SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 []
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 18 [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 []
Amendment No. 20 [ ]
(Check appropriate box or boxes.)
COMMONWEALTH CASH RESERVE FUND, INC.
(Exact Name of Registrant as Specified in Charter)
P.O. BOX 1192
RICHMOND, VIRGINA 23209-1192
(Address of Principal Executive Offices) (Zip Code)
1-800-338-3383
Registrant's Telephone Number, including Area Code
JEFFREY A. LAINE
38 COHASSET LANE
CHERRY HILL, NEW JERSEY 08003
(Name and Address of Agent for Service)
COPY TO:
BARBARA L. FAVA
PUBLIC FINANCIAL MANAGEMENT, INC.
2101 NORTH FRONT ST., BLDG. 3, SUITE 200
HARRISBURG, PA 17110
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective
(check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Omit from the facing sheet reference to the other Act if the Registration
Statement or amendment is filed under only one of the Acts. Include the
"Approximate Date of Proposed Public Offering" only when shares are being
registered under the Securities Act of 1933.
Form N-1A is to be used by open-end management investment companies,
except insurance company separate accounts and small business investment
companies licensed under the United States Small Business Administration,
to register under the Investment Company Act of 1940 and to offer their
shares under the Securities Act of 1933. The Commission has designed Form
N-1A to provide investors with information that will assist them in making
a decision about investing in an investment company eligible to use the
Form. the Commission also may use the information provided on Form N-1A
in its regulatory, disclosure review, inspection, and policy making roles.
A Registrant is required to disclose the information specified by Form
N-1A, and the Commission will make this information public. A Registrant is
not required to respond to the collection of information contained in Form
N-1A unless the Form displays a currently valid Office of Management and
Budget ("OMB") control number. Please direct comments concerning the
accuracy of the information collection burden estimate and any suggestions
for reducing the burden to Secretary, Securities and Exchange Commission,
450 5th Street, N.W., Washington, D.C. 20549-6009. The OMB has reviewed
this collection of information under the clearance requirements of 44 U.S.C.
Section 3507.
COMMONWEALTH CASH RESERVE FUND, INC.
The Commonwealth Cash Reserve Fund (the "Fund") is a money market fund.
The Fund is designed and managed to suit the special cash management needs of
institutions, such as municipalities, other governmental entities,
universities, hospitals and not-for-profit organizations.
Public Financial Management, Inc. ("PFM") serves as the Fund's investment
advisor and administrator.
An investment in the fund is not insured or guaranteed by the federal deposit
insurance corporation or any other government agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon
the accuracy or adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
PROSPECTUS AUGUST 1, 1999
Table of Contents
Risk and Return Summary
Principal Investment Strategies
Principal Risks
Performance and Expenses
Investment Objectives and Policies
Portfolio Management
Permitted Investments
Special Information About Municipal Cash Management
Year 2000
Valuation
Management of the Fund
Investment Advisory and Administrative Arrangements
Distributor and Other Service Providers
How to Purchase and Redeem Shares of the Fund
Dividends, Tax and Related Information
Financial Highlights
Risk and Return Summary
Investment Objective and Principal Investment Strategies
Commonwealth Cash Reserve Fund (the "Fund") is a money market fund. The Fund
seeks to provide its shareholders with as high current income as is consistent
with stability, safety of principal and liquidity and to maintain a stable net
asset value of $1.00 per share. To do so, the Fund maintains a dollar-
weighted average portfolio maturity of 90 days or less and invests only in
securities that have remaining maturities of thirteen months or less.
The Fund invests exclusively in high-quality, short-term money market
instruments. These instruments include:
* Unconditional Obligations of the United States Government or it agencies.
* High quality debt obligations of U.S. Companies.
* Obligations of Financial Institutions
* Municipal Obligations
Except for obligations of the U.S. Government or muncipalities, all securities
purchased by the Fund -- or the companies that issues securities purchased by
the Fund -- must be rated of high quality by Standard & Poor's and by
Moody's Investor Services, Inc. In addition, all instruments acquired by
the Fund are instruments in which municipalities and other government
entities organized under the laws of the Commonwealth of Virginia are
permitted to invest.
Principal Risks
Notwithstanding the high-quality securities in which the Fund exclusively
invests, an investment in a money market fund such as the Fund is subject
to certain basic risks.
One of these is rlated to interest rates -- the chance that falling short-
term interest rates will cause the Fund's income to decline.
A second is "management risk" -- the possibility that securities selected by
the Fund's investment adviser will cause the Fund to underperform other
money market funds.
Finally, the Fund is subject to "credit risks" -- the risk that the issuer of
a security held by the Fund will fail to pay interest and principal in a
timely manner. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the Fund.
Performance
The following information illustrates how the Fund's performance has varied
over time. The bar chart depicts the change in performance from year to
year. The table below the bar chart illustrates the fund's average annual
return for the periods indicated. Keep in mind that the information below
is calculated on a calendar year basis; corresponding information set
forth in the Financial Highlights portion of this Prospectus is calculated
based on the Fund's fiscal year.
[Required Bar Chart To Be Supplied By Amendment.]
Annual Total Returns for Periods Ended 12/31
* Before ______, 1994, the Fund was managed by another investment adviser.
The Fund's return for the six-month period ended June 30, 1999 is ________%.
During the period shown in the bar chart, the highest return for a calendar
quarter was _____% (quarter ended _______) and the lowest return for a
quarter was ______% (quarter ended __________). The Fund's yield for
the seven days ended December 31, 1998 was _____%. For the Fund's current
yield, call 1-800- ______ _______.
Fund Expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund. It is based upon gross expenses, without taking
into account any fees that may have been waived by the Fund's investment
adviser or other service providers.
Management Fees (1) %
12b-1 Fees (2) %
Other Expenses %
Total Fund Operating Expenses (3) %
(1) Management fees include both the advisory and administration fees payable
to PFM. Figures shown do not reflect the voluntary waiver by PFM for the
year ended March 31, 1999. PFM can terminate this voluntary waiver at any
time at its sole discretion. After giving effect to this fee waiver, the
Management Fees paid by the Fund during the period shown were ______%
(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." Figures shown in the table above do not
reflect certain voluntary fee waivers. After giving effect to such waivers,
12-b1 fees would be ________%.
(3) The Total Fund Operating Expenses in the table above do not feflect
voluntary waivers for the fiscal year ended March 31, 1999. Taking such fee
waivers into account, the ratio of expenses to average daily net assets
would be ________%.
Expense Example. This example allows you compare the cost of investing in
the fund to the cost of investing in other mutual funds. It is based on the
following assumptions: $10,000 initial investment; 5% total return on your
investment each year; Fund operating expenses remain as shown in the table
above throughout the period; and redemption at the end of each time period.
1 year 3 years 5 years 10 years
This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
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 may not be changed without the approval of the Fund's
outstanding voting securities.
To achieve its investment objective, the Fund is permitted to purchase the
instruments described in this Prospectus. The Fund will invest only when
PFM is satisfied that the credit risk presented by any investment is
minimal. Detailed information about these investments is in the Statement
of Additional Information.
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 the Federal
National Mortgage Association, Federal Home Loan Banks, Federal Farm Credit
System, and Government National Mortgage Association.
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. All commercial paper purchased by
the Fund will 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.
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.
All corporate debt obligations purchased by the Fund will be rated at
least Aa by Moody's and a rating of at least AA by S&P. The Fund may
purchase variable and floating rate instruments.
Obligations of Banks. The Fund may purchase bankers' acceptances and
certificates of deposit.
Bankers acceptances 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. Certificates of deposit are
securities evidencing deposits in domestic banks and domestic offices of
foreign banks.
Bank obligations will be considered for purchase by the Fund only if the
securities are rated at least A-1 by Standard & Poor's and P-1 by Moody's
Investor Services, Inc., in the case of securities with maturities of one
year or less. A rating of at least AA by Standard & Poor's and Aa by
Moody's Investor Service, Inc., will be required before any bank obligation
with a remaining maturity of over one year will be considered for purchase
by the Fund. The Fund will not invest in any bank obligation with more
than thirteen months remaining until maturity.
Municipal Obligations. The Fund may invest in the stocks, bonds, notes and
other evidences of indebtedness of municipal entities including any state of
the United States or any city, county, town or district situated in any one
of the states of the United States upon which there is no default. See
"Investment Policies" in the Additional Statement for a discussion
of additional criteria that municipal obligations must meet to be eligible
for investment by the Fund.
Repurchase Agreements. The Fund may enter into collateralized repurchase
agreements. Repurchase agreements are transactions in which a Fund
purchases securities and simultaneously commits to resell those securities
to the seller at an agreed-upon price on an agreed-upon future date. The
repurchase price reflects a market rate of interest and is collateralized
by cash or securities.
If the seller of the securities underlying a repurchase agreement fails to pay
the agreed resale price on the agreed delivery date, the Fund may incur
costs in disposing of the collateral and my experience losses if there is
any delay in its ability to do so.
Special Information about Cash Management for Municipalities and Institutions
Although suitable for a range of institutional investors, the Fund's
investment objectives and strategies are consistent with the special cash
management needs 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.
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, hospitals, and not-for-profit
organizations 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 recordkeeping 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 to comply with such provisions.
Year 2000
[to be supplied]
Valuation. The Fund values its portfolio based on the amortized cost method of
valuation in accordance with rules adopted by the SEC. This valuation method
permits that Fund to establish the value of each security held in the Fund's
portfolio based on its cost to the Fund and to assume 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. Using this method, the Fund determines the
net asset value of its portfolio as of 11:00 a.m., Eastern Time, Monday
through Friday exclusive of federal holidays, except Good Friday (a
"Business Day"). The Fund's net asset value per share -- the price at
which shares of the Fund are purchased and redeemed -- is determined by
dividing the value of the net assets of the Fund by the total number
of shares outstanding.
Management of the Fund
Board of Directors and Advisory Board. The Fund's Board of Directors has
overall responsibility for the business and affairs of the Fund. The Board
of Directors has engaged 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 shareholders of the Fund.
The function of the Advisory Board is 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 Advisors 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, 1999, PFM had more than $9.3
billion in funds under management. PFM is also investment manager for
the Pennsylvania Local Government Investment Trust, the New Jersey
Asset & 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, 1999, PFM received advisory fees equal to .07 of 1% 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, 1999 (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
Administration 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 oversees the
preparation of tax returns, reports to shareholders and Directors of the
Fund, and filings with the Securities and Exchange Commission and state
"Blue Sky" authorities; and coordinates 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,
1999, PFM waived its fees and received no compensation under the
Administration Agreement. 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.
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, 1999, the Fund paid
$25,300, 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
Wachovia Bank, N.A., 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, 1999, PFM received no reimbursement for its expenses.
How to Purchase and Redeem Shares of The Fund
Purchases. 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. Shares of the Fund are available to institutions, such
as municipalities, other governmental entities, universities, hospitals and
not-for-profit organizations ("Investors").
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:
Wachovia Bank, N.A.
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:
Wachovia 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.
Redemptions. 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.
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.
Ernst & Young LLP, located at 99 Wood Avenue South, Iselin, New Jersey 08830,
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.
Financial Highlights
The following financial highlights have been audited by ____________- 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
_____________ LLP, in the Fund's 1999 Annual Report to Shareholders.
<TABLE>
<CAPTION>
Financial Highlights(a)
Fiscal Year Ending March 31
For a Share Outstanding
Throughout Each Year<F1>
1999 1998 1997 1996 1995 1994 1993<F3> 1992<F3> 1991<F3>
<S> <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
BEGINNING OF THE YEAR
INVESTMENT ACTIVITIES
Net Investment Income 0.055 0.053 0.058 0.049 0.025 0.035 0.057 0.088 0.086
Net Realized and Unrealized
Gain (Loss) on Investments _ _ _ _ _ _ _ _ _
Total From Investment
Activities 0.055 0.053 0.058 0.049 0.025 0.035 0.057 0.088 0.086
DISTRIBUTIONS
Net Investment Income (0.055) (0.053) (0.058) (0.049) (0.025) (0.035) (0.057) (0.088) (0.086)
Realized Capital Gains _ _ _ _ _ _ _ _ _
Total Distributions (0.055) (0.053) (0.058) (0.049) (0.025) (0.035) (0.057) (0.088) (0.086)
NET ASSET VALUE, $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
END OF YEAR
Total Return 5.68% 5.43% 5.90% 5.01% 2.48% 3.59% 5.81% 9.11% 10.67%
Ratios/Supplemental Data
Net Assets (in thousands) $120,359 $116,183 $102,614 $130,940 $69,422 $74,081 $7,831 $8,973 $33,681
Ratio of Expenses to
Average Net Assets <F2> 0.15% 0.15% 0.15% 0.15% 0.70% 0.63% 0.60% 0.59% 0.50%
Ratio of Net Investment
Income to Average Net
Assets <F2> 5.54% 5.31% 5.78% 4.91% 2.49% 2.91% 4.57% 7.52% 8.57%
<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>Certain fees were voluntarily waived in fiscal years ended March 31, 1999,
1998, 1997, 1996, 1995, 1992 and 1991. If these fees had not been waived,
the ratio of expenses to average net assets would have been .25%, .28%,
.29%, .29%, 1.10% and .97%, respectively, and the ratio of net investment
income to average net assets would have been 5.44%, 5.18%, 5.64%, 4.77%,
4.07%, and 7.14% respectively, for the fiscal years ended March 31, 1998,
1997, 1996, 1995, 1992 and 1991.
<F3>Restated
</FN>
</TABLE>
[BACK COVER]
FOR MORE INFORMATION
Additional information about the Fund's investments is available in the Fund's
semi-annual and annual reports to shareholders. The Fund's annual report
contains a discussion of the market conditions and investment strategies
that affected the fund's performance over the past year.
You may want to read the statement of additional information (SAI) for more
information on the Fund and the securities it invests in. The SAI is
incorporated into this prospectus by reference, which means that it is
legally considered to be part of this prospectus.
You can get free copies of the semi-annual and annual reports and the SAI,
request other information and get answers to your questions by calling
the Fund at 1-800-338-3383 or by writing to Commonwealth Cash Reserve fund,
Inc. P.O Box 1192, Richmond, VA 23209-1192.
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 at 800-338-3383.
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.
Text-only versions of all fund documents can be viewed online or downloaded
from the SEC's website at www.sec.gov. You can also obtain copies by
visiting the SEC's Public Reference Room in Washington, DC, calling (800)
SEC-0330, or by sending your request and the appropriate fee to the SEC's
public reference section, Washington DC 20549-6009.
The Fund's Investment Company Act File number is 811-4933.
Commonwealth Cash Reserve Fund, Inc.
Prospectus
STATEMENT OF ADDITIONAL INFORMATION
COMMONWEALTH CASH RESERVE FUND, INC.
P.O. Box 1192
Richmond, Virginia 23209-1192
1-800-338-3383
This Statement of Additional Information ("Statement of Additional Information")
is not a prospectus and is only authorized for distribution when preceded or
accompanied by the Commonwealth Cash Reserve Fund, Inc. Prospectus (the
"Prospectus") dated August 1, 1999. 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
INVESTMENT RESTRICTIONS
ADDITIONAL INFORMATION ABOUT MANAGEMENT ARRANGEMENTS
YIELD INFORMATION
VALUATION
GENERAL INFORMATION
The date of this Additional Statement is August 1, 1999.
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.
Certificates of Deposit - The Fund is authorized to invest in negotiable
certificates of deposits and negotiable bank deposits of domestic banks and
domestic offices of foreign banks with a rateing of at least A-1 by Standard
& Poor's and P-1 by Moody's Investor Services, Inc., for maturities of one
year or less, and a rating of at least AA by Standard & Poor's and Aa by
Moody's Investor Service, Inc., for maturities over one year and not
exceeding thirteen months.
Municipal Obligations - The Fund may invest in the stocks, bonds, notes and
other evidences of indebtedness of municipal entities including any state of
the United States or any city, county, town or district situated in any one
of the states of the United States upon which there is no default. See
"Investment policies" in the Additional Statement for a discussion of
additional criteria that municipal obligations must meet to be eligible for
investment by the Fund.
Additional Requirements for Municipal Obligations - The Fund may only purchase
municipal obligations that are legal investments for governmental units in
Virginia under Section 2.1-328 of the Code of Virginia, as it may be amended
from time to time. The following municipal obligations are permitted
investments for the Fund.
Obligations of the Commonwealth - Stocks, bonds, notes and other evidences of
indebtedness of the Commonwealth of Virginia, and those unconditionally
guaranteed as to the payment of principal and interest by the Commonwealth
of Virginia.
Obligations of Other States - Stocks, bonds, notes and other evidences of
indebtedness of any state of the United States upon which there is no default
and upon which there has been no default for more than ninety days; provided,
that within the twenty fiscal years next preceeding the making of such
investment, such state has not been in default for more than ninety days in
the payment of any part of principal or interest of any debt authorized by
the legislature of such state to be contracted.
Obligations of Virginia Governmental Units - Stocks, bonds, notes and other
evidences of indebtedness of any county, city, town, district, authority or
other public body in the Commonwealth of Virginia upon which there is no
default; provided, that if the principal and interest be payable from revenue
or tolls and the project has not been completed, or if completed, has not
established an operating record of net earnings available for payment of
principal and interest equal to estimated requirements for that purpose
according to the terms of the issue, the Fund will invest in such
instruments only when PFM is satisfied that the credit risk with respect
to the issuer is minimal.
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 - 1991. Member International City Management
Association; Virginia Local Government Management Association, Government
Finance Officers Association; Past President Virginia Government Finance
Officers Association. Mr. Dodd is 72 years old.
ROBERT J. FAGG, JR., Director, 1605 Westcastle Drive, Richmond, Virginia 23233
Director of the Annual Giving Program, Virginia Commonwealth University, 1981-
1998, 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 58 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 41 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 54 years old.
ROBERT R. SEDIVY, Director, 3804 Wellesley Terrace Circle, Richmond,
Virginia 23233
Vice President-Finance and Treasurer, Collegiate School, Richmond, Virginia,
1988 - present; Deputy Director, Science Museum of Virginia, 1986 - 1988;
Administrator, Science Museum of Virginia, 1985 - 1986; Treasurer, Trinity
College, Washington, D..C., 1983 - 1985; Director of Resource Management,
Loyola College, Baltimore, Maryland, 1978 - 1983. Member Virginia Association
of Independent Schools, Financial Officers Group. Mr. Sedivy is 53 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 LLP. Mr. Anderson is 40 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, 1999, such fees totaled $6,000.
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, 1999, nor does the Fund
intend to pay any remuneration to any officer during the current fiscal year.
McGuire Woods Battle & Boothe LLP, the law firm of Arthur E. Anderson,
II, the Fund's Secretary, received an aggregate of $11,417 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 $26,664 of which
$13,736 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 $ 2,000 $ 2,000
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-
-------- --------
$ 6,000 $ 6,000
-------- --------
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, 1999.
LARRY W. DAVENPORT, 1944 Ravencroft Lane, Virginia Beach, Virginia 23454
Director of Finance, Southeastern Public Service Authority, Virginia, 1998 -
Present; 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 52 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 53 years old.
DENNIS W. KERNS, 11800 Marquis Terrace, Richmond, Virginia 23233
Director of Finance, Culpeper County, 1997-Present, 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 62 years old.
J. JEFFREY LUNSFORD, 154 Pinewood Drive, Mineral, Virginia 23117.
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 45 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 42 years old.
ROGER W. MITCHELL, JR., 9461 Jamesons Mill Road, Culpeper, VA 22701
Director of Finance/Treasurer, Town of Culpeper, 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 38 years old.
CLARENCE A. ROBINSON, 1401 Prince Edward Street, Fredericksburg, VA 22401
Director of Fiscal Affairs, City of Fredericksburg, 1986 - present; Business
Manager, Germanna Community College, Locust Grove, VA, 1985 - 1986; Director
of Accounting, Baltimore City Public Schools, Baltimore, MD, 1980 - 1985;
Assistant to Financial Director, Howard University Hospital, Washington, D.C.,
1979 - 1980. Mr. Robinson is 51 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 June 30, 1999:
[to be supplied by amendment]
Number of Share
Investor Shares Percentage
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.
Advisor
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 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 Board of Directors, including a majority of the members of the Board
who are not "interested directors", approved a continuance of the Advisory
Agreement for an additional one year period at a meeting on October 22, 1998.
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, 1999, 1998 and 1997, fees were payable to
PFM in the amounts of $159,097, $140,376 and $111,792, respectively, of which
$63, 598, $56,216 and $66,645, respectively were waived. Fees for fiscal years
ended March 31, 1999, 1998 and 1997 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.
PFM is wholly-owned by the managing directors of PFM. PFM was formerly a
wholly-owned subsidiary of PFM Acquisition Corp., a Pennsylvania corporation
formed in 1995 for the purpose of aquiring PFM from Marine Midland Bank, N.A.
PFM Acquisition Corp. was owned by the managing directors of PFM and was
dissolved on Janury 1, 1998.
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 22, 1998. 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, 1999, 1998 and 1997 fees of $66,291,
$58,490 and $46,580, respectively, were payable to PFM; however, PFM
voluntarily waived all administration fees.
Fund Expenses
All expenses not borne by PFM under the Advisory Agreement or the
Administration Agreement are paid by the Fund. Examples of such Fund expenses
include the cost of preparing, printing and distributing its prospectuses and
reports to shareholders; legal and audit expenses, costs and expenses of any
custodian, shareholder servicing agent or bookkeeping (accounting) agent; share
issuance and redemption costs; certain printing costs, registration costs and
expenses of the Fund and its shares under federal and state securities laws,
interest, taxes and non-recurring expenses including litigation. Since PFM
keeps the Fund's financial records, PFM computes the Net Asset Value per share
at PFM's expense. The expenses under the Fund's Distribution Plan are paid by
the Fund. See "Distribution Plan."
DISTRIBUTION 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, 1999, 1998 and 1997, the Fund paid $26,664,
$25,300 and $22,670 respectively, pursuant to the Distribution Plan. All of
these amounts were paid in accordance with the Distribution Agreement,
described below, to Commonwealth Financial Group, Inc., of which Jeffrey A.
Laine, the Fund's President, is the President and sole shareholder.
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
22, 1999, 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, 1999 was 4.80%
and its effective yield for that period was 4.92%
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;
* yields on investment pools that operate in a manner consistent with the SEC's
Rule 2a7 of the Investment Company Act.
* 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
Ernst & Young 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, 1999
Statement of Operations for the year ended March 31, 1999
Statements of Changes in Net Assets for each of the years ended March 31, 1999
and March 31, 1998
Financial Highlights
Notes to Financial Statements
PART C
OTHER INFORMATION
Item 23. Exhibits
Subject to General Instruction D regarding incorporation by reference and
rule 483 under the Securities Act [17CFR 230.483], file the exhibits listed
below as part of the registration statement. Letter or number the exhibits
in the sequence indicated and file copies rather than originals, unless
otherwise rerquired by rule 483. Reflect any exhibit incorporated by
reference in the list below and identify the previously filed document
containing the incorporated material.
(a) Articles of Incorporation. The Fund's current articles of incorporation,
charter, declaration of trust or corresponding instruments and any related
amendment.
Copy of Articles of Incorporation is incorporated herein by
reference to Exhibit (1) of Registrant's Registration Statement
filed on December 11, 1986.
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.
(b) By-laws. The Fund's current by-laws or corresponding instruments and
any related amendment.
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.
(c) Instruments Defining Rights of Security Holders. Instuments defining
the rights of holders of the securities being registered, including the
relevant portion of the Fund's articles of incorporation or by-laws.
Not applicable.
(d) Investment Advisory Contracts. Investment advisory contracts relating
to the management pf the Fund's assets.
Investment Advisory Agreement between the Registrant
and Public Financial Management, Inc. dated November 30, 1995.
Administration Agreement between the Registrant and
Public Financial Management, Inc. dated November 30, 1995.
(e) Underwriting Contracts. Underwriting or distribution contracts between
the Fund and a principal underwriter, and agreements between principal
underwriters and dealers.
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.
(f) Bonus or Profit Sharing Contracts. Bonus, profit sharing, pension, or
similar [*302] contracts or arrangements in whole or in part for the benefit
of the Fund's directors or officers in their official capacity. Describe in
detail any plan not included in a formal document.
Not Applicable.
(g) Custodian Agreements. Custodian agreements and depository contracts
under section 17(f) [15 U.S.C. 80a-17 (f)] concerning the Fund's securities
and similar investments, including the schedule of renumeration.
Form of Custody Agreement between the Registrant and Wachovia Bank
N.A. (formerly Central Fidelity National Bank dated March 15, 1994
is incorporated by reference to Exhibit (2) of Registrant's
Post-Effective Amendment No. 16, filed on July 31, 1997.
(h) Other Material Contracts. Other material contracts not made in the
ordinary course of business to be performed in whole or in part on or after
the filing date of the registration statement.
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.
(i) Legal Opinion. An opinion and consent of counsel regarding the
legality of the securities being registered, stating whether the securities
will, when sold, be legally issued, fully paid, and nonassessable.
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.
(j) Other Opinions. Any other opinions, appraisals, or rulings, and
related consents relied on in preparing the registration statement and
required by section 7 of the Securities Act [15 U.S.C. 77g].
[auditors report and consent to be filed by amendment.]
(k) Omitted Financial Statements. Financial statements omitted from
Item 22.
(l) Initial Capital Agreements. Any agreements or understandings made
in consideration for providing the initial capital between or among the Fund,
the underwriter, adviser, promoter or initial shareholders and written
assurances from promoters or initial shareholders that purchases were
made for investment purposes and not with the intention of redeeming or
reselling.
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.
(m) Rule 12-b-1 Plan. Any plan entered into by the Fund under rule 12b-1
and any agreements with any person relating to the plan's implementation.
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.
(n) Financial Data Schedule. A Financial Data Schedule meeting the
requirements of rule 483 under the Securities Act.
(o) Rule 18f-3 Plan. Any plan entered into by the Fund under rule 18f-3,
any agreement with any person relating to the plan's implementation, and
any amendment to the plan or an agreement.
Not Applicable
Item 24. Persons Controlled by or Under Common Control with Registrant.
None.
Item 25. 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 26. 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 27. 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 28. 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 LLP (Registrant's Articles
of Incorporation, Bylaws and corporate records).
(c) Commonwealth Financial Group, Inc. (records relating to its
functions as distributor).
(d) Wachovia Bank, N.A. (records relating to its
function as custodian).
Item 29. 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 30. 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(a) 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 1st day of June, 1999.
COMMONWEALTH CASH RESERVE FUND, INC.
(Registrant)
By /s/ Jeffrey Laine
Jeffrey Laine, President
(Principal Executive officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
/s/ Jeffrey Laine Director and President May 28, 1999
Jeffrey Laine (Principal Financial
Officer)
/s/ Martin Margolis Director and June 1, 1999
Martin Margolis Vice President
/s/ Robert J. Fagg, Jr. Director May 28, 1999
Robert J. Fagg, Jr.
__________________ Director
Giles Dodd
__________________ Director
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.18
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. 18
to Form N-1A Registration Statement
Ref. Description of Exhibit
1) Consent of Independent Accountants
[To be filed by amendment.]
