COMMONWEALTH
CASH RESERVE FUND
SEMI-ANNUAL REPORT
September 30, 2000
Commonwealth Cash Reserve Fund, Inc.
P.O. Box 1192
Richmond, Virginia 23209-1192
(800) 338-3383
Message to our Shareholders
We are pleased to present the semi-annual report for the Commonwealth Cash
Reserve Fund (the Fund) for the period ended September 30, 2000.
The U.S. economy began the period continuing the rapid pace of expansion
experienced over the last few years. Real Gross Product increased 5.6% during
the second quarter of 2000 bringing the year-over-year gain in Gross Domestic
Product to a sizzling 6.1%. The continuance of very brisk growth, expecially
in the beginning of the second quarter, prompted the Federal Reserve to
implement a 1/2% rise in the Federal Funds rate to 6.50%, the sixth increase in
this benchmark rate since June 30, 1999. A variety of economic reports and
indicators over the end of the second quarter and through the third quarter of
2000 finally pointed to a slowing from the previous months' rapid pace of
economic growth. At both their June 28 and August 22 meetings, the FOMC opted
to leave short-term rates unchanged at 6.50%. A decision that had been widely
anticipated by the market.
While inflation clearly has risen over the last three years, the less volatile
core rate of inflation, which excludes food and energy, has remained fairly
tame over this period. Still the Federal Reserve has maintained a bias toward
possible future "inflation tendencies" at their recent meetings.
Interest rates during the period were very volatile, rising sharply in the
beginning of the period to the highest levels in over five years. When
economic reports began showing an apparent slowdown occurring in June and
July, intermediate and long-term interest rates began a 4-month decline from
the high reached in May, with interest rates ending September at the lowest
level of the year. The two-year US Treasury Note for instance began the period
at 6.50%, rose to a high of 6.90% and ended September at a yield of 6.00%.
Short-term interest rates, after rising to the peaks set in May, stabilized
around the Federal Funds rate of 6.50%. The one-month to one-year yield curve
is virtually flat at 6.50%.
Many local government investors have turned to the Fund to provide stable and
increasing short-term returns and daily liquidity. Because a money market
mutual fund such as the Commonwealth Cash Reserve Fund can invest only short
term investment securities with terms to maturity of no more than thirteen
months, the return will be relatively stable. Thus investors in the Fund
enjoyed strong returns during the fiscal year period as interest rose sharply.
The Commonwealth Cash Reserve Fund will continue its tradition of care and
prudence in the management of local government investments. We look forward
to the continued opportunity to meet your investment needs.
Commonwealth Cash Reserve Fund, Inc.
Statement of Net Assets
September 30, 2000
Face
Amount Maturity Value
(000) Rate Date (000)
BANKER'S ACCEPTANCES (18.1%)
Toronto Dominion Bank 4,000 6.52% 10/2/00 $3,999
Fleet National Bank 3,500 6.52% 10/3/00 3,499
Rabobank (NY) 5,000 6.51% 10/12/00 4,990
Toronto Dominion Bank (NY) 3,000 6.53% 10/13/00 2,994
Fleet Boston Bank 2,000 6.87% 10/17/00 1,994
Chase Manhattan Bank 3,000 6.52% 10/19/00 2,990
Mellon Bank 7,000 6.53% 10/19/00 6,977
Fleet National Bank 3,500 6.52% 10/26/00 3,484
Bank of America Corporation 5,000 6.63% 3/13/01 4,855
TOTAL BANKER'S ACCEPTANCES 35,782
CERTIFICATES OF DEPOSIT (38.4%)
Barclays (NY) 10,000 6.52% 10/10/00 10,000
Dresdner Bank, AG (NY) 9,000 6.53% 10/10/00 9,000
CIBC Bank 10,000 6.52% 10/16/00 10,000
Societe Generale 6,000 6.53% 10/23/00 6,000
CITI Bank NA 9,000 6.54% 10/27/00 8,999
Bank of Montreal (CHIC) 3,000 6.57% 11/2/00 3,000
Bayerische Landesbank 5,000 6.60% 12/11/00 5,000
Societe Generale 4,000 6.72% 1/18/01 3,998
Deutsche Bank (NY) 3,000 6.55% 1/22/01 3,000
Toronto Dominion (NY) 3,000 6.74% 2/07/01 2,999
Dresdner Bank, AG (NY) 1,000 6.70% 3/01/01 1,000
Bayerische Landesbank 5,000 6.69% 3/07/01 4,998
Commerzbank, AG (NY) 2,000 6.80% 4/20/01 2,000
Commerzbank, NA (NY) 2,000 6.85% 4/27/01 2,000
Commerzbank, AG 3,950 6.90% 7/23/01 3,954
TOTAL CERTIFICATES OF DEPOSIT 75,948
COMMERCIAL PAPER (33.8%)
Associates Corp. of NA 9,000 6.53% 10/5/00 8,994
Centric Capital Corp. 2,000 6.55% 10/6/00 1,998
Sweetwater Capital Corp. 4,000 6.55% 10/6/00 3,996
Sweetwater Capital Corp. 2,000 6.55% 10/6/00 1,998
Prudential Funding Corp. 10,000 6.53% 10/10/00 9,984
Ford Motor Credit Corp. 10,000 6.54% 10/18/00 9,969
Salomon Smith Barney 10,000 6.55% 10/19/00 9,967
Sweetwater Capital Corp. 3,000 6.57% 10/23/00 2,988
Daimler Chrysler NA Holdings 9,000 6.55% 10/25/00 8,961
General Electric Capital Corp. 8,000 6.54% 10/25/00 7,965
TOTAL COMMERCIAL PAPER 66,820
CORPORATE NOTE (6.3%)
Wachovia Bank NA Bank Note 10,000 6.41% 10/16/00 10,000
Associates Corp. of NA 1,000 6.63% 1/15/01 998
Wal-Mart Stores, Inc. 1,500 7.02% 4/01/01 1,512
TOTAL CORPORATE NOTE 12,510
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (2.6%)
Federal Home Loan Bank Note 1,700 6.68% 4/26/01 1,698
Federal Home Loan Mortgage
Corporation Discount Notes 3,330 6.46% 10/10/00 3,325
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS 5,023
TOTAL INVESTMENTS (99.2%) (Cost $196,083 $196,083
OTHER ASSETS IN EXCESS OF OTHER LIABILITIES (0.8%) 1,527
NET ASSETS (100%)
Applicable to 197,610,078 outstanding shares of beneficial
interest(500,000,000 shares authorized - no par value) $197,610
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE $1.00
AT SEPTEMBER 30, 2000, NET ASSETS CONSISTED OF:
Amount
(000)
Paid in Capital $197,610
Undistributed Net Investment Income -
Accumulated Net Realized Gain -
Unrealized Appreciation (Depreciation) of
Investments -
NET ASSETS $197,610
The accompanying notes are an integral part of these financial statements.
Statement of Operations
SIX MONTHS ENDED SEPTEMBER 30,2000
(000)
INVESTMENT INCOME
Interest $5,553
EXPENSES
Management Fees 144
Custodian 17
Distribution Fees 17
Legal 5
Audit 5
Directors Fees and Expenses 5
Insurance, Registration Fees and Other 10
Total Expenses 203
Expenses waived by Investment Advisor and Distributor (75)
Net Expenses 128
Net Investment Income 5,425
Net Increase in Net Assets
Resulting From Operations $5,425
Statements of Changes in Net Assets
4/1/00 4/1/99
to to
9/30/00 3/31/00
(000) (000)
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS
Net Investment Income $ 5,425 $ 7,615
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income (5,425 (7,615)
CAPITAL SHARE TRANSACTIONS
(at $1.00 per share)
Issued 330,105 403,237
Distributions Reinvested 5,425 7,615
Redeemed (273,629) (388,875)
Net Increase from Capital Share Transactions 61,901 21,977
Total Increase in Net Assets 61,901 21,977
NET ASSETS
Beginning of Year 135,708 113,731
End of Year $197,609 $135,708
The accompanying notes are an integral part of these financial statements.
Financial Highlights
Six Months
Ended Year Ended March 31,
For a Share Outstanding 9/30/00 2000 1999 1998 1997
Throughout Each Year
NET ASSET VALUE,
BEGINNING OF YEAR $1.000 $1.000 $1.000 $1.000 $1.000
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.032 0.053 0.053 0.055 0.053
TOTAL FROM INVESTMENT
OPERATIONS 0.032 0.053 0.053 0.055 0.053
LESS: DISTRIBUTIONS
Net Investment Income (0.032) (0.053) (0.053) (0.055) (0.053)
TOTAL DISTRIBUTIONS (0.032) (0.053 (0.053 (0.055) (0.053)
NET ASSET VALUE,
END OF YEAR $1.000 $1.000 $1.000 $1.000 $1.000
Total Retun 6.53% 5.43% 5.40% 5.68% 5.43%
Ratios/Supplemental Data
Net Assets,
End of Period (000) $197,609 $135,708 $113,731 $120,359 $116,183
Ratio of Expenses to
Average Net Assets* 0.15% 0.15% 0.15% 0.15% 0.15%
Ratio of Net Investment
Income to Average Net
Assets* 6.38 5.34 5.28 5.54 5.31%
*Certain fees were voluntarily waived for the six months ended September 30,
2000, and in the fiscal years ended March 31, 2000, 1999, 1998, 1997.
If these fees had not been waived, the ratio of expenses to average net
assets would have been .24% for the six months ended September 30, 2000,
and .25%, .25%,.25%, and .28% respectively for the fiscal years ended
March 31, 2000, 1999, 1998, and 1997. The ratio of net investment income
to average net assets would have been 6.29% for the six months ended
September 30, 2000, and 5.24%, 5.18%, 5.44%, and 5.18%, for the fiscal
years ended March 31, 2000, 1999, 1998, and 1997, respectively.
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
ORGANIZATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. The Commonwealth Cash Reserve Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as a diversified open-end investment
company and was organized as a Virginia corporation on December 8, 1986.
The Fund provides comprehensive investment management to counties, cities,
towns, political subdivisions, public bodies. The Fund invests in
short-term debt instruments issued by the U.S. Government or
its agencies and instrumentalities and by companies primarily operating
in the banking industry; the issuers' abilities to meet their obligations
may be affected by economic developments in such industry.
B. The following significant accounting policies of the Fund are in
conformity with generally accepted accounting principles. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the amounts and disclosures reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
The significant accounting policies are as follows:
1. Securities held are stated at amortized cost, which approximates fair
value at September 30, 2000. It is the Fund's policy to compare
amortized cost and fair value of securities weekly and as of the last
business day of each month.
2. Security transactions are accounted for on the trade date. Costs
used in determining realized gains and losses on sales of investment
securities are those of specific securities sold. Interest income is
recorded using the accrual method. Discounts and premiums are accreted
and amortized, respectively, to interest income over the lives of the
respective securities.
3. Dividends from net investment income are declared daily and reinvested
in each participant's account by the purchase of additional shares of the
Fund on the last business day of each month.
4. The Fund invests cash in repurchase agreements secured by U.S.
Government and Agency obligations. Securities pledged as collateral for
repurchase agreements are held by the Fund's custodian bank until
maturity of the repurchase agreement. Provisions of each agreement
require that the market value of the collateral including accrued
interest thereon, is sufficient in the event of default; however, in
the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of of the collateral may be subject to legal
proceedings. As of September 30, 2000, there were no repurchase
agreements held by the Fund.
5. The Fund intends to continue to qualify as a "regulated investment
company" under the Internal Revenue Code and distribute all of its
taxable income. Accordingly, no provision for federal income taxes is
required in the financial statements. At September 30, 2000, the cost
of securities for federal income tax purposes is the same as the amounts
reported for financial reporting purposes.
Fees and Charges
C. Public Financial Management, Inc. ("PFM"), an investment advisory firm,
provides investment advisory, administration, and transfer agent services
to the Fund, pursuant to separate agreements with the Fund expiring
November 21, 2001. Fees for investment advisory services are calculated
at an annual rate of .12% of the average daily net assets of the Fund up
to $200 million, .10% on the next $200 million, .09% on the next $200
million and .08% on such assets in excess of $600 million. Fees for the
administration services are calculated at an annual rate of .05% of
average daily net assets. Fees for transfer services are limited to
out-of-pocket expenses attributable to the performance of duties under the
transfer agency agreement. There have been no transfer agent fees charged
for six months ended September 30, 2000. PFM waived $71,700 of its
fees under the advisory, administration, and transfer agency agreements so
that the aggregate operating expenses of the Fund for the Fund's six
months ended September 30, 2000 would not exceed .15% of the Fund's
average net assets. Fees paid to PFM, after such waiver for the year
represented .09% of average net assets.
The Fund has adopted an Amended and Restated Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1 of 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. Commonwealth Financial Group, Inc. (the "Distributor")
serves as the Fund's Distributor pursuant to a distribution agreement with
the Fund. The President and a director of the Fund is the President and
sole shareholder of the Distributor. The Distribution Plan 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. Any payments made under the Plan shall be made only as
determined from time to time by the Board of Directors. For the six
months ended September 30, 2000, total payments made to the Distributor
under the Plan were $13,600 after waiving fees of $3,000.
During the six months ended September 30, 2000, the Fund paid approximately
$3,900 for legal services of a law firm of which the Secretary of the Fund
is a Partner.
D. Under Governmental Accounting Standards ("GAS"), state and local
governments, including school districts and other municipal entities,
are required to classify their investments, excluding pools managed by
governments or investment funds similar to the Fund in prescribed
categories of credit risk. Although the Fund is not subject to GAS,
its September 30, 2000 investments have been classified for the
information of the participants as Category 1 investments. Category
1 includes investments that are insured or registered or are held by the
Fund or its agent in the Fund's name. Category 2 includes uninsured and
unregistered investments held by the broker's or dealer's trust department
or agent in the Fund's name. Category 3 includes uninsured and
unregistered investments held by the broker's or dealer's trust department
or agent, but not in the Fund's name.
Commonwealth
Cash Reserve Fund
Investment Adviser
Public Financial Management, Inc.
Governor's Plaza North
2101 North Front Street
Building 3, Suite 200
Harrisburg, Pennsylvania 17110
Distributor
Commonwealth Financial Group, Inc.
38 Cohasset Lane
Cherry Hill, New Jersey 08003
Custodian
Wachovia Bank, N.A.
1021 East Cary Street
P.O. Box 27602
Richmond, Virginia 23261
Administrator and Transfer Agent SEMI-ANNUAL REPORT
September 30, 2000
Public Financial Management, Inc.
Governor's Plaza North
2101 North Front Street
Building 3, Suite 200
Harrisburg, Pennsylvania 17110
Independent Accountants
Ernst & Young LLP
Two Commerce Square, Suite 4000
2001 Market Street
Philadelphia, Pennsylvania 19103
Co-Counsel
McGuire Woods LLP
One James Center
901 E. Cary Street
Richmond, Virginia 23219
Laura Anne Corsell, Esq.
7307 Elbow Lane
Philadelphia, Pennsylvania 19119
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus. The prospectus can
be obtained from the Fund's Distributor. The prospectus provides more
complete information including charges and expenses. Please read it
carefully before investing.
Commonwealth Cash Reserve Fund, Inc.
P.O. Box 1192
Richmond, Virginia 23209-1192
