As filed with the Securities and Exchange Commission on August 1, 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. 16 [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT [X]
COMPANY ACT OF 1940
AMENDMENT NO. 18 [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)
X on (August 2, 1997) pursuant to Rule 485(b)
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 2, 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
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 coordinate the maturities of investments 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
dated August 2, 1997 containing further information which may be of interest
to Investors 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. Management fees absent fee
waivers would be 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 are set forth in the Statement of Additional Information, and
vary in accordance with the Fund's net asset value. 12b-1 fees absent fee
waivers would be 0.02%.
(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
fee waivers the ratio of expenses to average daily net assets would be 0.28%.
Example:
Your investment of $1,000 would incur the following expenses assuming a 5%
annual return and redemption at the end of each period indicated:
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 to 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 money market funds
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 the amortized cost method of
valuation. Under this method of valuation, securities held in the Fund's
portfolio are valued at cost 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 signed by
an authorized signatory or signatories of the Investor, 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
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. Redemption requests for
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 will be
processed as stated above; however, payment of redemption proceeds relating to
shares purchased by check within 15 days of the date on which the redemption
request was received may be delayed by the Fund until a determination is made
that the check given in purchase has cleared, which may be up to fifteen 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
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 is registered as an investment
advisor under the Investment Advisers Act of 1940, and has acted as financial
advisor and/or investment advisor 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 and computing net asset value 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 .05% 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 necessary administrative
services, other than those relating to the Fund's investment portfolio and the
maintenance of its accounting books and records. Specifically, the
Administrative contract requires PFM to provide 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); PFM oversee 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;
and coordinate the activities of the Fund's various service providers.
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 ("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 advisors 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 its 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 through the Fund, an investment in the Fund is also suitable 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, 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 is
not expected to 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
Fund Expenses and Financial Highlights 3
Investment Objectives and Policies 6
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 Advisor
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 2, 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 ABOUT MANAGEMENT ARRANGEMENTS 4
YIELD INFORMATION 10
VALUATION 11
GENERAL INFORMATION 12
The date of this Additional Statement is August 2, 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 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 net 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 ABOUT 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; Registered Representative, 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., (an investment advisory
firm) 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, (an investment advisory firm) 1987-1990; Treasurer,
Van Lieu Securities, (a mutual fund distributor) 1989-1991; Senior Vice
President, Treasurer and Chief Financial Officer of Mariner Funds Services,
(a mutual fund distributor)1987-1992; Vice-President and Treasurer of Mariner
Funds Trust, ( a mutual fund complex) 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, 5604 Heritage Hills Circle, Fredericksburg,
Virginia 22407
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, 1997, such fees totaled $5,500.
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.
Schedule of Compensation of Directors and Officers
Aggregate
Name and Compensation Total Compensation
Position From Fund From Fund
Giles Dodd $ 1,500 $ 1,500
Director
Robert J. Fagg 2,000 2,000
Director
Jeffrey A. Laine -0- -0-
Director,
President and
Treasurer
Martin Margolis -0- -0-
Director and
Vice President
Robert R. Sedivy 2,000 2,000
Director
Arthur E. Anderson
Secretary -0- -0-
-------- --------
$ 5,500 $ 5,500
-------- --------
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 Culpeper, Virginia, 1997 to Present; 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, Culpepper, 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.
Principal Holders of Securities
Set forth below is certain information as to all persons known to the Fund to
own of record or beneficially 5% or more of the Fund's shares on July 3, 1997:
Number of Share
Investor Shares Percentage
City of Norfolk 52,608,818 47.83%
City of Roanoke 21,865,586 19.88%
City of Lynchburg 13,049,874 11.86%
Prince William County 7,727,645 7.03%
Additional Information About 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 30, 1995, was
approved by the Board of Directors, including a majority of the 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, unless terminated, 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.
The Advisory Agreement, provides that, in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations thereunder,
PFM to act as an investment advisor for any other organization, firm,
corporation or person.
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; .10% of 1% of such
assets over $200 up to $400 million; .09% of 1% of such assets over $400 million
up to $600 million, and .08% of 1% of such assets over $600 million.
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 About 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 initially 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. Therefore, 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."
ARRANGEMENTS
The Fund has adopted an Amended and Restated Distribution Plan (the
"Distribution Plan") under Rule 12b-1 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 the qualified Directors. 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, 1994. The Distribution
Agreement was last approved for continuance by the Fund's Directors on April
23, 1997, and was approved 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.
VALUATION
As noted in the Prospectus, the Fund values its portfolio on the basis of the
amortized cost method of valuation. 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. Payment of redemption proceeds relating to shares
purchased by check within 15 days of the date on which the redemption request
was received may be delayed by the Fund until a determination is made that
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 Advisor.
(a) Public Financial Management, Inc. ("PFM") is the investment
advisor 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 advisor, 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 certifies that this Post-Effective
Amendment meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to the Registration Statement to se signed on its behalf
by the undersigned thereunto duly authorized, in the City of Richmond, and the
State of Virginia the 31st day of July, 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 Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
/s/ Jeffrey Laine Director and President July 31, 1997
Jeffrey Laine (Principal Financial
Officer)
/s/ Martin Margolis Director and July 31, 1997
Martin Margolis Vice President
/s/ Robert J. Fagg, Jr. Director July 31, 1997
Robert J. Fagg, Jr.
/s/ Giles Dodd Director July 31, 1997
Giles Dodd
/s/ Robert R. Sedivy Director July 31, 1997
Robert R. Sedivy
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
2) Form of Custody Agreement
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this
Post-Effective Amendment No. 16 to the Registration Statement of Form N-1A
(the "Registration Statement") of our report dated April 18, 1997, relating
to the financial statements and the financial highlights appearing in the
March 31, 1997 Annual Report to Shareholders of Commonwealth Cash Reserve
Fund, which is also incorporated by reference into this Registration
Statement. We also consent to the references to us under the headings
"Fund Expenses and Financial Highlights" and "Independent Accountants" in
the Prospectus and under the heading "Financial Statements" in the Statement
of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse, LLP
Philadelphia, PA
July 30, 1997
CUSTODY AGREEMENT
THIS AGREEMENT is made as of this______ day of_______ 199_, by and between
COMMONWEALTH CASH RESERVE FUND, INC., a Virginia corporation (the "Company"),
and CENTRAL FIDELITY NATIONAL BANK ("CFNB"), as custodian.
W I T N E S E T H:
WHEREAS, the Company is registered as an open-end diversified, investment
company under the Investment Company Act of 1940, as amended ("the 1940
Act"), and is offering 500,000,000 shares (the "Shares") which represent
interests in the Company's investment portfolio (the "Fund"); and
WHEREAS, the Company desires to retain CFNB to serve as the Fund's custodian
and CFNB is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints CFNB to act as custodian of the
portfolio securities, cash and other property of the Fund for the period and
on the terms set forth in this Agreement. CFNB accepts such appointment and
agrees to furnish the services herein set forth in return for the
compensation as provided in Paragraph 22 of this Agreement. CFNB agrees to
comply with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder.
2. Delivery of Documents. The Company has furnished CFNB with copies properly
certified or authenticated of each of the following:
(a) Resolutions of the Company's Board of Directors authorizing the appointment
of CFNB as custodian of the portfolio securities, cash and other property of
the Fund and approving this Agreement;
(b) Incumbency and signature certificates identifying and containing the
signatures of the Company's officers and/or other persons authorized to sign
Written Instructions, as hereinafter defined, on behalf of the Company;
(c) The Company's Articles of Incorporation filed with the Clerk of the state
Corporation Commission of the Commonwealth of Virginia on December 8, 1986, and
all amendments thereto (such Articles of Incorporation as currently in effect
and as it shall from time to time be amended, is herein called the "Articles");
(d) The Company's Bylaws and all amendments thereto (such Bylaws, as currently
in effect and as they shall from time to time be amended, are herein called the
"Bylaws"),
(e) Resolutions of the Company's Board of Directors appointing PUBLIC
FINANCIAL MANAGEMENT, INC. (the "Advisor") as the investment advisor to the
Fund and the resolutions of the Company's Board of Directors approving an
Advisory Agreement between the Advisor and the Company (the "Advisory
Agreement");
(f) Resolutions of the Company's Board of Directors appointing Public Financial
Management, Inc. ("PFM") as the administrator of the Fund and resolutions of
the Company's Board of Directors approving an Administration Agreement
between the Company and PFM (the "Administration Agreement");
(g) Resolutions of the Company's Board of Directors appointing Commonwealth
Financial Group, Inc. ("Distributor") as the distributor of the Fund's Shares
and approving a Distribution Agreement between Distributor and the Company
(the "Distribution Agreement");
(h) Resolutions of the Company's Board of Directors appointing PFM as the
Fund's transfer agent and approving a Transfer Agency Agreement between the
Company and PFM (the "Transfer Agency Agreement");
(i) The Advisory Agreement, the Administration Agreement, the Distribution
Agreement, and the Transfer Agency Agreement;
(j) The Company's Notification of Registration filed pursuant to Section 8(a)
of the 1940 Act on Form N-8A with the Securities and Exchange Commission
("SEC") on December 11, 1986;
(k) The Company's Registration Statement on Form N-1A under the 1940 Act and
the Securities Act of 1933, as amended ("the 1933 Act"), as filed with the SEC
on December 11, 1986 (File No. 33-10754) relating to the Fund's Shares, and
all amendments thereto; and
(1) The Company's most recent prospectus and statement for additional
information for the Fund (such prospectus and statement of additional
information as presently in effect and all amendments and supplements
thereto are herein called the "Prospectus").
The Company will furnish CFNB from time to time with copies of all amendments
of or supplements to the foregoing, if any.
(3) Definitions.
(a) "Authorized Persons". As used in this Agreement, the term "Authorized
Persons" means any two directors of the Company, acting jointly, and any other
person, whether or not any such person is an officer or employee of the
Company, duly authorized by the Board of Directors of the Company to give
Oral & Written Instructions on behalf of the Company and listed on the
Certificates annexed hereto as Appendix A or such other Certificate listing
persons duly authorized to give Oral and Written Instructions on behalf of
the Company as may be received by CFNB from time to time.
(b) "Book-Entry System". As used in this Agreement, the term "Book-Entry
System" means the Federal Reserve Treasury book-entry system for United
States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing
agency registered with the SEC under Section 17A of the Securities and
Exchange Act of 1934 (the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means verbal instructions actually received by CFNB from an
Authorized Person or from a person reasonably believed by CFNB to be an
Authorized Person. The Company agrees to deliver to CFNB, at the time and
in the manner specified in Paragraph 8(b) of this Agreement Written
Instructions confirming Oral Instructions.
(d) "Property". The term "Property" as used in this Agreement, means:
(i) any and all securities and other property which the Company may from
time to time deposit, or cause to be deposited, with CFNB with respect to the
Fund or which CFNB may from time to time hold for the Company with respect to
the Fund;
(ii) all income in respect to any of such securities or other property;
(iii) all proceeds of the sale of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Company with
respect to the Fund, which are received by CFNB from time to time
from or on behalf of the Company.
(e) "Written Instructions". As used in this Agreement, the term "Written
Instructions" means written instructions delivered by mail, tested telegram,
cable, telex, or facsimile sending device, and received by CFNB, signed by
an Authorized Person.
4. Delivery and Registration of the Property. The Company will deliver or
cause to be delivered to CFNB securities and moneys with respect to the Fund
owned by it (other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the 1940 Act),
including cash received for the issuance of Shares, at any time during the
period of this Agreement. CFNB will not be responsible for such securities
and such moneys until actually received by it. All securities delivered to
CFNB (other than in bearer form) shall be registered in the name of the
Company or in the name of a nominee of the Company or in the name of CFNB or
any nominee of CFNB, or in the name of any subcustodian or any nominee of
any such subcustodian appointed pursuant to paragraph 6 hereof, or shall be
properly endorsed and in form for transfer satisfactory to CFNB. Certain
securities, similar investments, cash proceeds and other cash assets of the
Company may from time to time be kept in the custody of other custodians;
CFNB shall have no responsibilities, duties or liabilities with respect to
such securities, similar investments, cash proceeds and other cash assets of
the Company which are kept with any other custodian.
5. Receipt and Disbursement of Money.
(a) CFNB shall open and maintain a separate Custodian account or accounts and
a separate Demand Deposit account or accounts for the Fund in the name of the
Company, subject only to draft or order by CFNB acting pursuant to the terms
of this Agreement, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of the
Fund. CFNB shall make payments of cash to, or for the account of, the
Company from such cash only (i) for the purchase of securities as provided
in Paragraph 12 hereof; (ii) for the redemption of Shares as provided in
subparagraph (b) of Paragraph 9 hereof; (iii) upon receipt of Written
Instructions, for the payment of interest, dividends, taxes or custodial,
transfer agency, administration, distribution or advisory fees or expenses
which are to be borne by the Company under the terms of this Agreement, the
Transfer Agency Agreement, the Advisory Agreement, the Administration
Agreement and the Distribution Agreement; (iv) upon receipt of Written
Instructions, for payments in connection with the conversions, exchanges, or
surrender of securities owned or subscribed to by the Company and held by or
to be delivered to CFNB; (v) to a subcustodian pursuant to Paragraph 6
hereof; or (vi) for other proper Company purposes, but only upon receipt of
Written Instructions, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such purpose to
be a proper purpose and naming the person or persons to whom such payment is
to be made.
(b) CFNB is hereby authorized to endorse and collect all check, drafts, or
other orders for the payment of money received as custodian for the account
of the Fund and will do so as expeditiously as possible.
(c) CFNB will notify the Transfer Agent in a timely manner of any instruments
presented for payment against the Fund. Such notification shall be in a format
agreed to by CFNB and the Transfer Agent and will provide enough time for the
Transfer Agent to verify that the Shareholder balance is sufficient to cover
the redemption. If the Shareholder balance is not sufficient to cover the
redemption, the Transfer Agent will notify CFNB, by the time deadline
established by CFNB, to return such instrument without payment.
6. Receipt of Securities; (a) Except as provided in Paragraph 7 hereof, CFNB
shall hold and physically segregate in a separate account identifiable at all
times from those of any other persons, firms, or corporations, all securities
and non-cash property received by it for the account of the Fund. All such
securities and non-cash property are to be held or disposed of by CFNB for
the Fund pursuant to the terms of this Agreement. In the absence of Written
Instructions accompanied by a certified resolution of the Company's Board of
Directors authorizing the specific transaction, CFNB shall have no power or
authority to withdraw, deliver, assign, hypothecate, pledge, or otherwise
dispose of any such securities and investments except in accordance with the
express terms provided for in this Agreement. In no case may any Director,
officer, employee, or agent of the Company withdraw any securities. In
connection with its duties under this Paragraph 6, CFNB may, at it own
expense, enter into subcustodian agreements with other banks or trust
companies for the receipt of certain securities and cash to be held by CFNB
for the account of the Fund pursuant to this Agreement; provided that each
such bank or trust company has an aggregate capital, surplus and undivided
profits, as shown by its last published report, of not less than five
hundred thousand dollars ($500,000.00) and that such bank or trust company
agrees with CFNB to comply with all relevant provisions of the 1940 Act and
applicable rules and regulations thereunder. CFNB shall remain responsible
for the performance of all of its duties under this Agreement and shall hold
the Company harmless from the acts and omissions of any bank or trust company
that it might choose pursuant to this Paragraph 6.
(b) In the event that cash is made available for disbursement for the purchase
of securities, upon the failure to receive said Securities, CFNB will credit the
Fund's account with earnings on said cash calculated at a rate equal to the
effective Federal Funds rate for the period of the failure, adjusted for such
bank reserve requirements as CFNB may have with respect to such cash for the
period.
(c) Where securities are transferred to an account of the Fund established
pursuant to Paragraph 7 hereof, CFNB shall also by book-entry or otherwise
identify as belonging to the Fund the quantity of securities in a fungible
bulk of securities registered in the name of CFNB (or its nominee) or shown
in CFNB's account on the books of the Book-Entry System. At least monthly
and from time to time, CFNB shall furnish the Company with a detailed
statement of the Property held for the Fund under this Agreement, including
segregated collateral for any repurchase agreements as are then held.
7. Use of Book-Entry Systems. The Company shall deliver to CFNB a certified
resolution of the Board of Directors of the Company approving, authorizing and
instructing CFNB on a continuous and on-going basis until instructed to the
contrary by Oral or Written Instructions actually received by CFNB (i) to
deposit in the Book-Entry System all securities of the Fund eligible for
deposit therein and (ii) to utilize the Book-Entry System to the extent
possible in connection with settlements of purchase and sales of securities
by the Fund, and deliveries and returns of securities collateral in connection
with borrowings. Without limiting the generality of such use, it is agreed
that the following provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in the Book-Entry System
will at all times be segregated from any assets and cash controlled by CFNB
in other than a fiduciary or custodian capacity but may be co-mingled with
other assets held in such capacities. CFNB will pay out money only upon
receipt of securities and will deliver securities only upon the receipt of
money.
(b) All books and records maintained by CFNB which relate to the Fund's
participation in the Book-Entry System will at all times during CFNB's
regular business hours be open to the inspection of the Fund's duly
authorized employees or agents, and the Fund will be furnished with all
information in respect of the services rendered to it as it may require.
(c) CFNB will provide the Company with copies of any report obtained by CFNB
on the system of internal accounting control of the Book-Entry System within
ten days after receipt of such a report by CFNB. CFNB will also provide the
Company with such reports on its own system of internal control as the
Company may reasonably request from time to time.
8. Instructions Consistent with Charter. etc.
(a) Unless otherwise provided in the Agreement, CFNB shall act only upon Oral
and Written Instructions. Although CFNB may take cognizance of the provisions
of the Articles and Bylaws of the Company, CFNB may assume that any Oral or
Written Instructions received thereunder are not in any way inconsistent with
any provisions of such Articles or Bylaws or any vote, resolution or proceeding
of the Shareholders, or of the Board of Directors, or of any committee thereof.
(b) CFNB shall be entitled to rely upon any Oral Instructions and any Written
Instructions actually received by CFNB pursuant to this Agreement. The Company
agrees to forward to CFNB Written Instructions confirming Oral Instructions in
such manner that the Written Instructions are received by CFNB, whether by hand
delivery, telex, facsimile sending device or otherwise, by the close of business
of the same day that such Oral Instructions are given to CFNB. The Company
agrees that the fact that such confirming Written Instructions are not received
by CFNB shall in no way affect the validity of the transactions or
enforceability of the transactions authorized by the Company by giving Oral
Instructions. The Company agrees that CFNB shall incur no liability to the
Company in acting upon Oral Instructions given to CFNB hereunder concerning
such transactions provided such instructions reasonably appear to have been
received from an Authorized Person.
9. Transactions Not Requiring Instructions. CFNB is authorized to take the
following action without Oral or Written Instructions:
(a) Deposits of Proceeds of Issuance of Shares. CFNB shall collect and
receive for the account of the Fund all payments received in payment for
Shares of such Fund issued by the Company and shall promptly advise the
Company and the Fund's transfer agent of any receipt by it of payments for
Shares of the Fund.
(b) Redemptions. Upon receipt of notice by the Company's Transfer Agent
stating that such Transfer Agent is required to redeem Shares and specifying
the number and class of Shares which such transfer agent is required to
redeem and the date and time the request or requests for redemption were
received by the Company's Distributor, CFNB shall arrange for the direct
payment of such redemption proceeds by CFNB to the redeeming Shareholder (i)
in the manner described in the Company's then current Prospectus or (ii) in
accordance with such procedures and controls as are mutually agreed upon from
time to time by and among CFNB, the Company and the Company's Transfer Agent.
(c) With respect to paying instruments drawn on the Fund, CFNB is authorized
to pay such instruments unless CFNB shall receive Oral or Written Instructions
to return said instrument by the time deadline established by CFNB, and in the
event CFNB shall notify the Transfer Agent that it shall require Oral or
Written Instructions before paying any instrument, CFNB may, without
liability, return without payment such instruments unless Oral or Written
Instructions to pay are received by the deadline established by CFNB.
(d) Collection of Income and Other Payments. CFNB shall:
(i) collect and receive for the account of the Fund, all income and other
payments and distributions, including (without limitation) stock dividends,
rights, warrants and similar items, included or to be included in the
Property of the Fund, and shall promptly advise the Company of such receipt
and shall credit such income, as collected, to the Company's Custodian
account for the Fund;
(ii) endorse and deposit for collection, in the name of the Company, checks,
drafts, or other orders for the payment of money pursuant to CFNB standard
timeframes.
(iii) receive and hold for the account of the Fund all securities received
as a distribution on the portfolio securities of the Fund as a result of a
stock dividend, share split-up or reorganization, recapitalization,
readjustment or other re-arrangement or distribution of rights or similar
securities issued with respect to any portfolio securities of the Fund held by
CFNB hereunder;
(iv) present for payment and collect the amount payable upon all securities
which may mature or be called, redeemed, or retired, or otherwise become
payable on the date such securities become payable; and
(v) take any action which may be necessary and proper in connection with the
collection and receipt of such income, payments and other Property and the
endorsement for collection of checks, drafts, and other negotiable instruments.
(e) Miscellaneous Transactions. CFNB is authorized to deliver or cause to be
delivered Property against payment or other consideration or written receipt
therefor in the following cases:
(i) for examination by a broker or its clearing agent for the account of the
Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary securities for
definitive securities; and
(iii) for transfer of securities into the name of the Company or CFNB or a
nominee of either, or for exchange of securities for a different number of
bonds, certificates, or other evidence, representing the same aggregate face
amount or number of units bearing the same interest rate, maturity date and
call provisions, if any; provided that, in any such case, the new securities
are to be delivered to CFNB.
10. Transactions Requiring Instructions. Upon receipt of Oral or Written
Instructions and not otherwise, CFNB directly or through the use of the
Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in such Oral
or Written Instructions, proxies, consents, authorizations, and other
instructions whereby the authority of the Company as owner of any securities
may be exercised;
(b) deliver any securities held for the Company in exchange for other
securities or cash issued or paid in connection with the liquidation,
reorganization, re-financing, merger, consolidation, recapitalization or
sale of assets of any corporation, or the exercise of any conversion privilege;
(c) deliver any securities held for the Company to any protective committee,
reorganization committee or other person in connection with the liquidation,
reorganization, refinancing merger, consolidation, recapitalization or sale
of assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments
or documents as may be used to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Company and take
such other steps as shall be stated in said Oral or Written Instructions to
be for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation, recapitalization, or sale of assets
of the Company; and
(e) release securities belonging to the Company to any bank or trust company
for the purpose of pledge or hypothecation to secure any loan incurred by the
Company; provided, however, that securities shall be released only upon payment
to CFNB of the money borrowed, except that in cases where additional collateral
is required to secure a borrowing already made, subject to proper prior
authorization, further securities may be released for that purpose; and
repay such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes evidencing the
loan; and
(f) release and deliver securities owned by the Fund in connection with any
repurchase agreement entered into on behalf of the Fund, but only on receipt
of payment therefor, and pay out moneys of the Fund in connection with such
repurchase agreements, but only upon the delivery of the securities; and
(g) otherwise transfer, exchange or deliver securities in accordance with
Oral or Written Instructions.
11. Dividends and Distributions. The Company shall furnish CFNB with
appropriate evidence of action by the Company's Board of Directors declaring
and authorizing the payment of any dividends and distributions to the
Shareholders of the Fund. Upon receipt by CFNB of Written Instructions
(which may be continuing instructions when deemed appropriate by the parties)
with respect to dividends and distributions declared by the Company's Board of
Directors and payable to the Shareholders of the Fund who have elected in the
proper manner to receive their distributions and/or dividends in cash, and in
conformance with procedures mutually agreed upon by CFNB, the Company, and
the Company's Transfer Agent, CFNB shall pay to the Company's Transfer Agent,
as agent for the Shareholders, and amount equal to the amount indicated in
said Written Instructions as payable by the Company to such Shareholders for
distribution in cash by the Transfer Agent to such Shareholders. In lieu of
paying the Company's Transfer Agent cash dividends and distributions, CFNB
may arrange for the direct payment of cash dividends and distributions, to
Shareholders by CFNB in accordance with such procedures and controls as are
mutually agreed upon from time to time by and among the Company, CFNB and the
Company's Transfer Agent.
12. Purchases of Securities. Promptly after each decision to purchase
securities for the Company, the Company, through the Advisor, shall deliver
or cause to be delivered to CFNB Written Instructions specifying with respect
to each such purchase; (a) the name of the issuer and the title of the
securities; (b) the number of shares or the principal amount purchased and
accrued interest, if any, (c) the date of purchase and settlement, (d) the
purchase price per unit, (e) the total amount payable upon such purchase, and
(f) the name of the persons from whom or the broker through whom the purchase
was made. CFNB shall, upon receipt of securities purchased by or for the Fund,
pay out of the moneys held for the account of the Fund the total amount payable
to the person from whom or the broker through whom the purchase was made,
provided that the same conforms to the total amount payable as set forth in
such Written Instructions.
13. Sales of Securities. Promptly after each decision to sell securities for
the Company, the Company shall, through the Advisor, deliver to CFNB Written
Instructions, specifying with respect to each such sale: (a) the name of the
issuer and the title of the security, (b) the number of shares or principal
amount sold, and accrued interest, if any, (c) the date of sale, (d) the sale
price per unit, (e) the total amount payable to the Company upon such sale,
and (f) the name of the broker through whom or the person to whom the sale
was made. CFNB shall deliver the securities upon receipt of the total amount
payable to the Company upon such sale, provided that the same conforms to the
total amount payable as set forth in such Written Instructions. Subject to
the foregoing, CFNB may accept payment in such form as shall be satisfactory
to it, and may deliver securities and arrange for payment in accordance with
the customs prevailing among dealers in securities.
14. Correspondence. CFNB shall answer correspondence from securities brokers
and others relating to its duties hereunder and such other correspondence as
may from time to time be mutually agreed upon between CFNB and the Company.
15. Records. CFNB shall keep and maintain appropriate financial books and
records with respect to its duties hereunder for the Company. The books and
records pertaining to the Company which are in the possession of CFNB shall
be the property of the Company. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities laws
and rules and regulations. The Company, or the Company's authorized
representatives, shall have access to such books and records at all times
during CFNB's normal business hours. Upon the reasonable request of the
Company copies of any such books and records shall be provided by CFNB to the
Company or the Company's authorized representative at the Company's expense.
16. Reports. CFNB shall furnish the Company the following reports:
(a) such periodic and special reports as the Company may reasonably request;
(b) a monthly statement summarizing all transactions and entries for the
account of the Fund;
(c) a monthly report of portfolio securities belonging to the fund showing
the adjusted average cost of each issue and the market value at the end of
such month;
(d) a daily report of account balances and previous day's activity through
CFNB's balance reporting system.
(e) a monthly report of the cash account of the Fund showing disbursements;
and
(f) such other information as may be agreed upon from time to time between
the Company and CFNB.
17. Cooperation with Accountants. CFNB shall cooperate with the Company's
independent certified public accountants and shall take all reasonable action
in the performance of its obligations under this Agreement to assure that the
necessary information is made available to such accountants for the expression
of their unqualified opinion, including but not limited to the opinion included
in the Company's semiannual report on Form N-SAR.
18. Confidentiality. CFNB agrees on behalf of itself and its employees to
treat confidentially and as the proprietary information of the Company all
records and other information relative to the Company and its prior, present
or potential Shareholders and relative to Distributor and its prior, present
or potential customers, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company,
which approval shall not unreasonably be withheld and may not be withheld
where CFNB may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge this information by duly
constituted authorities, or when so requested by the Company.
19. Equipment Failures. In the event of equipment failures beyond CFNB's
control, CFNB shall, at no additional expense to the Company, take reasonable
steps to minimize service interruptions but shall have no liability with
respect thereto. CFNB shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment to the extent
appropriate equipment is available.
20. Right to Receive Advice.
(a) Advice of Company. If CFNB shall be in doubt as to any action to be
taken or omitted by it, it may request, and shall receive, from the Company
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If CFNB shall be in doubt as to any question of law
involved in any action to be taken or omitted by CFNB, it may request advice
at its own cost (or which cost shall be borne by the Fund with its prior
consent, which consent will not be unreasonably withheld) from counsel of
its own choosing (who may be counsel for the Advisor, the Distributor, the
Administrator, the Company, or CFNB at the option of CFNB).
(c) Conflicting Advice. In case of conflict between directions or advice
(including Oral or Written Instructions) received by CFNB pursuant to
subparagraph (a) of the paragraph and advice received by CFNB pursuant to
sub-paragraph (b) of this paragraph, CFNB shall be entitled to rely on and
follow the advice received pursuant to sub-paragraph (b) alone.
(d) Protection of CFNB. CFNB shall be protected in accordance with Section
23 below in any action or inaction which it takes in reliance on any directions
or advice (including Oral or Written Instructions) received pursuant to
subparagraphs (a) or (b) of this paragraph which CFNB, after receipt of such
directions or advice, reasonably and in good faith believes to be consistent
with such directions or advice, as the case may be. However, nothing in this
paragraph shall be construed as imposing upon CFNB any obligation (i) to seek
such directions or advice (including Oral or Written Instructions), or (ii)
to act in accordance with such directions or advice when received, unless,
under the terms of another provision this Agreement, the same is a condition
to CFNB's properly taking or omitting to take such action. Nothing in this
subsection shall excuse CFNB when an action or omission on the part
of CFNB constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by CFNB of its duties under this Agreement.
21. Compliance with Governmental Rules and Relations. The Company assumes
full responsibility for insuring that the contents of each prospectus of the
Company complies with all applicable requirements of the 1933 Act, the 1940
Act, and any laws, rules and regulations of governmental authorities having
jurisdiction.
22. Compensation. As compensation for the services rendered by CFNB during
the term of this Agreement, the Company will pay to CFNB such monthly fees as
are set forth in Appendix B attached hereto, as the same may be amended from
time to time by written amendment signed by the company and CFNB.
23. Indemnification. The Company, as sole owner of the Property, agrees to
indemnify and hold harmless CFNB and it nominees from all taxes, charges,
expense, assessments, claims and liabilities (including, without limitation,
liabilities arising under the 1933 Act, the Securities Exchange Act of 1934,
the 1940 Act, and any state and foreign securities and blue sky laws, all as
or to be amended from time to time) and expenses, including (without
limitation) attorneys' fees and disbursements, arising directly or
indirectly (a) from the fact that securities included in the Property are
registered in the name of any such nominee or (b) without limiting the
generality of the foregoing clause (a), from any action or thing which
CFNB takes or does or omits to take or do (i) under the terms of this
agreement, (ii) at the request or on the direction of or in reliance of the
advice of the Company or (iii) upon Oral or Written Instructions, provided,
that neither CFNB nor any of its nominees shall be indemnified against any
liability to the Company or to it Shareholders (or any expenses incident to
such liability) arising out of (x) CFNB's or such nominee's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
under this Agreement or (y) CFNB's own negligent failure to perform its
duties under this Agreement. In order that the indemnification provisions
contained in this Section 23 shall apply, however, it is understood that if
in any case the Company may be asked to indemnify or save CFNB harmless, the
Company shall be fully advised of all pertinent facts concerning the
situation in question, and it is further understood that CFNB will use
all reasonable care to identify and notify the Company concerning any
situation which presents the probability of such a claim for indemnification
against the Company. The Company shall have the option to defend CFNB
against any claim which may be the subject of this indemnification, and in
the event that the Company so elects it will so notify CFNB and thereupon
the Company shall take over complete defense of the claim, and CFNB shall in
such situations initiate no further legal or other expenses for which it shall
seek indemnification under this section 23. CFNB shall in no case confess any
claim or make any compromise in any case in which the Company will be asked
to indemnify CFNB except with the Company's prior written consent. In the
event of any advance of cash for any purpose made by CFNB resulting from
orders or Oral or Written Instructions of the Company, or in the event that
CFNB or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any Property at any
time held for the account of the Company shall be security therefor.
24. Responsibility of CFNB. CFNB shall be under no duty to take any action on
behalf of the Company except as specifically set forth herein or as may be
specifically agreed to by CFNB in writing. In the performance of its duties
hereunder, CFNB shall be obligated to exercise care and diligence to act in
good faith and to use its best efforts within reasonable limits to insure the
accuracy of all services performed under this Agreement, but CFNB shall not
be liable for any action or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of CFNB or reckless
disregard by CFNB of its duties under this Agreement, provided that CFNB
shall be responsible for its own negligent failure to perform its duties
under this Agreement. Without limiting the generality of the foregoing or of
any other provision of this Agreement, CFNB in connection with its duties
under this Agreement shall not be under any duty or obligation to inquire
into and shall not be liable for or in respect of (a) the validity or
invalidity or authority or lack thereof of any Oral or Written Instructions,
notice or other instrument which conforms to the applicable requirements of
this Agreement, if any, and which CFNB reasonably believes to be genuine;
(b) the validity or invalidity of the issuance of any securities included or
to be included in the Property, the legality or illegality of the purchase
of such securities, or the propriety or impropriety of the amount paid
therefor; (c) the legality or illegality of the sale (or exchange) of any
Property or the propriety or impropriety of the amount for which such
Property is sold or exchanged); or (d) delays or errors or loss of data
occurring by reason of circumstances beyond CFNB's control, including acts
of civil or military authority, national emergencies, labor difficulties,
fire, mechanical breakdown except as provided in paragraph 19 hereof, flood
or catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply , nor shall CFNB be under any
duty or obligation to ascertain whether any Property at any time delivered
to or hold by CFNB may properly be held by or for the Company.
25. Collections. All collections of money or other property in respect, or
which are to become part, of the Property (but not the safekeeping thereof
upon receipt by CFNB) shall be at the sole risk of the Company. In any
case in which CFNB does not receive any payment due the Company within a
reasonable time after CFNB has made proper demands for the same, it shall
so notify the Company as soon as reasonably practicable by telephone and
with a follow-up notice in writing, including copies of all demand letters,
any written responses thereto, and memoranda of all oral responses thereto
and to telephonic demands, and await instructions from the Company. CFNB
shall not be obliged to take legal action for collection unless and until
reasonably indemnified to its satisfaction. CFNB shall also notify the
Company as soon as reasonably practicable whenever income due on securities
is not collected in due course.
26. Duration and Termination. This Agreement shall continue until termination
by the Company or CFNB on sixty (60) days written notice. Upon any termination
of this Agreement, pending appointment of a successor to CFNB or vote of the
Shareholders of the Fund to dissolve or to function without a custodian of
its cash, securities or other property, CFNB shall not deliver cash, securities
or other property of the Company to the Company, but may deliver them to a bank
or trust company of its own selection, having an aggregate capital, surplus an
undivided profits, as shown by its last published report of not less than fifty
million dollars ($50,000,000) as a custodian for the Company to be held under
terms similar to those of this Agreement; provided, however, that CFNB shall
not be required to make any such delivery or payment until full payment shall
have been made by the Company on all liabilities constituting a charge on or
against the properties of the Company then held by CFNB or on or against
CFNB and until full payment shall have been made to CFNB of all of its fees,
compensation, costs, and expenses.
27. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to
CFNB at CFNB's address, Central Fidelity National Bank, 1021 East Cary
Street, P.O. Box 27602, Richmond, Virginia 27602, marked for the attention
of the Institutional Custodian Services Department (or its successor); (b)
if to the Company, at the address of the Company; or (c) if to neither of
the foregoing, at such other address shall have been notified to the sender
of any such Notice or other communication. If the location of this sender
of a Notice and the address of the addressee thereof are, at the time of
sending, more than 100 miles apart, the Notice may be sent by first-class
mail, in which case it shall be deemed to have been given three days after
it is sent, or if sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately, and, if
the location of the sender of a Notice and the address of the addresses
thereof are, at the time of sending, not more than 100 miles apart, the
Notice may be sent by first-class mail, in which case it shall be deemed to
have been given two days after it is sent, or if sent by messenger, it shall
be deemed to have been given on the day it is delivered, or if sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately. All postage, cable, telegram, telex
and facsimile sending device charges arising from the sending of a Notice
hereunder shall be paid by the sender.
28. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
29. Amendments. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
30. Delegation. On thirty (30 ) days' prior written notice to the Company,
CFNB may assign its rights and delegate its duties hereunder to any wholly
owned subsidiary of it, provided that CFNB may delegate its duties only to a
bank having the qualifications provided in section 17 (f) of the 1940 Act, and
further provided that CFNB and its delegate shall promptly provide such
information as the Company may request and respond to such questions as the
Company may ask relative to the delegation, including (without limitation)
the capabilities of the delegate.
31. Names. The names "Commonwealth Cash Reserve Fund, Inc." and "Directors of
Commonwealth Cash Reserve Fund, Inc." refer respectively to the Company created
and the Directors, as directors but not individually or personally, acting
from time to time under the Articles of Incorporation dated December 2, 1986,
which is hereby referred to and a copy of which is on file at the office of
the Clerk of the State Corporation Commission of the Commonwealth of Virginia
and at the principal office of the Company. The obligations of "Commonwealth
Cash Reserve Fund, Inc." entered into in the name or on behalf thereof by any
of the Directors, representatives or agents are not made individually, but in
such capacities, and are not binding upon any of the Directors, Shareholders,
or representatives of the Company personally, but bind only the Company
Property, and all persons dealing with any class of shares of the Company
must look solely to the Company Property belonging to such class for the
enforcement of any claims against the Company.
32. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof,
provided that the parties may embody in one or more separate documents their
agreement, if any, with respect to delegated and/or Oral or Written
Instructions. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. This Agreement
shall be deemed to be a contract made in Virginia and governed by Virginia
law. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first
above written.
COMMONWEALTH CASH RESERVE FUND, INC.
BY;
CENTRAL FIDELITY NATIONAL BANK
BY
