Under the Fund's amended and restated bylaws, each of the
Fund's directors will hold office until his successor is elected and qualified
or until his earlier resignation or removal. 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.
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 70 years old.
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
56 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., (a
mutual fund administrator) 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 39 years old.
*MARTIN MARGOLIS, Director and Vice President, 345 Quarry Road, Wellsville,
Pennsylvania 17365
Managing Director, Public Financial Management, Inc., (the Funds Investment
Advisor) 1986- present; Partner, Financial Management Services, Inc., 1978 -
1986. Mr. Margolis is 52 years old.
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 51 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 38 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, 1997, 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 $8,543 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 $22,670 of which
$10,670 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, 1997.
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 50 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 51 years old.
DENNIS W. KERNS, 11800 Marquis Terrace, Richmond, Virginia 23233
Director of Finance, County of Henrico, Virginia, 1992- 1997; 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. Mr. Kerns is 60 years old.
J. JEFFREY LUNSFORD, 240 Tanglewood Drive, Christiansburg, Virginia 24703.
County Administrator, Louisa County, Virginia, 1997-Present; Assistant County
Administrator, Montgomery County, Virginia, 1994-1997; 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 43 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 40 years old.
ROGER W. MITCHELL, JR., 9461 Jamesons Mill Road, Culpeper, VA 22701
Director of Finance/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; Member of the Virginia
Government Finance Officers Association; Member of Virginia Local Government
Auditors Association. Mr. Mitchell is 36 years old.
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 years ended March 31, 1997, 1996, and 1995, fees were payable to
PFM in the amounts of $111,792, $141,858, and $154,043, respectively, of which
$66,645, $95,518 and $111,860, respectively were waived. Fees for fiscal years
ended March 31, 1997, 1996 and 1995 were payable at an annual rate of .12% of
1% of the first $200 million of average daily net assets.
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. 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, N.A.
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 years ended March 31, 1997, 1996 and 1995 fees of $46,580,
59,108, and $64,185, 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 Fund 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, 1997, 1996 and 1995, the Fund paid $22,670,
$23,325, and $20,325respectively, 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.
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 are 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 made 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, 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, 1997 was 5.37%
and its effective yield for that period was 5.52%
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 Purchases and 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, 1997
Statement of Operations for the year ended March 31, 1997
Statements of Changes in Net Assets for each of the years ended March 31, 1997
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 which was filed on June 2, 1997:
(i) Report of Independent Accountants
(ii) Statement of Net Assets as of March 31, 1997
(iii) Statement of Operations for the year ended March 31, 1997
(iv) Statements of Changes in Net Assets for each of the years
ended March 31, 1996 and March 31, 1997
(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 is
incorporated by reference to Exhibit (b)(2) of Registrant's
Post-Effective Amendment filed on July 30, 1996.
(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 Form 24f-2 filed on May 29, 1997.
* (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.
AS OF June 2, 1997
Class of Holders Number of Holders
Common Stock 11
Item 27. Indemnification.
Reference is made to Article IV Section 4.10 of Registrant's
Amended and Restated By-Laws, a copy of which By-Laws were filed
as an exhibit to Post Effective Amendment Number 13.
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.
(b) Information regarding the business and other connections of
PFM's directors is incorporated by reference to Part I (Item
8, 10 and 12) and Part II (Item 6 - 9 and 13) of PFM's Form
ADV, File No. 801-29162 which has been filed with the
Securities and Exchange Commission.
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
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 and has duly caused this Post-Effective
Amendment No. 15 to the Registration Statement to be signed on its behalf by
the undersigned thereunto duly authorized, in the Township of Cherry Hill, and
the State of New Jersey the 2nd day of June, 1997.
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 Post-Effective
Amendment No. 15 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 June 2, 1997
Jeffrey Laine (Principal Financial
Officer)
/s/ Martin Margolis Director and June 2, 1997
Martin Margolis Vice President
/s/ Robert J. Fagg, Jr. Director June 2, 1997
Robert J. Fagg, Jr.
Giles Dodd Director
Robert R. Sedivy Director
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.15
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. 15
to Form N-1A Registration Statement
Ref. Description of Exhibit
1) Consent of Independent Accountants
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. 15 to the Registration Statement of Form N-1A
(the "Registration Statement"), of our report dated April 18, 1997, relating
to the financial statements, including the financial highlights appearing
in the March 31, 1997 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
June 2, 1997
