<PAGE> 1
As filed with the Securities and Exchange Commission
on November 8, 1996
REGISTRATION NOS. 33-12608 AND 811-5059
---------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 18 X
REGISTRATION STATEMENT UNDER THE INVESTMENT X
COMPANY ACT OF 1940
Amendment No. 21 X
THE HIGHMARK GROUP
(Exact Name of Registrant as Specified in Charter)
3435 STELZER ROAD, COLUMBUS, OHIO 43219
----------------------------------------
(Address of principal executive offices)
(800) 433-6884
--------------
(Registrant's telephone number, including area code)
NAME AND ADDRESS OF AGENT FOR SERVICE:
--------------------------------------
Martin E. Lybecker, Esq.
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b), or
X on November 15, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on [date] pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on [date] pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
post-effective amendment No. ____ filed on ________________________.
Pursuant to Rule 24f-2(a) under the Investment Company Act of 1940,
the Registrant has registered an indefinite number or amount of its shares of
beneficial interest under the Securities Act of 1933. The Registrant filed a
Rule 24f-2 Notice with respect to the Registrant's fiscal year ended
July 31, 1996 on September 27, 1996.
<PAGE> 2
[Highmark Logo]
THE HIGHMARK BOND FUND
THE HIGHMARK GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
SUPPLEMENT DATED NOVEMBER 15, 1996 TO THE PROSPECTUS DATED DECEMBER 1, 1995
FOR THE HIGHMARK FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
INVESTORS SHOULD RETAIN THIS SUPPLEMENT
WITH THE PROSPECTUS FOR FUTURE REFERENCE
------------------------------------
CAPITALIZED TERMS USED HEREIN HAVE THE SAME MEANING AS IN THE PROSPECTUS.
The Board of Trustees of The HighMark Group will be asked to discontinue
operations of the HighMark Intermediate California Municipal Bond Fund and the
HighMark Intermediate Municipal Bond Fund (the "Municipal Funds") at the next
quarterly Board Meeting on December 4, 1996. Therefore, all references to the
Municipal Funds should be deleted.
Pacific Alliance Capital Management (formerly MERUS -- UCA Capital
Management), a division of Union Bank of California, N.A., serves as the advisor
to the HighMark Fixed Income Funds. All references to MERUS in the prospectus
should be replaced with Pacific Alliance Capital Management.
The Fee Table and related Example and footnotes on pages 4 and 5 should be
deleted and replaced with the following:
<PAGE> 3
INCOME FUNDS FEE TABLE
<TABLE>
<CAPTION>
BOND GOVERNMENT
FUND BOND FUND
-------------------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY
SHARES SHARES SHARES SHARES
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(A)
Maximum Sales Load Imposed on Purchases (as a percentage of offering 3.00% 0% 3.00% 0%
price)......................................................................
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of 0% 0% 0% 0%
offering price).............................................................
Deferred Sales Load (as a percentage of original purchase price or redemption 0% 0% 0% 0%
proceeds, as applicable)....................................................
Redemption Fees (as a percentage of amount redeemed, if applicable)(b)....... 0% 0% 0% 0%
Exchange Fee(c).............................................................. 0% 0% 0% 0%
ANNUAL OPERATING EXPENSES
(as a percentage of net assets)
Management Fees (after voluntary reduction)(d)............................... 0.45% 0.45% 0% 0%
12b-1 Fees (after voluntary reduction)....................................... 0%(e) 0% 0%(e) 0%
Other Expenses (after voluntary reduction)(f)................................ 0.44% 0.44% 0.85% 0.85%
----- ----- ----- -----
Total Fund Operating Expenses(g)............................................. 0.89% 0.89% 0.85% 0.85%
===== ===== ===== =====
</TABLE>
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Bond Fund
Investor Shares................................................ $ 39 $58 $78 $136
Fiduciary Shares............................................... $ 9 $28 $49 $110
Government Bond Fund
Investor Shares................................................ $ 38 $56 $76 $132
Fiduciary Shares............................................... $ 9 $27 $47 $105
</TABLE>
The purpose of the tables above is to assist an investor in the Income Funds
in understanding the various costs and expenses that a Shareholder will bear
directly or indirectly. For a more complete discussion of each Fund's annual
operating expenses, see SERVICE ARRANGEMENTS below. THE FOREGOING EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
Long-term shareholders of Investor Shares may pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by rules
of the National Association of Securities Dealers, Inc.
- ---------------
(a) Certain entities (including Union Bank of California and its affiliates)
making investments in the Income Funds on behalf of their customers may
charge customers fees for services provided in connection with the
investment. (See HOW TO PURCHASE SHARES and SERVICE
ARRANGEMENTS -- Administrator & Distributor -- The Distribution Plan
below.)
(b) A wire redemption charge is deducted from the amount of a wire redemption
payment made at the request of a Shareholder. (See HOW TO REDEEM
SHARES -- Payments to Shareholders below.)
2
<PAGE> 4
(c) Certain entities (including Union Bank of California and its affiliates)
may charge their customers fees with respect to exchanges effected on the
customer's behalf. (See EXCHANGE PRIVILEGES and SERVICE
ARRANGEMENTS -- Administrator & Distributor -- The Distribution Plan
below.)
(d) As indicated under SERVICE ARRANGEMENTS -- Investment Adviser below, Union
Bank of California may voluntarily reduce its advisory fee. Absent the
voluntary reduction of investment advisory fees, MANAGEMENT FEES would be
at an annual rate of 1.00% of the first $40 million of each Fund's average
daily net assets and 0.60% of the Fund's remaining average daily net
assets.
(e) Reflects Rule 12b-1 fees estimated for the current fiscal year. The maximum
annual rate of distribution fees that may be imposed as a percentage of
average daily net assets attributable to a Fund's Investor Shares is 0.25%.
(See SERVICE ARRANGEMENTS -- Administrator & Distributor -- The
Distribution Plan below.)
(f) OTHER EXPENSES are based on each Fund's estimated expenses for the current
fiscal year. As indicated under SERVICE ARRANGEMENTS -- Administrator &
Distributor below, BISYS Fund Services may voluntarily reduce its
administration fee. Absent the voluntary reduction of administration fees,
OTHER EXPENSES as a percentage of average daily net assets would be 0.51%
for each of the Investor and Fiduciary Shares of the Bond Fund and 1.05%
for each of the Investor and Fiduciary Shares of the Government Bond Fund.
(g) Absent voluntary fee waivers, Total Fund Operating Expenses would be: 1.87%
for the Investor Shares and 1.62% for the Fiduciary Shares of the Bond Fund
and 2.55% for the Investor Shares and 2.30% for the Fiduciary Shares of the
Government Bond Fund.
The last sentence in the fourth paragraph under the heading SERVICE
ARRANGEMENTS -- Investment Adviser (on page 32) should be deleted and replaced
with the following:
During the Group's fiscal year ended July 31, 1996, Union Bank of California
received investment advisory fees from the Bond Fund and the Government Bond
Fund aggregating 0.45% and 0%, respectively, of each Fund's average daily net
assets.
The last five paragraphs under the heading SERVICE ARRANGEMENTS -- Investment
Adviser (on pages 32 and 33) should be deleted and replaced with the following:
Union Bank of California offers a wide range of banking services to its
clients in California, Oregon and Washington and around the world. As of
September 30, 1996, Union Bank of California and its subsidiaries had
approximately $28.7 billion in commercial assets. Pacific Alliance Capital
Management is a division of Union Bank of California's Trust and Investment
Management Group, which, as of June 30, 1996, has approximately $13.4 billion of
assets under management.
The last sentence in the second paragraph under the heading SERVICE
ARRANGEMENTS -- Administrator & Distributor (on page 34) should be deleted and
replaced with the following:
During the Group's fiscal year ended July 31, 1996, BISYS Fund Services
received administration fees from the Bond Fund and the Government Bond Fund
aggregating 0.13% and 0%, respectively, of each Fund's average daily net assets.
3
<PAGE> 5
The last paragraph under the heading GENERAL INFORMATION -- Description of The
Group and Its Shares (page 37) should be deleted and replaced with the
following:
The Group believes that as of October 17, 1996, Union Bank of California (400
California Street, Post Office Box 45000, San Francisco, CA 94104) was the
Shareholder of record of 88.46% of the Fiduciary Shares of the Bond Fund and
63.35% of the Fiduciary Shares of the Government Bond Fund.
The financial information below is an addition to the "Financial Highlights"
which appear on pages 6 through 8 of the prospectus.
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information with respect to the
Shares of each Fixed Income Fund. Financial Highlights for each Fund for the
periods ended July 31, 1996 have been derived from financial statements audited
by Deloitte & Touche LLP, independent auditors for The HighMark Group, whose
report thereon is included in the Statement of Additional Information. Prior to
the fiscal year ended July 31, 1996, Coopers & Lybrand L.L.P. served as
independent accountants to the Group.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1996
----------------------------------------------
BOND GOVERNMENT
FUND BOND FUND
--------------------- ---------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 10.29 $ 10.38 $ 9.43 $ 9.50
-------- --------- -------- ---------
Investment Activities
Net investment income.................................. 0.69 0.66 0.62 0.60
Net realized and unrealized gains (losses) on (0.18) (0.16) (0.18) (0.16)
investments.........................................
-------- --------- -------- ---------
Total from Investment Activities.................... 0.51 0.50 0.44 0.44
-------- --------- -------- ---------
Distributions
From Net investment income............................. (0.65) (0.65) (0.59) (0.59)
-------- --------- -------- ---------
Net Asset Value, End of Period........................... $ 10.15 $ 10.23 $ 9.28 $ 9.35
====== ======= ====== =======
Total Return............................................. 4.95% 4.81% 4.79% 4.75%
Ratios/Supplementary Data:
Net Assets at end of period (000)...................... $ 1,157 $ 60,374 $ 1,104 $ 3,386
Ratio of expenses to average net assets................ 0.89% 0.89% 0.85% 0.85%
Ratio of net investment income to average net assets... 6.10% 6.10% 6.22% 6.12%
Ratio of expenses to average net assets*............... 1.85% 1.61% 4.05% 3.80%
Ratio of net investment income to average net 5.14% 5.38% 3.02% 3.17%
assets*.............................................
Portfolio Turnover (a)................................... 20.88% 20.88% 44.72% 44.72%
</TABLE>
- ---------------
(a)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
*During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
4
<PAGE> 6
[Highmark Logo]
THE HIGHMARK GROWTH FUND
THE HIGHMARK INCOME & GROWTH FUND
THE HIGHMARK INCOME EQUITY FUND
THE HIGHMARK BALANCED FUND
- --------------------------------------------------------------------------------
SUPPLEMENT DATED NOVEMBER 15, 1996 TO THE PROSPECTUS DATED DECEMBER 1, 1995
FOR THE HIGHMARK EQUITY FUNDS
- --------------------------------------------------------------------------------
INVESTORS SHOULD RETAIN THIS SUPPLEMENT
WITH THE PROSPECTUS FOR FUTURE REFERENCE
------------------------------------
CAPITALIZED TERMS USED HEREIN HAVE THE SAME MEANING AS IN THE PROSPECTUS.
The Board of Trustees of The HighMark Group will be asked to discontinue
operations of the HighMark Intermediate California Municipal Bond Fund and the
HighMark Intermediate Municipal Bond Fund (the "Municipal Funds") at the next
quarterly Board Meeting on December 4, 1996. Therefore, all references to the
Municipal Funds should be deleted.
Pacific Alliance Capital Management (formerly MERUS -- UCA Capital
Management), a division of Union Bank of California, N.A., serves as the advisor
to the HighMark Equity Funds. All references to MERUS in the prospectus should
be replaced with Pacific Alliance Capital Management.
The Fee Table and related Example and footnotes on pages 4 and 5 should be
deleted and replaced with the following:
<PAGE> 7
EQUITY FUNDS FEE TABLE
<TABLE>
<CAPTION>
GROWTH INCOME & INCOME BALANCED
FUND GROWTH FUND EQUITY FUND FUND
-------------------- -------------------- -------------------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(A)
Maximum Sales Load Imposed on 4.50% 0% 4.50% 0% 4.50% 0% 4.50% 0%
Purchases (as a percentage of
offering price).....................
Maximum Sales Load Imposed on 0% 0% 0% 0% 0% 0% 0% 0%
Reinvested Dividends (as a
percentage of offering price).......
Deferred Sales Load (as a percentage 0% 0% 0% 0% 0% 0% 0% 0%
of original purchase price or
redemption proceeds, as
applicable).........................
Redemption Fees (as a percentage of 0% 0% 0% 0% 0% 0% 0% 0%
amount redeemed, if
applicable)(b)......................
Exchange Fee(c)...................... $ 0.00 $0.00 $ 0.00 $0.00 $ 0.00 $0.00 $ 0.00 $0.00
ANNUAL OPERATING EXPENSES
(as a percentage of net assets)
Management Fees (after voluntary 0.62% 0.62% 0% 0% 0.70% 0.70% 0.63% 0.63%
reduction)(d).......................
12b-1 Fees (after voluntary 0%(e) 0% 0%(e) 0% 0.15%(e) 0% 0%(e) 0%
reduction)..........................
Other Expenses (after voluntary 0.43% 0.43% 0.98% 0.98% 0.37% 0.37% 0.40% 0.40%
reduction)(f).......................
-------- --------- -------- --------- -------- --------- -------- ---------
Total Fund Operating Expenses(g)..... 1.05% 1.05% 0.98% 0.98% 1.22% 1.07% 1.03% 1.03%
======= ======== ======= ======== ======= ======== ======= ========
</TABLE>
- ---------------
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
3 5
1 YEAR YEARS YEARS 10 YEARS
------ ------ ------ --------
<S> <C> <C> <C> <C>
Growth Fund
Investor Shares................................ $ 55 $ 77 $100 $167
Fiduciary Shares............................... $ 11 $ 33 $ 58 $128
Income and Growth Fund
Investor Shares................................ $ 55 $ 75 $ 97 $160
Fiduciary Shares............................... $ 10 $ 31 $ 54 $120
Income Equity Fund
Investor Shares................................ $ 57 $ 82 $109 $186
Fiduciary Shares............................... $ 11 $ 34 $ 59 $131
Balanced Fund
Investor Shares................................ $ 55 $ 76 $ 99 $165
Fiduciary Shares............................... $ 11 $ 33 $ 57 $126
</TABLE>
The purpose of the tables above is to assist an investor in the Equity Funds
in understanding the various costs and expenses that a Shareholder will bear
directly or indirectly. For a more complete discussion of each Fund's annual
operating expenses, see SERVICE ARRANGEMENTS below. THE FOREGOING EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE> 8
Long-term shareholders of Investor Shares may pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by rules
of the National Association of Securities Dealers, Inc.
- ---------------
(a) Certain entities (including Union Bank of California and its affiliates)
making investments in the Equity Funds on behalf of their customers may
charge customers fees for services provided in connection with the
investment. (See HOW TO PURCHASE SHARES and SERVICE ARRANGEMENTS --
Administrator & Distributor -- The Distribution Plan below.)
(b) A wire redemption charge is deducted from the amount of a wire redemption
payment made at the request of a Shareholder. (See HOW TO REDEEM SHARES --
Payments to Shareholders below.)
(c) Certain entities (including Union Bank of California and its affiliates)
may charge their customers fees with respect to exchanges effected on the
customer's behalf. (See EXCHANGE PRIVILEGES and SERVICE ARRANGEMENTS --
Administrator & Distributor -- The Distribution Plan below.)
(d) As indicated under SERVICE ARRANGEMENTS -- Investment Adviser below, Union
Bank of California may voluntarily reduce its advisory fee. Absent the
voluntary reduction of investment advisory fees, MANAGEMENT FEES would be
at an annual rate of 1.00% of the first $40 million of each Fund's average
daily net assets and 0.60% of the Fund's remaining average daily net
assets.
(e) Reflects Rule 12b-1 fees estimated for the current fiscal year. The maximum
annual rate of distribution fees that may be imposed as a percentage of
average daily net assets attributable to a Fund's Investor Shares would be
0.25%. (See SERVICE ARRANGEMENTS -- Administrator & Distributor -- The
Distribution Plan below.)
(f) OTHER EXPENSES are based on that Fund's estimated expenses for the current
fiscal year. As indicated under SERVICE ARRANGEMENTS -- Administrator &
Distributor below, BISYS Fund Services may voluntarily reduce its
administration fee. Absent the voluntary reduction of administration fees,
OTHER EXPENSES as a percentage of average daily net assets would be 1.18%
for each of the Investor and Fiduciary Shares of the Income and Growth
Fund.
(g) Absent voluntary fee waivers, Total Fund Operating Expenses would be: 1.89%
for the Investor Shares and 1.64% for the Fiduciary Shares of the Growth
Fund, 2.68% for the Investor Shares and 2.43% for the Fiduciary Shares of
the Income and Growth Fund, 1.57% for the Investor Shares and 1.32% for the
Fiduciary Shares of the Income Equity Fund, and 1.90% for the Investor
Shares and 1.65% for the Fiduciary Shares of the Balanced Fund.
The last sentence in the third paragraph under the heading SERVICE
ARRANGEMENTS -- Investment Adviser (on page 34) should be deleted and replaced
with the following:
During the Group's fiscal year ended July 31, 1996, Union Bank of California
received investment advisory fees from the Growth Fund, Income & Growth Fund,
Income Equity Fund and Balanced Fund aggregating 0.50%, 0%, 0.66% and 0.54%,
respectively of each of the Fund's average daily net assets.
The last five paragraphs under the heading SERVICE ARRANGEMENTS -- Investment
Adviser (on pages 34 and 35) should be deleted and replaced with the following:
3
<PAGE> 9
Union Bank of California offers a wide range of banking services to its
clients in California, Oregon and Washington and around the world. As of
September 30, 1996, Union Bank of California and its subsidiaries had
approximately $28.7 billion in commercial assets. Pacific Alliance Capital
Management is a division of Union Bank of California's Trust and Investment
Management Group, which, as of June 30, 1996, has approximately $13.4 billion of
assets under management.
The fourth paragraph under the heading SERVICE ARRANGEMENTS -- Administrator &
Distributor (on page 36) should be deleted and replaced with the following:
During the Group's fiscal year ended July 31, 1996, BISYS Fund Services
received administration fees aggregating 0.20%, 0%, 0.20% and 0.20% of the
average daily net assets of the Growth Fund, Income & Growth Fund, Income Equity
Fund and Balanced Fund, respectively.
The last paragraph under the heading GENERAL INFORMATION -- Description of The
Group and Its Shares (page 39) should be deleted and replaced with the
following:
The Group believes that as of October 17, 1996, Union Bank of California (400
California Street, Post Office Box 45000, San Francisco, CA 94104) was the
Shareholder of record of 87.48% of the Fiduciary Shares of the Growth Fund,
94.67% of the Fiduciary Shares of the Income & Growth Fund, 72.99% of the
Fiduciary Shares of the Income Equity Fund and 97.77% of the Fiduciary Shares of
the Balanced Fund.
The financial information below is an addition to the "Financial Highlights"
which appear on pages 6 through 11 of the prospectus.
4
<PAGE> 10
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information with respect to the
Shares of each Equity Fund. Financial Highlights for each Fund for the periods
ended July 31, 1996 have been derived from financial statements audited by
Deloitte & Touche, LLP, independent auditors for The HighMark Group, whose
report thereon is included in the Statement of Additional Information. Prior to
the fiscal year ended July 31, 1996, Coopers & Lybrand L.L.P. served as
independent accountants to the Group.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1996
---------------------------------------------------------------------------------------------------
INCOME & GROWTH FUND
INCOME EQUITY FUND BALANCED FUND GROWTH FUND
--------------------- --------------------- --------------------- ---------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period....... $13.03 $ 13.00 $10.79 $ 10.85 $11.87 $ 11.87 $11.75 $11.74
------ ------ ------ ------ ------ ------ ------ ------
Investment Activities
Net Investment income...... 0.42 0.42 0.40 0.40 0.11 0.12 0.22 0.25
Net realized and
unrealized gains (losses)
on investments........... 1.92 1.93 0.77 0.79 1.38 1.35 1.49 1.46
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Activities................ 2.34 2.35 1.17 1.19 1.49 1.47 1.71 1.71
------ ------ ------ ------ ------ ------ ------ ------
Distributions
From Net investment
income................. (0.42) (0.42 ) (0.40) (0.40) (0.12) (0.12) (0.25) (0.25)
From Net realized
gains.................. (0.66) (0.66 ) -- -- (0.64) (0.64) (0.69) (0.69)
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions..... (1.08) (1.08 ) (0.40) (0.40) (0.76) (0.76) 0.94 (0.94)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Period.................... $14.29 $ 14.27 $11.56 $ 11.64 $12.60 $ 12.58 $12.52 $12.51
====== ====== ====== ====== ====== ====== ====== ======
Total Return............... 18.21% 18.25 % 10.94% 11.06% 12.88% 12.72% 15.02% 15.04%
Ratios/Supplementary Data:
Net Assets at end of
period (000)............. $10,143 $262,660 $ 694 $39,502 $2,843 $41,495 $ 394 $ 6,013
Ratio of expenses to
average net assets....... 1.03% 1.03 % 0.94% 0.94% 0.93% 0.93% 0.98% 0.98%
Ratio of net investment
income to average net
assets................... 2.89% 2.95 % 3.48% 3.49% 0.96% 0.98% 1.96% 2.00%
Ratio of expenses to
average net assets*...... 1.51% 1.27 % 2.03% 1.78% 1.91% 1.67% 3.52% 3.27%
Ratio of net investment
income (loss) to average
net assets*.............. 2.41% 2.71 % 2.39% 2.85% (0.02%) 0.23% (0.58)% (0.29)%
Portfolio Turnover (a)..... 41.51% 41.51 % 12.84% 12.84% 78.58% 78.58% 36.64% 36.64%
</TABLE>
- ---------------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
5
<PAGE> 11
[Highmark Logo]
The HighMark Diversified Obligations Fund
The HighMark U.S. Government Obligations Fund
The HighMark 100% U.S. Treasury Obligations Fund
The HighMark California Tax-Free Fund
The HighMark Tax-Free Fund
- --------------------------------------------------------------------------------
Supplement dated November 15, 1996 to the Prospectus dated December 1, 1995
for The HighMark Fixed Income Funds
- --------------------------------------------------------------------------------
INVESTORS SHOULD RETAIN THIS SUPPLEMENT
WITH THE PROSPECTUS FOR FUTURE REFERENCE
------------------------------------
CAPITALIZED TERMS USED HEREIN HAVE THE SAME MEANING AS IN THE PROSPECTUS.
The Board of Trustees of The HighMark Group will be asked to discontinue
operations of the HighMark Intermediate California Municipal Bond Fund and the
HighMark Intermediate Municipal Bond Fund (the "Municipal Funds") at the next
quarterly Board Meeting on December 4, 1996. Therefore, all references to the
Municipal Funds should be deleted.
Pacific Alliance Capital Management (formerly MERUS -- UCA Capital
Management), a division of Union Bank of California, N.A., serves as the advisor
to the HighMark Money Market Funds. All references to MERUS in the prospectus
should be replaced with Pacific Alliance Capital Management.
The Fee Table and the related Example and footnotes on pages 5 and 6 should be
deleted and replaced with the following:
<PAGE> 12
MONEY MARKET FUNDS FEE TABLE
<TABLE>
<CAPTION>
100%
DIVERSIFIED U.S. GOVERNMENT U.S. TREASURY CALIFORNIA
OBLIGATIONS FUND OBLIGATIONS FUND OBLIGATIONS FUND TAX-FREE FUND TAX-FREE FUND
------------------- ------------------- ------------------- ------------------- -------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES(A)
Maximum
Sales
Load
Imposed on
Purchases
(as a
percentage
of offering
price)......... 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Maximum
Sales
Load
Imposed on
Reinvested
Dividends
(as a
percentage
of offering
price)......... 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Deferred
Sales
Load (as a
percentage
of
original
purchase
price or
redemption
proceeds, as
applicable).... 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Redemption
Fees (as a
percentage
of amount
redeemed, if
applicable(b).. 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Exchange
Fee(c)......... 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
ANNUAL
OPERATING
EXPENSES
(as a
percentage
of net
assets)
Management
Fees
(after
voluntary
reduction)..... 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.30%(d) 0.30%(d) 0.35%(d) 0.35%(d)
12b-1 Fees (after
voluntary
reduction)..... 0.05%(e) 0% 0.08%(e) 0% 0.05%(e) 0% 0.05%(e) 0% 0.03%(e) 0%
Other
Expenses
(after
voluntary
reduction)..... 0.35% 0.35% 0.35% 0.35% 0.34% 0.34% 0.32%(f) 0.32%(f) 0.44%(f) 0.44%(f)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
Fund
Operating
Expenses(g).... 0.80% 0.75% 0.83% 0.75% 0.79% 0.74% 0.67% 0.62% 0.82% 0.79%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
3 5
1 YEAR YEARS YEARS 10 YEARS
------ ------ ------ --------
<S> <C> <C> <C> <C>
Diversified Obligations Fund
Investor Shares................................ $8 $ 26 $ 44 $ 99
Fiduciary Shares............................... $8 $ 24 $ 42 $ 93
U.S. Government Obligations Fund
Investor Shares................................ $8 $ 26 $ 46 $103
Fiduciary Shares............................... $8 $ 24 $ 42 $ 93
100% U.S. Treasury Obligations Fund
Investor Shares................................ $8 $ 25 $ 44 $ 98
Fiduciary Shares............................... $8 $ 24 $ 41 $ 92
California Tax-Free Fund
Investor Shares................................ $7 $ 21 $ 37 $ 83
Fiduciary Shares............................... $6 $ 20 $ 35 $ 77
Tax-Free Fund
Investor Shares................................ $8 $ 26 $ 46 $101
Fiduciary Shares............................... $8 $ 25 $ 44 $ 98
</TABLE>
2
<PAGE> 13
The purpose of the tables above is to assist an investor in the Money Market
Funds in understanding the various costs and expenses that a Shareholder will
bear directly or indirectly. For a more complete discussion of each Fund's
annual operating expenses, see SERVICE ARRANGEMENTS below. THE FOREGOING EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
(a) Certain entities (including Union Bank of California and its affiliates)
making investments in the Money Market Funds on behalf of their customers
may charge customers fees for services provided in connection with the
investment. (See HOW TO PURCHASE SHARES and SERVICE ARRANGEMENTS --
Administrator & Distributor -- The Distribution Plan below.)
(b) A wire redemption charge is deducted from the amount of a wire redemption
payment made at the request of a Shareholder. (See HOW TO REDEEM SHARES --
Payments to Shareholders below.)
(c) Certain entities (including Union Bank of California and its affiliates) may
charge their customers fees with respect to exchanges effected on the
customer's behalf. (See EXCHANGE PRIVILEGES and SERVICE ARRANGEMENTS --
Administrator & Distributor -- The Distribution Plan below.)
(d) As indicated under SERVICE ARRANGEMENTS-- Investment Adviser below, Union
Bank of California may voluntarily reduce its advisory fee. Absent the
voluntary deduction of investment advisory fees, MANAGEMENT FEES as a
percentage of average daily net assets would be 0.40%.
(e) Reflects Rule 12b-1 fees estimated for the current fiscal year. The maximum
annual rate of distribution fees that may be imposed as a percentage of
average daily net assets attributable to a Fund's Investor Shares is 0.25%.
(See SERVICE ARRANGEMENTS -- Administrator & Distributor -- The Distribution
Plan below.)
(f) OTHER EXPENSES are each Fund's estimated expenses for the current fiscal
year. As indicated under SERVICE ARRANGEMENTS -- Administrator & Distributor
below, BISYS Fund Services may voluntarily reduce its administration fee.
Absent the voluntary reduction of administration fees, OTHER EXPENSES as a
percentage of average daily net assets would be 0.37% for each of the
Investor Shares and Fiduciary Shares of the California Tax-Free Fund and
0.54% for each of the Investor and Fiduciary Shares of the Tax-Free Fund.
(g) Absent voluntary fee reductions, Total Fund Operating Expenses would be:
1.25% for the Investor and 1.00% for the Fiduciary Shares of the Diversified
Obligations Fund, 1.25% for the Investor and 1.00% for the Fiduciary Shares
of the U.S. Government Obligations Fund, 1.24% for the Investor Shares and
0.99% for the Fiduciary Shares of the 100% U.S. Treasury Obligations Fund,
1.27% for the Investor Shares and 1.02% for the Fiduciary Shares of the
California Tax-Free Fund, and 1.44% for the Investor Shares and 1.19% for
the Fiduciary Shares of the Tax-Free Fund.
The last sentence in the second paragraph under the heading SERVICE
ARRANGEMENTS -- Investment Adviser (on page 36) should be deleted and replaced
with the following:
During the Group's fiscal year ended July 31, 1996, Union Bank of California
received investment advisory fees aggregating 0.40% of the Diversified
Obligations Fund's average daily net assets, 0.40% of the U.S. Government
Obligations Fund's average daily net assets, 0.40% of the 100% U.S. Treasury
Obligations Fund's average daily net assets, 0.23% of the California Tax-Free
Fund's average daily net assets and 0.34% of the Tax-Free Fund's average daily
net assets.
3
<PAGE> 14
The last five paragraphs under the heading SERVICE ARRANGEMENTS -- Investment
Adviser (on pages 36 and 37) should be deleted and replaced with the following:
Union Bank of California offers a wide range of banking services to its
clients in California, Oregon and Washington and around the world. As of
September 30, 1996, Union Bank of California and its subsidiaries had
approximately $28.7 billion in commercial assets. Pacific Alliance Capital
Management is a division of Union Bank of California's Trust and Investment
Management Group, which, as of June 30, 1996, has approximately $13.4 billion of
assets under management.
The last sentence in the third paragraph under the heading SERVICE
ARRANGEMENTS -- Administrator & Distributor (on page 38) should be deleted and
replaced with the following:
During the Group's fiscal year ended July 31, 1996, BISYS Fund Services
received administration fees aggregating 0.20% of the Diversified Obligations
Fund's average daily net assets, 0.20% of the U.S. Government Obligations Fund's
average daily net assets, 0.20% of the 100% U.S. Treasury Obligations Fund's
average daily net assets, 0.15% of the California Tax- Free Fund's average daily
net assets and 0.09% of the Tax-Free Fund's average daily net assets.
The last paragraph under the heading GENERAL INFORMATION -- Description of The
Group and Its Shares (page 41) should be deleted and replaced with the
following:
The Group believes that as of October 17, 1996, Union Bank of California (400
California Street, Post Office Box 45000, San Francisco, CA 94104) was the
Shareholder of 93.45% of the Fiduciary Shares of the Diversified Obligations
Fund, 94.37% of the Fiduciary Shares of the U.S. Government Obligations Fund,
94.42% of the Fiduciary Shares of the 100% U.S. Treasury Obligations Fund,
97.90% of the Fiduciary Shares of the Tax-Free Fund, and substantially all of
the Fiduciary Shares of the California Tax-Free Fund.
The financial information below is an addition to the "Financial Highlights"
which appear on pages 6 through 11 of the prospectus.
4
<PAGE> 15
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information with respect to the
Shares of each Money Market Fund. Financial Highlights for each Fund for the
periods ended July 31, 1996 have been derived from financial statements audited
by Deloitte & Touche LLP, independent auditors for The HighMark Group, whose
report thereon is included in the Statement of Additional Information. Prior to
the fiscal year ended July 31, 1996, Coopers & Lybrand L.L.P. served as
independent accountants to the Group.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1996
--------------------------------------------------------------------------------------------------------------------
DIVERSIFIED U.S. GOVERNMENT 100% U.S. TREASURY CALIFORNIA
OBLIGATIONS FUND OBLIGATIONS FUND OBLIGATIONS FUND TAX-FREE FUND TAX-FREE FUND
-------------------- -------------------- -------------------- -------------------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset
Value,
Beginning
of
Period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Investment
Activities
Net
Investment
income..... 0.049 0.049 0.048 0.048 0.046 0.046 0.029 0.029 0.028 0.028
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Distributions
From Net
investment
income..... (0.049) (0.049 ) (0.048 ) (0.048 ) (0.046) (0.046 ) (0.029 ) (0.029) (0.028 ) (0.028)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Net Asset
Value, End
of
Period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
Total
Return..... 5.01% 5.01 % 4.86 % 4.88 % 4.74% 4.74 % 2.91 % 2.91% 2.87 % 2.87%
Ratios/
Supplementary
Data:
Net Assets
at end of
period
(000)...... $185,952 $244,775 $75,714 $151,483 $100,623 $173,340 $53,627 $98,352 $16,148 $28,109
Ratio of
expenses to
average net
assets..... 0.75% 0.75 % 0.79 % 0.77 % 0.74% 0.74 % 0.55 % 0.55% 0.77 % 0.76%
Ratio of
net
investment
income to
average net
assets..... 4.89% 4.91 % 4.77 % 4.76 % 4.64% 4.64 % 2.89 % 2.88% 2.81 % 2.86%
Ratio of
expenses to
average net
assets*.... 1.23% 0.99 % 1.26 % 1.00 % 1.23% 0.97 % 1.25 % 1.00% 1.42 % 1.16%
Ratio of
net
investment
income to
average net
assets*.... 4.41% 4.67 % 4.30 % 4.53 % 4.15% 4.41 % 2.19 % 2.43% 2.16 % 2.46%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
5
<PAGE> 16
CROSS REFERENCE SHEET
THE HIGHMARK GROUP
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
FORM N-1A PART B ITEM INFORMATION CAPTION
- --------------------- --------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Group; Additional Information--Description of
Shares
13. Investment Objectives and Policies Investment Objectives and Policies
14. Management of the Group Management of the Group
15. Control Persons and Principal
Holders of Securities Additional Information--Miscellaneous
16. Investment Advisory and Other
Services Management of the Group
17. Brokerage Allocation Management of the Group--Portfolio Transactions
18. Capital Stock and Other Securities Valuation; Additional Purchase and Redemption
Information--Matters Affecting Redemption;
Management of the Group--Distributor--The
Distribution Plan; Additional Information
19. Purchase, Redemption and
Pricing of Securities Being
Offered Valuation; Additional Purchase and Redemption
Information--Matters Affecting Redemption;
Management of the Group
20. Tax Status Additional Purchase and Redemption Information--
Additional Federal Tax Information; Additional
Purchase and Redemption Information--Additional Tax
Information Concerning the California Tax-Free
Fund and the Tax-Free Fund
21. Underwriters Management of the Group--Distributor
22. Calculation of Performance Data Calculation of Performance Data
23. Financial Statements Independent Auditors' Report for The HighMark Group
for the Year Ended July 31, 1996/Financial
Statements for The HighMark Group for the Periods
Ended July 31, 1996
</TABLE>
<PAGE> 17
THE HIGHMARK GROUP
Statement of Additional Information
November 15, 1996
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectuses of The HighMark Equity Funds, The HighMark
Income Funds and The HighMark Money Market Funds, each of which is dated
December 1, 1995, as supplemented November 15, 1996 (collectively, the
"Prospectuses") and any supplements thereto. This Statement of Additional
Information is incorporated in its entirety into the Prospectuses. Copies of the
Prospectuses may be obtained by writing The HighMark Group at 3435 Stelzer Road,
Columbus, Ohio 43219, or by telephoning toll free (800) 433-6884. Capitalized
terms used but not defined herein have the same meanings as set forth in the
Prospectuses.
<PAGE> 18
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE HIGHMARK GROUP................................................................................................1
INVESTMENT OBJECTIVES AND POLICIES................................................................................2
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS...................................................................2
High Quality Investments with Regard to the Money Market Funds...........................................2
Bank Instruments........................................................................................ 3
Commercial Paper and Variable Amount Master Demand Notes................................................ 4
Loan Participations......................................................................................5
Lending of Portfolio Securities..........................................................................5
Foreign Investments..................................................................................... 5
Repurchase Agreements....................................................................................6
Reverse Repurchase Agreements........................................................................... 6
U.S. Government Obligations..............................................................................7
Mortgage-Related Securities............................................................................. 7
Adjustable Interest Rate Notes..........................................................................10
Municipal Securities....................................................................................11
Investments in Municipal Securities by the California Tax-Free Fund.....................................14
Investments in Municipal Securities by the Tax-Free Fund............................................... 17
Puts................................................................................................... 17
Shares of Mutual Funds................................................................................. 18
When-Issued Securities..................................................................................18
Zero-Coupon Securities..................................................................................19
INVESTMENT RESTRICTIONS..........................................................................................19
Illiquid Securities.....................................................................................25
Investments in Warrants.................................................................................25
Voting Information......................................................................................25
PORTFOLIO TURNOVER...............................................................................................25
Valuation of the Money Market Funds.................................................................... 26
Valuation of the Growth Fund, The Income and Growth Fund,
The Income Equity Fund, The Balanced Fund, The Bond Fund
and The Government Bond Fund...................................................................27
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.................................................................. 27
Purchase of Investor Shares............................................................................ 27
Matters Affecting Redemption........................................................................... 28
</TABLE>
-i-
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C>
Additional Federal Tax Information..................................................................... 28
Additional Tax Information Concerning The California Tax-Free Fund and
The Tax-Free Fund..............................................................................30
Federal Taxation........................................................................................30
California Taxation.................................................................................... 32
MANAGEMENT OF THE GROUP......................................................................................... 33
Trustees and Officers.................................................................................. 33
Investment Adviser......................................................................................37
Portfolio Transactions..................................................................................39
Glass-Steagall Act..................................................................................... 40
Administrator and Sub-Administrator.................................................................... 41
Shareholder Services Plan.............................................................................. 43
Expenses ...............................................................................................44
Distributor.............................................................................................45
The Distribution Plans.................................................................................45
Transfer Agent, Custodian and Fund Accounting Services..................................................46
Auditors ...............................................................................................49
Legal Counsel...........................................................................................49
ADDITIONAL INFORMATION...........................................................................................49
Description of Shares...................................................................................49
Shareholder and Trustee Liability.......................................................................51
The Reorganization of the IRA Fund and The Group........................................................51
Calculation of Performance Data.........................................................................52
Miscellaneous.......................................................................................... 58
APPENDIX ....................................................................................................... 69
INDEPENDENT AUDITORS' REPORT FOR THE HIGHMARK GROUP FOR
THE YEAR ENDED JULY 31, 1996.............................................................................1
FINANCIAL STATEMENTS FOR THE HIGHMARK GROUP FOR
THE PERIODS ENDED JULY 31, 1996..........................................................................2
</TABLE>
-ii-
<PAGE> 20
STATEMENT OF ADDITIONAL INFORMATION
THE HIGHMARK GROUP
The HighMark Group (the "Group") is a diversified, open-end management
investment company. The Group presently consists of eleven series of Shares,
representing units of beneficial interest in The HighMark Growth Fund, The
HighMark Income and Growth Fund, The HighMark Income Equity Fund, The HighMark
Balanced Fund, The HighMark Bond Fund, The HighMark Government Bond Fund, The
HighMark Diversified Obligations Fund, The HighMark U.S. Government Obligations
Fund, The HighMark 100% U.S. Treasury Obligations Fund, The HighMark California
Tax-Free Fund and The HighMark Tax-Free Fund. The HighMark Income and Growth
Fund, The HighMark Balanced Fund, and The HighMark Government Bond Fund
commenced operations on November 14, 1993 and The HighMark Growth Fund
commenced operations on November 18, 1993. The HighMark Income Equity Fund and
the HighMark Bond Fund commenced operations on June 23, 1988 as a result of the
reorganization of the Income Equity Portfolio and the Bond Portfolio,
respectively, of the IRA Collective Investment Fund (the "IRA Fund") described
under "Additional Information - The Reorganization of the IRA Fund and the
Group" below. The HighMark Diversified Obligations Fund, the HighMark U.S.
Government Obligations Fund and The 100% U.S. Treasury Obligations Fund
commenced operations on August 10, 1987. The HighMark California Tax-Free Fund
commenced operations on August 11, 1987. The HighMark Tax-Free Fund commenced
operations on August 22, 1987.
As described in the Prospectuses, each of the Group's Funds has been
divided into two classes of Shares (designated Investor Shares and Fiduciary
Shares) for purposes of the Group's Distribution and Shareholder Services Plans
(the "Distribution Plans"), which Distribution Plans applies only to such
Funds' Investor Shares. Investor Shares and Fiduciary Shares are sometimes
herein referred to collectively as "Shares".
The Diversified Obligations Fund, The U.S. Government Obligations
Fund, the 100% U.S. Treasury Obligations Fund, the California Tax-Free Fund and
the Tax-Free Fund are sometimes herein referred to as the "Money Market Funds."
The Income Equity Portfolio and the Bond Portfolio of the IRA Fund (which were
reorganized into the Group's Funds as described above) are sometimes referred
to herein as the "IRA Fund Portfolios."
Much of the information contained herein expands upon subjects
discussed in the Prospectuses for the respective Funds. No investment in Shares
of a Fund should be made without first reading that Fund's Prospectus.
<PAGE> 21
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and
policies of each Fund of the Group as set forth in the respective Prospectus
for that Fund.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
High Quality Investments with Regard to the Money Market Funds. As
noted in the Prospectuses for the Money Market Funds, each such Fund may invest
only in obligations determined by Pacific Alliance Capital Management (the
"Advisor") to present minimal credit risks under guidelines adopted by the
Group's Board of Trustees.
With regard to the Diversified Obligations Fund, the California
Tax-Free Fund, and the Tax-Free Fund, investments will be limited to "Eligible
Securities" that (i) in the case of the Diversified Obligations Fund, include
those obligations that, at the time of purchase, possess one of the two highest
short-term ratings by at least two NRSROs or do not possess a rating (i.e., are
unrated) but are determined by the Advisor to be of comparable quality to the
rated instruments eligible for purchase by the Fund under guidelines adopted by
the Board of Trustees and (ii) in the case of the California Tax-Free Fund and
the Tax-Free Fund, include those obligations that, at the time of purchase,
possess one of the two highest short-term ratings by at least one NRSRO or do
not possess a rating (i.e., are unrated) but are determined by the Advisor to
be of comparable quality to the rated obligations eligible for purchase by the
Fund under guidelines adopted by the Board of Trustees. In applying the
above-described investment policies, a security that has not received a rating
will be deemed to possess the rating assigned to an outstanding class of the
issuer's short-term debt obligations if determined by the Advisor to be
comparable in priority and security to the obligation selected for purchase by
the Fund.
A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, are
determined by the Advisor to be of comparable quality; provided, however, that
where the demand feature would be readily exercisable in the event of a default
in payment of principal or interest on the underlying security, the obligation
may be acquired based on the rating possessed by the demand feature or, if the
demand feature does not possess a rating, a determination of comparable quality
by the Advisor. A security that at the time of issuance had a maturity
exceeding 397 days but, at the time of purchase, has a remaining maturity of
397 days or less, is not considered an Eligible Security if it does not possess
a high quality rating and the long-term rating, if any, is not within the two
highest rating categories.
Eligible Securities include First Tier Securities and Second Tier
Securities. In the case of the Diversified Obligations Fund, First Tier
Securities include those that possess at least
-2-
<PAGE> 22
two ratings in the highest category and, if the securities do not possess a
rating, those that are determined to be of comparable quality by the Advisor
pursuant to guidelines adopted by the Board of Trustees. In the case of the
California Tax-Free Fund and the Tax-Free Fund, First Tier Securities include
those that possess a rating in the highest category and, if the securities do
not possess a rating, those that are determined to be of comparable quality by
the Advisor pursuant to guidelines adopted by the Board of Trustees. In the
case of each of the Diversified Obligations Fund, the California Tax-Free
Fund, and the Tax-Free Fund, Second Tier Securities are all other Eligible
Securities.
The Diversified Obligations Fund will not invest more than 5% of its
total assets in the First Tier Securities of any one issuer, except that the
Fund may invest up to 25% of its total assets in First Tier Securities of a
single issuer for a period of up to three business days. In addition, the
Diversified Obligations Fund may not invest more than 5% of its total assets in
Second Tier Securities, with investments in the Second Tier Securities of any
one issuer further limited to the greater of 1% of the Fund's total assets or
$1.0 million. If a percentage limitation is satisfied at the time of purchase,
a later increase in such percentage resulting from a change in the Diversified
Obligations Fund's net asset value or a subsequent change in a security's
qualification as a First Tier or Second Tier Security will not constitute a
violation of the limitation. In addition, there is no limit on the percentage
of the Diversified Obligations Fund's assets that may be invested in
obligations issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities and repurchase agreements fully collateralized by such
obligations.
Under the guidelines adopted by the Group's Board of Trustees and in
accordance with Rule 2a-7 under the Investment Company Act of 1940 (the "1940
Act"), the Advisor may be required to promptly dispose of an obligation held
in a Fund's portfolio in the event of certain developments that indicate a
diminishment of the instrument's credit quality, such as where an NRSRO
downgrades an obligation below the second highest rating category, or in the
event of a default relating to the financial condition of the issuer.
The Appendix to this Statement of Additional Information identifies
each NRSRO that may be utilized by the Advisor with regard to portfolio
investments for the Funds and provides a description of relevant ratings
assigned by each such NRSRO. A rating by an NRSRO may be utilized only where
the NRSRO is neither controlling, controlled by, or under common control with
the issuer of, or any issuer, guarantor, or provider of credit support for, the
instrument.
Bank Instruments. Consistent with its investment objective, policies,
and restrictions, each Fund (other than the U.S. Government Obligations Fund,
the 100% U.S. Treasury Obligations Fund, the California Tax-Free Fund and the
Tax-Free Fund) may invest in bankers' acceptances, certificates of deposit, and
time deposits.
-3-
<PAGE> 23
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise that
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity. Investments in
bankers' acceptances will be limited to those guaranteed by domestic and
foreign banks having, at the time of investment, capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of the
institution's most recently published financial statements).
Certificates of deposit and time deposits represent funds deposited in
a commercial bank or a savings and loan association for a definite period of
time and earning a specified return.
Investments in certificates of deposit and time deposits may include
Eurodollar Certificates of Deposit, which are U.S. dollar denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States, Yankee Certificates of Deposit, which are
certificates of deposit issued by a U.S. branch of a foreign bank denominated
in U.S. dollars and held in the United States, Eurodollar Time Deposits
("ETDs"), which are U.S. dollar denominated deposits in a foreign branch of a
U.S. bank or a foreign bank, and Canadian Time Deposits ("CTDs"), which are
U.S. dollar denominated certificates of deposit issued by Canadian offices of
major Canadian banks. All investments in certificates of deposit and time
deposits will be limited to those (a) of domestic and foreign banks and savings
and loan associations which, at the time of investment, have capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of the
institution's most recently published financial statements) or (b) the
principal amount of which is insured in full by the Federal Deposit Insurance
Corporation.
There is no limitation on the Diversified Obligations Fund's ability
to invest in domestic certificates of deposit and bankers' acceptances in
connection with the Fund's fundamental investment restriction governing
concentration in the securities of one or more issuers conducting their
principal business activities in the same industry. For purposes of this
exception to the Fund's fundamental investment restriction, domestic
certificates of deposit and bankers' acceptances include those issued by
domestic branches of foreign banks to the extent permitted by the rules and
regulations of the Securities and Exchange Commission staff. These rules and
regulations currently permit U.S. branches of foreign banks to be considered
domestic banks if it can be demonstrated that they are subject to the same
regulation as U.S. banks.
Commercial Paper and Variable Amount Master Demand Notes. Consistent
with its investment objective, policies, and restrictions, each Fund (other
than the U.S. Government Obligations Fund and the 100% U.S. Treasury
Obligations Fund) may invest in commercial paper and variable amount master
demand notes. Commercial paper consists of unsecured promissory notes issued by
corporations normally having maturities of less than nine months and fixed
rates of return. These investments may include Canadian Commercial Paper, which
-4-
<PAGE> 24
is U.S. dollar denominated commercial paper issued by a Canadian corporation or
a Canadian counterpart of a U.S. corporation, and Europaper, which is U.S.
dollar denominated commercial paper of a foreign issuer.
Variable amount master demand notes are unsecured demand notes that
permit the indebtedness thereunder to vary and provide for periodic adjustments
in the interest rate according to the terms of the instrument. Because master
demand notes are direct lending arrangements between a Fund and the issuer,
they are not normally traded. Although there is no secondary market in the
notes, a Fund may demand payment of principal and accrued interest at any time.
A variable amount master demand note will be deemed to have a maturity equal to
the longer of the period of time remaining until the next readjustment of its
interest rate or the period of time remaining until the principal amount can be
recovered from the issuer through demand.
Loan Participations. As indicated in the Money Market Funds'
Prospectus, the Diversified Obligations Fund may invest in loan participations
pursuant to which the Fund acquires a portion of bank or other lending
institution's interest in a secured or unsecured loan to a corporate borrower.
Loans in which the Fund may purchase loan participations may be made to finance
a variety of corporate purposes, but will not be made to finance highly
leveraged activities such as "leveraged buy-outs." Loan participations will be
subject to the Fund's non-fundamental 10% limitation governing investments in
"illiquid" securities. See "Investment Restrictions" below.
Lending of Portfolio Securities. In order to generate additional
income, the Growth Fund, the Income and Growth Fund, the Income Equity Fund,
the Balanced Fund, the Bond Fund, the Government Bond Fund, the Diversified
Obligations Fund, the U.S. Government Obligations Fund and the 100% U.S.
Treasury Obligations Fund may each lend its portfolio securities to
broker-dealers, banks or other institutions. During the time portfolio
securities are on loan, the borrower will pay the Fund any dividends or
interest paid on the securities. In addition, loans will be subject to
termination by the Fund or the borrower at any time. While the lending of
securities may subject a Fund to certain risks, such as delays or an inability
to regain the securities in the event the borrower were to default on its
lending agreement or enter into bankruptcy, the Fund will receive 100%
collateral in the form of cash or U.S. Government securities. This collateral
will be valued daily and, should the market value of the loaned securities
increase, the borrower will be required to furnish additional collateral to the
Fund. Although the Funds do not expect to do so on a regular basis, a Fund may
lend portfolio securities in amounts representing up to 35% of the value of the
Fund's total assets.
Foreign Investments. Investments in securities issued by foreign
branches of U.S. banks, foreign banks, or other foreign issuers, including
American Depository Receipts ("ADRs") and securities purchased on foreign
securities exchanges, may subject the Funds to investment risks that differ in
some respects from those related to investments in obligations of U.S. domestic
issuers or in U.S. securities markets. Such risks include future adverse
political
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and economic developments, possible seizure, nationalization or expropriation
of foreign investments, less stringent disclosure requirements, increased
costs associated with the conversion of foreign currency into U.S. dollars,
changes in foreign currency exchange rates, the possible establishment of
exchange controls or taxation at the source, or the adoption of other foreign
governmental restrictions.
Repurchase Agreements. Securities held by each Fund (other than the
100% U.S. Treasury Obligations Fund) may be subject to repurchase agreements.
As a matter of non-fundamental policy, each of the California Tax-Free Fund and
the Tax-Free Fund intends to limit investments in repurchase agreements to no
more than 5% of the value of its total assets.
Under the terms of a repurchase agreement, a Fund will acquire
securities from financial institutions such as member banks of the Federal
Deposit Insurance Corporation with capital, surplus, and undivided profits of
not less than $100,000,000 (as of the date of the institution's most recently
published financial statements) and from registered broker-dealers that the
Advisor deems creditworthy under guidelines approved by the Group's Board of
Trustees. Under a repurchase agreement, the seller agrees to repurchase the
securities at a mutually agreed-upon date and price, and the repurchase price
will generally equal the price paid by the Fund plus interest negotiated on the
basis of current short-term rates, which may be more or less than the rate on
the underlying portfolio securities. The seller under a repurchase agreement
will be required to maintain the value of collateral held pursuant to the
agreement at not less than the repurchase price (including accrued interest)
and the Advisor will monitor the collateral's value to ensure that it equals
or exceeds the repurchase price. In addition, securities subject to repurchase
agreements will be held in a segregated custodial account.
If the seller were to default on its repurchase obligation or become
insolvent, the Fund holding such obligation would suffer a loss to the extent
that either the proceeds from a sale of the underlying portfolio securities
were less than the repurchase price under the agreement or the Fund's
disposition of the underlying securities was delayed pending court action.
Additionally, although there is no controlling legal precedent confirming that
a Fund would be entitled, as against a claim by the seller or its receiver or
trustee in bankruptcy, to retain the underlying securities, the Group's Board
of Trustees believes that, under the regular procedures normally in effect for
custody of a Fund's securities subject to repurchase agreements and under
federal laws, a court of competent jurisdiction would rule in favor of the Fund
if presented with the question. Securities subject to repurchase agreements
will be held by the Group's custodian or another qualified custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the Investment Company Act of 1940.
Reverse Repurchase Agreements. Each Fund (other than the 100% U.S.
Treasury Obligations Fund) may borrow funds for temporary purposes by entering
into reverse
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<PAGE> 26
repurchase agreements, provided such action is consistent with the Fund's
investment objective and fundamental investment restrictions; as a matter of
non-fundamental policy, each Fund intends to limit such investments to no more
than 5% of the value of its total assets. Pursuant to a reverse repurchase
agreement, a Fund will sell portfolio securities to financial institutions
such as banks or to broker-dealers, and agree to repurchase the securities at
a mutually agreed-upon date and price. A Fund intends to enter into reverse
repurchase agreements only to avoid otherwise selling securities during
unfavorable market conditions to meet redemptions. At the time a Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account assets such as U.S. Government securities or other liquid,
high-quality debt securities consistent with the Fund's investment objective
having a value equal to the repurchase price (including accrued interest), and
will subsequently monitor the account to ensure that an equivalent value is
maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by a Fund may decline below the price at which a
Fund is obligated to repurchase the securities. Reverse repurchase agreements
are considered to be borrowings by a Fund under the Investment Company Act of
1940.
U.S. Government Obligations. With the exception of the 100% U.S.
Treasury Obligations Fund, which may invest only in direct U.S. Treasury
obligations, each Fund may, consistent with its investment objective, policies,
and restrictions, invest in obligations issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities. Obligations of certain agencies
and instrumentalities of the U.S. Government, such as those of the Government
National Mortgage Association and the Export-Import Bank of the United States,
are supported by the full faith and credit of the U.S. Treasury; others, such
as those of the Federal National Mortgage Association, are supported by the
right of the issuer to borrow from the Treasury; others, such as those of the
Student Loan Marketing Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and
still others, such as those of the Federal Farm Credit Banks or the Federal
Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
For information concerning mortgage-related securities issued by
certain agencies or instrumentalities of the U.S. Government, see
"Mortgage-Related Securities" below.
Mortgage-Related Securities. As indicated in the Money Market Funds'
Prospectus, the Diversified Obligations Fund and the U.S. Government
Obligations Fund may each invest in mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") representing GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes"). The Growth Fund, the
Income and Growth Fund, the Income Equity Fund, the Balanced Fund, the Bond
Fund and the Government Bond Fund may also, consistent with each such Fund's
investment objective and policies, invest in Ginnie Maes as well as other
mortgage-related securities issued or guaranteed by the U.S. Government, its
agencies, or its instrumentalities or, except for the Government Bond Fund,
those issued by nongovernmental
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<PAGE> 27
entities. In addition, the Balanced Fund, the Bond Fund and the Government
Bond Fund may invest in collateralized mortgage obligations ("CMOs"), provided
that the Government Bond Fund may invest only in CMOs issued or guaranteed by
the U.S. Government, its agencies and instrumentalities. The Growth Fund, the
Income and Growth Fund and the Income Equity Fund will each limit its
investments in mortgage-related securities to no more than 5% of such Fund's
total assets.
Mortgage-related securities represent interests in pools of mortgage
loans assembled for sale to investors. Mortgage-related securities may be
assembled and sold by certain governmental agencies and may also be assembled
and sold by nongovernmental entities such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If a Fund purchases a mortgage-related security
at a premium, that portion may be lost if there is a decline in the market
value of the security, whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of mortgage-related securities are
inversely affected by changes in interest rates. However, although the value of
a mortgage-related security may decline when interest rates rise, the converse
is not necessarily true because in periods of declining interest rates the
mortgages underlying the security are prone to prepayment. For this and other
reasons, a mortgage-related security's stated maturity may be shortened by
unscheduled prepayments on the underlying mortgages and, therefore, it is not
possible to predict accurately the security's return to the Fund. In addition,
regular payments received in respect of mortgage-related securities include
both interest and principal. No assurance can be given as to the return a Fund
will receive when these amounts are reinvested.
There are a number of important differences both among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities themselves. As noted above, Ginnie Maes are
issued by GNMA, which is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. Ginnie Maes are guaranteed as to
the timely payment of principal and interest by GNMA and GNMA's guarantee is
backed by the full faith and credit of the U.S. Treasury. In addition, Ginnie
Maes are supported by the authority of GNMA to borrow funds from the U.S.
Treasury to make payments under GNMA's guarantee. Mortgage-related securities
issued by the Federal National Mortgage Association ("FNMA") include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes"),
which are solely the obligations of the FNMA and are not backed by or entitled
to the full faith and credit of the U.S. Treasury. The FNMA is a
government-sponsored organization owned entirely by private stockholders.
Fannie Maes are guaranteed as to timely payment of principal and interest by
FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality of
the U.S. Government, created pursuant to an Act of Congress, which is owned
entirely by the Federal Home Loan
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<PAGE> 28
Banks. Freddie Macs are not guaranteed by the U.S. Treasury or by any Federal
Home Loan Banks and do not constitute a debt or obligation of the U.S.
Government or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by the FHLMC. The FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When the FHLMC does not guarantee
timely payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
Collateralized mortgage obligations ("CMOs") in which the Balanced
Fund, the Bond Fund and the Government Bond Fund may invest represent
securities issued by a private corporation or a U.S. Government instrumentality
that are backed by a portfolio of mortgages or mortgage-backed securities held
under an indenture. The Government Bond Fund's investments in CMOs are limited
to those issued by the U.S. Government or an agency or instrumentality of the
U.S. Government. The issuer's obligation to make interest and principal
payments is secured by the underlying portfolio of mortgages or mortgage-backed
securities. CMOs are issued with a number of classes or series that have
different maturities and that may represent interests in some or all of the
interest or principal on the underlying collateral or a combination thereof.
CMOs of different classes are generally retired in sequence as the underlying
mortgage loans in the mortgage pool are repaid. In the event of sufficient
early prepayments on such mortgages, the class or series of a CMO first to
mature generally will be retired prior to its maturity. Thus, the early
retirement of a particular class or series of a CMO held by a Fund would have
the same effect as the prepayment of mortgages underlying a mortgage-backed
pass-through security.
CMOs may include stripped mortgage securities. Such securities are
derivative multi-class mortgage securities issued by agencies or
instrumentalities of the United States Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing. Stripped mortgage securities are usually
structured with two or more classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. A common
type of Stripped Mortgage Security will have one class receiving all of the
interest from the mortgage assets (the interest-only or "IO" class), while the
other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class (or similar class that receives a
disproportionate amount of interest in relation to principal) is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on the securities' yield to maturity.
Generally, the market value of the PO class is unusually volatile in response
to changes in interest rates. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, an Income Fund may fail to
fully recoup its initial investment in these securities even if the security is
rated in the highest rating category.
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Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not fully developed. The Funds will not
purchase a stripped mortgage security that is illiquid if, as a result thereof,
more than 15% of the value of the Fund's total assets would be invested in such
securities and other illiquid securities.
Adjustable Interest Rate Notes. Consistent with its investment
objective, policies, and restrictions, each Fund (other than the 100% U.S.
Treasury Obligations Fund) may invest in "adjustable interest rate notes,"
which include variable rate notes and floating rate notes. A variable rate note
is one whose terms provide for the readjustment of its interest rate on set
dates and that, upon such readjustment, can reasonably be expected to have a
market value that approximates its par value; the degree to which a variable
rate note's market value approximates its par value subsequent to readjustment
will depend on the frequency of the readjustment of the note's interest rate
and the length of time that must elapse before the next readjustment. A
floating rate note is one whose terms provide for the readjustment of its
interest rate whenever a specified interest rate changes and that, at any time,
can reasonably be expected to have a market value that approximates its par
value. Although there may be no active secondary market with respect to a
particular variable or floating rate note purchased by a Fund, the Fund may
seek to resell the note at any time to a third party. The absence of an active
secondary market, however, could make it difficult for the Fund to dispose of a
variable or floating rate note in the event the issuer of the note defaulted on
its payment obligations and the Fund could, as a result or for other reasons,
suffer a loss to the extent of the default. Variable or floating rate notes
may be secured by bank letters of credit. Adjustable interest rate notes for
which no readily available market exists will be subject to a Fund's
non-fundamental 15% (10% in the case of the Money Market Funds) limitation
governing investments in "illiquid" securities, unless such notes are subject
to a demand feature that will permit the Fund to receive payment of the
principal within seven days of the Fund's demand. See "INVESTMENT
RESTRICTIONS" below.
Variable and floating rate notes will be deemed to have maturities as
follows:
1. A variable rate note, the principal amount of which is scheduled on
the face of the instrument to be paid within thirteen months or less, will be
deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
2. A variable rate note that is subject to a demand feature will be
deemed to have a maturity equal to the longer of the period remaining until the
next adjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
3. A floating rate note that is subject to a demand feature will be
deemed to have a maturity equal to the period remaining until the principal
amount can be recovered through demand.
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As used above, a note is "subject to a demand feature" where the Fund
is entitled to receive the principal amount of the note either at any time on
not more than thirty days' notice or at specified intervals, not exceeding
thirteen months and upon not more than thirty days' notice.
Municipal Securities. As stated in the Money Market Funds Prospectus,
under normal market conditions, at least 80% of the total assets of the
California Tax-Free Fund and the Tax-Free Fund will be invested in Municipal
Securities, the interest on which is both excluded from gross income for
federal income tax (and, in the case of the California Tax-Free Fund,
California personal income tax) purposes and not treated as a preference item
for individuals for purposes of the federal alternative minimum tax.
Municipal Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and public entities. Private activity bonds that are issued
by or on behalf of public authorities to finance various privately operated
facilities are included within the term Municipal Securities if the interest
paid thereon is (i) excluded from gross income for federal income tax purposes
and (ii) not treated as a preference item for individuals for purposes of the
federal alternative minimum tax.
As described in the Money Market Funds' Prospectus, the two principal
classifications of Municipal Securities consist of "general obligation" and
"revenue" issues. The Tax-Free Fund, may also acquire "moral obligation"
issues, which are normally issued by special purpose authorities. In general,
only general obligation bonds are backed by the full faith and credit and
general taxing power of the issuer. There are, of course, variations in the
quality of Municipal Securities, both within a particular classification and
between classifications, and the yields on Municipal Securities depend upon a
variety of factors, including general market conditions, the financial
condition of the issuer (or other entity whose financial resources are
supporting the Municipal Securities), general conditions of the municipal bond
market, the size of a particular offering, the maturity of the obligation and
the rating(s) of the issue. In this regard, it should be emphasized that the
ratings of any NRSRO are general and are not absolute standards of quality;
Municipal Securities with the same maturity, interest rate and rating(s) may
have different yields while Municipal Securities of the same maturity and
interest rate with a different rating(s) may have the same yield.
An issuer's obligations with respect to its Municipal Securities are
subject to the provisions of bankruptcy, insolvency, and other laws affecting
the rights and remedies of creditors, such as the Federal Bankruptcy Code, and
laws, if any, that may be enacted by Congress or state legislatures extending
the time for payment of principal or interest, or both, or imposing other
constraints upon the enforcement of such obligations or upon the ability of
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<PAGE> 31
municipalities to levy taxes or otherwise raise revenues. Certain of the
Municipal Securities may be revenue securities and dependent on the flow of
revenue, generally in the form of fees and charges. The power or ability of an
issuer to meet its obligations for the payment of interest on and principal of
its Municipal Securities may be materially adversely affected by litigation or
other conditions, including a decline in property value or a destruction of
uninsured property due to natural disasters.
In addition, in accordance with such Fund's investment objective, the
California Tax-Free Fund and the Tax-Free Fund may each invest in private
activity bonds, which may constitute Municipal Securities depending upon the
federal income tax treatment of such bonds. Such bonds are usually revenue
bonds because the source of payment and security for such bonds is the
financial resources of the private entity involved; the full faith and credit
and the taxing power of the issuer in normal circumstances will not be pledged.
The payment obligations of the private entity also will be subject to
bankruptcy and similar debtor's rights, as well as other exceptions similar to
those described above. Moreover, the California Tax-Free Fund may invest in
obligations secured in whole or in part by a mortgage or deed of trust on real
property located in California that are subject to the "anti-deficiency"
legislation discussed below.
The California Tax-Free Fund and the Tax-Free Fund may also invest
indirectly in Municipal Securities by purchasing the shares of tax-exempt money
market mutual funds. Such investments will be made solely for the purpose of
investing short-term cash on a temporary tax-exempt basis and only in those
funds with respect to which the Advisor believes with a high degree of
certainty that redemption can be effected within seven days of demand.
Additional limitations on investments by the Tax-Free Fund and California
Tax-Free Fund in the shares of other tax-exempt money market mutual funds are
set forth under "Investment Restrictions" below.
Certain Municipal Securities in the California Tax-Free Fund may be
obligations that are payable solely from the revenues of health care
institutions, although the obligations may be secured by real or personal
property of such institutions. Certain provisions under federal and California
law may adversely affect such revenues and, consequently, payment on those
Municipal Securities.
Certain Municipal Securities in which the California Tax-Free Fund
may invest may be obligations that are secured in whole or in part by a
mortgage or deed of trust on real property. California has certain statutory
provisions that limit the remedies of a creditor secured by a mortgage or deed
of trust. Two of the provisions limit a creditor's right to obtain a deficiency
judgment, one limitation being based on the method of foreclosure and the other
on the type of debt secured. Under the former, a deficiency judgment is barred
when the foreclosure is accomplished by means of a nonjudicial trustee's sale.
Under the latter, a deficiency judgment is barred when the foreclosed mortgage
or deed of trust secures certain purchase money obligations. A third statutory
provision, commonly known as the "one action"
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<PAGE> 32
rule, has two aspects, an "affirmative defense aspect" and a "sanction
aspect." The "affirmative defense" aspect limits creditors secured by real
property to a single legal action for recovery of their debt, and that single
action must be a judicial foreclosure action against their real property
security. Under the "sanction" aspect, if the real estate-secured creditor
proceeds by legal action other than judicial foreclosure, the creditor loses
its lien on the real property security and, in some instances, the right to
recover its debt. California courts have interpreted enforcement procedures as
"actions", resulting in the "sanction" aspect of the one action rule. There
are limited exceptions to the anti-deficiency rule and the "one action" rule
in certain cases where the debtor property is environmentally contaminated.
Another statutory provision gives the debtor the right to redeem the real
property from any judicial foreclosure sale.
Upon the default under a mortgage or deed of trust with respect to
California real property, a creditor's nonjudicial foreclosure rights under the
power of sale contained in the mortgage or deed of trust are subject to certain
procedural requirements. A non-judicial foreclosure is initiated by the
recording of a formal notice of default. The power of sale is exercised by
recording, mailing and posting a notice of sale after expiration of the
three-month period that commences upon the recording of the formal notice of
default and at least 20 days prior to the sale date, publishing the notice of
sale at least weekly during that period. At any time up until five business
days prior to the sale, the debtor is entitled to reinstate the mortgage by
making any overdue payments. Therefore, the effective minimum period for
foreclosing on a mortgage or deed of trust is generally four to five months
after the initial default and such foreclosure could be further delayed by
bankruptcy proceedings initiated by the debtor. Such time delays in collections
could disrupt the flow of revenues available to an issuer for the payment of
debt service on the outstanding obligations if such defaults occur with respect
to a substantial number of mortgages or deeds of trust securing an issuer's
obligations. Following a creditor's non-judicial foreclosure under a power of
sale, no deficiency judgment is available. This limitation, however, does not
apply to bonds authorized or permitted to be issued by the Commissioner of
Corporations, or which are made by a public utility subject to the Public
Utilities Act.
Certain Municipal Securities in the California Tax-Free Fund may be
obligations that finance the acquisition of mortgages for low and moderate
income mortgagors. These obligations may be payable solely from revenues
derived from home mortgages and are subject to California's statutory
limitations applicable to obligations secured by real property, as described
above. Under California anti-deficiency legislation, there is no personal
recourse against a mortgagor of a dwelling of no more than four units, at least
one of which is occupied by such a mortgagor, where the dwelling has been
purchased with the loan that is secured by the mortgage, regardless of whether
the creditor chooses judicial or nonjudicial foreclosure. In the event that
this purchase money anti-deficiency rule applies to a loan secured by a
mortgage or deed of trust, and the value of the property subject to that
mortgage or deed of trust has been substantially reduced because of market
forces or by an earthquake or other event for which the mortgagor or trustor
carried no insurance, upon default, the issuer holding that loan
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<PAGE> 33
nevertheless would be entitled to collect no more on its loan than it could
obtain from the foreclosure sale of the property.
Under California law, loans secured by mortgages or deeds of trust on
residential property of four units or less may be prepaid at any time.
Prepayment charges on mortgage loans on owner-occupied residential property
containing four units or less may be imposed only with respect to voluntary
prepayments made during the first five years during the term of the mortgage
loan, and cannot in any event exceed six months advance interest on the amount
prepaid in excess of 20% of the unpaid balance of the mortgage loan in any
12-month period. Such prepayment charges may not be charged if the property
securing the loan is damaged by a natural disaster for which the Governor has
declared a state of emergency, if the dwelling cannot be occupied and the
prepayment is causally related to such damage.
Legislation has been introduced from time to time regarding the
California state personal income tax status of interest paid on Municipal
Securities issued by the State of California and its local governments and held
by investment companies such as the California Tax-Free Fund. The California
Tax-Free Fund can not predict what legislation relating to Municipal
Securities, if any, may be proposed in the future or which proposals, if any,
might be enacted. Such proposals, while pending or if enacted, might materially
adversely affect the availability of Municipal Securities generally, as well as
the availability of Municipal Securities issued by the State of California and
its local governments specifically, for investment by the California Tax-Free
Fund and the liquidity and value of its portfolio. In such an event, the
California Tax-Free Fund would re-evaluate its investment objective and
policies and consider changes in its structure or possible dissolution. See
"Investments in Municipal Securities by the California Tax-Free Fund" below.
Investments in Municipal Securities by the California Tax-Free Fund.
The following information is a general summary intended to give a recent
historical description, and is not a discussion of any specific factors that
may affect any particular issuer of California Municipal Securities. The
information is not intended to indicate continuing or future trends in the
condition, financial or otherwise, of California.
Because the California Tax-Free Fund expects to invest substantially
all of its assets in California Municipal Securities, it will be susceptible to
a number of complex factors affecting the issuers of California Municipal
Securities, including national and local political, economic, social,
environmental, and regulatory policies and conditions. The Fund cannot predict
whether or to what extent such factors or other factors may affect the issuers
of California Municipal Securities, the market value or marketability of such
securities or the ability of the respective issuers of such securities to pay
interest on, or principal of, such securities. The creditworthiness of
obligations issued by a local California issuer may be unrelated to the
creditworthiness of obligations issued by the State of California, and there is
no responsibility on the part of the State of California to make payments on
such local obligations.
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<PAGE> 34
From mid-1990 to late 1993, California suffered the most severe
recession in the State since the 1930's, with significant job losses
(particularly in the aerospace, other manufacturing, services and construction
sectors). The greatest effects of the recession were felt in Southern
California. While a steady recovery has been underway since 1994, pre-recession
employment levels are not expected to be reached until later in the decade.
The recession severely affected State revenues while the State's
health and welfare costs were increasing. Consequently, from the late 1980's
until 1993-94, the State had a period of budget imbalance and reported
multibillion dollar year-end deficits. Under a two-year budget plan for fiscal
1994-95 and fiscal 1995-96, a substantial deficit was carried over into fiscal
1995-96. Current estimates indicate that this reported deficit was
substantially reduced or eliminated by the end of fiscal 1995-96. Such budget
estimates, however, reflected certain amounts paid to schools as off-budget
loans while, according to settlement of litigation over the issue, such amounts
should be treated as liabilities.
The State's ability to raise revenues and reduce expenditures to the
extent necessary to balance the budget for any year depends upon numerous
factors, including economic conditions in the State and the nation, the
accuracy of the State's revenue predictions, as well as impact of budgetary
restrictions imposed by voter-passed initiatives.
During the recession that began in 1990, the State depleted its
available cash resources and became increasingly dependent on external
borrowings to meet its cash needs. For over a decade, California has issued
revenue anticipation notes (which must be issued and repaid during the same
fiscal year) to fund its operating budget during the fiscal year. Beginning in
1992, the State's expanded its external borrowing to include revenue
anticipation warrants (which can be issued and redeemed in different fiscal
years). The State was severely criticized by the major credit rating agencies
for the State's reliance upon such external borrowings during the recession.
(The State was also criticized for its issuance of registered warrants,
promissory notes with no specific maturity, to suppliers and other State payees
during a two- month delay that took place in enacting the State's budget for
fiscal 1992-1993.) In 1996, the State fully repaid $4 billion of revenue
anticipation warrants issued in 1994. The State anticipates that it will not
need to use such "cross-year" borrowing during the 1996-97 fiscal year. It is
not presently possible, however, to determine the extent to which California
will issue additional revenue anticipation warrants, short-term
interest-bearing notes or other instruments in future fiscal years.
Certain of the securities in the California Tax-Free Fund may be
obligations of issuers that rely in whole or in part, directly or indirectly,
on ad valorem real property taxes as a source of revenue. Article XIII A of the
California Constitution, adopted by the voters in 1978, limits ad valorem taxes
on real property, and restricts the ability of taxing entities to increase real
property and other taxes. Under Article XIII A, the maximum ad valorem tax on
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<PAGE> 35
real property cannot exceed one percent of the property's "full cash value".
Article XIII A permits an increase in the one percent rate limit for certain
bonded indebtedness approved by two-thirds of the voters voting on the proposed
indebtedness. The "full cash value" of property may be adjusted annually to
reflect increases (but not more than two percent) or decreases in the consumer
price index or comparable local data, to reflect reductions in property value
caused by substantial damage, destruction or other factors, or when there is a
"change in ownership" or "new construction" with respect to the property.
Constitutional challenges to Article XIII A to date have been
unsuccessful. In 1992, the United States Supreme Court ruled that
notwithstanding the disparate property tax burdens that Article XIII A might
place on otherwise comparable properties, those provisions of Article XIII A do
not violate the Equal Protection Clause of the United States Constitution.
In response to the significant reduction in local property tax revenue
caused by the passage of Article XIII A, the State enacted legislation to
provide local governments with increased expenditures from the State. This
fiscal relief has ended, however.
Article XIII B of the California Constitution limits significantly
spending by state government and by "local governments". Article XIII B
generally limits the amount of the appropriations of the State and of local
governments to the amount of appropriations of the entity for the prior year,
adjusted for changes in the cost of living, population, and the services that
the government entity is financially responsible for providing. To the extent
that the "proceeds of taxes" of the State or a local government exceed its
"appropriations limit," the excess revenues must be rebated. One of the
exclusions from these limitations for any entity of government is the debt
service costs of bonds existing or legally authorized as of January 1, 1979 or
on bonded indebtedness thereafter approved by the voters. Although Article XIII
B states that it shall not "be construed to impair the ability of the state or
of any local government to meet its obligations with respect to existing or
future bonded indebtedness," concern has been expressed with respect to the
combined effect of such constitutionally imposed spending limits on the ability
of California state and local governments to utilize bond financing.
Article XIII B was modified substantially by Propositions 98 and 111
of 1988 and 1990, respectively. These initiatives changed the State's Article
XIII B appropriations limit to require that the State set aside a prudent
reserve fund for public education, and guarantee a minimum level of State
funding for public elementary and secondary schools as well as community
colleges. Such guaranteed spending is often cited as one of the causes of the
State's recurring budget problems.
The effect of Article XIII A, Article XIII B and other constitutional
and statutory changes and of budget developments on the ability of California
issuers to pay interest and
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principal on their obligations remains unclear, and may depend on whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected).
There is no assurance that any California issuer will make full or
timely payments of principal or interest or remain solvent. For example, in
December 1994, Orange County filed for bankruptcy. In June 1995, Orange County
negotiated a rollover of its short-term debt originally due at that time; the
major rating agencies considered the rollover a default. However, the Orange
County bankruptcy and such default have had a serious effect upon the market for
California municipal obligations.
Reductions in federal funding may adversely affect the State and
municipal economies. Welfare reform enacted in 1996 is expected to result in
the loss of approximately $6.8#billion in federal assistance available to the
State over the next six years; $5.8#billion of this amount relates to
assistance for resident noncitizens.
In addition, it is impossible to predict the time, magnitude, or
location of a major earthquake or its effect on the California economy. In
January 1994, a major earthquake struck the Los Angeles area, causing
significant damage in a four-county area. The possibility exists that another
such earthquake could create a major dislocation of the California economy.
The California Tax-Free Fund's concentration in California Municipal
Securities provides a greater level of risk than a fund that is diversified
across numerous states and municipal entities.
Investments in Municipal Securities by the Tax-Free Fund. In addition
to the short-term tax-exempt investments described in the Money Market Funds'
Prospectus, the Tax-Free Fund also may invest in general obligation notes,
construction loan notes, project notes, and pollution control bonds. Project
notes are issued by a state or local housing agency and are sold by the
Department of Housing and Urban Development. While the issuing agency has the
primary obligation with respect to its project notes, such notes are also
secured by the full faith and credit of the United States through agreements
with the issuing authority, which agreements provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the project notes.
Puts. The California Tax-Free Fund and the Tax-Free Fund may acquire
"puts" with respect to securities held in their respective portfolios. A put is
a right to sell a specified security (or securities) within a specified period
of time at a specified exercise price. These Funds may sell, transfer, or
assign a put only in conjunction with the sale, transfer, or assignment of the
underlying security or securities.
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The amount payable to a Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities (excluding any accrued
interest that the Fund paid on the acquisition), less any amortized market
premium or plus any amortized market or original issue discount during the
period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.
Puts may be acquired by a Fund to facilitate the liquidity of the
Fund's portfolio assets. Puts may also be used to facilitate the reinvestment
of a Fund's assets at a rate of return more favorable than that of the
underlying security. Under certain circumstances, puts may be used to shorten
the maturity of underlying adjustable interest rate notes for purposes of
calculating the remaining maturity of those securities and the dollar-weighted
average portfolio maturity of the Fund's assets pursuant to Rule 2a-7 under the
Investment Company Act of 1940. See "INVESTMENT OBJECTIVES AND POLICIES -
Additional Information on Portfolio Instruments -Adjustable Interest Rate
Notes" and "VALUATION - Valuation of the Money Market Funds" in this Statement
of Additional Information.
The California Tax-Free Fund and the Tax-Free Fund will generally
acquire puts only where the puts are available without the payment of any
direct or indirect consideration. However, if necessary or advisable, a Fund
may pay for puts either separately in cash or by paying a higher price for
portfolio securities that are acquired subject to the puts (thus reducing the
yield to maturity otherwise available for the same securities).
Shares of Mutual Funds. The Growth Fund, the Income and Growth Fund,
the Income Equity Fund, the Balanced Fund, the Bond Fund and the Government
Bond Fund may each invest in the securities of a money market mutual fund; as
a matter of non-fundamental policy, each Fund intends to limit such investments
to no more than 10% of the value of its total assets. When a Fund invests in
the shares of mutual funds other than the Funds of the Group, investment
advisory and other normally applicable fees will not be waived and the
investment's yield will be reduced accordingly. When a Fund invests in another
Fund of the Group, however, the Investment Adviser and the Administrator will
reduce that portion of their usual asset-based fees from each Fund by an amount
equal to their asset-based fees from the Fund in which the investment is made.
The Investment Adviser and the Administrator will promptly forward such fees to
the investing Fund. Additional restrictions on the Fund's investments in the
securities of a money market mutual fund are set forth under "Investment
Restrictions" below.
Investments by the California Tax-Free Fund and the Tax-Free Fund in
the shares of other tax-exempt money market mutual funds are described under
"Municipal Securities" above.
When-Issued Securities. Each Fund may purchase securities on a
"when-issued" basis, which means that the securities will be purchased for
delivery beyond the normal settlement date at a stated price and yield and
thereby involve the risk that the yield obtained in the
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transaction will be less than that available in the market when delivery takes
place. A Fund will generally not pay for such securities and no interest
accrues on the securities until they are received by the Fund. These
securities are recorded as an asset and are subject to changes in value based
upon changes in the general level of interest rates.
When a Fund agrees to purchase securities on a "when-issued" basis,
the Group's custodian will set aside cash or liquid portfolio securities equal
to the amount of the commitment in a separate account. Normally, the custodian
will set aside portfolio securities to satisfy the purchase commitment, and in
such a case, the Fund may be required subsequently to place additional assets
in the separate account in order to assure that the value of the account
remains equal to the amount of the Fund's commitment. It may be expected that
the Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when the Fund sets
aside cash. The purchase of securities on a "when-issued" basis may have the
effect of leverage, which may increase the risk of fluctuations in a Fund's net
asset value.
The Funds expect that commitments to purchase "when-issued" securities
will not exceed 25% of the value of their respective total assets under normal
market conditions; in the event any Fund exceeded this 25% threshold, the
Fund's liquidity and the Advisor's ability to manage it might be adversely
affected. In addition, the Funds do not intend to purchase "when-issued"
securities for speculative purposes but only in furtherance of such Fund's
investment objective. When a Fund engages in "when-issued" transactions, it
relies on the seller to consummate the trade. Failure of the seller to do so
may result in the Fund incurring a loss or missing the opportunity to obtain a
price considered to be advantageous.
Zero-Coupon Securities. The Balanced Fund, the Bond Fund and the
Government Bond Fund may invest in zero-coupon securities, which are debt
securities that do not pay interest, but instead are issued at a deep discount
from par. The value of the security increases over time to reflect the interest
accreted. The value of these securities may fluctuate more than similar
securities that are issued at par and pay interest periodically. Although these
securities pay no interest to holders prior to maturity, interest on these
securities is reported as income to the Fund and distributed to its
shareholders. These distributions must be made from the Fund's cash assets or,
if necessary, from the proceeds of sales of portfolio securities. The Fund will
not be able to purchase additional income producing securities with cash used
to make such distributions and its current income ultimately may be reduced as
a result.
INVESTMENT RESTRICTIONS
Unless otherwise indicated, the following investment restrictions are
fundamental and, as such, may be changed with respect to a particular Fund only
by a vote of a majority of the outstanding Shares of that Fund (as defined
below). Except with respect to a Fund's restriction governing the borrowing of
money, if a percentage restriction is satisfied at the time of
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<PAGE> 39
investment, a later increase or decrease in such percentage resulting from a
change in asset value will not constitute a violation of the restriction.
The U.S. Government Obligations Fund may not purchase securities other
than U.S. Treasury bills, notes, and other obligations issued or guaranteed by
the U.S. Government, its agencies, or instrumentalities, some of which may be
subject to repurchase agreements.
The 100% U.S. Treasury Obligations Fund may not purchase securities
other than short-term obligations issued or guaranteed as to payment of
principal and interest by the full faith and credit of the U.S. Treasury, some
of which may be subject to repurchase agreements. It is the present policy of
the 100% U.S. Treasury Obligations Fund to invest only in direct U.S. Treasury
obligations and not to invest in repurchase agreements. The 100% U.S. Treasury
Obligations Fund may lend portfolio securities in order to generate additional
income.
Each Fund, except for the California Tax-Free Fund and the Tax-Free
Fund (the restrictions for which are outlined below), may not:
1. Purchase securities on margin (except that, with respect to the
Growth Fund, the Income and Growth Fund, the Income Equity Fund, the Balanced
Fund, the Bond Fund, and the Government Bond Fund only, such Funds may make
margin payments in connection with transactions in options and financial and
currency futures contracts), sell securities short, participate on a joint or
joint and several basis in any securities trading account, or underwrite the
securities of other issuers, except to the extent that a Fund may be deemed to
be an underwriter under certain securities laws in the disposition of
"restricted securities" acquired in accordance with the investment objectives
and policies of such Fund;
2. Purchase or sell commodities, commodity contracts (excluding, with
respect to the Growth Fund, the Income and Growth Fund, the Income Equity Fund,
the Balanced Fund, the Bond Fund and the Government Bond Fund only, options and
financial and currency futures contracts), oil, gas or mineral exploration
leases or development programs, or real estate (although investments by the
Growth Fund, the Income Equity Fund, the Balanced Fund, the Bond Fund, the
Government Bond Fund and the Diversified Obligations Fund in marketable
securities of companies engaged in such activities and investments by the
Growth Fund, the Income and Growth Fund, the Income Equity Fund, the Balanced
Fund, the Bond Fund and the Government Bond Fund in securities secured by real
estate or interests therein, are not hereby precluded to the extent the
investment is appropriate to such Fund's investment objective and policies);
3. Invest in any issuer for purposes of exercising control or
management;
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<PAGE> 40
4. Purchase or retain securities of any issuer if the officers or
Trustees of the Group or the officers or directors of its investment adviser
owning beneficially more than one-half of 1% of the securities of such issuer
together own beneficially more than 5% of such securities;
5. Borrow money or issue senior securities, except that a Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with permissible borrowings and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of the Fund's total
assets at the time of its borrowing. A Fund will not invest in additional
securities until all its borrowings (including reverse repurchase agreements)
have been repaid. For purposes of this restriction, the deposit of securities
and other collateral arrangements with respect to options and financial and
currency futures contracts, and payments of initial and variation margin in
connection therewith, are not considered a pledge of a Fund's assets; and
6. Make loans, except that a Fund may purchase or hold debt
instruments, lend portfolio securities, and enter into repurchase agreements in
accordance with its investment objective and policies (as indicated below, each
Fund may not lend portfolio securities in excess of 35% of the value of the
Fund's total assets).
The Diversified Obligations Fund, the U.S. Government Obligations Fund
and the 100% U.S. Treasury Obligations Fund may not:
1. Buy common stocks or voting securities, or state, municipal or
private activity bonds;
2. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, reorganization, or
acquisition of assets;
3. Write or purchase put or call options; or
4. Invest more than 10% of total assets in the securities of issuers
that together with any predecessors have a record of less than three years'
continuous operation.
The Growth Fund, the Income and Growth Fund, the Income Equity Fund,
the Balanced Fund, the Bond Fund and the Government Bond Fund may not:
1. Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities, if, immediately after the purchase, more than 5% of the
value of such Fund's total assets would be invested in the issuer or the Fund
would hold more than 10% of any class of securities of the issuer or more than
10% of the issuer's outstanding voting securities (except that up to 25% of the
value of the Fund's total assets may be invested without regard to these
limitations). There is no limit to the
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percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. Government, its agencies,
or instrumentalities;
2. Purchase any securities that would cause more than 25% of such
Fund's total assets at the time of purchase to be invested in securities of one
or more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. or foreign governments or their agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services (for example,
gas, gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry);
3. Invest in securities of other investment companies except as they
may be acquired as part of a merger, consolidation, reorganization, or
acquisition of assets, provided, however, that each of the Funds may purchase
securities of a money market fund, if, immediately after such purchase, the
acquiring Fund does not own in the aggregate (i) more than 3% of the acquired
company's outstanding voting securities, (ii) securities issued by the acquired
company having an aggregate value in excess of 5% of the value of the total
assets of the acquiring Fund, or (iii) securities issued by the acquired
company and all other investment companies (other than treasury stock of the
acquiring Fund) having an aggregate value in excess of 10% of the value of the
acquiring Fund's total assets; and
4. Lend portfolio securities in excess of 35% of the value of the
total assets of such Fund.
The Diversified Obligations Fund may not:
1. Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities, if, immediately after the purchase, more than 5% of the
value of the Fund's total assets would be invested in such issuer (except that
up to 25% of the value of the Fund's total assets may be invested without
regard to the 5% limitation). There is no limit to the percentage of assets
that may be invested in U.S. Treasury bills, notes, or other obligations
issued or guaranteed by the U.S. Government, its agencies, or instrumentalities
(as indicated under High Quality Investments in the Fund's Prospectus, the Fund
has adopted an investment policy that is more restrictive than this fundamental
investment limitation); and
2. Purchase any securities that would cause more than 25% of the value
of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities, domestic bank certificates of deposit or
bankers' acceptances, and repurchase agreements secured by bank instruments or
obligations of the U.S. Government, its
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agencies, or instrumentalities; (b) wholly owned finance companies will be
considered to be in the industries of its parents if their activities are
primarily related to financing the activities of their parents; and (c)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered
a separate industry).
The California Tax-Free Fund and the Tax-Free Fund may not:
1. Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities, if, immediately after the purchase, more than 5% of the
value of its total assets would be invested in such issuer (except that up to
25% of the value of the Fund's total assets may be invested without regard to
the 5% limitation). For purposes of this investment restriction, a security is
considered to be issued by the government entity (or entities) whose assets and
revenues back the security or, with respect to a private activity bond that is
backed only by the assets and revenues of a non-governmental user, by the
non-governmental user;
2. Purchase any securities that would cause 25% or more of such Fund's
total assets at the time of purchase to be invested in the securities of one or
more issuers conducting their principal business activities in the same
industry; provided that this limitation shall not apply to securities of the
U.S. Government, its agencies or instrumentalities or Municipal Securities or
governmental guarantees of Municipal Securities; and provided, further, that
for the purpose of this limitation, private activity bonds that are backed only
by the assets and revenues of a non-governmental user shall not be deemed to be
Municipal Securities;
3. Make loans; provided, however, that each Fund may purchase or hold
debt instruments and enter into repurchase agreements pursuant to such Fund's
investment objective and policies;
4. Purchase or sell real estate; provided, however, that each Fund
may, to the extent appropriate to its investment objective, purchase Municipal
Securities secured by real estate or interests therein or securities issued by
companies investing in real estate or interests therein;
5. Purchase securities on margin, make short sales of securities or
maintain a short position;
6. Underwrite the securities of other issuers;
7. Purchase securities of companies for the purpose of exercising
control or management;
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<PAGE> 43
8. Invest in private activity bonds where the payment of principal and
interest are the responsibility of a company (including its predecessors) with
less than three years of continuous operation;
9. Purchase or sell commodities or commodity contracts, or invest in
oil, gas or mineral exploration leases or development programs; provided,
however, each Fund may, to the extent appropriate to such Fund's investment
objective, purchase publicly traded obligations of companies engaging in whole
or in part in such activities;
10. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets;
11. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with permissible borrowings and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of the Fund's total
assets at the time of its borrowing. Each Fund will not invest in additional
securities until all its borrowings (including reverse repurchase agreements)
have been repaid;
12. Write or sell puts, calls, straddles, spreads, or combinations
thereof, except that each Fund may acquire puts with respect to Municipal
Securities in its portfolio and sell the puts in conjunction with a sale of the
underlying Municipal Securities;
13. Acquire a put, if, immediately after the acquisition, more than
5% of the total amortized cost value of such Fund's assets would be subject to
puts from the same institution (except that (i) up to 25% of the value of the
Fund's total assets may be subject to puts without regard to the 5% limitation
and (ii) the 5% limitation is inapplicable to puts that, by their terms, would
be readily exercisable in the event of a default in payment of principal or
interest on the underlying securities). In applying the above-described
limitation, the Fund will aggregate securities subject to puts from any one
institution with the Fund's investments, if any, in securities issued or
guaranteed by that institution. In addition, for the purpose of this investment
restriction and investment restriction No. 4 below, a put will be considered to
be from the party to whom such Fund will look for payment of the exercise
price;
14. Acquire a put that, by its terms, would be readily exercisable in
the event of a default in payment of principal and interest on the underlying
security or securities if, immediately after the acquisition, the amortized
cost value of the security or securities underlying the put, when aggregated
with the amortized cost value of any other securities issued or guaranteed by
the issuer of the put, would exceed 10% of the total amortized cost value of
such Fund's assets; and
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15. Invest in securities of other investment companies except as they
may be acquired as part of a merger, consolidation, reorganization, or
acquisition of assets; provided, however, that the California Tax-Free Fund and
the Tax-Free Fund may purchase securities of a tax-exempt money market fund if,
immediately after such purchase, the acquiring Fund does not own in the
aggregate (i) more than 3% of the acquired company's outstanding voting
securities, (ii) securities issued by the acquired company having an aggregate
value in excess of 5% of the value of the total assets of the acquiring Fund,
or (iii) securities issued by the acquired company and all other investment
companies (other than treasury stock of the acquiring Fund) having an aggregate
value in excess of 10% of the value of the acquiring Fund's total assets.
Illiquid Securities. Each Fund has adopted a non-fundamental policy
(which may be changed without shareholder approval) prohibiting the Fund from
investing more than 15% (in the case of each of the Money Market Funds, not
more than 10%) of its total assets in "illiquid" securities, which include
securities with legal or contractual restrictions on resale or for which no
readily available market exists but exclude such securities if resalable
pursuant to Rule 144A under the Securities Act ("Rule 144A Securities").
Pursuant to this policy, the Funds may purchase Rule 144A Securities only in
accordance with liquidity guidelines established by the Board of Trustees of
the Group and only if the investment would be permitted under applicable state
securities laws.
Investments in Warrants. The Group has agreed with a state
administrator, on behalf of the Growth Fund, the Income and Growth Fund, the
Income Equity Fund and the Balanced Fund, that it will limit its investments in
warrants to not more than 5% of each of these Funds' net assets and, of this
5%, not more than 2% will be invested in warrants that are not listed on the
New York Stock Exchange or the American Stock Exchange; provided, however, that
for the purposes of this limitation, warrants acquired in units or attached to
other securities will be deemed to be without value.
Voting Information. As used in this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of the Group or a
particular Fund or a particular Class of Shares of the Group or a Fund means
the affirmative vote of the lesser of (a) more than 50% of the outstanding
Shares of the Group or such Fund or such Class, or (b) 67% or more of the
Shares of the Group or such Fund or such Class present at a meeting at which
the holders of more than 50% of the outstanding Shares of the Group or such
Fund or such Class are represented in person or by proxy.
PORTFOLIO TURNOVER
A Fund's turnover rate is calculated by dividing the lesser of a
Fund's purchases or sales of portfolio securities for the year by the monthly
average value of the portfolio securities. The calculation excludes all
securities whose maturities at the time of acquisition
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<PAGE> 45
were one year or less. Thus, for regulatory purposes, the portfolio turnover
rate with respect to each of the Money Market Funds was zero percent from the
commencement of their respective operations to July 31, 1996, and is expected
to remain zero percent. For the Group's fiscal year ended July 31, 1996, the
portfolio turnover rate of the Growth Fund was 78.58%, for the Income and
Growth Fund was 36.64%, for the Income Equity Fund was 41.51%, for the
Balanced Fund was 12.84%, for the Bond Fund was 20.88%, and for the Government
Bond Fund was 44.72%. For the Group's fiscal year ended July 31, 1995, the
portfolio turnover rate of the Growth Fund was 67.91%, for the Income and
Growth Fund was 15.01%, for the Income Equity Fund was 36.64%, for the
Balanced Fund was 20.70%, for the Bond Fund was 36.20%, and for the Government
Bond Fund was 67.49%. The portfolio turnover rate may vary greatly from year
to year as well as within a particular year, and may also be affected by cash
requirements for redemption of Shares and, in the case of the California
Tax-Free Fund and the Tax-Free Fund, by requirements that enable them to
receive certain favorable tax treatment.
VALUATION
As disclosed in the Prospectuses, each Fund's net asset value per
share for purposes of pricing purchase and redemption orders is determined by
the administrator as of the close of trading on the New York Stock Exchange
(generally 4:00 p.m. Eastern Time) (and 1:00 p.m. Eastern Time in the case of
the Money Market Funds) on each weekday, with the exception of those holidays
on which the New York Stock Exchange or the Federal Reserve Bank of San
Francisco are closed (a "Business Day"). Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, President's Day (Washington's
Birthday), Good Friday, Memorial Day (observed), Independence Day (observed),
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day
(observed).
VALUATION OF THE MONEY MARKET FUNDS
The Money Market Funds have elected to use the amortized cost method
of valuation pursuant to Rule 2a-7 under the 1940 Act. The amortized cost
method involves valuing an instrument at its cost initially and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. This method may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Fund would
receive if it sold the instrument. The value of securities in a Fund can be
expected to vary inversely with changes in prevailing interest rates.
The Group's Board of Trustees has undertaken to establish procedures
reasonably designed, taking into account current market conditions and a Fund's
investment objective, to stabilize the net asset value per Share of each Money
Market Fund for purposes of sales and redemptions at $l.00. These procedures
include review by the Trustees, at such intervals as
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<PAGE> 46
they deem appropriate, to determine the extent, if any, to which the net asset
value per Share of each Fund calculated by using available market quotations
deviates from $1.00 per Share. In the event such deviation exceeds one-half
of one percent, Rule 2a-7 requires that the Board promptly consider what
action, if any, should be initiated. If the Trustees believe that the extent
of any deviation from a Fund's $1.00 amortized cost price per Share may result
in material dilution or other unfair results to new or existing investors, the
Trustees will take such steps as they consider appropriate to eliminate or
reduce to the extent reasonably practicable any such dilution or unfair
results. These steps may include selling portfolio instruments prior to
maturity, shortening the average portfolio maturity of a Fund, withholding or
reducing dividends, reducing the number of a Fund's outstanding Shares without
monetary consideration, or utilizing a net asset value per Share based on
available market quotations.
VALUATION OF THE GROWTH FUND, THE INCOME AND GROWTH FUND,
THE INCOME EQUITY FUND, THE BALANCED FUND, THE BOND FUND
AND THE GOVERNMENT BOND FUND
Except as noted below, investments by the Growth Fund, the Income and
Growth Fund, the Income Equity Fund, the Balanced Fund, the Bond Fund and the
Government Bond Fund in securities traded on a national exchange (or
exchanges) are valued based upon their last sale price on the principal
exchange on which such securities are traded. With regard to each such Fund,
securities the principal market for which is not a securities exchange are
valued based upon the mean of their latest available bid prices in such
principal market or, if there are no reported bids for that day, the
securities are valued based upon their last reported trading price. Securities
and other assets for which market quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of the
Group's Board of Trustees. With the exception of short-term securities as
described below, the value of each Fund's investments may be based on
valuations provided by a pricing service. Short-term securities (i.e.,
securities with remaining maturities of 60 days or less) are valued at
amortized cost, which approximates current value.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Both classes of Shares in each Fund are sold on a continuous basis by
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services (the
"Distributor"), and the Distributor has agreed to use appropriate efforts to
solicit all purchase orders.
Investor Shares may be purchased pursuant to agreements between the
Distributor and Participating Organizations whereby investments in Investor
Shares are made by the Participating Organization on behalf of its customers,
while Fiduciary Shares may be purchased through procedures established by the
Distributor in connection with the requirements of fiduciary, advisory, agency
and other similar accounts maintained by or on behalf of customers of Union
Bank of California or its affiliates. An investor must be
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<PAGE> 47
eligible to purchase Investor or Fiduciary Shares under the criteria described
in the Prospectuses.
PURCHASE OF INVESTOR SHARES
As stated in the relevant Prospectuses, the public offering price of
Investor Shares of the Equity Funds and the Income Funds is the net asset
value next computed after the receipt of the order to purchase Shares plus a
sales charge, which varies based upon the type of Fund and amount purchased.
The public offering price of such Investor Shares of the Group is calculated by
dividing net asset value by the difference between 100% and the sales charge
percentage of offering price applicable to the purchase (see "How to Purchase
Shares" in the relevant Prospectuses). The offering price is rounded to two
decimal places each time a computation is made. The sales charge scale set
forth in a Fund's Prospectus applies to purchases of Investor Shares of such a
Fund by a purchaser.
As the Group's principal underwriter, the Distributor acts as
principal in selling Investor Shares of the Group to dealers. The Distributor
re-allows the sales charge as dealer discounts and brokerage commissions.
Dealer allowances expressed as a percentage of offering price for all offering
prices are set forth in the relevant Prospectuses (see "How to Purchase
Shares"). From time to time, the Distributor may make expense reimbursements
for special training of a dealer's registered representatives in group meetings
or to help pay the expenses of sales contests. In some instances, promotional
incentives to dealers may be offered only to certain dealers who have sold or
may sell significant amounts of the Funds' Investor Shares. Neither the
Distributor nor dealers are permitted to delay the placement of orders to
benefit themselves by a price change.
MATTERS AFFECTING REDEMPTION
The Group may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission; (b) the Exchange is closed for other
than customary weekend and holiday closings; (c) the Securities and Exchange
Commission has by order permitted such suspension; or (d) an emergency exists
as determined by the Securities and Exchange Commission.
The Group may redeem Shares involuntarily if redemption appears
appropriate in light of the Group's responsibilities under the 1940 Act. See
"VALUATION" above.
ADDITIONAL FEDERAL TAX INFORMATION
Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). In order so to qualify and to qualify for the special tax
treatment accorded regulated investment companies
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<PAGE> 48
and their Shareholders, a Fund must, among other things, (a) derive at least
90% of its gross income from dividends, interest, payments with respect to
certain securities loans, and gains from the sale of stock, securities, and
foreign currencies, or other income (including but not limited to gains from
options, futures, or forward contracts) derived with respect to its business
of investing in such stock, securities, or currencies; (b) derive less than
30% of its gross income from the sale or other disposition of certain assets
(including stocks and securities) held for less than three months; (c) each
year distribute at least 90% of its dividends, interest (including tax-exempt
interest), certain other income and the excess, if any, of its net short-term
capital gains over its net long-term capital losses; and (d) diversify its
holdings so that, at the end of each fiscal quarter (i) at least 50% of the
market value of the Fund's assets is represented by cash, cash items, U.S.
Government securities, securities of other regulated investment companies, and
other securities, limited in respect of any one issuer to a value not greater
than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of
its assets is invested in the securities (other than those of the U.S.
Government or other regulated investment companies) of any one issuer or of
two or more issuers that the Fund controls and that are engaged in the same,
similar, or related trades or businesses. The 30% of gross income test
described above may restrict a Fund's ability to sell certain assets held (or
considered under Code rules to have been held) for less than three months.
If a Fund fails to distribute in a calendar year substantially all of
its ordinary income for the year and substantially all its capital gain net
income for the one-year period ending October 31 of the year (and any retained
amount from the prior calendar year), the Fund will be subject to a
non-deductible 4% excise tax on the undistributed amounts.
Any dividend declared by a Fund to Shareholders of record on a date in
October, November or December generally is deemed to have been received by its
Shareholders on December 31 of such year (and paid by the Fund on or before
such time) provided that the dividend actually is paid not later than the end
of January of the following year.
The Funds will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends and other distributions
paid to any Shareholder who has provided either an incorrect tax identification
number or no number at all, or who is subject to withholding by the Internal
Revenue Service for failure to properly include on his or her tax return
payments of interest or dividends.
Unless treaty relief applies, foreign Shareholders (i.e., nonresident
alien individuals and foreign corporations, partnerships, trusts and estates)
generally are subject to U.S. withholding tax at the rate of 30% on
distributions derived from net investment income and short-term capital gains
notwithstanding whether a portion of such income (e.g., short-term gains and
portfolio interest) may not have been taxable to the foreign Shareholder if it
had been earned directly rather than through a Fund. Distributions to foreign
Shareholders of long-term capital gains and any gains from the sale or other
disposition of Shares of a Fund
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<PAGE> 49
generally are not subject to U.S. taxation, unless the recipient is a
nonresident alien individual who is present in the United States for more than
182 days during the taxable year and who meets certain other requirements.
Different tax consequences may result if the foreign Shareholder is engaged in
a trade or business within the United States or, if treaty relief applies, has
a U.S. permanent establishment. Foreign Shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in
the Funds.
The foregoing discussion and the one below regarding the California
Tax-Free Fund and the Tax-Free Fund under "Federal Taxation" is only a summary
of some of the important Federal tax considerations generally affecting
purchasers of the Funds' Shares. No attempt has been made to present a detailed
explanation of the Federal income tax treatment of the Funds, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of the Funds' Shares are urged to consult
their tax advisers with specific reference to their own tax situation. In
addition, this discussion is based on tax laws and regulations that are in
effect on the date of this Statement of Additional Information; such laws and
regulations may be changed by legislative, judicial or administrative action,
and such changes may be retroactive.
ADDITIONAL TAX INFORMATION CONCERNING THE CALIFORNIA TAX-FREE FUND AND
THE TAX-FREE FUND
Federal Taxation. As indicated in their respective Prospectuses, the
California Tax-Free Fund and the Tax-Free Fund are designed to provide
individual Shareholders with current tax-exempt interest income. None of these
Funds is intended to constitute a balanced investment program or is designed
for investors seeking capital appreciation. Nor are the California Tax-Free
Fund or the Tax-Free Fund designed for investors seeking maximum tax-exempt
income irrespective of fluctuations in principal. Shares of the Funds may not
be suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans, and individual
retirement accounts because such plans and accounts are generally tax-exempt
and, therefore, would not gain any additional benefit from the Funds' dividends
being tax-exempt, and such dividends would ultimately be taxable to the
beneficiaries when distributed to them.
The Code permits a regulated investment company that invests at least
50% of its total assets in tax-free Municipal Securities to pass through to its
investors, tax-free, net Municipal Securities interest income to the extent
such interest would be exempt if earned directly. The policy of the California
Tax-Free Fund and the Tax-Free Fund is to pay each year as dividends
substantially all of such Fund's Municipal Securities interest income net of
certain deductions. An exempt-interest dividend is any dividend or part
thereof derived from interest excludable from gross income and designated as an
exempt-interest dividend in a written notice mailed to Shareholders after the
close of such Fund's taxable year, but the aggregate of such dividends may not
exceed the net Municipal Securities interest received by the Fund during the
taxable year. In the case of each of the California Tax-Free Fund and the
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<PAGE> 50
Tax-Free Fund the percentage of the dividends paid for any taxable year that
qualifies as federal exempt-interest dividends will be the same for all
Shareholders receiving dividends during such year, regardless of the period for
which the Shares were held.
Exempt-interest dividends may be treated by Shareholders of the
California Tax-Free Fund and the Tax-Free Fund as items of interest excludable
from their gross income under Section 103(a) of the Code. However, each such
Shareholder is advised to consult his or her tax adviser with respect to
whether exempt-interest dividends would retain the exclusion under Section
103(a) if such Shareholder were treated as a "substantial user" or a "related
person" to such user under Section 147(a) with respect to facilities financed
through any of the tax-exempt obligations held by the California Tax-Free Fund
and the Tax-Free Fund.
The California Tax-Free Fund and the Tax-Free Fund will distribute
substantially all of any investment company taxable income for each taxable
year. In general, a Fund's investment company taxable income will be its
taxable income subject to certain adjustments and excluding the excess of any
net long-term capital gains for the taxable year over the net short-term
capital loss, if any, for such year. Distributions of such income will be
taxable to Shareholders as ordinary income. The dividends-received deduction
for corporations is not expected to apply to such distributions.
Distribution of the excess of the California Tax-Free Fund's and the
Tax-Free Fund's net long-term capital gain (if any) over its net short-term
capital loss will be taxable to the Fund's Shareholders as a long-term capital
gain in the year in which received, regardless of how long a time the
Shareholder held the Fund's Shares and such distributions will not be eligible
for the dividends received deduction. If a Shareholder disposes of Shares in a
Fund at a loss before holding such Shares for longer than six months, such loss
will be treated as a long-term capital loss to the extent the Shareholder has
received a capital gain dividend on the Shares.
Shareholders receiving social security or railroad retirement benefits
may be taxed on a portion of those benefits as a result of receiving tax-exempt
income (including exempt-interest dividends distributed by the Fund).
Like the other Funds, if for any taxable year the California Tax-Free
Fund or the Tax-Free Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of such Fund's taxable income will
be subject to tax at regular corporate rates (without any deduction for
distributions to Shareholders), and Municipal Securities interest income,
although not taxable to the California Tax-Free Fund or the Tax-Free Fund would
be taxable to Shareholders when distributed as dividends.
Depending upon the extent of its activities in states and localities
in which its offices are maintained, in which its agents or independent
contractors are located or in which it is otherwise deemed to be conducting
business, the California Tax-Free Fund and the Tax-Free
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<PAGE> 51
Fund may be subject to the tax laws of such states or localities. For a
summary of certain California tax considerations affecting the California
Tax-Free Fund, see "California Taxation" below.
As indicated in their Prospectuses, the California Tax-Free Fund and
the Tax-Free Fund may acquire rights regarding specified portfolio securities
under puts. See "INVESTMENT OBJECTIVES AND POLICIES - Additional Information on
Portfolio Instruments - Puts" in this Statement of Additional Information. The
policy of each Fund is to limit its acquisition of puts to those under which the
Fund will be treated for Federal income tax purposes as the owner of the
Municipal Securities acquired subject to the put and the interest on such
Municipal Securities will be tax-exempt to the Fund. There is currently no
guidance available from the Internal Revenue Service that definitively
establishes the tax consequences that may result from the acquisition of many of
the types of puts that the California Tax-Free Fund or the Tax-Free Fund could
acquire under the 1940 Act. Therefore, although they will only acquire a put
after concluding that it will have the tax consequences described above, the
Internal Revenue Service could reach a different conclusion from that of the
relevant Fund.
California Taxation. Under existing California law, if the California
Tax-Free Fund continues to qualify for the special federal income tax
treatment afforded regulated investment companies and if at the end of each
quarter of such Fund's taxable year at least 50% of the value of that Fund's
assets consists of obligations that, if held by an individual, would pay
interest exempt from California taxation ("California Exempt-Interest
Securities"), Shareholders of that Fund will be able to exclude from income,
for California personal income tax purposes, "California exempt-interest
dividends" received from that Fund during that taxable year. A "California
exempt-interest dividend" is any dividend or portion thereof of the California
Tax-Free Fund not exceeding the interest received by the Fund during the
taxable year on obligations that, if held by an individual, would pay interest
exempt from California taxation (less direct and allocated expenses, which
includes amortization of acquisition premium) and so designated by written
notice to Shareholders within 60 days after the close of that taxable year.
Distributions, other than of "California exempt-interest dividends,"
by the California Tax-Free Fund to California residents will be subject to
California personal income taxation. Gains realized by California residents
from a redemption or sale of Shares of the California Tax-Free Fund will also
be subject to California personal income taxation. In general, California
nonresidents, other than certain dealers, will not be subject to California
personal income taxation on distributions by, or on gains from the redemption
or sale of, Shares of the California Tax-Free Fund unless those Shares have
acquired a California "business situs." (Such California nonresidents may,
however, be subject to other state or local income taxes on such distributions
or gains, depending on their residence.) Short-term capital losses realized by
shareholders from a redemption of shares of the California Tax-Free Fund
within six months from the date of their purchase will not be allowed for
California personal income tax purposes to the extent of any tax-exempt
dividends received with respect to such Shares during
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<PAGE> 52
such period. No deduction will be allowed for California personal income tax
purposes for interest on indebtedness incurred or continued in order to
purchase or carry Shares of the California Tax-Free Fund for any taxable year
of a Shareholder during which the Fund distributes "California
exempt-interest dividends."
A statement setting forth the amount of "California exempt-interest
dividends" distributed during each calendar year will be sent to Shareholders
annually.
The foregoing is only a summary of some of the important California
personal income tax considerations generally affecting the Shareholders of the
California Tax- Free Fund . This summary does not describe the California tax
treatment of the California Tax-Free Fund and, in addition, no attempt has
been made to present a detailed explanation of the California personal income
tax treatment of the Fund's Shareholders. Accordingly, this discussion is not
intended as a substitute for careful planning. Further, "California
exempt-interest dividends" are excludable from income for California personal
income tax purposes only. Any dividends paid to Shareholders subject to
California franchise tax or California corporate income tax will be taxed as
ordinary dividends to such Shareholders, notwithstanding that all or a portion
of such dividends is exempt from California personal income tax. Accordingly,
potential investors in the California Tax- Free Fund including, in particular,
corporate investors which may be subject to either California franchise tax or
California corporate income tax, should consult their tax advisers with respect
to the application of such taxes to the receipt of Fund dividends and as to
their own California tax situation, in general.
MANAGEMENT OF THE GROUP
TRUSTEES AND OFFICERS
Overall responsibility for management of each Fund rests with the
Trustees of the Group, who are elected by the Group's Shareholders. There are
currently five Trustees, four of whom are not "interested persons" of the Group
within the meaning of that term under the 1940 Act.
The Trustees, in turn, elect the officers of the Group to supervise
actively its day-to-day operations.
The Trustees and officers of the Group, their addresses and principal
occupations during the past five years are set forth below.
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<PAGE> 53
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE GROUP DURING PAST 5 YEARS
- ---------------- ---------------- --------------------
<S> <C> <C>
Stephen G. Mintos* Chairman of the Board, Trustee and Employee, and prior to
3435 Stelzer Road President October 1993 a limited
Columbus, OH 43219 partner, BISYS Fund
Services.
Thomas L. Braje Trustee Retired October, 1996.
1000 Alfred Nobel Drive Prior to October 1996,
Hercules, CA 94547 Vice President and Chief
Financial Officer of Bio
Rad Laboratories, Inc.
David A. Goldfarb Trustee Parner, Goldfarb &
111 Pine Street Simens, Certified Public
18th Floor Accountants.
San Francisco, CA 94111
Joseph C. Jaeger Trustee Senior Vice President and
100 First Street Chief Financial Officer,
San Francisco, CA 94105 Delta Dental Plan of
California.
Frederick J. Long Trustee President and Chief
520 Pike Street Executive Officer,
20th Floor Pettit-Morry Co. and
Seattle, WA 98101 Acordia Northwest Inc.
(each an insurance
brokerage firm).
</TABLE>
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<PAGE> 54
<TABLE>
<S> <C> <C>
J. David Huber Vice President From June, 1994, Senior
3435 Stelzer Road Vice President, Business
Columbus, OH 43219 Development; from
December 1993 to June
1994, Managing Director
of Business Development;
from June, 1993 to
December, 1993,
Managing Director of
Sales Management
Services of BISYS Fund
Services Limited
Partnership; from June,
1987 to June, 1993,
Managing Director of
Client Services of BISYS
Fund Services.
Irimga McKay Vice President From July 1993 to present,
1230 Columbia Street Senior Vice President of
Suite 500 Client Services, BISYS
San Diego, CA 92101 Fund Services, Inc.; from
November 1988 to July
1993, First Vice President
of Concord Holding
Corporation (now BISYS
Fund Services, Inc.)
Cynthia L. Lindsey Vice President Employee, BISYS Fund
3435 Stelzer Road Services.
Columbus, OH 43219
</TABLE>
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<PAGE> 55
<TABLE>
<S> <C> <C>
George O. Martinez Secretary From March 1995 to
3435 Stelzer Road present, Senior Vice
Columbus, OH 43219 President and Director of
Legal and Compliance
Services, BISYS Fund
Services, Inc.; from June
1989-March 1995, Vice
President and Associate
General Counsel, Alliance
Capital Management.
Mark E. Nagle Treasurer From September 1995 to
present, Senior Vice
President of Accounting
Services, BISYS Fund
Services, Inc.; from 1993
to September 1995, Senior
Vice President, Fidelity
Institutional Retirement
Services; from 1981 to
1993, Fidelity Accounting
& Custody Services.
Alaina V. Metz Assistant Secretary From June, 1995 to
3435 Stelzer Road present, Chief
Columbus, OH 43219 Administrator,
Administration and
Regulatory Services,
BISYS Fund Services,
Inc.; from May, 1989 to
June, 1995, Supervisor,
Mutual Fund Legal
Department, Alliance
Capital Management.
</TABLE>
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<PAGE> 56
<TABLE>
<S> <C> <C>
Michael Sakala Assistant Treasurer From April 1996 to
3435 Stelzer Road present, Associate
Columbus, OH 43219 Director, Accounting
Services, BISYS Fund
Services, Inc.; from April
1994 to April 1996, Head
of Fund Administration,
Banque Paribas,
Luxembourg; from May
1989 to April 1994,
Accounting Manager,
Fidelity Investments.
</TABLE>
* Mr. Mintos is considered to be an "interested person" of the Group as
defined in the 1940 Act.
The Trustees of the Group receive quarterly retainer fees and fees and
expenses for each meeting of the Board of Trustees attended. No employee,
officer or stockholder of BISYS Fund Services, BISYS Fund Services, Inc. and/or
BISYS Fund Services Ohio, Inc. ("BISYS Fund Services Ohio") receives any
compensation directly from the Group for serving as a Trustee and/or officer.
BISYS Fund Services receives administration, servicing and distribution fees
from each of the Group's Funds. See "Manager and Administrator" and
"Distributor" below. Messrs. Mintos, Huber, Martinez, Nagle and Sakala, Ms.
Lindsey, Ms. Metz and Ms. McKay are employees of BISYS Fund Services. As
described under "Transfer Agent, Custodian, and Fund Accounting Services"
below, BISYS Fund Services Ohio receives fees from each of the Group's Funds
for acting as transfer agent and fund accountant. Messrs. Huber and Mintos are
each officers of BISYS Fund Services Ohio. While BISYS Fund Services Ohio is a
distinct legal entity from BISYS Fund Services, BISYS Fund Services Ohio is
considered to be an affiliated person of BISYS Fund Services under the 1940 Act
due to, among other things, the fact that BISYS Fund Services Ohio and BISYS
Fund Services are both controlled by the same ultimate parent company, The
BISYS Group, Inc.
During the fiscal year ended July 31, 1996, fees /paid to the
disinterested Trustees for their services as Trustees aggregated $36,000. For
the disinterested Trustees, the
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<PAGE> 57
following table sets forth information concerning fees paid and
retirement benefits accrued during the fiscal year ended July 31, 1996:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Annual Total Compensation
Trustee Compensation Retirement Benefits Upon from Fund
from Group Benefits Accrued Retirement Complex Paid to
as Trustees
Part of Fund
Expenses
------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Thomas L. Braje $9,000 None None $9,000
David A. Goldfarb $9,000 None None $9,000
Joseph C. Jaeger $9,000 None None $9,000
Frederick J. Long $9,000 None None $9,000
</TABLE>
INVESTMENT ADVISER
Investment advisory and management services are provided to each of
the Group's Funds by Pacific Alliance Capital Management formerly MERUS-UCA
Capital Management (the "Advisor"), pursuant to an investment advisory
agreement between Union Bank of California and the Group dated as of April 1,
1996 (the "Investment Advisory Agreement"). Union Bank of California serves as
custodian for each of the Group's Funds. In addition, pursuant to separate
agreements with BISYS Fund Services, Union Bank of California serves as
sub-transfer agent for each of the Group's Funds. See "Transfer Agent,
Custodian and Fund Accounting Services" below. Union Bank of California also
serves as sub-administrator to each of the Group's Funds pursuant to an
agreement with BISYS Fund Services. See "Manager and Administrator" below.
Unless sooner terminated, the Investment Advisory Agreement will
continue in effect as to each particular Fund from year to year if such
continuance is approved at least annually by the Group's Board of Trustees or
by vote of a majority of the outstanding Shares of such Fund (as defined under
GENERAL INFORMATION - Miscellaneous in the Prospectuses), and a majority of the
Trustees who are not parties to the Investment Advisory Agreement or interested
persons (as defined in the 1940 Act) of any party to the Investment Advisory
Agreement by votes cast in person at a meeting called for such purpose. The
Investment Advisory Agreement is terminable as to a particular Fund at any time
on 60 days' written notice without penalty by the Trustees, by vote of a
majority of the outstanding Shares of that Fund, or by Union Bank of
California. The Investment Advisory Agreement terminates automatically in the
event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that Union Bank of
California will not be liable for any error of judgment or mistake of law or
for any loss suffered by the Group in connection with the Advisor's services
under the Investment Advisory Agreement, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part
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<PAGE> 58
of the Advisor in the performance of its duties, or from reckless disregard by
the Advisor of its duties and obligations thereunder.
On April 1, 1996, the Bank of California, N.A., the Group's
then-investment advisor, combined with Union Bank and the resulting bank changed
its name to Union Bank of California, N.A. At the same time, the banks'
investment management divisions were combined. Each of the Bank of California
and Union Bank (or its predecessor bank) has been in banking since the early
1900's, and historically, each has had significant investment functions within
its trust and investment division. Union Bank of California, N.A. is a
subsidiary of UnionBanCal Corporation, a publicly held corporation, a majority
of the shares of which are owned by the Bank of Tokyo-Mitsubishi, Limited.
For the services provided and expenses assumed by the Advisor
pursuant to the Investment Advisory Agreement, Union Bank of California is
entitled to receive fees from each Fund as described in that Fund's Prospectus.
For the fiscal year ended July 31, 1996, Union Bank of California received the
following investment advisory fees: $180,047 from the Growth Fund (an
additional $182,161 in fees were voluntarily reduced); $0 from the Income and
Growth Fund (an additional $61,697 in fees were voluntarily reduced);
$1,722,014 from the Income Equity Fund (an additional $33,207 in fees were
voluntarily reduced); $187,523 from the Balanced Fund (an additional $160,670
in fees were voluntarily reduced); $277,708 from the Bond Fund (an additional
$256,561 in fees were voluntarily reduced); $0 from the Government Bond Fund
(an additional $43,470 in fees were voluntarily reduced); $1,590,719 from the
Diversified Obligations Fund; $944,226 from the U.S. Government Obligations
Fund; $1,203,300 from the 100% U.S. Treasury Obligations Fund; $352,464 from
the California Tax Free Fund (an additional $265,714 in fees were voluntarily
reduced); and $148,126 from the Tax-Free Fund (an additional $24,074 in fees
were voluntarily reduced).
For the fiscal year ended July 31, 1995, the Bank of California
received the following investment advisory fees: $37,349 from the Growth Fund
(an additional $158,716 in fees were voluntarily reduced); $0 from the Income
and Growth Fund (an additional $56,251 in fees were voluntarily reduced);
$1,419,062 from the Income Equity Fund (an additional $11,439 in fees were
voluntarily reduced); $83,790 from the Balanced Fund (an additional $168,408 in
fees were voluntarily reduced); $271,150 from the Bond Fund (an additional
$250,310 in fees were voluntarily reduced); $0 from the Government Bond Fund
(an additional $46,447 in fees were voluntarily reduced); $1,429,494 from the
Diversified Obligations Fund; $729,094 from the U.S. Government Obligations
Fund; $920,611 from the 100% U.S. Treasury Obligations Fund; $267,095 from the
California Tax Free fund (an additional $326,450 in fees were voluntarily
reduced); and $157,964 from the Tax-Free Fund (an additional $33,508 in fees
were voluntarily reduced).
For the fiscal year ended July 31, 1994, the Bank of California
received the following investment advisory fees: $0 from the Growth Fund (an
additional $63,330 in fees were voluntarily reduced); $0 from the Income and
Growth Fund (an additional $37,543 in fees
-39-
<PAGE> 59
were voluntarily reduced); $1,216,590 from the Income Equity Fund (an
additional $40,330 in fees were voluntarily reduced); $47,972 from the
Balanced Fund (an additional $112,239 in fees were voluntarily reduced);
$268,520 from the Bond Fund (an additional $249,371 in fees were voluntarily
reduced); $0 from the Government Bond Fund (an additional $36,996 in fees were
voluntarily reduced); $1,471,655 from the Diversified Obligations Fund;
$825,406 from the U.S. Government Obligations Fund; $833,971 from the 100%
U.S. Treasury Obligations Fund; $316,744 from the California Tax-Free Fund (an
additional $387,133 in fees were voluntarily reduced); and $200,171 from the
Tax-Free Fund (an additional $42,460 in fees were voluntarily reduced).
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Advisor
determines, subject to the general supervision of the Board of Trustees of the
Group and in accordance with each Fund's investment objective and restrictions,
which securities are to be purchased and sold by a Fund, and which brokers are
to be eligible to execute its portfolio transactions. Purchases and sales of
portfolio securities for the Bond Fund, the Government Bond Fund, the
Diversified Obligations Fund, the U.S. Government Obligations Fund, the 100%
U.S. Treasury Obligations Fund, the California Tax-Free Fund and the Tax Free
Fund usually are principal transactions in which portfolio securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. Purchases from underwriters of portfolio securities
include a commission or concession paid by the issuer to the underwriter and
purchases from dealers serving as market makers may include the spread between
the bid and asked price. Securities purchased by the Growth Fund, the Income
and Growth Fund and the Income Equity Fund will generally involve the payment
of a brokerage fee. Portfolio transactions for the Balanced Fund may be
principal transactions or involve the payment of brokerage commissions. While
the Advisor generally seeks competitive spreads or commissions on behalf of
each of the Funds, the Group may not necessarily pay the lowest spread or
commission available on each transaction, for reasons discussed below.
Allocation of transactions, including their frequency, to various
dealers is determined by the Advisor in its best judgment and in a manner
deemed fair and reasonable to Shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
the Advisor may receive orders for transactions by the Group. Information so
received is in addition to and not in lieu of services required to be performed
by the Advisor and does not reduce the advisory fees payable to Union Bank of
California by the Group. Such information may be useful to the Advisor in
serving both the Group and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to the Advisor in carrying out its obligations to the Group.
Upon adoption by the Board of Trustees of certain procedures pursuant
to Rule 17e-1 under the Investment Company Act, the Group may execute portfolio
transactions involving
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the payment of a brokerage fee through Union Bank of California, BISYS Fund
Services, and their affiliates in accordance with such procedures. The Group
will not acquire portfolio securities issued by, make savings deposits in, or
enter repurchase or reverse repurchase agreements with, Union Bank of
California, BISYS Fund Services, or their affiliates, and will not give
preference to correspondents of Union Bank of California with respect to such
securities, savings deposits, repurchase agreements and reverse repurchase
agreements.
Investment decisions for each Fund of the Group are made independently
from those for the other Funds or any other investment company or account
managed by the Advisor or Union Bank of California. However, any such other
investment company or account may invest in the same securities as the Group.
When a purchase or sale of the same security is made at substantially the same
time on behalf of a Fund and another Fund, investment company or account, the
transaction will be averaged as to price, and available investments allocated as
to amount, in a manner that the Advisor and Union Bank of California believe
to be equitable to the Fund(s) and such other investment company or account. In
some instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained by a Fund. To the extent
permitted by law, the Advisor and Union Bank of California may aggregate the
securities to be sold or purchased for a Fund with those to be sold or purchased
for the other Funds or for other investment companies or accounts in order to
obtain best execution. As provided in the Investment Advisory Agreement, in
making investment recommendations for the Group, the Advisor will not inquire
or take into consideration whether an issuer of securities proposed for purchase
or sale by the Group is a customer of the Advisor or Union Bank of California,
its parent or its subsidiaries or affiliates and, in dealing with its commercial
customers, the Advisor and Union Bank of California, its parent, subsidiaries,
and affiliates will not inquire or take into consideration whether securities of
such customers are held by the Group.
The following brokerage commissions were paid in the fiscal year
ended July 31, 1996: $104,127 by the Growth Fund, $6,251 by the Income and
Growth Fund, $318,261 by the Income Equity Fund, and $13,043 by the Balanced
Fund. The following brokerage commissions were paid in the fiscal year ended
July 31, 1995: $57,798 by the Growth Fund, $4,469 by the Income and Growth
Fund, $257,339 by the Income Equity Fund, and $10,757 by the Balanced Fund. The
following brokerage commissions were paid in the fiscal year ended July 31,
1994: $49,878 by the Growth Fund; $10,440 by the Income and Growth Fund;
$212,350 by the Income Equity Fund; and $30,025 by the Balanced Fund.
GLASS-STEAGALL ACT
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation
and interpretation to the effect that the Glass-Steagall Act and such
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decision: (a) forbid a bank holding company registered under the Federal Bank
Holding Company Act of 1956 (the "Holding Company Act") or any non-bank
affiliate thereof from sponsoring, organizing, or controlling a registered,
open-end investment company continuously engaged in the issuance of its
shares, but (b) do not prohibit such a holding company or affiliate from
acting as investment adviser, transfer agent, and custodian to such an
investment company. In 1981, the United States Supreme Court held in Board of
Governors of the Federal Reserve System v. Investment Company Institute that
the Board did not exceed its authority under the Holding Company Act when it
adopted its regulation and interpretation authorizing bank holding companies
and their non-bank affiliates to act as investment advisers to registered
closed-end investment companies. In the Board of Governors case, the Supreme
Court also stated that if a national bank complies with the restrictions
imposed by the Board in its regulation and interpretation authorizing bank
holding companies and their non-bank affiliates to act as investment advisers
to investment companies, a national bank performing investment advisory
services for an investment company would not violate the Glass-Steagall Act.
Union Bank of California believes that the Advisor possesses the
legal authority to perform the services for the Funds contemplated by the
Investment Advisory Agreement and described in the Prospectuses and this
Statement of Additional Information and has so represented in the Investment
Advisory Agreement. Future changes in either federal or state statutes and
regulations relating to the permissible activities of banks or bank holding
companies and the subsidiaries or affiliates of those entities, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations could prevent or restrict the Advisor from
continuing to perform such services for the Group. Depending upon the nature
of any changes in the services that could be provided by the Advisor, the
Board of Trustees of the Group would review the Group's relationship with the
Advisor and consider taking all action necessary in the circumstances.
Should further legislative, judicial or administrative action prohibit
or restrict the activities of Union Bank of California, its affiliates, and
its correspondent banks in connection with Customer purchases of Shares of the
Group, such Banks might be required to alter materially or discontinue the
services offered by them to Customers. It is not anticipated, however, that any
change in the Group's method of operations would affect its net asset value per
Share or result in financial losses to any Customer.
ADMINISTRATOR AND SUB-ADMINISTRATOR
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS Fund Services") (formerly, The Winsbury Company Limited Partnership
d/b/a The Winsbury Company) serves as administrator to each of the Group's
Funds pursuant to the management and administration agreement dated as of
August 1, 1995 between the Group and BISYS Fund Services (the "Administration
Agreement").
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BISYS Fund Services also serves as the distributor for each of the
Group's Funds. See "Distributor" below. BISYS Fund Services is a broker-dealer
registered with the Securities and Exchange Commission, and is a member of the
National Association of Securities Dealers, Inc. The primary business of BISYS
Fund Services is to act as sponsor, administrator, principal underwriter and
distributor to mutual funds for which financial institutions, principally
banks, act as investment adviser.
Pursuant to the Administration Agreement, BISYS Fund Services
maintains office facilities for the Group, maintains the Group's financial
accounts and records, and furnishes the Group statistical and research data,
data processing, clerical, accounting and bookkeeping services, and certain
other services required by the Group. In addition, BISYS Fund Services prepares
annual and semi-annual reports to the Securities and Exchange Commission,
prepares federal and state tax returns, prepares filings with state securities
commissions, and generally assists in all aspects of the Group's operations. As
described below, BISYS Fund Services has delegated part of its responsibilities
under the Administration Agreement to Union Bank of California.
For its services as administrator and expenses assumed pursuant to the
Administration Agreement, BISYS Fund Services receives a fee from each Fund as
described in that Fund's Prospectus. For the fiscal year ended July 31, 1996,
BISYS Fund Services earned the following administration fees: $72,337 from the
Growth Fund; $0 from the Income and Growth Fund (an additional $12,340 in fees
were voluntarily reduced); $520,671 from the Income Equity Fund; $69,581 from
the Balanced Fund; $80,226 from the Bond Fund (an additional $43,205 in fees
were voluntarily reduced); $0 from the Government Bond Fund (an additional
$8,694 in fees were voluntarily reduced); $795,393 from the Diversified
Obligations Fund; $472,171 from the U.S. Government Obligations Fund; $601,680
from the 100% U.S. Treasury Obligations Fund; $231,814 from the California
Tax-Free Fund (an additional $77,275 in fees were voluntarily reduced); and
$39,684 from the Tax-Free Fund (an additional $46,416 in fees were voluntarily
reduced).
For the fiscal year ended July 31, 1995, BISYS Fund Services earned
the following administration fees: $23,444 from the Growth Fund (an additional
$15,769 in fees were voluntarily reduced); $0 from the Income and Growth Fund
(an additional $11,250 in fees were voluntarily reduced); $423,500 from the
Income Equity Fund; $50,440 from the Balanced Fund; $78,332 from the Bond Fund
(an additional $42,155 in fees were voluntarily reduced); $0 from the
Government Bond Fund (an additional $9,290 in fees were voluntarily reduced);
$714,740 from the Diversified Obligations Fund; $364,547 from the U.S.
Government Obligations Fund; $460,306 from the 100% U.S. Treasury Obligations
Fund; $222,580 from the California Tax-Free Fund (an additional $74,193 in fees
were voluntarily reduced); and $47,869 from the Tax-Free Fund (an additional
$47,867 in fees were voluntarily reduced).
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For the fiscal year ended July 31, 1994, BISYS Fund Services earned
the following administration fees: $0 from the Growth Fund (an additional
$12,666 in fees were voluntarily reduced); $0 from the Income and Growth Fund
(an additional $7,509 in fees were voluntarily reduced); $349,213 from the
Income Equity Fund (an additional $16,429 in fees were voluntarily reduced);
$24,823 from the Balanced Fund (an additional $7,219 in fees were voluntarily
reduced); $77,570 from the Bond Fund (an additional $41,725 in fees were
voluntarily reduced); $0 from the Government Bond Fund (an additional $7,399 in
fees were voluntarily reduced); $735,828 from the Diversified Obligations Fund;
$412,703 from the U.S. Government Obligations Fund; $416,985 from the 100% U.S.
Treasury Obligations Fund; $263,954 from the California Tax-Free Fund (an
additional $87,985 in fees were voluntarily reduced); and $60,660 from the
Tax-Free Fund (an additional $60,655 in fees were voluntarily reduced).
The Administration Agreement became effective on August 1, 1995, and,
unless sooner terminated as provided in the Administration Agreement (and as
described below), the Administration Agreement, as amended, will continue in
effect until July 31, 1998. The Administration Agreement thereafter shall be
renewed automatically for successive annual terms, unless written notice not to
renew is given by the non-renewing party to the other party at least 60 days
prior to the expiration of the then-current term. The Administration Agreement
is terminable at any time with respect to a particular Fund or the Trust as a
whole by either party without penalty for any reason upon 120 days' written
notice by the party effecting such termination to the other party.
The Administration Agreement provides that BISYS Fund Services shall
not be liable for any error of judgment or mistake of law or any loss suffered
by the Group in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or from the reckless
disregard by BISYS Fund Services of its obligations and duties thereunder.
The Administration Agreement permits BISYS Fund Services to
subcontract its services thereunder, provided that BISYS Fund Services will not
be relieved of its obligations under the Administration Agreement by the
appointment of a subcontractor and BISYS Fund Services shall be responsible to
the Group for all acts of the subcontractor as if such acts were its own,
except for losses suffered by any Fund resulting from willful misfeasance, bad
faith or gross negligence by the subcontractor in the performance of its duties
or for reckless disregard by it of its obligations and duties.
SHAREHOLDER SERVICES PLAN
The Group has adopted a Shareholder Services Plan (the "Services
Plan") pursuant to which a Fund is authorized to pay compensation to financial
institutions (each a "Service Organization"), which may include BISYS Fund
Services, that agree to provide certain shareholder support services for their
customers or account holders (collectively, "customers")
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who are the beneficial or record owners of Shares of a Fund. In consideration
for such services, a Service Organization is reimbursed by a Fund for the
costs of providing these services, which costs are computed daily and paid
monthly, subject to a maximum annual rate of up to 0.25% of the average daily
net asset value of Shares of a Fund owned of record or beneficially by such
Service Organization's customers for whom the Service Organization provides
such services.
The servicing agreements adopted under the Services Plan (the
"Servicing Agreements") require the Service Organization receiving such
compensation to perform certain shareholder support services as set forth in
the Servicing Agreements with respect to the beneficial or record owners of
Shares of a Fund.
As authorized by the Services Plan, the Group has entered into a
Servicing Agreement with BISYS Fund Services pursuant to which BISYS Fund
Services has agreed to provide certain shareholder support services in
connection with Shares of one or more of the Group's Funds. Such shareholder
support services may include, but are not limited to, (i) responding to routine
customer inquiries relating to services provided for the Fund; (ii) resolving
Shareholder account problems and complaints; (iii) providing administrative
support regarding Shareholder accounts and Fund features to entities whose
customers are Fund Shareholders; (iv) assisting customers in changing dividend
or distribution options, account designations and addresses; and (v) other
similar services. In consideration of such services, the Group, on behalf of
each Fund, has agreed to reimburse BISYS Fund Services its costs of providing
these services, subject to a maximum annual rate of 0.25% of the average daily
net assets of a Fund's shares, which costs will be computed daily and payable
monthly.
EXPENSES
The Group's service providers bear all expenses in connection with the
performance of their respective services, except that each Fund will bear the
following expenses relating to its operations: taxes, interest, brokerage fees
and commissions, if any, fees and travel expenses of Trustees who are not
partners, officers, directors, shareholders or employees of Union Bank of
California, BISYS Fund Services or BISYS Fund Services Ohio, Securities and
Exchange Commission fees and state Blue Sky qualification and renewal fees and
expenses, certain insurance premiums, outside and, to the extent authorized by
the Group, inside auditing and legal fees and expenses, fees charged by rating
agencies in having the Fund's Shares rated, advisory and administration fees,
fees and reasonable out-of-pocket expenses of the custodian and transfer agent,
expenses incurred for pricing securities owned by the Fund, costs of
maintenance of corporate existence, typesetting and printing prospectuses for
regulatory purposes and for distribution to current Shareholders, costs and
expenses of Shareholders' and Trustees' reports and meetings and any
extraordinary expenses.
If total expenses of any of the Funds in any fiscal year exceed
expense limitations imposed by applicable state securities regulations, Union
Bank of California and BISYS
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Fund Services will bear that Fund's expenses in an amount equal to such
excess, in proportion to their respective investment advisory and
administration fees. As of the date of this Statement of Additional
Information, the most restrictive expense limitation applicable to the Group's
Funds limits each Fund's aggregate annual expenses, including management and
advisory fees but excluding interest, taxes, brokerage commissions, and
certain other expenses, to 2.5% of the first $30 million of a Fund's average
net assets, 2.0% of the next $70 million of a Fund's average net assets, and
1.5% of a Fund's remaining average net assets. Fees charged to customers by
certain entities (including Participating Organizations in the case of
Investor Shares and Union Bank of California and its affiliates in the case
of Fiduciary Shares) in connection with investments in a Fund on a customer's
behalf are not included within the Fund's expenses for purposes of any such
expense limitation.
DISTRIBUTOR
BISYS Fund Services serves as distributor to the Group's Funds
pursuant to the distribution agreement dated August 1, 1995 between the Group
and BISYS Fund Services (the "Distribution Agreement"). BISYS Fund Services
also serves as the administrator for each of the Group's Funds. See
"Administrator and Sub-Administrator" above.
Unless terminated, the Distribution Agreement will continue in effect
until July 31, 1997, and from year to year thereafter if approved at least
annually (i) by the Group's Board of Trustees or by the vote of a majority of
the outstanding Shares of the Group, and (ii) by the vote of a majority of the
Trustees of the Group who are not parties to the Distribution Agreement or
interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement is terminable without
penalty, on not less than sixty days' notice by the Group's Board of Trustees,
by vote of a majority of the outstanding voting securities of the Group or by
the Distributor. The Distribution Agreement terminates in the event of its
assignment, as defined in the 1940 Act.
The Distribution Plans. The operation and the 0.25% fee payable under
the Group's Distribution Plans to which the Investor Shares of the Group's
Funds are presently subject are described in each such Fund's Prospectus under
"SERVICE ARRANGEMENTS ADMINISTRATOR & DISTRIBUTOR -The Distribution Plan." For
the fiscal year ended July#31, 1996, BISYS Fund Services received in respect of
the sale of Investor Shares distribution fees of: $236 in respect of the Growth
Fund; $53 in respect of the Income and Growth Fund, $1,166 in respect of the
Income Equity Fund, $87 in respect of the Balanced Fund, $183 in respect of the
Bond Fund, $133 in respect of the Government Bond Fund, $672 in respect of the
Diversified Obligations Fund, $14,879 in respect of the U.S. Government
Obligations Fund, $0 in respect of the 100% U.S. Treasury Obligations Fund, $0
in respect of the California Tax-Free Fund, and $0 in respect of the Tax-Free
Fund.
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For the fiscal year ended July 31, 1995, BISYS Fund Services received
in respect of the sale of Investor Shares distribution fees of: $0 in respect
of the Growth Fund; $0 in respect of the Income and Growth Fund, $0 in respect
of the Income Equity Fund, $0 in respect of the Balanced Fund, $0 in respect of
the Bond Fund, $0 in respect of the Government Bond Fund, $1,054 in respect of
the Diversified Obligations Fund, $1,701 in respect of the U.S. Government
Obligations Fund, $0 in respect of the 100% U.S. Treasury Obligations Fund, $0
in respect of the California Tax-Free Fund, and $0 in respect of the Tax-Free
Fund.
For the fiscal year ended July 31, 1994, BISYS Fund Services received
$1,598.65 in distribution fees in respect of the Investor Shares of the
Diversified Obligations Fund. No other distribution fees were paid during such
fiscal year.
In accordance with Rule 12b-1 under the 1940 Act, the Distribution
Plans may be terminated with respect to any Fund by a vote of a majority of the
Independent Trustees, or by a vote of a majority of the outstanding Investor
Shares of that Fund. The Distribution Plans may be amended by vote of the
Group's Board of Trustees, including a majority of the Independent Trustees,
cast in person at a meeting called for such purpose, except that any change in
a Distribution Plan that would materially increase the distribution fee with
respect to a Fund requires the approval of that Fund's Investor Shareholders.
The Group's Board of Trustees will review on a quarterly and annual basis
written reports of the amounts received and expended under the Distribution
Plans (including amounts expended by the Distributor to Participating
Organizations pursuant to the Servicing Agreements entered into under the
Distribution Plans) indicating the purposes for which such expenditures were
made.
Each Distribution Plan provides that it will continue in effect with
respect to each Fund for successive one-year periods, provided that each such
continuance is specifically approved (i) by the vote of a majority of the
Independent Trustees and (ii) by the vote of the entire Board of Trustees, cast
in person at a meeting called for such purpose. For so long as each of the
Distribution Plans remains in effect, the selection and nomination of those
trustees who are not interested persons of the Group (as defined in the 1940
Act) shall be committed to the discretion of such disinterested persons.
TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio performs transfer agency services for the
Group's Funds pursuant to a transfer agency and shareholder service agreement
with the Group dated as of August 1, 1995 (the "Transfer Agency Agreement"). As
each Fund's transfer agent, BISYS Fund Services Ohio processes purchases and
redemptions of each Fund's Shares and maintains each Fund's Shareholder
transfer and accounting records, such as the history of purchases, redemptions,
dividend distributions, and similar transactions in a Shareholders's account.
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Under the Transfer Agency Agreement, the Group has agreed to pay BISYS
Fund Services Ohio an annual minimum fee for each Fund based on the number of
shareholder accounts of record of each Class and whether the class has certain
specified features. The annual minimum fee schedule is $18,000 for the Investor
Class and $10,000 for the Fiduciary Class where the number of shareholder
accounts of record is between 1 and 99; $24,000 for the Investor Class and
$18,000 for the Fiduciary Class where the number of shareholder accounts of
record is between 100 and 499; and $36,000 for the Investor class and $24,000
for the Fiduciary Class where the number of shareholder accounts of record is
500 or more. The annual minimum fee is increased by specified amounts if a
Fund's Class of Shares has certain specified features. Under the Transfer
Agency Agreement, BISYS Fund Services Ohio is also entitled to receive annual
fees based on individual shareholder accounts of record equal to $16 per
shareholder account of record with respect to each of the Group's U.S.
Government Obligations Fund, Diversified Obligations Fund, 100% U.S. Treasury
Obligations Fund, California Tax-Free Fund and the Tax-Free Fund, and equal to
$14 per shareholder accounts of record with respect to each of the Group's
Growth Fund, Income and Growth Fund, Income Equity Fund, Balanced Fund, Bond
Fund and Government Fund. The number of accounts for purposes of determining
the annual minimum fee per class of Shares is calculated on a monthly basis.
The Transfer Agency Agreement also provides that BISYS Fund Services
Ohio is entitled to be reimbursed by the Group for postage, handling fees, and
reasonable costs of supplies used by BISYS Fund Services Ohio in the
performance of its services under the Agreement. BISYS Fund Services Ohio may
periodically voluntarily reduce all or a portion of its transfer agency fee
with respect to a Fund to increase the Fund's net income available for
distribution as dividends.
In accordance with its Transfer Agency Agreement with the Group, BISYS
Fund Services Ohio has entered into a sub-transfer agency agreement with Union
Bank of California with respect to the Group's Funds dated February 22, 1989,
as amended September 15, 1992 (the "Sub-Transfer Agency Agreement"). Under the
Sub-Transfer Agency Agreement, BISYS Fund Services Ohio has delegated its
transfer agency responsibilities to Union Bank of California with respect to
investments in each of the Group's Funds through certain individual retirement
accounts maintained with Union Bank of California and its affiliates
("Sub-Accounts"). For its services as sub-transfer agent, BISYS Fund Services
Ohio has agreed to pay Union Bank of California with respect to the Group's
Growth Fund, Income and Growth Fund, Income Equity Fund, Balanced Fund, Bond
Fund, and Government Bond Fund an annual base fee of $12.00 per Shareholder
Sub-Account with respect to the first 101 through 2,999 Shareholder
Sub-Accounts invested in a Fund and an annual base fee of $9.00 per Shareholder
Sub- Account with respect to 3,000 or more Shareholder Sub-Accounts invested in
a Fund; BISYS Fund Services Ohio has agreed to pay Union Bank of California
with respect to the Group's Diversified Obligations Fund, U.S. Government
Obligations Fund, 100% U.S. Treasury Obligations Fund, California Tax-Free Fund
and Tax-Free Fund an annual base fee of $15.00 per Shareholder Sub-Account with
respect to 101 or more
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Shareholder Sub-Accounts invested in a Fund. (The number of Shareholder
Sub-Accounts for purposes of determining the base fee is calculated on a
monthly basis and the base fee does not apply when 100 or fewer Shareholder
Sub-Accounts have been invested in a Fund.) Union Bank of California is also
entitled to be reimbursed by BISYS Fund Services Ohio for postage, handling
fees, and reasonable costs of supplies used by Union Bank of California in
the performance of its services under the Sub-Transfer Agency Agreement.
In addition to its transfer agency services, BISYS Fund Services Ohio
serves as fund accountant for the Group's Funds pursuant to a fund accounting
agreement with the Group dated as of August 1, 1995, as amended (the "Fund
Accounting Agreement").
As fund accountant for each Fund, BISYS Fund Services Ohio prices each
Fund's Shares, calculates each Fund's net asset value, and maintains the
general ledger accounting records for each Fund. Under the Fund Accounting
Agreement, BISYS Fund Services Ohio is entitled to receive a fee from each Fund
at an annual rate of .03% of the Fund's average daily net assets plus BISYS
Fund Services Ohio out-of-pocket expenses, with a minimum annual fee of $30,000
per Fund and $10,000 per each additional Class of Shares. BISYS Fund Services
Ohio may periodically voluntarily reduce all or a portion of its fund
accounting fee with respect to a Fund in order to increase the Fund's net
income available for distribution as dividends.
Union Bank of California serves as custodian to the Group's Funds
pursuant to a custodian agreement with the Group dated as of December 23, 1991,
as amended (the "Custodian Agreement"). Under the Custodian Agreement, Union
Bank of California's responsibilities include safeguarding and controlling each
Fund's cash and securities, handling the receipt and delivery of securities,
and collecting interest and dividends on each Fund's investments.
Under the Custodian Agreement, the Group has agreed to pay Union Bank
of California a custodian fee with respect to each Fund at an annual rate of
.02% of the Fund's average daily net assets, with an annual minimum fee of
$2,500 per Fund. In addition, Union Bank of California is entitled to receive
a flat fee from each Fund as follows: (i) $17.00 for each purchase or sale of
Fund securities eligible for deposit in a securities depository as defined in
Rule 17f-4 under the 1940 Act (a "securities depository"), with a $25.00 annual
holding charge for such securities; and $40.00 for each purchase or sale of
Fund securities that are not eligible for deposit in a securities depository,
with a $40.00 annual holding charge for such securities; and (ii) $10.00 for
disbursement charges. Union Bank of California is also entitled to be
reimbursed by the Group for its reasonable out-of-pocket expenses incurred in
the performance of its duties under the Custodian Agreement. Union Bank of
California may periodically voluntarily reduce all or a portion of its
custodian fee with respect to a Fund to increase the Fund's net income
available for distribution as dividends.
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AUDITORS
The financial statements of the Group for the period ended July 31,
1996, appearing in this Statement of Additional Information have been audited
by Deloitte & Touche LLP, independent auditors, as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report and
on the authority of such firm as experts in auditing and accounting.
LEGAL COUNSEL
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800
East, Washington, D.C. 20005, are counsel to the Group and will pass upon the
legality of the Shares offered hereby.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Group is a Massachusetts business trust. The Group's Declaration
of Trust was originally filed with the Secretary of State of The Commonwealth
of Massachusetts on March#10, 1987. The Declaration of Trust, as amended,
authorizes the Board of Trustees to issue an unlimited number of Shares, which
are units of beneficial interest, without par value. The Group's Declaration
of Trust, as amended, further authorizes the Board of Trustees to establish one
or more series of Shares of the Group, and to classify or reclassify the Shares
of any series into one or more classes by setting or changing in any one or
more respects the preferences, designations, conversion or other rights,
restrictions, limitations as to dividends, conditions of redemption,
qualifications or other terms applicable to the Shares of such class, subject
to those matters expressly provided for in the Declaration of Trust, as
amended, with respect to the Shares of each series of the Group. The Group
presently consists of eleven series of Shares, representing units of
beneficial interest in the Growth Fund, the Income and Growth Fund, the Income
Equity Fund, the Balanced Fund, the Bond Fund, the Government Bond Fund, the
Diversified Obligations Fund, the U.S. Government Obligations Fund, the 100%
U.S. Treasury Fund, the California Tax-Free Fund and the Tax-Free Fund. As
described in the Prospectuses, each Fund has been divided into two classes of
Shares, designated Investor Shares and Fiduciary Shares.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Group's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Group,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund that are available
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for distribution. Upon liquidation or dissolution of the Group, Investor and
Fiduciary shareholders are entitled to receive the net assets of the Fund
attributable to each class.
As used in the Prospectuses and in this Statement of Additional
Information, "assets belonging to a Fund" means the consideration received by
the Group upon the issuance or sale of Shares in that Fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or payments derived from any reinvestment of such
proceeds, and any general assets of the Group not readily identified as
belonging to a particular Fund that are allocated to that Fund by the Group's
Board of Trustees. Such allocations of general assets may be made in any manner
deemed fair and equitable, and it is anticipated that the Board of Trustees
will use the relative net asset values of the respective Funds at the time of
allocation. Assets belonging to a particular Fund are charged with the direct
liabilities and expenses of that Fund, and with a share of the general
liabilities and expenses of the Group not readily identified as belonging to a
particular Fund that are allocated to that Fund in proportion to the relative
net asset values of the respective Funds at the time of allocation. The timing
of allocations of general assets and general liabilities and expenses of the
Group to particular Funds will be determined by the Board of Trustees and will
be in accordance with generally accepted accounting principles. Determinations
by the Board of Trustees as to the timing of the allocation of general
liabilities and expenses and as to the timing and allocable portion of any
general assets with respect to a particular Fund are conclusive.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Group shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding Shares of
each Fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding Shares of a Fund will be required in
connection with a matter, a Fund will be deemed to be affected by a matter
unless it is clear that the interests of each Fund in the matter are identical,
or that the matter does not affect any interest of the Fund.
Under Rule 18f-2, the approval of an investment advisory agreement or
any change in investment policy would be effectively acted upon with respect to
a Fund only if approved by a majority of the outstanding Shares of such Fund.
However, Rule 18f-2 also provides that the ratification of independent public
accountants, the approval of principal underwriting contracts, and the election
of Trustees may be effectively acted upon by Shareholders of the Group voting
without regard to series.
Although not governed by Rule 18f-2, Investor Shares of a Fund have
exclusive voting rights with respect to matters pertaining to the Fund's
Distribution Plan.
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SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, holders of units of interest in a business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, the Group's Declaration of Trust,
as amended, provides that Shareholders shall not be subject to any personal
liability for the obligations of the Group, and that every written agreement,
obligation, instrument, or undertaking made by the Group shall contain a
provision to the effect that the Shareholders are not personally liable
thereunder. The Declaration of Trust, as amended, provides for indemnification
out of the trust property of any Shareholder held personally liable solely by
reason of his or her being or having been a Shareholder. The Declaration of
Trust, as amended, also provides that the Group shall, upon request, assume the
defense of any claim made against any Shareholder for any act or obligation of
the Group, and shall satisfy any judgment thereon. Thus, the risk of a
Shareholder incurring financial loss on account of Shareholder liability is
limited to circumstances in which the Group itself would be unable to meet its
obligations.
The Declaration of Trust, as amended, states further that no Trustee,
officer, or agent of the Group shall be personally liable in connection with
the administration or preservation of the assets of the trust or the conduct of
the Group's business, nor shall any Trustee, officer, or agent be personally
liable to any person for any action or failure to act except for his own bad
faith, willful misfeasance, gross negligence, or reckless disregard of his
duties. The Declaration of Trust, as amended, also provides that all persons
having any claim against the Trustees or the Group shall look solely to the
assets of the trust for payment.
THE REORGANIZATION OF THE IRA FUND AND THE GROUP
As of June 23, 1988, pursuant to an Agreement and Plan of
Reorganization between the IRA Fund, the Group, and the Bank of California,
substantially all of the assets of the IRA Fund's Income Equity Portfolio, and
Bond Portfolio were transferred to the Group's Income Equity Fund, and Bond
Fund, respectively, in exchange for such Fund's Shares, and substantially all
of the assets of the IRA Fund's Short Term Portfolio were transferred to one or
more of the Group's Money Market Funds in exchange for Shares of such Money
Market Fund or Funds. Prior to June 23, 1988, the aggregate total return and
average annual total return of the Bond Fund and Income Equity Fund reflect the
aggregate total return and average annual total return of the IRA Fund Bond
Portfolio and the IRA Fund Income Equity Portfolio, respectively. The IRA Fund
Bond Portfolio and the IRA Fund Income Equity Portfolio both received
investment advice from the same division of the Bank of California now known
as Pacific Alliance Capital Management and had investment objectives, policies
and restrictions substantially similar to those of the Bond Fund and the Income
Equity Fund, respectively. However, potential investors should be aware that
both the nature and amount of fees and expenses of the IRA Fund Bond Portfolio
and the Bond Fund and those of the IRA Fund Income Equity Portfolio and the
Income Equity Fund differ.
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<PAGE> 72
CALCULATION OF PERFORMANCE DATA
From time to time, articles relating to the performance, rankings, and
other investment characteristics of mutual funds and their investment advisers,
including the Group's Funds and the Advisor, may appear in national, regional,
and local publications. In particular, some publications may publish their own
rankings or performance reviews of mutual funds and their investment advisers,
including the Group's Funds and the Advisor. Various mutual fund or market
indices may also serve as a basis for comparison of the performance of the
Group's Funds with other mutual funds or mutual fund portfolios with comparable
investment objectives and policies. In addition to the indices prepared by Dow
Jones & Co., Inc. and Standard & Poor's Corporation, references to or reprints
from the following publications may be used in the Group's promotional
literature: IBC/Donoghue's Money Fund Report, Ibbotson Associates of Chicago,
MorningStar, Lipper Analytical Services, Inc., CDA/Wiesenberger Investment
Company Services, SEI Financial Services, Callan Associates, Wilshire
Associates, MONEY Magazine, Pension and Investment Age, Forbes Magazine,
Business Week, American Banker, Fortune Magazine, Institutional Investor,
Barron's National Business & Financial Weekly, The Wall Street Journal, New York
Times, San Francisco Chronicle and Examiner, Los Angeles Times, U.S.A. Today,
Sacramento Bee, Seattle Times, Seattle Daily Journal of Commerce, Seattle
Post/Intelligence, Seattle Business Journal, Tacoma New Tribune, Bellevue
Journal-American, The Oregonian, Puget Sound Business Journal, Portland Chamber
of Commerce and Portland Daily Journal of Commerce/Portland Business Today.
Shareholders may call toll free (800) 433-6884 for current information
concerning the performance of each of the Group's Funds.
From time to time, the Funds may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of compounding and the benefits of dollar-cost averaging); (2)
discussions of general economic trends; (3) presentations of statistical data
to supplement such discussions; (4) descriptions of past or anticipated
portfolio holdings for one or more of the Funds within the Group; (5)
descriptions of investment strategies for one or more of the Funds; (6)
descriptions or comparisons of various savings and investment products
(including, but not limited to, insured bank products, annuities, qualified
retirement plans and individual stocks and bonds), which may or may not include
the Funds; (7) comparisons of investment products (including the Funds) with
relevant market or industry indices or other appropriate benchmarks; (8)
discussions of fund rankings or ratings by recognized rating organizations; and
(9) testimonials describing the experience of persons that have invested in one
or more of the Funds. The Funds may also include calculations, such as
hypothetical compounding examples, which describe hypothetical investment
results in such communications. Such performance examples will be based on an
express set of assumptions and are not indicative of the performance of any of
the Funds. In addition, the California Tax-Free Fund, the Tax-Free Fund, the
California Municipal Fund and the Municipal Fund may each include charts
comparing various tax-free yields versus taxable yield equivalents at different
income levels.
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<PAGE> 73
Based on the seven-day period ended July 31, 1996 (the "base period"
for the Diversified Obligations Fund, the U.S. Government Obligations Fund, the
100% U.S. Treasury Obligations Fund, the California Tax Free Fund, and the Tax
Free Fund), the yield of the Diversified Obligations Fund's Investor Shares and
Fiduciary Shares was 4.76% and 4.76%, respectively, and the effective yield of
the Fund's Investor Shares and Fiduciary Shares was 4.87% and 4.87%,
respectively; the yield of the U.S. Government Obligations Fund's Investor
Shares and Fiduciary Shares was 4.60% and 4.61%, respectively, and the
effective yield of the Fund's Investor Shares and Fiduciary Shares was 4.71%
and 4.72%, respectively; the yield of the 100% U.S. Treasury Obligations Fund's
Investor Shares and Fiduciary Shares was 4.46% and 4.46% respectively, and the
effective yield of the Fund's Investor Shares and Fiduciary Shares was 4.56%
and 4.56% respectively; the yield of the California Tax-Free Fund's Investor
Shares and Fiduciary Shares was 2.71% and 2.71% respectively, and the effective
yield of the Fund's Investor Shares and Fiduciary Shares was 2.75% and 2.75%,
respectively; and the yield of the Tax-Free Fund's Investor Shares and Fiduciary
Shares was 2.70% and 2.70% respectively, and the effective yield of the Fund's
Investor Shares and Fiduciary Shares was 2.74% and 2.74%, respectively. The
yield of each Fund's Investor Shares and Fiduciary Shares, respectively, was
computed by determining the percentage net change, excluding capital changes, in
the value of an investment in one Share of the Class over the base period, and
multiplying the net change by 365/7 (or approximately 52 weeks). The effective
yield of each Fund's Investor Shares and Fiduciary Shares, respectively,
represents a compounding of the yield of the Class by adding 1 to the number
representing the percentage change in value of the investment during the base
period, raising that sum to a power equal to 365/7, and subtracting 1 from the
result.
Based on the thirty-day period ended July 31, 1996, the yield of the
Diversified Obligations Fund's Investor Shares and Fiduciary Shares was 4.73%
and 4.73% respectively, and the effective yield of the Fund's Investor Shares
and Fiduciary Shares was 4.83% and 4.83%, respectively; the yield of the U.S.
Government Obligations Fund's Investor Shares and Fiduciary Shares was 4.59%
and 4.60%, respectively, and the effective yield of the Fund's Investor Shares
and Fiduciary Shares was 4.69% and 4.70%, respectively; the yield of the 100%
U.S. Treasury Obligations Fund's Investor Shares and Fiduciary Shares was
4.47% and 4.47%, respectively, and the effective yield of the Fund's Investor
Shares and Fiduciary Shares was 4.56% and 4.56%, respectively; the yield of
the California Tax- Free Fund's Investor Shares and Fiduciary Shares was
2.31% and 2.31%, respectively, and the effective yield of the Fund's Investor
Shares and Fiduciary Shares was 2.33% and 2.33%, respectively; and the yield of
the Tax-Free Fund's Investor Shares and Fiduciary Shares was 2.30% and 2.30%,
respectively, and the effective yield of the Fund's Investor Shares and
Fiduciary Shares was 2.32% and 2.32%, respectively. The yield of each Fund's
Investor Shares and Fiduciary Shares, respectively, was computed by determining
the percentage net change, excluding capital changes, in the value of an
investment in one Share of the Class over the thirty-day period, and
multiplying the net change by 365/30 (or approximately twelve months). The
effective yield of each Fund's Investor
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<PAGE> 74
Shares and Fiduciary Shares, respectively, represents a compounding of the
yield of the Class by adding 1 to the number representing the percentage
change in value of the investment during the thirty-day period, raising that
sum to a power equal to 365/30, and subtracting 1 from the result.
Based on the seven-day period ended July 31, 1996, the
tax-equivalent yield of the California Tax-Free Fund's Investor Shares and
Fiduciary Shares was 4.49% and 4.49% respectively (using a federal income
tax rate of 39.6%), and 5.49% and 5.49% respectively (using a federal income
tax rate of 39.6% and a California personal income tax rate of 11%), and the
tax-equivalent effective yield of the Fund's Investor Shares and Fiduciary
Shares was 4.55% and 4.55%, respectively (using a federal income tax rate of
39.6%), and 5.57% and 5.57%, respectively (using a federal income tax rate of
39.6% and a California personal income tax rate of 11%). For the same
seven-day period, the tax-equivalent yield of the Tax-Free Fund's Investor
Shares and Fiduciary Shares was 4.47% and 4.47% respectively, and the
tax-equivalent effective yield of the Fund's Investor Shares and Fiduciary
Shares was 5.55% and 5.55% respectively (in each case utilizing a federal
income tax rate of 39.6%).
Based on the thirty-day period ended July 31, 1996, the
tax-equivalent yield of the California Tax-Free Fund's Investor Shares and
Fiduciary Shares was 3.82% and 3.82%, respectively (using a federal income
tax rate of 39.6%), and 4.68% and 4.68%, respectively (using a federal
income tax rate of 39.6% and a California personal income tax rate of 11%),
and the tax-equivalent effective yield of the Fund's Investor Shares and
Fiduciary Shares was 3.86% and 3.86%, respectively (using a federal income
tax rate of 39.6%), and 4.72% and 4.72%, respectively (using a federal income
tax rate of 39.6% and a California personal income tax rate of 11%). Based on
the same thirty-day period ended July 31, 1996, the tax-equivalent yield of
the Tax-Free Fund's Investor Shares and Fiduciary Shares was 3.81% and 3.81%,
respectively, and the tax-equivalent effective yield of the Fund's Investor
Shares and Fiduciary Shares was 3.84% and 3.84%, respectively (in each case
utilizing a federal income tax rate of 39.6%).
The tax-equivalent yield of the Investor Shares and Fiduciary Shares,
respectively, of the California Tax-Free Fund and the Tax-Free Fund was
computed by dividing that portion of the yield of the Class that is tax-exempt
by 1 minus the stated income tax rate (or rates) and adding the product to that
portion, if any, of the yield of the Class that is not tax-exempt. The
tax-equivalent effective yield of each Fund's Investor Shares and Fiduciary
Shares, respectively, was computed by dividing that portion of the effective
yield of the Class which is tax-exempt by 1 minus the stated income tax rate
(or rates) and adding to that portion, if any, of the effective yield of the
Class that is not tax-exempt.
For the year ended July 31, 1996, the one-year average annual total
return of the Diversified Obligations Fund Investor and Fiduciary shares was
5.01% of the U.S.
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Government Obligations Fund Investor and Fiduciary shares was 4.86% and 4.88%,
respectively, of the 100% U.S. Treasury Obligations Fund Investor and
Fiduciary shares was 4.74%, of the California Tax-Free Fund Investor and
Fiduciary shares was 2.91%, and of the Tax-Free Fund Investor and Fiduciary
shares was 2.87%.
For the period ended July 31, 1996, the five-year average annual total
return of the Diversified Obligations Fund's Investor and Fiduciary shares was
4.00%; of the U.S. Government Obligations Fund's Investor and Fiduciary shares
was 3.88%; of the 100% U.S. Treasury Obligations Fund's Investor and Fiduciary
shares was 3.78%; of the California Tax-Free Fund's Investor and Fiduciary
shares was 2.68%; and of the Tax-Free Fund's Investor and Fiduciary shares was
2.67%.
For the period from August 10, 1987 (the date on which the Diversified
Obligations Fund, the U.S. Government Obligations Fund and the 100% U.S.
Treasury Obligations Fund commenced operations) through July 31, 1996, the
average annual total return of the Diversified Obligations Fund Investor and
Fiduciary shares, the U.S. Government Obligations Fund Investor and Fiduciary
shares and the 100% U.S. Treasury Obligations Fund Investor and Fiduciary shares
was 5.66%, 5.48% and 5.38%, respectively. For the period from August 11, 1987
(the date on which the California Tax-Free Fund commenced operations) through
July 31, 1996, the average annual total return of the California Tax-Free Fund
Investor and Fiduciary shares was 3.69%. For the period from August 22, 1988
(the date on which the Tax-Free Fund commenced operations) through July 31,
1996, the average annual total return of the Tax-Free Fund Investor and
Fiduciary shares was 3.73%.
Prior to June 23, 1988 (the date on which the Income Equity Fund and
the Bond Fund commenced operations as a result of the reorganization involving
the IRA Fund Income Equity Portfolio and the IRA Fund Bond Portfolio,
respectively, as described under "Additional Information - The Reorganization
of the IRA Fund and the Group" above), the total return and average annual
total return of the Income Equity Fund and the Bond Fund reflects the total
return and average annual total return of the IRA Fund Income Equity Portfolio,
and the IRA Fund Bond Portfolio, respectively. Each IRA Fund Portfolio received
investment advice from the same division of the Bank of California now known
as Pacific Alliance Capital Management and had substantially similar
investment objectives, policies, and restrictions of the Fund into which it was
reorganized. However, potential investors in the Income Equity Fund, and the
Bond Fund should be aware that both the nature and amount of fees and expenses
of the IRA Fund Income Equity Portfolio, and the IRA Fund Bond Portfolio differ
from the Fund into which the respective IRA Fund Portfolios were reorganized.
See "Management of the Group Investment Adviser" and the Statements of
Operations in the Financial Statements with respect to the Income Equity Fund,
and the Bond Fund and the IRA Fund Income Equity Portfolio, and the IRA Fund
Bond Portfolio for the applicable period ended July 31, 1989 and June 22, 1988
contained in this Statement of Additional Information.
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<PAGE> 76
Each Equity Fund and Income Fund offered a single class of shares
throughout the periods shown below. The performance figures relating to the
Investor Shares have been adjusted, however, to give effect to the sales charge
and distribution fee to which the Investor Shares are subject. Because only
Investor Shares bear the expense of the fee, if any, under the Distribution
Plan and a sales charge, total return and yield relating to a Fund's Investor
Shares will be lower than that relating to the Funds' Fiduciary Shares.
For the one year period ended July 31, 1996, the average annual total
return of the Investor and Fiduciary Shares of the Income Equity Fund was 12.93%
(18.21% without a load) and 18.25%, respectively, and of the Bond Fund was 1.79%
(4.95% without a load) and 4.81%, respectively. For the five-year period ended
July 31, 1996, the average annual total return of the Investor and Fiduciary
Shares of the Income Equity Fund was 11.99% (13.02% without a load) and 12.98%,
respectively, and of the Bond Fund was 6.15% (6.80% without a load) and 6.95%,
respectively. For the ten year period ended July 31, 1996, the average annual
total return of the Investor and Fiduciary Shares of the Income Equity Fund was
12.17% (13.02% without a load) and 12.66%, respectively. For the ten year period
ended July 31, 1996, the average annual total return of the Investor and
Fiduciary Shares of the Bond Fund was 6.71% (7.03% without a load) and 7.10%,
respectively.
For the one year period ended July 31, 1996, the average annual total
return of the Investor and Fiduciary Shares of the Growth Fund was 7.80%
(12.88% without a load) and 12.72%, respectively, of the Investor and Fiduciary
Shares of the Income and Growth Fund was 9.88% (15.02% without a load) and
15.04%, respectively, of the Investor and Fiduciary Shares of the Balanced Fund
was 5.93% (10.94% without a load) and 11.06% respectively, and of the
Government Bond Fund was 1.66% (4.79% without a load) and 4.75%, respectively.
For the period beginning November 18, 1993 (commencement of
operations) and ending July 31, 1996, the average annual total return of the
Investor Shares and Fiduciary Shares of the Growth Fund was 10.97% (12.87%
without a load) and 12.81%, respectively.
For the period beginning November 14, 1993 (commencement of
operations) and ending July 31, 1996, the aggregate total return of the
Investor Shares and Fiduciary Shares of the Income and Growth Fund was 11.64%
(13.55% without a load) and 13.52%, respectively. For the period beginning
November 14, 1993 (commencement of operations) and ending July 31, 1996, the
aggregate total return of the Investor Shares and Fiduciary Shares of the
Balanced Fund was 7.66% (9.49% without a load) and 9.75%, respectively. For
the period beginning November 14, 1993 (commencement of operations) and ending
July 31, 1996, the aggregate total return of the Investor Shares and Fiduciary
Shares of the Government Bond Fund was 2.38% (3.54% without a load) and
3.78%, respectively.
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<PAGE> 77
Each Fund's respective average annual total return and/or aggregate
total return was calculated by determining the change in the value of a
hypothetical $1,000 investment in the Fund over the applicable period
(utilizing, when appropriate, performance information from the applicable IRA
Fund Portfolio prior to June 23, 1988) that would equate the initial amount
invested to the ending redeemable value of the investment; in the case of the
average annual total return, this amount (representing the Fund's total return)
was then averaged over the relevant number of years. The ending redeemable
value includes dividends and capital gain distributions reinvested at net asset
value. The resulting percentages indicate the positive or negative investment
results that an investor would have experienced from changes in Share price and
reinvestment of dividends and capital gains distributions.
For the thirty-day period ended July 31, 1996, the yield for the
Investor and Fiduciary Shares of the Growth Fund was 0.74% (0.77% without a
load) and 0.77%, respectively; for the Investor and Fiduciary Shares of the
Income and Growth Fund was 1.82% (1.91% without a load) and 1.90%, respectively;
for the Investor and Fiduciary Shares of the Income Equity Fund was 2.86% (2.99%
without a load) and 2.80%, respectively; for the Investor and Fiduciary Shares
of the Balanced Fund was 3.41% (3.57% without a load) and 3.57%, respectively;
for the Investor and Fiduciary Shares of the Bond Fund was 5.90% (6.08% without
a load) and 6.08%, respectively; and for the Investor and Fiduciary Shares of
the Government Bond Fund was 5.93% (6.12% without a load) and 6.12%,
respectively. The Fund's "yield" (referred to as "standardized yield") for a
given 30-day period for a class of shares is calculated using the following
formula set forth in rules adopted by the Commission that apply to all funds
that quote yields:
Standardized Yield = 2 [(a-b + 1)6 - 1]
----------------
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares of that class outstanding during
the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of the class on the last day of
the period, adjusted for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The Commission formula assumes
that the standardized yield for a 30-day period occurs at a constant rate for a
six-month period and is annualized at the end of the six-month period. This
standardized yield is not based on actual distributions paid by the Fund to
shareholders in the 30-day period, but is a hypothetical yield based upon the
net investment income from the Fund's portfolio investments
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<PAGE> 78
calculated for that period. Because each class of shares is subject to
different expenses, it is likely that the standardized yields of the Fund
classes of shares will differ.
For the one year period ended July 31, 1996, the distribution rate
(including capital gains and excluding a sales charge) of the Income Equity
Fund was 7.57% for Investor Shares and 7.58% for Fiduciary Shares and of the
Bond Fund was 6.37% for Investor Shares and 6.32% for Fiduciary Shares. For
the one year period ended July 31, 1996, the distribution rate (excluding
capital gains and a sales charge) of the Income Equity Fund was 2.94% for the
Investor and Fiduciary Shares, and of the Bond Fund was 6.37 for the Investor
Shares and 6.32% for the Fiduciary Shares. For the one year period ended July
31, 1996, the distribution rate (including capital gains and a sales load) of
the Income Equity Fund was 7.23% and of the Bond Fund was 6.18%. For the
one year period ended July 31, 1996 the distribution rate (excluding capital
gains and including a load) of the Income Equity Fund was 2.80% and of the
Bond Fund was 6.18%. The distribution rate for each Fund is determined by
dividing the income distributions and, where the distribution rate includes
capital gains distributions, capital gains distributions on a Share of the
Fund over a twelve-month period by the per Share net asset value of the Fund
on the last day of the period and annualized in the case of Funds which have
not had a full year of results.
All performance information presented is based on past performance and
does not predict future performance.
MISCELLANEOUS
The Group is not required to hold meetings of Shareholders for the
purpose of electing Trustees except that (i) the Group is required to hold a
Shareholders' meeting for the election of Trustees at such time as less than a
majority of the Trustees holding office have been elected by Shareholders and
(ii) if, as a result of a vacancy on the Board of Trustees, less than
two-thirds of the Trustees holding office have been elected by the
Shareholders, that vacancy may be filled only by a vote of the Shareholders. In
addition, Trustees may be removed from office by a written consent signed by
the holders of Shares representing two-thirds of the outstanding Shares of the
Group at a meeting duly called for the purpose, which meeting shall be held
upon the written request of the holders of Shares representing not less than
10% of the outstanding Shares of the Group. Upon written request by the holders
of Shares representing 1% of the outstanding Shares of the Group stating that
such Shareholders wish to communicate with the other Shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
removal of a Trustee, the Group will provide a list of Shareholders or
disseminate appropriate materials (at the expense of the requesting
Shareholders). Except as set forth above, the Trustees may continue to hold
office and may appoint successor Trustees.
The Group is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Securities and Exchange Commission of the management or policies of the
Group.
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The Prospectuses and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Securities and Exchange Commission. Copies of such information may be
obtained from the Securities and Exchange Commission upon payment of the
prescribed fee.
The 1996 Annual Report to Shareholders of the Group is incorporated
herein by reference. This Report includes audited financial statements for the
fiscal year ended July 31, 1996. Upon the incorporation by reference herein
of such Annual Report, the opinion in such Annual Report of independent
accountants is incorporated herein by reference and such Annual Report's
financial statements are incorporated by reference herein in reliance upon
the authority of such accountants as experts in auditing and accounting.
The Prospectuses and this Statement of Additional Information are not
an offering of the securities herein described in any state in which such
offering may not lawfully be made.
No salesperson, dealer, or other person is authorized to give any
information or make any representation other than those contained in the
Prospectuses and this Statement of Additional Information.
As of October 17, 1996, the Group believes that the trustees and
officers of the Group, as a group, owned less than one percent of the Shares of
any Fund of the Group. As of October 17, 1996, the Group believes that Union
Bank of California was the shareholder of record of 87.48% of the Fiduciary
Shares of the Growth Fund, 94.67% of the Fiduciary Shares of the Income and
Growth Fund, 72.99% of the Fiduciary Shares of the Income Equity Fund, 97.77%
of the Fiduciary Shares of the Balanced Fund, 88.46% of the Fiduciary Shares of
the Bond Fund, 63.35% of the Fiduciary Shares of the Government Bond Fund,
97.90% of the Fiduciary Shares of the Tax-Free Fund, 94.37% of the Fiduciary
Shares of the U.S. Government Obligations Fund, 93.45% of the Fiduciary Shares
of the Diversified Obligations Fund, 94.42% of the Fiduciary Shares of the 100%
U.S. Treasury Obligations Fund and substantially all of the Fiduciary Shares of
the California Tax-Free Fund. As of October 17, 1996, the Group believes that
Union Bank of California had voting power with respect to 61.60% of the Growth
Fund Fiduciary Shares, 43.53% of the Income Equity Fund Fiduciary Shares, 39.55%
of the Balanced Fund Fiduciary Shares, 47.32% of the Bond Fund Fiduciary Shares,
15.11% of the Diversified Obligations Fund Fiduciary Shares, 17.19% of the 100%
U.S. Treasury Fund Fiduciary Shares, 19.45% of the California Tax-Free Fund
Fiduciary Shares, 25.08% of the Tax-Free Fund Fiduciary Shares and 7.13% of the
Income and Growth Fund Fiduciary Shares.
The table below indicates each additional person known by the Group to
own beneficially 5% or more of the Shares of the following Funds of the Group
as of October 17, 1996:
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<PAGE> 80
<TABLE>
<CAPTION>
5% OR MORE BENEFICIAL OWNERS
PERCENT OF
BENEFICIAL
NAME AND ADDRESS OWNERSHIP
- ---------------- ----------
<S> <C>
GROWTH FUND
INVESTOR SHARES
National Financial Services 7.35%
Corporation for the Exclusive
Benefit of Our Customers and
Bill S. Tsutagawa
Yuriko Tsutagawa
2242 Valley Rd.
Oceanside, CA 92056
National Financial Services 12.32%
Corporation for the Exclusive
Benefit of Our Customers and
IRA of John A. Dito
550 S. Hope St. 2000
Los Angeles, CA 90071
National Financial Services 5.67%
Corporation for the Exclusive
Benefit of Our Customers and
Douglas S. Querin
4228 SW Selling Court
Portland, OR 97221
</TABLE>
-61-
<PAGE> 81
<TABLE>
<S> <C>
FIDUCIARY SHARES
Union Bank of California, N.A. 32.93%
Capital Accumulation Plan
400 California St.
San Francisco, CA 94104
Union Bank of California N.A. 17.61%
Personal Retirement Options Plan
400 California St.
San Francisco, CA 94104
INCOME AND GROWTH FUND
INVESTOR SHARES
National Financial Services 8.57%
Corporation for the Exclusive
Benefit of Our Customers
Attn: Gary Frankowski
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
National Financial Services 8.58%
Corporation for the Exclusive
Benefit of Our Customers and
Thomas Walker Gammill,
Trustee
The Gammill Family Trust
1948 Braeburn Street
Altadena, CA 91101
National Financial Services 27.63%
Corporation for the Exclusive
Benefit of Our Customers and
Bill S. Tsutagawa
Yuriko Tsutagawa
2242 Valley Rd.
Oceanside, CA 92056
</TABLE>
-62-
<PAGE> 82
<TABLE>
<S> <C>
FIDUCIARY SHARES
EBT/Employee Benefits 5.92%
Accounting
ATTN: Joyce Carroll
475 Sansome Street, 12th Floor
San Francisco, CA 94111
United Alloys Inc. Profit Sharing Plan 7.18%
900 East Slauson Ave.
Los Angeles, CA 90011
Dick's Towing & Road Service 7.73%
2012 South 146th Street
Seattle, WA 98168
Newport Adhesive & Composites Inc. 5.79%
Qualified Retirement Plan
1822 Reynolds Ave.
Irvine, CA 92714
INCOME EQUITY FUND
INVESTOR SHARES
National Financial Services 9.76%
Corporation for the Exclusive
Benefit of Our Customers and
Richard W. Killion
c/o Killion Industries
2811 La Mirada Dr.
Vista, CA 92083
FIDUCIARY SHARES
Union Bank of California N.A. 18.27%
Capital Accumulation Plan
400 California St.
San Francisco, CA 94104
Union Bank of California N.A. 8.67%
Personal Retirement Options Plan
400 California St.
San Francisco, CA 94104
</TABLE>
-63-
<PAGE> 83
<TABLE>
<S> <C>
BALANCED FUND
INVESTOR SHARES
National Financial Services 8.03%
Corporation for the Exclusive
Benefit of Our Customers and
Rosalind Fahmy
2691 Pocatello
Rolland Heights, CA 91748
National Financial Services 46.62%
Corporation for the Exclusive
Benefit of Our Customers and
John F. Roach
587 Perugia Way
Los Angeles, CA 90077
National Financial Services 5.73%
Corporation for the Exclusive
Benefit of Our Customers and
Yoko Fujii, Trustee
Tadashi Yoko Fujii
1405 Lamont Ave.
Thousand Oaks, CA 91362
FIDUCIARY SHARES
Union Bank of California N.A. 25.44%
Capital Accumulation Plan
400 California St.
San Francisco, CA 94104
Union Bank of California N.A. 12.55%
Personal Retirement Options Plan
400 California St.
San Francisco, CA 94104
</TABLE>
-64-
<PAGE> 84
<TABLE>
<S> <C>
EBT/Employee Benefits 6.54%
Accounting
Attn: Joyce Carroll
475 Sansome Street, 12th Floor
San Francisco, CA 94111
BOND FUND
INVESTOR SHARES
National Financial Services 23.28%
Corporation for the Exclusive
Benefit of Our Customers and
Mildred Walsh
Stephanie McGowan
3701 E. Valley St.
Seattle, WA 98112
National Financial Services 6.35%
Corporation for the Exclusive
Benefit of Our Customers and
IRA of Charles L. Masingill
2218 Windward Lane
Newport, CA 92660
National Financial Services 5.82%
Corporation for the Exclusive
Benefit of Our Customers and
Wallace Allred
Norma Allred
2250 N. Broadway, No. 48
Escondido, CA 92026
National Financial Services 6.22%
Corporation for the Exclusive
Benefit of Our Customers and
IRA of James Harris
1212 Christian Valley Rd.
Auburn, CA 95602
</TABLE>
-65-
<PAGE> 85
<TABLE>
<S> <C>
National Financial Services 8.08%
Corporation for the Exclusive
Benefit of Our Customers and
Frederick V. Betts
800 Financial Center
1215 Fourth Ave.
Seattle, WA 98161
National Financial Services 5.84%
Corporation for the Exclusive
Benefit of Our Customers and
Marla J. Arata
7801 Oakmont Drive
Modesto, CA 95356
FIDUCIARY SHARES
Union Bank of California N.A. 12.12%
Capital Accumulation Plan
400 California St.
San Francisco, CA 94104
Union Bank of California N.A. 6.03%
Personal Retirement Options Plan
400 California St.
San Francisco, CA 94104
GOVERNMENT BOND FUND
INVESTOR SHARES
National Financial Services 85.17%
Corporation for the Exclusive
Benefit of Our Customers and
Chapa-De Indian Health
Program Inc.
11670 Atwood Rd.
Auburn, CA 95603
</TABLE>
-66-
<PAGE> 86
<TABLE>
<S> <C>
FIDUCIARY SHARES
United Alloys Inc. Profit Sharing Plan 14.01%
900 East Slauson Ave.
Los Angeles, CA 90011
Northwest Plywood Sales 5.28%
Attn: Mel Hartmeier
P.O. Box 25277
Portland, OR 97225
DIVERSIFIED OBLIGATIONS FUND
INVESTOR SHARES
National Financial Services 98.36%
Corporation for the Exclusive
Benefit of Our Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
FIDUCIARY SHARES
[None.]
U.S. GOVERNMENT OBLIGATIONS FUND
INVESTOR SHARES
National Financial Services 83.50%
Corporation for the Exclusive
Benefit of Our Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
RIC Advisor Inc. 6.77%
Defined Benefit Pension Plan
140 N. Escondido Blvd.
Escondido, CA 92025
</TABLE>
-67-
<PAGE> 87
<TABLE>
<S> <C>
FIDUCIARY SHARES
Spitzel/Anderson Escrow 7.45%
3700 Wilshire Blvd. #820
Los Angeles, CA 90010
The Macneal-Schwendler Corp. 5.34%
815 Colorado Blvd.
Los Angeles, CA 90041
Pac West Center, #2850 5.19%
1211 SW 5th Avenue
Portland, OR 97204
Joseph A. Brislin 13.39%
6825 S.W. Sandburg Street
Tigard, OR 97223
EBT/Employee Benefits 6.02%
Accounting
Attn: Joyce Carroll
475 Sansome Street, 12th Floor
San Francisco, CA 94111
100% U.S. TREASURY OBLIGATIONS FUND
INVESTOR SHARES
National Financial Services 98.61%
Corporation for the Exclusive
Benefit of Our Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
FIDUCIARY SHARES
[None.]
CALIFORNIA TAX-FREE FUND
</TABLE>
-68-
<PAGE> 88
<TABLE>
<S> <C>
INVESTOR SHARES
National Financial Services 95.22
Corporation for the Exclusive
Benefit of Our Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
FIDUCIARY SHARES
[None.]
TAX-FREE FUND
INVESTOR SHARES
National Financial Services 100.00%
Corporation for the Exclusive
Benefit of Our Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
FIDUCIARY SHARES
Ms. Lola Klug 5.36%
13310 North East Vine Maple Road
Brush Prairie, WA 98606
</TABLE>
As of October 17, 1996, the Lutheran Services Foundation, 2424 S.
Fremont Ave., Alhambra, CA 91803 owned 13.51% and Michael Rizzuto, 1975 E.
Heather Cir., Brea, CA 92621 owned 12.97% of the Fiduciary Shares of the
Government Bond Fund. No person other than Union Bank of California and the
beneficial owners listed above own as of record more than 5% of the Fiduciary
or Investor Shares of a Fund.
-69-
<PAGE> 89
APPENDIX
The nationally recognized statistical rating organizations (individually, an
"NRSRO") that may be utilized by the Advisor with regard to portfolio
investments for the Funds include Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), Duff & Phelps, Inc. ("Duff"), Fitch
Investors Service, Inc. ("Fitch"), IBCA Limited and its affiliate, IBCA Inc.
(collectively, "IBCA"), and Thomson BankWatch, Inc. ("Thomson"). Set forth
below is a description of the relevant ratings of each such NRSRO. The NRSROs
that may be utilized by
the Advisor and the description of each NRSRO's ratings is as of the date of
this Statement of Additional Information, and may subsequently change.
Long-Term Debt Ratings (may be assigned, for example, to corporate and
municipal bonds)
Description of the three highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (1, 2, and 3) in each rating category to indicate
the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear
somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the
future.
- -Description of the three highest long-term debt ratings by S&P (S&P may apply
a plus (+) or minus (-) to a particular rating classification to show relative
standing within that classification):
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
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<PAGE> 90
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only
in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Description of the three highest long-term debt ratings by Duff:
AAA Highest credit quality. The risk factors are negligible being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality . Protection factors are strong. AA Risk
is modest but may vary slightly from time to time A- because
of economic conditions.
A+ Protection factors are average but adequate. However, A risk
factors are more variable and greater in periods A- of
economic stress.
Description of the three highest long-term debt ratings by Fitch (plus or minus
signs are used with a rating symbol to indicate the relative position of the
credit within the rating category):
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issues is generally rated "[-]+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
IBCA's description of its three highest long-term debt ratings:
AAA Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk significantly.
-71-
<PAGE> 91
AA Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment
risk albeit not very significantly.
A Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal
and interest is strong, although adverse changes in business,
economic or financial conditions may lead to increased
investment risk.
Thomson's description of its three highest long-term debt ratings (Thomson may
include a plus (+) or minus (-) designation to indicate where within the
respective category the issue is placed):
AAA The highest category; indicates ability to repay principal
and interest on a timely basis is very high.
AA The second highest category; indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
A The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
Short-Term Debt Ratings (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions)
have a superior capacity for repayment of senior
short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by
many of the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
-72-
<PAGE> 92
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions)
have a strong capacity for repayment of senior
short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to
variation. Capitalization characteristics, while
still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions)
have an acceptable ability for repayment of senior
short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and
profitability may result in changes in the level of
debt protection measurements and may require
relatively high financial leverage. Adequate
alternate liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety
regarding timely payment is strong. Those issues
determined to have extremely strong safety
characteristics are denoted with a plus sign (+).
A-2 Capacity for timely payment on issues with this
designation is satisfactory. However, the relative
degree of safety is not as high as for issues
designated "A-1."
A-3 Issues carrying this designation have adequate
capacity for timely payment. They are, however, more
vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher
designations.
Duff's description of its three highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors
and/or access to alternative sources of funds, is
-73-
<PAGE> 93
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good
fundamental protection factors. Risk factors are
minor.
Duff 1- High certainty of timely payment. Liquidity factors
are strong and supported by good fundamental
protection factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing
requirements, access to capital markets is good.
Risk factors are small.
Duff 3 Satisfactory liquidity and other protection factors
qualify issue as to investment grade. Risk factors
are larger and subject to more variation.
Nevertheless, timely payment is expected.
Fitch's description of its three highest short-term debt ratings:
F-1+ Exceptionally Strong Credit Quality. Issues assigned
this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this
rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating
have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as
for issues assigned F-1+ or F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating
have characteristics suggesting that the degree of
assurance for timely payment is adequate, however,
near-term adverse changes could cause these
securities to be rated below investment grade.
IBCA's description of its three highest short-term debt ratings:
A+ Obligations supported by the highest capacity for
timely repayment.
A1 Obligations supported by a very strong capacity for
timely repayment.
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<PAGE> 94
A2 Obligations supported by a strong capacity for
timely repayment, although such capacity may be
susceptible to adverse changes in business, economic
or financial conditions.
Thomson's description of its three highest short-term ratings:
TBW-1 The highest category; indicates a very high
degree of likelihood that principal and
interest will be paid on a timely basis.
TBW-2 The second highest category; while the
degree of safety regarding timely repayment
of principal and interest is strong, the
relative degree of safety is not as high as
for issues rated "TBW-1".
TBW-3 The lowest investment grade category;
indicates that while more susceptible to
adverse developments (both internal and
external) than obligations with higher
ratings, capacity to service principal and
interest in a timely fashion is considered
adequate.
Short-Term Loan/Municipal Note Ratings
Moody's description of its two highest short-term loan/municipal note
ratings:
MIG-1/VMIG-1 This designation denotes best quality. There is
present strong protection by established cash flows,
superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG-2/VMIG-2 This designation denotes high quality. Margins of
protection are ample although not so large as in
the preceding group.
S&P's description of its two highest municipal note ratings:
SP-1 Very strong or strong capacity to pay principal and
interest. Those issues determined to possess
overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
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<PAGE> 95
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
THE HIGHMARK GROUP
We have audited the accompanying statements of assets and liabilities including
the schedules of portfolio investments of The HighMark Group (the "Funds"),
including Diversified Obligations Fund, U.S. Government Obligations Fund, 100%
U.S. Treasury Obligations Fund, California Tax-Free Fund, Tax-Free Fund, Bond
Fund, Government Bond Fund, Income Equity Fund, Balanced Fund, Growth Fund, and
Income & Growth Fund, as of July 31, 1996, the related statements of operations,
statements of changes in net assets and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
highlights for the other years presented and the statement of changes in net
assets for the year ended July 31, 1995 were audited by other auditors whose
report, dated September 22, 1995, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996 by correspondence with the Funds' custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Funds at July 31, 1996, the results of
their operations, the changes in their net assets, and the financial highlights
for the year then ended, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
September 13, 1996
LOGO
24
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<PAGE> 96
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
100% U.S.
DIVERSIFIED U.S. GOVERNMENT TREASURY CALIFORNIA
OBLIGATIONS OBLIGATIONS OBLIGATIONS TAX-FREE TAX-FREE
FUND FUND FUND FUND FUND
----------- --------------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at amortized cost............ $ 413,900 $ 188,438 $ 274,306 $ 148,504 $43,994
Repurchase agreements, at cost.......................... 21,502 39,183 -- -- --
-------- -------- -------- -------- -------
Total Investments..................................... 435,402 227,621 274,306 148,504 43,994
Cash.................................................... 3 16 -- 897 215
Interest receivable..................................... 2,256 557 910 432 158
Receivable from brokers for investments sold............ -- -- -- 2,500 --
Prepaid expenses and other assets....................... 14 17 12 10 1
-------- -------- -------- -------- -------
Total Assets........................................ 437,675 228,211 275,228 152,343 44,368
-------- -------- -------- -------- -------
LIABILITIES:
Distributions payable................................... 1,690 863 1,088 287 78
Payable to brokers for investments purchased............ 5,000 -- -- -- --
Accrued expenses and other payables:
Investment advisory fees.............................. 143 76 98 31 12
Administration fees................................... 19 10 12 5 1
Shareholder services fees............................. 1 1 1 1 --
Custodian, accounting and transfer agent fees......... 26 26 13 14 13
Other................................................. 69 38 53 26 7
-------- -------- -------- -------- -------
Total Liabilities................................... 6,948 1,014 1,265 364 111
-------- -------- -------- -------- -------
NET ASSETS:
Capital................................................. 431,097 227,373 273,958 152,028 44,273
Accumulated undistributed net realized gains (losses) on
investment transactions............................... (370) (176) 5 (49) (16)
-------- -------- -------- -------- -------
Net Assets.......................................... $ 430,727 $ 227,197 $ 273,963 $ 151,979 $44,257
======== ======== ======== ======== =======
Net Assets
Investor.............................................. $ 185,952 $ 75,714 $ 100,623 $ 53,627 $16,148
Fiduciary............................................. 244,775 151,483 173,340 98,352 28,109
-------- -------- -------- -------- -------
Total............................................... $ 430,727 $ 227,197 $ 273,963 $ 151,979 $44,257
======== ======== ======== ======== =======
Outstanding units of beneficial interest (shares)
Investor.............................................. 186,031 75,727 100,626 53,639 16,153
Fiduciary............................................. 245,066 151,646 173,332 98,389 28,120
-------- -------- -------- -------- -------
Total............................................... 431,097 227,373 273,958 152,028 44,273
======== ======== ======== ======== =======
Net asset value -- offering and redemption price per
share
Investor.............................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Fiduciary............................................. 1.00 1.00 1.00 1.00 1.00
======== ======== ======== ======== =======
</TABLE>
See notes to financial statements.
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25
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<PAGE> 97
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
INCOME
BOND GOVERNMENT EQUITY
FUND BOND FUND FUND
-------- ---------- ----------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost $59,354; $4,334; and $232,422,
respectively)............................................................... $ 58,799 $4,295 $ 266,771
Repurchase agreements, at cost................................................ 2,237 121 4,858
------- ------ --------
Total Investments......................................................... 61,036 4,416 271,629
Interest and dividends receivable............................................. 912 94 796
Receivable from brokers for investments sold.................................. -- -- 2,930
Prepaid expenses and other assets............................................. 2 12 6
------- ------ --------
Total Assets.............................................................. 61,950 4,522 275,361
------- ------ --------
LIABILITIES:
Distributions payable......................................................... 319 24 586
Payable for capital shares redeemed........................................... 42 -- --
Payable to brokers for investments purchased.................................. -- -- 1,726
Accrued expenses and other payables:
Investment advisory fees.................................................... 23 -- 154
Administration fees......................................................... 2 -- 12
Custodian, accounting and transfer agent fees............................... 15 5 21
Other....................................................................... 18 3 59
------- ------ --------
Total Liabilities......................................................... 419 32 2,558
------- ------ --------
NET ASSETS:
Capital....................................................................... 65,254 4,837 223,480
Net unrealized appreciation (depreciation) on investments..................... (555) (39) 34,349
Undistributed net investment income........................................... 32 2 --
Accumulated undistributed net realized gains (losses) on investment
transactions................................................................ (3,200) (310) 14,974
------- ------ --------
Net Assets................................................................ $ 61,531 $4,490 $ 272,803
======= ====== ========
Net Assets
Investor.................................................................... $ 1,157 $1,104 $ 10,143
Fiduciary................................................................... 60,374 3,386 262,660
------- ------ --------
Total..................................................................... $ 61,531 $4,490 $ 272,803
======= ====== ========
Outstanding units of beneficial interest (shares)
Investor.................................................................... 114 119 710
Fiduciary................................................................... 5,900 362 18,413
------- ------ --------
Total..................................................................... 6,014 481 19,123
======= ====== ========
Net asset value
Investor -- redemption price per share...................................... $ 10.15 $ 9.28 $ 14.29
Fiduciary -- offering and redemption price per share........................ 10.23 9.35 14.27
======= ====== ========
Maximum Sales Charge (Investor Shares)........................................ 3.00% 3.00% 4.50%
======= ====== ========
Maximum Offering Price (100%/(100%-Maximum Sales Charge) of net asset value
adjusted to nearest cent) per share (Investor Shares)....................... $ 10.46 $ 9.57 $ 14.96
======= ====== ========
</TABLE>
See notes to financial statements.
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26
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<PAGE> 98
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
INCOME &
BALANCED GROWTH GROWTH
FUND FUND FUND
-------- ------- --------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost $32,159; $39,610; and $4,969,
respectively).................................................................. $36,273 $43,527 $6,022
Repurchase agreements, at cost................................................... 3,787 900 386
--------- --------- -------
Total Investments............................................................ 40,060 44,427 6,408
Interest and dividends receivable................................................ 278 55 12
Receivable from brokers for investments sold..................................... -- 216 --
Prepaid expenses................................................................. 9 5 5
--------- --------- -------
Total Assets................................................................. 40,347 44,703 6,425
--------- --------- -------
LIABILITIES:
Distributions payable............................................................ 118 28 9
Payable to brokers for investments purchased..................................... -- 301 --
Accrued expenses and other payables:
Investment advisory fees....................................................... 20 21 --
Administration fees............................................................ 2 2 --
Custodian, accounting and transfer agent fees.................................. 5 5 6
Other.......................................................................... 6 8 3
--------- --------- -------
Total Liabilities............................................................ 151 365 18
--------- --------- -------
NET ASSETS:
Capital.......................................................................... 35,830 38,047 5,100
Net unrealized appreciation on investments....................................... 4,114 3,917 1,053
Undistributed net investment income.............................................. 1 -- --
Accumulated undistributed net realized gains on investment transactions.......... 251 2,374 254
--------- --------- -------
Net Assets................................................................... $40,196 $44,338 $6,407
========= ========= =======
Net Assets
Investor....................................................................... $ 694 $ 2,843 $ 394
Fiduciary...................................................................... 39,502 41,495 6,013
--------- --------- -------
Total........................................................................ $40,196 $44,338 $6,407
========= ========= =======
Outstanding units of beneficial interest (shares)
Investor....................................................................... 60 226 31
Fiduciary...................................................................... 3,392 3,300 480
--------- --------- -------
Total........................................................................ 3,452 3,526 511
========= ========= =======
Net asset value
Investor -- redemption price per share......................................... $ 11.56 $ 12.60 $12.52
Fiduciary -- offering and redemption price per share........................... 11.64 12.58 12.51
========= ========= =======
Maximum Sales Charge (Investor Shares)........................................... 4.50% 4.50% 4.50%
========= ========= =======
Maximum Offering Price (100%/(100%-Maximum Sales Charge) of net asset value
adjusted to nearest cent) per share (Investor Shares).......................... $ 12.10 $ 13.19 $13.11
========= ========= =======
</TABLE>
See notes to financial statements.
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27
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<PAGE> 99
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
U.S. 100% U.S.
DIVERSIFIED GOVERNMENT TREASURY CALIFORNIA
OBLIGATIONS OBLIGATIONS OBLIGATIONS TAX-FREE TAX-FREE
FUND FUND FUND FUND FUND
----------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.................................. $22,468 $ 13,070 $16,193 $5,301 $1,554
------- ------- ------- ------ ------
Total Income................................. 22,468 13,070 16,193 5,301 1,554
------- ------- ------- ------ ------
EXPENSES:
Investment advisory fees......................... 1,591 944 1,203 618 172
Administration fees.............................. 795 472 602 309 86
Distribution fees (Investor shares).............. 396 194 267 122 36
Shareholder services fees........................ 994 590 752 386 108
Custodian and accounting fees.................... 264 181 177 121 83
Legal and audit fees............................. 63 37 52 29 5
Trustees' fees and expenses...................... 11 7 9 5 1
Transfer agent fees.............................. 89 44 50 47 34
Registration and filing fees..................... 47 16 28 5 4
Printing costs................................... 51 69 42 23 6
Other............................................ 13 7 9 4 2
------- ------- ------- ------ ------
Total Expenses............................... 4,314 2,561 3,191 1,669 537
Expenses voluntarily reduced..................... (1,327) (739) (978) (824) (207)
------- ------- ------- ------ ------
Net Expenses................................. 2,987 1,822 2,213 845 330
------- ------- ------- ------ ------
Net Investment Income............................ 19,481 11,248 13,980 4,456 1,224
------- ------- ------- ------ ------
REALIZED GAINS ON INVESTMENTS:
Net realized gains (losses) on investments....... 16 15 (51) -- --
------- ------- ------- ------ ------
Change in net assets resulting from operations... $19,497 $ 11,263 $13,929 $4,456 $1,224
======= ======= ======= ====== ======
</TABLE>
See notes to financial statements.
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28
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<PAGE> 100
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
GOVERNMENT INCOME
BOND BOND EQUITY
FUND FUND FUND
------ ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income...................................................... $4,316 $304 $ 425
Dividend income...................................................... -- -- 9,943
------ ---- -------
Total Income....................................................... 4,316 304 10,368
------ ---- -------
EXPENSES:
Investment advisory fees............................................. 534 43 1,755
Administration fees.................................................. 123 9 521
Distribution fees (Investor shares).................................. 2 2 20
Shareholder services fees............................................ 154 11 651
Custodian and accounting fees........................................ 85 64 174
Legal and audit fees................................................. 10 3 44
Trustees' fees and expenses.......................................... 2 -- 7
Transfer agent fees.................................................. 54 32 106
Registration and filing fees......................................... 6 1 19
Printing costs....................................................... 22 2 47
Other................................................................ 3 -- 8
------ ---- -------
Total Expenses................................................... 995 167 3,352
Expenses voluntarily reduced......................................... (445) (87) (666)
------ ---- -------
Total expenses before expense reimbursements..................... 550 80 2,686
Expense reimbursements........................................... -- (43) --
------ ---- -------
Net Expenses..................................................... 550 37 2,686
------ ---- -------
Net Investment Income................................................ 3,766 267 7,682
------ ---- -------
REALIZED/UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investment transactions............... (369) (8) 19,384
Net change in unrealized appreciation (depreciation) on
investments........................................................ (465) (67) 13,911
------ ---- -------
Net realized/unrealized gains (losses) on investments................ (834) (75) 33,295
------ ---- -------
Change in net assets resulting from operations....................... $2,932 $192 $ 40,977
====== ==== =======
</TABLE>
See notes to financial statements.
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29
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<PAGE> 101
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
INCOME &
BALANCED GROWTH GROWTH
FUND FUND FUND
-------- ------ --------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................................................ $ 996 $ 82 $ 21
Dividend income........................................................ 549 607 163
------ ------ ------
Total Income......................................................... 1,545 689 184
------ ------ ------
EXPENSES:
Investment advisory fees............................................... 348 362 62
Administration fees.................................................... 70 72 12
Distribution fees (Investor shares).................................... 2 5 1
Shareholder services fees.............................................. 87 90 16
Custodian and accounting fees.......................................... 64 78 74
Legal and audit fees................................................... 6 6 3
Trustees' fees and expenses............................................ 1 1 --
Transfer agent fees.................................................... 33 42 33
Registration and filing fees........................................... 3 4 1
Printing costs......................................................... 6 6 --
Other.................................................................. 1 2 --
------ ------ ------
Total Expenses..................................................... 621 668 202
Expenses voluntarily reduced........................................... (293) (333 ) (119)
------ ------ ------
Total expenses before expense reimbursements....................... 328 335 83
Expense reimbursements............................................. -- -- (23)
------ ------ ------
Net Expenses....................................................... 328 335 60
------ ------ ------
Net Investment Income.................................................. 1,217 354 124
------ ------ ------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions.......................... 446 3,272 628
Net change in unrealized appreciation on investments................... 1,716 155 56
------ ------ ------
Net realized/unrealized gains on investments........................... 2,162 3,427 684
------ ------ ------
Change in net assets resulting from operations......................... $3,379 $3,781 $808
====== ====== ======
</TABLE>
See notes to financial statements.
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30
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<PAGE> 102
STATEMENTS OF CHANGES IN NET ASSETS
Amounts in Thousands
<TABLE>
<CAPTION>
DIVERSIFIED U.S. GOVERNMENT
OBLIGATIONS FUND OBLIGATIONS FUND
-------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.......................... $ 19,481 $ 17,476 $ 11,248 $ 8,697
Net realized gains (losses) on investment
transactions................................. 16 (29) 15 34
----------- ----------- ----------- -----------
Change in net assets resulting from operations... 19,497 17,447 11,263 8,731
----------- ----------- ----------- -----------
DISTRIBUTIONS TO INVESTOR SHAREHOLDERS:
From net investment income..................... (7,738) (5,516) (3,707) (2,084)
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income..................... (11,743) (11,960) (7,541) (6,613)
----------- ----------- ----------- -----------
Change in net assets from shareholder
distributions.................................. (19,481) (17,476) (11,248) (8,697)
----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued.................... 1,943,043 1,562,243 1,933,728 1,760,626
Dividends reinvested........................... 7,326 4,915 3,487 1,950
Cost of shares redeemed........................ (1,918,325) (1,473,121) (1,918,254) (1,740,538)
----------- ----------- ----------- -----------
Change in net assets from share transactions..... 32,044 94,037 18,961 22,038
----------- ----------- ----------- -----------
Change in net assets............................. 32,060 94,008 18,976 22,072
NET ASSETS:
Beginning of period............................ 398,667 304,659 208,221 186,149
----------- ----------- ----------- -----------
End of period.................................. $ 430,727 $ 398,667 $ 227,197 $ 208,221
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
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31
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<PAGE> 103
STATEMENTS OF CHANGES IN NET ASSETS
Amounts in Thousands
<TABLE>
<CAPTION>
100% U.S. TREASURY CALIFORNIA
OBLIGATIONS FUND TAX-FREE FUND TAX-FREE FUND
----------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995 1996 1995
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income........... $ 13,980 $ 10,640 $ 4,456 $ 4,619 $ 1,224 $ 1,405
Net realized gains (losses) on
investment transactions....... (51) 57 -- (23) -- (13)
---------- --------- --------- --------- --------- ---------
Change in net assets resulting
from operations................. 13,929 10,697 4,456 4,596 1,224 1,392
---------- --------- --------- --------- --------- ---------
DISTRIBUTIONS TO INVESTOR
SHAREHOLDERS:
From net investment income...... (4,948) (2,706) (1,404) (1,089) (400) (422)
DISTRIBUTIONS TO FIDUCIARY
SHAREHOLDERS:
From net investment income...... (9,032) (7,934) (3,052) (3,530) (824) (983)
---------- --------- --------- --------- --------- ---------
Change in net assets from
shareholder distributions....... (13,980) (10,640) (4,456) (4,619) (1,224) (1,405)
---------- --------- --------- --------- --------- ---------
CAPITAL TRANSACTIONS:
Proceeds from shares issued..... 1,004,680 736,668 343,893 354,814 132,220 156,974
Dividends reinvested............ 4,571 2,106 1,425 1,035 419 429
Cost of shares redeemed......... (1,014,501) (659,445) (339,625) (356,054) (131,897) (164,192)
---------- --------- --------- --------- --------- ---------
Change in net assets from share
transactions.................... (5,250) 79,329 5,693 (205) 742 (6,789)
---------- --------- --------- --------- --------- ---------
Change in net assets.............. (5,301) 79,386 5,693 (228) 742 (6,802)
NET ASSETS:
Beginning of period............. 279,264 199,878 146,286 146,514 43,515 50,317
---------- --------- --------- --------- --------- ---------
End of period................... $ 273,963 $ 279,264 $ 151,979 $ 146,286 $ 44,257 $ 43,515
========== ========= ========= ========= ========= =========
</TABLE>
See notes to financial statements.
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<PAGE> 104
STATEMENTS OF CHANGES IN NET ASSETS
Amounts in Thousands
<TABLE>
<CAPTION>
BOND FUND GOVERNMENT BOND FUND INCOME EQUITY FUND
---------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............ $ 3,766 $ 3,824 $ 267 $ 294 $ 7,682 $ 7,595
Net realized gains (losses) on
investment transactions........ (369) (1,512) (8) (55) 19,384 8,944
Net change in unrealized
appreciation (depreciation) on
investments.................... (465) 3,052 (67) 79 13,911 17,456
-------- -------- ------- -------- -------- --------
Change in net assets resulting from
operations....................... 2,932 5,364 192 318 40,977 33,995
-------- -------- ------- -------- -------- --------
DISTRIBUTIONS TO INVESTOR
SHAREHOLDERS:
From net investment income....... (63) (18) (53) (3) (239) (43)
From net realized gains on
investments.................... (1) -- -- -- (277) (16)
DISTRIBUTIONS TO FIDUCIARY
SHAREHOLDERS:
From net investment income....... (3,703) (3,806) (214) (291) (7,443) (7,552)
From net realized gains on
investments.................... (32) -- (2) -- (11,279) (7,309)
-------- -------- ------- -------- -------- --------
Change in net assets from
shareholder distributions........ (3,799) (3,824) (269) (294) (19,238) (14,920)
-------- -------- ------- -------- -------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares issued...... 15,630 11,393 1,352 1,376 63,282 36,043
Dividends reinvested............. 3,043 3,125 266 297 17,495 13,535
Cost of shares redeemed.......... (16,591) (19,934) (1,035) (2,884) (54,919) (56,799)
-------- -------- ------- -------- -------- --------
Change in net assets from share
transactions..................... 2,082 (5,416) 583 (1,211) 25,858 (7,221)
-------- -------- ------- -------- -------- --------
Change in net assets............... 1,215 (3,876) 506 (1,187) 47,597 11,854
NET ASSETS:
Beginning of period.............. 60,316 64,192 3,984 5,171 225,206 213,352
-------- -------- ------- -------- -------- --------
End of period.................... $ 61,531 $ 60,316 $4,490 $ 3,984 $272,803 $225,206
======== ======== ======= ======== ======== ========
</TABLE>
See notes to financial statements.
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33
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<PAGE> 105
STATEMENTS OF CHANGES IN NET ASSETS
Amounts in Thousands
<TABLE>
<CAPTION>
BALANCED FUND GROWTH FUND INCOME & GROWTH FUND
---------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............ $ 1,217 $ 992 $ 354 $ 272 $ 124 $ 133
Net realized gains on investment
transactions................... 446 21 3,272 915 628 42
Net change in unrealized
appreciation on investments.... 1,716 2,804 155 3,752 56 961
------- ------- ------- ------- ------ -------
Change in net assets resulting from
operations....................... 3,379 3,817 3,781 4,939 808 1,136
------- ------- ------- ------- ------ -------
DISTRIBUTIONS TO INVESTOR
SHAREHOLDERS:
From net investment income....... (23) (3) (21) (5) (6) (1)
From net realized gains on
investments.................... -- -- (94) (3) (14) --
DISTRIBUTIONS TO FIDUCIARY
SHAREHOLDERS:
From net investment income....... (1,194) (989) (333) (267) (118) (132)
From net realized gains on
investments.................... (2) -- (1,566) (240) (314) --
------- ------- ------- ------- ------ -------
Change in net assets from
shareholder distributions........ (1,219) (992) (2,014) (515) (452) (133)
------- ------- ------- ------- ------ -------
CAPITAL TRANSACTIONS:
Proceeds from shares issued...... 15,840 10,356 19,239 9,727 2,923 1,771
Dividends reinvested............. 1,172 986 1,965 503 434 127
Cost of shares redeemed.......... (9,404) (9,590) (4,947) (3,594) (4,190) (788)
------- ------- ------- ------- ------ -------
Change in net assets from share
transactions..................... 7,608 1,752 16,257 6,636 (833) 1,110
------- ------- ------- ------- ------ -------
Change in net assets............... 9,768 4,577 18,024 11,060 (477) 2,113
NET ASSETS:
Beginning of period.............. 30,428 25,851 26,314 15,254 6,884 4,771
------- ------- ------- ------- ------ -------
End of period.................... $ 40,196 $ 30,428 $ 44,338 $ 26,314 $6,407 $6,884
======= ======= ======= ======= ====== =======
</TABLE>
See notes to financial statements.
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34
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<PAGE> 106
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------------------------- ---------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT (23.4%):
Euro Certificates of Deposit (3.7%):
$ 5,000 Abbey National Treasury
Services, 5.72%, 9/11/96... $ 5,000
6,000 Abbey National Treasury
Services, 5.22%, 3/4/97 5,983
5,000 Bayerische Vereinsbank,
5.49%, 11/13/96 5,001
--------
15,984
--------
Yankee Certificates of Deposit (19.7%):
10,000 ABN-AMRO Bank N.V., 5.53%,
3/18/97.................... 9,996
5,000 Commerzbank, 5.66%, 4/24/97.. 4,997
10,000 Dresdner Bank, 5.05%,
2/26/97.................... 9,999
10,000 Deutsche Bank, 5.57%,
3/31/97.................... 10,001
5,000 Rabobank Nederland N.V.,
5.82% 8/14/96.............. 5,000
10,000 Sanwa Bank Ltd., 5.62%,
10/16/96................... 10,002
10,000 Society Generale, 5.65%,
4/1/97..................... 9,993
5,000 Society Generale, 5.80%,
4/15/97.................... 5,002
10,000 Sumitomo Bank Ltd., 5.48%,
8/26/96.................... 10,000
5,000 Sumitomo Bank Ltd., 5.46%,
9/3/96..................... 5,000
5,000 Sumitomo Bank Ltd., 6.01%,
10/30/96................... 5,000
--------
84,990
--------
Total Certificates of Deposit 100,974
--------
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------
<S> <C> <C> <C>
COMMERCIAL PAPER/MASTER DEMAND NOTES (67.5%):
Automotive (6.9%):
$ 5,000 Daimler-Benz North America
Corp., 5.35%, 1/6/97....... $ 4,876
5,000 Daimler-Benz North America
Corp., 5.53%, 1/13/97...... 4,873
5,000 Ford Motor Credit Corp.,
5.27%, 8/13/96............. 4,991
10,000 Ford Motor Credit Corp.,
5.34%, 8/15/96............. 9,979
5,000 Ford Motor Credit Corp.,
5.42%, 9/6/96.............. 4,973
--------
29,692
--------
Banking (9.2%):
5,000 ANZ (De) Inc., 5.38%,
9/10/96.................... 4,970
5,000 ANZ (De) Inc., 5.40%,
9/9/96..................... 4,971
5,000 ANZ (De) Inc., 5.47%,
10/9/96.................... 4,948
5,000 Abbey National North America
Inc., 5.54%, 9/25/96....... 4,958
5,000 Abbey National North America
Inc., 5.40%, 12/4/96....... 4,906
5,000 Commerzbank U.S. Finance
Inc., 5.35%, 8/8/96........ 4,995
5,000 Den Danske Corporation Inc.,
5.38%, 8/6/96.............. 4,996
5,000 Den Danske Corporation Inc.,
5.42%, 10/1/96............. 4,954
--------
39,698
--------
</TABLE>
Continued
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35
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<PAGE> 107
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMERCIAL PAPER/MASTER DEMAND NOTES,
CONTINUED:
Business Credit Institutions (21.9%):
$10,000 Alpha Finance Corp., 5.48%,
10/11/96................... $ 9,892
10,000 Assets Securitization
Cooperative Corp., 5.37%,
8/5/96..................... 9,994
5,000 Assets Securitization
Cooperative Corp., 5.40%,
9/17/96.................... 4,965
5,000 Beta Finance Inc., 5.53%,
1/3/97..................... 4,881
10,000 Ciesco, L.P., 5.26%,
8/16/96.................... 9,978
5,000 Ciesco, L.P., 5.32%,
9/9/96..................... 4,971
5,200 Corporate Receivables Corp.,
5.35%, 8/22/96............. 5,184
10,000 Corporate Receivables Corp.,
5.40%, 9/12/96............. 9,937
5,000 Corporate Receivables Corp.,
5.42%, 10/8/96............. 4,949
5,000 CXC, Inc., 5.38%, 8/1/96..... 5,000
10,000 CXC, Inc., 5.40%, 9/3/96..... 9,950
5,000 Falcon Asset Securitization
Corp., 5.40%, 8/19/96...... 4,986
5,000 Falcon Asset Securitization
Corp., 5.55%, 1/21/97...... 4,867
5,000 Jet Funding Corp., 5.50%,
9/30/96.................... 4,954
---------
94,508
---------
Electronic & Electrical--General (4.6%):
10,000 Panasonic Finance Inc.,
5.38%, 9/9/96.............. 9,942
10,000 Panasonic Finance Inc.,
5.34%, 9/17/96............. 9,930
---------
19,872
---------
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------------------------- ---------
COMMERCIAL PAPER/MASTER DEMAND NOTES,
CONTINUED:
Insurance (1.2%):
$ 5,000 TransAmerica Corp., 5.36%,
8/9/96..................... $ 4,994
---------
Mining (1.1%):
5,000 RTZ America Inc., 5.30%,
8/22/96.................... 4,985
---------
Multiple Industry (6.9%):
10,000 BTR Dunlop Finance Inc.,
5.37%, 8/7/96.............. 9,991
5,000 BTR Dunlop Finance Inc.,
5.27%, 8/26/96............. 4,982
5,000 BTR Dunlop Finance Inc.,
5.40%, 9/16/96............. 4,965
10,000 General Electric Capital
Corp., 5.29%, 9/5/96....... 9,949
---------
29,887
---------
Retail (3.5%):
5,000 J.C. Penney Funding Corp.,
5.38%, 8/7/96.............. 4,996
10,000 J.C. Penney Funding Corp.,
5.34%, 8/29/96............. 9,958
---------
14,954
---------
Technology (1.7%):
7,200 Hewlett Packard Co., 5.29%,
8/27/96.................... 7,172
---------
Tobacco & Tobacco Products (1.2%):
5,000 B.A.T. Capital Corp., 5.33%,
8/16/96.................... 4,989
---------
</TABLE>
Continued
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36
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<PAGE> 108
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMERCIAL PAPER/MASTER DEMAND NOTES,
CONTINUED:
Trading Company (3.5%):
$10,000 Cargill Financial Services
Corp. 5.33%, 8/16/96....... $ 9,978
5,000 Cargill Inc., 5.35%,
8/2/96..................... 4,999
---------
14,977
---------
Telecommunications (3.5%):
10,000 AT&T Corp., 5.30%, 8/8/96.... 9,990
5,000 AT&T Corp., 5.42%, 9/18/96... 4,964
---------
14,954
---------
Utility (2.3%):
10,000 National Rural Utilities
Co-op. Finance Corp.,
5.37%, 8/9/96.............. 9,988
---------
Total Commercial Paper / Master Demand
Notes 290,670
---------
MEDIUM TERM NOTES/CORPORATE BONDS (2.9%):
Banking (2.3%):
10,000 Sanwa Business Credit Corp.,
5.56%, 12/4/96 *........... 10,000
---------
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------------------------- ---------
Manufacturing--Consumer Goods (0.6%):
$ 2,500 Gillette Co., 4.75%,
8/15/96.................... $ 2,499
---------
Total Medium Term Notes/Corporate Bonds
12,499
---------
U.S. TREASURY BILLS (2.3%):
10,000 4.62%, 2/6/97................ 9,757
---------
Total U.S. Treasury Bills 9,757
---------
Total Investments, at value 413,900
---------
REPURCHASE AGREEMENTS (5.0%);
21,502 C.S. First Boston Corp.,
5.62%, 8/1/96
(Collateralized by 18,006
U.S. Treasury Bonds, 8.75%,
8/15/20, market value
$21,970)................... 21,502
---------
Total Repurchase Agreements 21,502
---------
Total $435,402 (a)
==========
</TABLE>
- ------------
Percentages indicated are based on net assets of $430,727.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity arrangements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of market
interest rates. The rate reflected on the Schedule of Portfolio Investments is
the rate in effect on July 31, 1996.
See notes to financial statements.
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37
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<PAGE> 109
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- ------------- ----------------------------- ---------
<S> <C> <C> <C>
U.S. TREASURY BILLS (4.3%):
$10,000 4.62%, 2/6/97................ $ 9,757
--------
Total U.S. Treasury Bills 9,757
--------
U.S. GOVERNMENT AGENCIES (78.6%):
Federal Home Loan Bank:
7,500 Discount note, 5.32%,
8/14/96.................... 7,486
5,000 Discount note, 5.22%,
8/20/96.................... 4,986
5,000 Discount note, 5.31%,
9/25/96.................... 4,959
5,000 Discount note, 5.19%,
10/15/96................... 4,946
5,000 Discount note, 5.37%,
11/1/96.................... 4,931
5,000 Discount note, 5.25%,
11/4/96.................... 4,931
5,000 Discount note, 5.19%,
1/14/97.................... 4,881
5,000 Discount note, 5.21%,
1/21/97.................... 4,875
4,610 5.26%, 1/29/97............... 4,610
Federal Home Loan Mortgage Corp.:
5,000 Discount note, 5.34%,
9/16/96.................... 4,966
Federal National Mortgage Assoc.:
5,000 Discount note, 5.30%,
8/1/96..................... 5,000
5,000 Discount note, 5.25%,
8/15/96.................... 4,990
5,000 Discount note, 5.24%,
8/21/96.................... 4,985
5,000 Discount note, 5.33%,
9/9/96..................... 4,971
5,000 Discount note, 5.35%,
9/10/96.................... 4,970
5,000 Discount note, 5.34%,
9/11/96.................... 4,970
10,000 Discount note, 5.27%,
9/17/96.................... 9,931
5,000 Discount note, 5.26%,
9/23/96.................... 4,961
5,540 Discount note, 5.30%,
9/24/96.................... 5,496
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- ------------- ----------------------------- ---------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc., continued:
$ 5,000 Discount note, 5.38%,
10/15/96................... $ 4,944
5,000 Discount note, 5.29%,
12/6/96.................... 4,907
6,940 7.60%, 1/10/97............... 6,999
20,000 5.30%, 5/5/97 *.............. 19,987
Overseas Private Investment Corp.:
20,000 5.40%, 1/15/09 *............. 20,000
Student Loan Marketing Assoc.:
10,000 5.57%, 9/23/96 *............. 9,999
10,000 5.49%, 7/18/97 *............. 10,000
--------
Total U.S. Government Agencies 178,681
--------
Total Investments, at value 188,438
--------
REPURCHASE AGREEMENTS (17.2%):
39,183 C. S. First Boston Corp.,
5.62%, 8/1/96
(Collateralized by 32,811
U.S. Treasury Bonds,
8.75%, 8/15/20, market
value--$40,034).............. 39,183
--------
Total Repurchase Agreements 39,183
--------
Total $227,621 (a)
========
</TABLE>
- ------------
Percentages indicated are based on net assets of $227,197.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of market
interest rates. The rate reflected on the Schedule of Portfolio Investments is
the rate in effect at July 31, 1996.
See notes to financial statements.
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38
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<PAGE> 110
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------------------------- ---------
<S> <C> <C> <C>
U.S. TREASURY BILLS (85.5%):
$ 1,355 4.99%, 8/1/96*............... $ 1,355
15,000 5.00%, 8/8/96*............... 14,985
2,303 5.01%, 8/8/96*............... 2,301
2,226 5.02%, 8/8/96*............... 2,224
5,000 5.03%, 8/8/96*............... 4,995
5,000 5.04%, 8/8/96*............... 4,995
10,192 4.96%, 8/15/96*.............. 10,172
7,425 5.01%, 8/15/96*.............. 7,411
5,000 5.03%, 8/15/96*.............. 4,990
2,777 5.04%, 8/15/96*.............. 2,772
1,067 4.95%, 8/22/96*.............. 1,064
10,000 4.98%, 8/22/96*.............. 9,971
10,000 5.02%, 8/22/96*.............. 9,971
2,000 5.48%, 8/22/96*.............. 1,993
2,500 5.50%, 8/22/96*.............. 2,492
4,744 4.98%, 8/29/96*.............. 4,725
10,000 5.05%, 8/29/96*.............. 9,961
2,023 5.04%, 9/5/96*............... 2,013
312 5.06%, 9/5/96*............... 310
4,572 5.07%, 9/5/96*............... 4,550
865 5.08%, 9/5/96*............... 861
15,000 5.10%, 9/5/96*............... 14,925
3,640 5.04%, 9/12/96*.............. 3,618
892 5.07%, 9/12/96*.............. 887
5,000 5.10%, 9/12/96*.............. 4,970
7,703 5.11%, 9/12/96*.............. 7,657
5,225 5.12%, 9/12/96*.............. 5,193
385 5.07%, 9/19/96*.............. 382
6,651 5.09%, 9/19/96*.............. 6,605
5,410 5.11%, 9/19/96*.............. 5,373
4,828 5.13%, 9/19/96*.............. $ 4,794
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------------------------- ---------
<S> <C> <C> <C>
U.S. TREASURY BILLS, CONTINUED:
$ 5,936 5.14%, 9/19/96*.............. 5,895
5,000 5.04%, 10/3/96*.............. 4,956
1,227 5.09%, 10/3/96*.............. 1,216
3,162 5.11%, 10/3/96*.............. 3,134
3,077 5.11%, 10/10/96*............. 3,046
5,000 5.15%, 10/10/96*............. 4,950
5,000 5.05%, 10/17/96*............. 4,946
2,034 5.09%, 10/17/96*............. 2,012
7,639 5.11%, 10/17/96*............. 7,556
4,000 5.07%, 10/24/96*............. 3,953
5,000 5.12%, 10/24/96*............. 4,940
5,000 5.34%, 1/9/97*............... 4,881
5,000 5.24%, 1/23/97*.............. 4,873
5,000 4.91%, 2/6/97*............... 4,871
5,000 5.11%, 2/6/97*............... 4,866
5,000 5.16%, 4/3/97*............... 4,825
5,000 5.32%, 4/3/97*............... 4,819
--------
Total U.S. Treasury Bills 234,254
--------
U.S. TREASURY NOTES (12.8%):
10,000 7.25%, 8/31/96............... 10,013
10,000 7.25%, 8/31/96............... 10,011
10,000 6.63%, 3/31/97............... 10,072
5,000 6.50%, 4/30/97............... 5,031
--------
Total U.S. Treasury Notes 35,127
--------
U.S. TREASURY STRIPS (1.8%):
5,000 5.12%, 11/15/96*............. 4,925
--------
Total U.S. Treasury Strips 4,925
--------
Total $274,306 (a)
========
</TABLE>
- ------------
Percentages indicated are based on net assets of $273,963.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Discount yield at date of purchase.
See notes to financial statements.
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<PAGE> 111
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------------------------------------------------------------------------------- ---------
<C> <S> <C>
MUNICIPAL SECURITIES $(90.1%):
California (90.1%)
$ 5,025 Contra Costa County, Park Regency, Series 1992, 3.70%, 8/1/32, AMT*................ $ 5,025
2,500 Department of Water Resources, 3.35%, 11/29/96..................................... 2,500
3,300 Health Facilities Authority, Enloe Memorial Hospital, 3.00%, 1/1/16*............... 3,300
6,800 Health Facilities Authority, Memorial Health Services, 3.25%, 10/1/24*............. 6,800
6,600 Health Finance Authority, Catholic Healthcare West, 3.25%, 7/1/05*................. 6,600
900 Health Finance Authority, Catholic Healthcare West, 3.25%, 7/1/09*................. 900
6,900 Health Finance Authority, Kaiser Permanente Series, 3.25%, 5/1/28*................. 6,900
1,700 Health Finance Authority, Pooled Program, Series 1990 A, 3.40%, 9/1/20*............ 1,700
2,400 Health Finance Authority, Pooled Program, Series B, 3.40%, 10/1/10*................ 2,400
1,200 Health Finance Authority, Santa Barbara Cottage, 3.25%, 9/1/15*.................... 1,200
1,000 Health Finance Authority, Santa Barbara Cottage, Series B, 3.25%, 9/1/05*.......... 1,000
1,200 Kern County Public Facilities, Project Series B, 3.35%, 8/1/06*.................... 1,200
1,700 Lancaster Multi-Family Housing, Westwood Park Apartments, 3.40%, 12/1/07*.......... 1,700
6,800 Los Angeles County Metro Transportation Authority, Union Station Gateway Project, 6,800
3.25%, 7/2/25*...................................................................
4,700 Los Angeles County Transportation, 3.40%, 7/1/12*.................................. 4,700
700 Los Angeles Multi-Family Housing, Crescent Gardens, 3.40%, 7/1/14*................. 700
3,700 Los Angeles Multi-Family Housing, Series K, 3.25%, 7/1/10*......................... 3,700
7,500 Los Angeles Multi-Family Housing, Southpark Apartment Project, 3.55%, 12/1/05*..... 7,500
3,700 Metropolitan Water District of Southern California, 3.25%, 6/1/23.................. 3,700
2,800 Oxnard Housing Authority, Seawood Apartments Project, 3.65%, 12/1/20, AMT*......... 2,800
7,200 Pollution Control Finance Authority, Burney Forest 1988, 3.70%, 9/1/20, AMT*....... 7,200
1,900 Pollution Control Finance Authority, Delano Project 1989, 3.65%, 8/1/19, AMT*...... 1,900
2,310 Pollution Control Finance Authority, Delano Project 1990, 3.65%, 8/1/19, AMT*...... 2,310
3,000 Pollution Control Finance Authority, Delano Project 1991, 3.65%, 8/1/19, AMT*...... 3,000
2,600 Pollution Control Finance Authority, Honey Lake Power Project, Series 88, 3.65%,
9/1/18, AMT...................................................................... 2,600
1,700 Pollution Control Finance Authority, North County Recycling Center, Series B,
3.40%, 7/1/17*................................................................... 1,700
500 Pollution Control Finance Authority, Pacific Gas & Electric, Series 88C, 3.35%,
8/15/96.......................................................................... 500
</TABLE>
Continued
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<PAGE> 112
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------
<C> <S> <C>
MUNICIPAL SECURITIES, CONTINUED:
California, continued:
$ 3,200 Pollution Control Finance Authority, Southern California Edison, Series 85C, 3.55%, $ 3,200
9/24/96..........................................................................
1,000 Pollution Control Finance Authority, Southern California Edison, Series 85D, 3.35%, 1,000
9/10/96..........................................................................
2,600 Pollution Control Finance Authority, Southern California Edison, Series 85C, 3.55%, 2,600
9/6/96...........................................................................
500 Pollution Control Finance Authority, Southern California Edison, Series 85C, 3.60%, 500
1/15/97..........................................................................
1,550 Pollution Control Finance Authority, Southern California Edison, Series 85C, 3.15%, 1,550
8/1/96...........................................................................
500 Pollution Control Finance Authority, Southern California Edison, Series 85C, 3.20%, 500
9/10/96..........................................................................
4,000 Pollution Control Finance Authority, Southern California Edison, Series 85C, 3.35%, 4,000
10/1/96..........................................................................
1,200 Pollution Control Finance Authority, Southern California Edison, Series 85C, 3.45%, 1,200
11/14/96.........................................................................
1,100 Pollution Control Finance Authority, Southern California Edison, Series 86A, 3.40%, 1,100
2/28/08*.........................................................................
1,400 Pollution Control Finance Authority, Southern California Edison, Series 86B, 3.40%, 1,400
2/28/08*.........................................................................
2,000 Pollution Control Finance Authority, Southern California Edison, Series 86C, 3.40%, 2,000
2/28/08..........................................................................
2,200 Pollution Control Finance Authority, Southern California Edison, Series 86D, 3.40%, 2,200
2/28/08..........................................................................
2,200 Sacramento County Multi-Family Housing Authority, River Oaks Apartments, 3.55%, 2,200
9/15/07*.........................................................................
5,000 San Bernardino County, TRANs, 4.50%, 6/30/97....................................... 5,027
500 San Jose, Multi-Family Housing, Somerset Park, 3.55%, 11/1/17, AMT*................ 500
2,900 SCAPPA, Revenue, 91 Refunding Series, 3.40%, 7/1/19*............................... 2,900
3,000 State of California, Tax Exempt Commercial Paper, 3.10%, 8/7/96.................... 3,000
1,000 State of California, Tax Exempt Commercial Paper, 3.35%, 11/14/96.................. 1,000
2,000 State of California, Tax Exempt Commercial Paper, 3.55%, 9/13/96................... 2,000
6,865 Statewide Community Development Authority, Series 95A, 3.45%, 5/15/25*............. 6,866
900 Vacaville Multi-Family Housing, The Sycamores Apartments, 3.40%, 4/1/05*........... 900
1,000 Walnut Creek Multi-Family Housing, Creekside Drive Apartments, 3.40%, 4/1/07*...... 1,000
--------
Total Municipal Securities 136,978
--------
</TABLE>
Continued
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SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------------------------------------------------------------------------------- ---------
INVESTMENT COMPANIES $(7.6%):
<C> <S> <C>
5,214 Goldman Sachs California Tax-Exempt Money Market Fund.............................. $ 5,214
6,312 Provident California Money Market Fund............................................. 6,312
--------
Total Investment Companies 11,526
--------
Total $148,504 (a)
========
</TABLE>
- ------------
Percentages indicated are based on net assets of $151,979.
<TABLE>
<C> <S>
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of credit or other credit and/or
liquidity agreements. The interest rate, which will change periodically, is based upon bank prime rates or an
index of market interest rates. The rate reflected on the Schedule of Portfolio Investments is the rate in
effect at July 31, 1996.
AMT Alternative Minimum Tax Paper
TRANs Tax Revenue Anticipation Notes
</TABLE>
See notes to financial statements.
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42
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<PAGE> 114
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- --------------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
MUNICIPAL SECURITIES (90.4%):
Arizona (4.8%):
$1,200 Maricopa County, PCR, Southern California Edison,
Series D, 3.25%, 12/1/09....................................................... $ 1,200
500 Maricopa County, PCR, Southern California Edison,
Series D, 3.35%, 12/1/09....................................................... 500
400 Maricopa County, PCR, Southern California Edison,
Series 85F, 3.50%, 2/1/09...................................................... 400
-------
2,100
-------
California (22.7%):
700 Health Facilities Finance Authority Revenue,
Kaiser Permanente Series B, 3.24%, 5/1/28...................................... 700
1,000 Health Facilities Finance Authority Revenue,
Memorial Health Services, 3.24%, 10/1/24....................................... 1,000
100 Los Angeles County Metro Transportation Authority,
Union Station Gateway Project, 3.24%, 7/1/25................................... 100
200 Los Angeles MFH Crescent Gardens Apartments, 3.40%, 7/1/14....................... 200
1,700 Los Angeles MFH, Series K, 3.49%, 7/1/10......................................... 1,700
400 Los Angeles MFH, Southpark Apartment Project, 3.54%,
12/1/05........................................................................ 400
100 Pollution Control Finance Authority,
Burney Forest 1988, 3.70%, 9/1/20, AMT......................................... 100
1,390 Pollution Control Finance Authority,
Delano Project 1990, 3.65%, 8/1/19............................................. 1,390
200 Pollution Control Finance Authority Revenue,
Southern California Edison, Series 85C, 3.15%, 3/1/08.......................... 200
500 Pollution Control Finance Authority Revenue,
Southern California Edison, Series 85C, 3.20%, 3/1/08.......................... 500
1,200 Pollution Control Finance Authority Revenue,
Southern California Edison, Series 85D, 3.20%, 3/1/08.......................... 1,200
250 Pollution Control Finance Authority Revenue,
Southern California Edison, Series 88C, 3.40%, 10/1/20......................... 250
</TABLE>
Continued
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<PAGE> 115
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- --------------------------------------------------------------------------------- -------
<S> <C> <C> <C>
MUNICIPAL SECURITIES, CONTINUED:
California, continued:
$1,000 San Bernardino County, TRANS, 4.50%, 6/30/97..................................... $ 1,005
1,000 State of California, Tax Exempt Commercial Paper, 3.50%, 10/24/96................ 1,000
300 Statewide Community Development Authority,
Series 95A, 3.45%, 5/15/25..................................................... 300
-------
10,045
-------
Florida (6.1%):
800 Broward County Housing Authority, Welleby Apartments
Project, 3.70%, 12/1/06........................................................ 800
1,900 Indian Trace Community Development, Water
Management Special Benefit, 3.54%, 11/1/99..................................... 1,900
-------
2,700
-------
Hawaii (4.1%):
1,800 Hawaii State Housing Finance, Affordable Rental
Housing, Series A, 3.54%, 7/1/27............................................... 1,800
-------
Illinois (4.0%):
300 Illinois Health Facilities Finance Authority, Methodist
Medical Center, Series 1985B, 3.65%, 10/1/14................................... 300
1,485 Illinois Housing Development Authority, MFH,
Revenue, 4.15%, 2/1/24......................................................... 1,485
-------
1,785
-------
Indiana (4.7%):
600 City of Sullivan, PCR, Hoosier 85, 3.65%, 9/24/96................................ 600
1,000 Jasper County, PCR Indiana Public Services, 3.65%, 11/1/16....................... 1,000
500 Jasper County, PCR, Indiana Public Services,
Series 1988C, 3.25%, 11/1/16................................................... 500
-------
2,100
-------
Kentucky (2.0%):
885 Clark County, PCR, East Kentucky Power Co-Op,
3.40%, 10/15/96................................................................ 885
-------
</TABLE>
Continued
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SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- --------------------------------------------------------------------------------- -------
<S> <C> <C> <C>
MUNICIPAL SECURITIES, CONTINUED:
Louisiana (3.8%):
$1,700 Public Facilities
Authority for Kenner Hotel, Ltd., 3.65%, 12/1/15............................... $ 1,700
-------
Minnesota (0.2%):
100 Hubbard County Solid Waste Disposal Revenue,
Potlatch Corp. Project, Series 1, 3.70%, 8/1/14................................ 100
-------
Missouri (2.7%):
1,200 St. Charles, Sun River Village Apartments, 3.65%, 12/1/07........................ 1,200
-------
Nevada (4.3%):
1,900 Clark County Airport, Sub Lien Revenue, Series
1995A-1, 3.54%, 7/1/25......................................................... 1,900
-------
New Mexico (4.3%):
1,900 Albuquerque Airport Revenue, Sub Lien Revenue,
Series 1995, 3.54%, 7/1/14..................................................... 1,900
-------
New York (4.5%):
200 GO, Series 1993, 3.70%, 10/1/20.................................................. 200
200 GO, Series 1993, 3.70%, 10/1/22.................................................. 200
1,600 Triborough Bridge Authority, 3.40%, 1/1/24....................................... 1,600
-------
2,000
-------
Oregon (4.0%):
1,760 Port Morrow Revenue, Portland General Electric
Co., Series A, 3.70%, 10/1/13.................................................. 1,760
-------
Pennsylvania (0.5%):
200 Lehigh County Industrial Development Authority, PCR,
Allegheny Electric Co-Op, Inc., Series A, 3.40%, 12/1/15....................... 200
-------
Rhode Island (0.9%):
400 State Student Loan Authority, Student Loan Revenue,
Series 1995, 3.70%, 7/1/19..................................................... 400
-------
Texas (4.6%):
2,040 Amoco Gulf Coast Waste Disposal, 3.65%, 10/1/17.................................. 2,040
-------
</TABLE>
Continued
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<PAGE> 117
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- --------------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
MUNICIPAL SECURITIES, CONTINUED:
Utah (2.3%):
$1,000 Emery County, PCR, Pacific Corp. Project, 3.60%, 7/1/15.......................... $ 1,000
-------
Virginia (8.8%):
2,100 Alexandria Redevelopment & Housing Authority,
MFH Revenue, Crystal City Apartments
Project, 3.65%, 12/15/18....................................................... 2,100
100 Amelia County Industrial Development Authority,
Chambers Waste Power Project, Series 1991, 3.85%,
7/1/07......................................................................... 100
1,700 Charles County Industrial Development Authority,
Chamber Development of Virginia Inc. Project, 3.85%,
10/1/04........................................................................ 1,700
-------
3,900
-------
Wyoming (1.1%):
500 Sweetwater County, PCR, Pacific Corp. Project,
Series 1990A, 3.49%, 7/1/15.................................................... 500
-------
Total Municipal Securities 40,015
-------
INVESTMENT COMPANIES (9.0%):
1,851 Goldman Sachs Tax Exempt National Fund........................................... 1,851
2,128 SEI Institutional Tax Exempt Money Market Fund................................... 2,128
-------
Total Investment Companies 3,979
-------
Total $43,994(a)
=======
</TABLE>
- ------------
Percentages indicated are based on total net assets of $44,257.
(a) Cost for federal income tax and financial reporting purposes are the same.
<TABLE>
<S> <C>
AMT Alternative Minimum Tax Paper
GO General Obligation
MFH Multi-Family Housing
PCR Pollution Control Revenue
TRANs Tax Revenue Anticipation Notes
</TABLE>
See notes to financial statements.
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46
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<PAGE> 118
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------- -------
<S> <C> <C> <C>
ASSET BACKED SECURITIES (17.4%):
$ 374 Advanta Mortgage Loan Trust,
7.90%, 3/25/07............... $ 375
1,000 Carco Auto Loan Master Trust,
Series 1994-2, 7.88%,
8/15/97...................... 1,018
860 Carco Auto Loan Master Trust,
Series 1991-3,
7.88%,3/15/98................ 869
1,125 Contimortgage Home Equity Loan
Trust, 8.09%, 9/15/09........ 1,144
1,000 Contimortgage Home Equity Loan
Trust, 8.05%, 7/15/12........ 1,016
1,200 EQCC Home Equity Loan Trust,
7.80%, 12/15/10.............. 1,196
1,250 Green Tree Financial Corp.,
6.80%, 1/15/26............... 1,221
500 MBNA Credit Card, 7.25%,
6/15/99...................... 502
738 Mid State Trust 4, 8.33%,
4/1/30....................... 765
531 Premier Auto Receivable Trust,
4.90%, 10/15/98.............. 525
1,000 Standard Credit Card Master
Trust, 4.65%, 3/7/99......... 987
600 UCFC Home Equity Loan, 7.78%,
12/10/06..................... 608
496 UFSB Grantor Trust, 5.08%,
5/15/00...................... 489
-------
Total Asset Backed Securities 10,715
-------
COLLATERALIZED MORTGAGE OBLIGATIONS (14.4%):
Bear Stearns Secured Investors:
500 7.50%, 1/20/99................. 504
Country Wide Mortgage:
1,021 6.75%, 3/25/08................. 995
Federal Home Loan Mortgage Corp.:
1,500 6.25%, 1/15/24................. 1,347
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------- -------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED:
Federal National Mortgage Assoc.:
$ 2,000 6.20%, 9/25/02................. $ 1,928
1,500 6.50%, 3/25/13................. 1,421
GE Capital Mortgage Service, Inc.:
1,850 6.50%, 1/25/24................. 1,740
Residential Funding Mortgage:
950 6.75%, 11/25/07................ 910
-------
Total Collateralized Mortgage Obligations 8,845
-------
CORPORATE BONDS (24.7%):
Automotive (3.9%):
2,290 General Motors Acceptance
Corp., 8.00%, 10/1/99........ 2,364
-------
Banking (5.2%):
1,785 Bank of America, 6.00%,
7/15/97...................... 1,779
600 Citicorp, 6.75%, 8/15/05....... 572
900 U.S. Bancorp, 6.75%,
10/15/05..................... 858
-------
3,209
-------
Computer Hardware (1.4%):
800 IBM Corp., 8.38%, 11/1/19...... 861
-------
Financial Services (1.0%):
650 Golden West Financial, 6.70%,
7/1/02....................... 634
-------
Governments (Foreign) (2.7%):
825 Hydro-Quebec, 8.05, 7/7/24..... 869
785 Norske Hydro, 7.75, 6/15/23.... 786
-------
1,655
-------
Industrial Goods & Services (1.3%):
860 Caterpillar Tractor Co., 6.00%,
5/1/07....................... 772
-------
Retail Stores (5.8%):
980 J.C. Penney Inc., 6.00%,
5/1/06....................... 883
900 Sears Roebuck Co., 9.25%,
8/1/97....................... 925
</TABLE>
Continued
LOGO
47
LOGO BOND FUND
<PAGE> 119
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------- -------
<S> <C> <C> <C>
CORPORATE BONDS, CONTINUED:
Retail Stores, continued:
$ 1,850 Wal-Mart Stores, 6.38,
3/1/03....................... $ 1,785
-------
3,593
-------
Telecommunications (3.4%):
1,500 Bell Atlantic-Maryland, 8.00%,
10/15/29..................... 1,581
500 New England Telephone &
Telegraph, 7.88%, 11/15/29... 524
-------
2,105
-------
Total Corporate Bonds 15,193
-------
U.S. GOVERNMENT AGENCIES (19.6%):
Federal Home Loan Bank:
300 8.38%, 10/25/99................ 315
Federal National Mortgage Assoc.:
1,000 9.05%, 4/10/00................. 1,074
1,750 5.45%, 10/10/03................ 1,610
1,625 6.50%, 3/1/24, Pool # 276510... 1,526
1,659 8.50%, 5/1/25, Pool # 303300... 1,696
1,018 6.50%, 5/1/26, Pool # 342718... 950
Government National Mortgage Association:
1,836 6.50%, 6/15/23, Pool #
354601....................... 1,717
616 6.50%, 12/15/23, Pool #
369270....................... 574
823 7.50%, 1/15/24, Pool #
352844....................... 811
157 7.50%, 1/15/24, Pool #
360285....................... 154
34 7.50%, 1/15/24, Pool #
362734....................... 34
299 7.50%, 1/15/24, Pool #
368677....................... 294
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------- -------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Government National Mortgage Assoc., continued:
$ 371 7.50%, 2/15/24, Pool #
353297....................... $ 366
70 7.50%, 2/15/24, Pool #
336245....................... 69
906 7.00%, 4/15/24, Pool #
392055....................... 869
-------
Total U.S. Government Agencies 12,059
-------
U.S. TREASURY BONDS (16.4%):
1,500 10.38%, 11/15/12............... 1,894
2,500 7.25%, 5/15/16................. 2,546
2,360 8.75%, 8/15/20................. 2,804
2,800 7.13%, 2/15/23................. 2,813
-------
Total U.S. Treasury Bonds 10,057
-------
U.S. TREASURY NOTES (3.1%):
1,000 8.13%, 2/15/98................. 1,029
430 9.00%, 5/15/98................. 450
420 8.50%, 11/15/00................ 451
-------
Total U.S. Treasury Notes 1,930
-------
Total Investments, at value 58,799
-------
REPURCHASE AGREEMENTS (3.6%):
2,237 C.S. First Boston Corp., 5.62%,
8/1/96 (Collateralized by
2,046 U.S. Treasury Bonds,
8.75%, 11/15/08, market
value--$2,287)............... 2,237
-------
Total Repurchase Agreements 2,237
-------
Total (Cost--$61,591)(a) $61,036
=======
</TABLE>
- ------------
Percentages indicated are based on net assets of $61,531.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows (amounts in thousands):
<TABLE>
<S> <C>
Unrealized appreciation............................................ $ 816
Unrealized depreciation............................................ (1,371)
------
Net unrealized depreciation........................................ $ (555)
======
</TABLE>
See notes to financial statements.
LOGO
48
LOGO BOND FUND
<PAGE> 120
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
Amounts in Thousands
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------- -------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (95.7%):
Federal Home Loan Bank:
$ 240 9.25%, 11/25/98................ $ 254
200 9.30%, 1/25/99................. 212
50 5.43%, 2/25/99................. 49
660 6.31%, 4/6/99.................. 656
330 7.91%, 11/7/01................. 346
Federal Home Loan Mortgage Corp.:
315 5.88%, 3/22/00................. 307
240 6.22%, 3/24/03................. 231
Federal National Mortgage Assoc.:
370 8.20%, 3/10/98................. 380
255 4.88%, 10/15/98................ 247
215 9.55%, 3/10/99................. 230
500 8.55%, 8/30/99................. 527
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------- -------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc., continued:
$ 320 9.05%, 4/10/00................. $ 344
300 8.25%, 12/18/00................ 317
200 6.16%, 4/3/01.................. 195
-------
Total U.S. Government Agencies 4,295
-------
Total Investments, at value 4,295
-------
REPURCHASE AGREEMENTS (2.7%):
121 C.S. First Boston Corp., 5.62%,
8/1/96, (Collateralized by 99
U.S. Treasury Bonds, 10.38%
11/15/12, market
value--$126)................. 121
-------
Total Repurchase Agreements 121
-------
Total (Cost--$4,455)(a) $ 4,416
=======
</TABLE>
- ------------
Percentages indicated are based on net assets of $4,490.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows (amounts in thousands):
<TABLE>
<S> <C>
Unrealized appreciation............................................. $ 47
Unrealized depreciation............................................. (86)
-----
Net unrealized depreciation......................................... $ (39)
=====
</TABLE>
See notes to financial statements
LOGO
49
LOGO GOVERNMENT BOND FUND
<PAGE> 121
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
COMMON STOCKS (97.8%):
Aerospace (2.0%):
153,100 B.F. Goodrich Co........... $ 5,550
--------
Banks (12.7%):
213,650 Banc One Corp.............. 7,398
82,200 BankAmerica Corp........... 6,555
122,800 Fleet Financial Group,
Inc...................... 4,973
77,900 J. P. Morgan & Co.......... 6,699
82,700 National City Corp......... 2,864
95,050 U.S. Bancorp............... 3,256
64,700 Wachovia Corp.............. 2,863
--------
34,608
--------
Beverages (2.0%):
72,000 Anheuser-Busch Co.......... 5,382
--------
Business Equipment & Services (0.6%):
34,600 Pitney Bowes, Inc.......... 1,678
--------
Chemicals-Petroleum & Inorganic (2.1%):
77,200 Dow Chemical Co............ 5,742
--------
Chemicals-Specialty (1.8%):
55,200 Betz Labs, Inc............. 2,505
83,500 Witco Corp................. 2,421
--------
4,926
--------
Commercial Goods & Services (1.2%):
87,000 National Services
Industries, Inc.......... 3,317
--------
Consumer Goods & Services (1.2%):
36,600 Clorox Co.................. 3,326
--------
Cosmetics & Toiletries (0.9%):
56,300 International Flavors &
Fragrances, Inc.......... 2,407
--------
Electrical Equipment (1.0%):
70,800 Thomas & Betts Corp........ 2,584
--------
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Environmental Services (0.3%):
37,700 Browning-Ferris Industries,
Inc...................... $ 844
--------
Financial Services (3.2%):
105,100 American General Corp...... 3,652
33,800 Beneficial Corp............ 1,825
106,700 Federal National Mortgage
Assoc.................... 3,388
--------
8,865
--------
Food & Related (2.6%):
94,300 General Mills, Inc......... 5,116
63,150 H.J. Heinz Co.............. 2,092
--------
7,208
--------
Forest & Paper Products (4.8%):
43,700 Georgia-Pacific Corp....... 3,267
92,470 International Paper Co..... 3,502
154,700 Weyerhaeuser Co............ 6,459
--------
13,228
--------
Health Care (5.9%):
77,000 Bristol-Myers Squibb Co.... 6,670
102,000 Pharmacia & Upjohn Co...... 4,208
48,800 SmithKline Beecham PLC
ADR...................... 2,623
44,100 Warner-Lambert Co.......... 2,403
--------
15,904
--------
Insurance-Life (0.8%):
45,125 Jefferson Pilot Corp....... 2,369
--------
Insurance-Multiline (1.8%):
53,600 Marsh & McLennan Cos.,
Inc...................... 4,857
--------
</TABLE>
Continued
LOGO
50
LOGO INCOME EQUITY FUND
<PAGE> 122
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------- -------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Insurance-Property & Casualty (3.1%):
42,500 Lincoln National Corp...... $ 1,812
78,300 SAFECO Corp................ 2,696
70,800 St. Paul Cos., Inc......... 3,664
--------
8,172
--------
Machinery & Equipment (1.2%):
80,900 Cooper Industries, Inc..... 3,185
--------
Medical Equipment & Supplies (0.6%):
39,000 Baxter International,
Inc...................... 1,623
--------
Motor Vehicle Parts (0.9%):
58,500 Genuine Parts Co........... 2,479
--------
Motor Vehicles (0.9%):
86,600 Chrysler Corp.............. 2,457
--------
Multiple Industry (3.1%):
43,300 General Electric Co........ 3,567
76,000 Minnesota Mining &
Manufacturing Co......... 4,940
--------
8,507
Petroleum-Domestic (4.5%):
73,200 Atlantic Richfield Co...... 8,491
83,400 Dresser Industries Inc..... 2,252
41,700 Phillips Petroleum Co...... 1,647
--------
12,390
--------
Petroleum-Internationals (7.3%):
95,300 Amoco Corp................. 6,373
58,300 Chevron Corp............... 3,374
52,300 Exxon Corp................. 4,302
68,500 Texaco, Inc................ 5,822
--------
19,871
--------
Publishing (0.9%):
61,400 McGraw-Hill, Inc........... 2,395
--------
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ------------------------------- -------
COMMON STOCKS, CONTINUED:
Railroad (0.5%):
20,500 Union Pacific Corp......... $ 1,404
--------
Retail-General Merchandise (4.1%):
173,100 J.C. Penney, Inc........... 8,612
59,000 May Department Stores
Co....................... 2,647
--------
11,259
--------
Telecommunications (7.2%):
25,600 Ameritech Corp............. 1,421
67,300 Bell Atlantic Corp......... 3,979
63,400 BellSouth Corp............. 2,599
118,500 GTE Corp................... 4,888
91,300 Nynex Corp................. 4,097
86,170 U.S. West, Inc............. 2,618
--------
19,602
--------
Tobacco (6.5%):
94,500 American Brands, Inc....... 4,300
85,400 Phillip Morris Cos.,
Inc...................... 8,935
139,400 UST, Inc................... 4,635
--------
17,870
--------
Utilities-Electric (8.3%):
123,400 Baltimore Gas & Electric
Co....................... 3,178
115,400 Central & South West
Corp..................... 3,087
36,600 Dominion Resources......... 1,377
72,500 Florida Progress Corp...... 2,429
70,000 PacifiCorp................. 1,461
118,900 Teco Energy, Inc........... 2,764
102,400 Texas Utilities Co......... 4,301
147,200 Wisconsin Energy Corp...... 3,919
--------
22,516
--------
</TABLE>
Continued
LOGO
51
LOGO INCOME EQUITY FUND
<PAGE> 123
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Utilities--Gas & Pipeline (3.8%):
128,200 Consolidated Natural Gas
Co....................... $ 6,458
44,100 Nicor, Inc................. 1,251
51,500 Tenneco, Inc............... 2,537
--------
10,246
--------
Total Common Stocks 266,771
--------
Total Investments, at value 266,771
--------
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
REPURCHASE AGREEMENTS (1.8%):
$4,857,527 C. S. First Boston Corp.,
5.62%, 8/1/96
(Collateralized by 3,888
U.S. Treasury Bonds,
10.38%, 11/15/12, market
value--$4,961)........... $ 4,858
--------
Total Repurchase Agreements 4,858
--------
Total (Cost--$237,280)(a) $271,629
========
</TABLE>
- ------------
Percentages indicated are based on net assets of $272,803.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of
approximately $64 (amount in thousands). Cost for federal income tax
purposes differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
<TABLE>
<S> <C>
Unrealized appreciation.......................................... $ 38,217
Unrealized depreciation.......................................... (3,932)
--------
Net unrealized appreciation...................................... $ 34,285
=======
</TABLE>
ADR -- American Depository Receipt
PLC -- Public Limited Company
See notes to financial statements.
LOGO
52
LOGO INCOME EQUITY FUND
<PAGE> 124
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
ASSET BACKED SECURITIES (4.0%)
$ 205,000 Carco Auto Loan Master
Trust, Series 1994-2,
7.88%, 3/15/98........... $ 207
190,000 Carco Auto Loan Master
Trust, Series 1991-3,
7.88%, 8/15/97........... 194
200,000 Contimortgage Home Equity
Loan Trust, 8.09%,
9/15/09.................. 203
200,000 Contimortgage Home Equity
Loan Trust, 7.44%,
9/15/12.................. 197
250,000 Green Tree Financial Corp.,
6.80%, 1/15/26........... 244
400,000 Standard Credit Card
MasterTrust, 4.65%,
3/7/99................... 395
165,324 UFSB Grantor Trust, 5.08%,
5/15/00.................. 163
--------
Total Asset Backed Securities 1,603
--------
COLLATERALIZED MORTGAGE OBLIGATIONS (2.3%):
86,516 Country Wide Mortgage,
6.75%, 3/25/08........... 84
500,000 Federal Home Loan Mortgage
Corp., 6.25%, 1/15/24.... 449
250,000 GE Capital Mortgage
Service, Inc., 1994-1,
6.50%, 1/25/24........... 235
175,000 Residential Funding
Mortgage, 6.75%,
11/25/07................. 168
--------
Total Collateralized Mortgage Obligations
936
--------
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
COMMON STOCKS (52.6%):
Aerospace (0.5%):
5,800 B.F. Goodrich Co........... $ 210
--------
Air Transportation (0.4%):
1,300 Federal Express Corp.
(b)...................... 101
2,200 Southwest Airlines Co...... 55
--------
156
--------
Banks (3.9%):
2,970 Banc One Corp.............. 103
4,800 BankAmerica Corp........... 383
3,300 Chase Manhattan Corp....... 229
8,000 Fleet Financial Group,
Inc...................... 324
1,300 J.P. Morgan & Co........... 112
3,300 National City Corp......... 114
6,000 Norwest Corp............... 213
2,400 Wachovia Corp.............. 106
--------
1,584
--------
Beverages (2.5%):
6,200 Anheuser-Busch Co.......... 463
5,600 Coca-Cola Co............... 263
8,200 PepsiCo, Inc............... 259
--------
985
--------
Building Materials (0.4%):
5,600 Masco Corp................. 156
--------
Business Equipment & Services (0.6%):
1,900 Dun & Bradstreet Corp...... 109
2,800 Pitney Bowes, Inc.......... 136
--------
245
--------
</TABLE>
Continued
LOGO
53
LOGO BALANCED FUND
<PAGE> 125
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Chemicals--Petroleum & Inorganic (0.9%):
1,400 Dow Chemical Co............ $ 104
1,400 duPont, (E.I.) de Nemours
Co....................... 113
5,000 Monsanto Corp.............. 156
--------
373
--------
Chemicals--Specialty (0.3%):
3,000 Betz Labs, Inc............. 136
--------
Commercial Goods & Services (0.3%):
3,000 National Services
Industries, Inc.......... 114
--------
Computers--Main & Mini (0.5%):
2,000 International Business
Machines Corp............ 216
--------
Computers (0.3%):
2,800 Seagate Technology, Inc.
(b)...................... 136
--------
Computer Software (1.0%):
1,900 Electronic Data Systems
Corp. (b)................ 101
1,300 Microsoft Corp. (b)........ 153
2,400 Shared Medical Systems
Corp..................... 132
--------
386
--------
Construction Materials (0.3%):
3,700 Fleetwood Enterprises,
Inc...................... 112
--------
Cosmetics & Toiletries (0.8%):
2,900 Colgate-Palmolive Co....... 228
2,600 International Flavors &
Fragrances, Inc.......... 111
--------
339
--------
Defense (0.7%):
5,400 Raytheon Co................ 262
--------
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
COMMON STOCKS, CONTINUED:
Electrical Equipment (4.5%):
7,600 AMP, Inc................... $ 294
2,600 Duracell International,
Inc...................... 117
2,500 Emerson Electric Co........ 211
7,700 General Electric Co........ 634
5,600 Intel Corp................. 421
3,300 Thomas & Betts Corp........ 120
--------
1,797
--------
Electronics (0.6%):
4,800 Motorola, Inc.............. 259
--------
Electronic Instruments (0.4%):
4,100 Texas Instruments, Inc..... 177
--------
Environmental Services (0.3%):
6,000 Browning-Ferris Industries,
Inc...................... 134
--------
Financial Services (1.2%):
6,600 American General Corp...... 230
7,600 Federal National Mortgage
Assoc.................... 241
--------
471
--------
Food & Related (1.6%):
3,700 General Mills, Inc......... 201
6,450 H. J. Heinz Co............. 213
1,500 Hershey Foods Corp......... 123
1,700 Ralston-Purina Co.......... 107
--------
644
--------
Forest & Paper Products (1.4%):
2,700 Georgia Pacific Corp....... 202
2,200 International Paper Co..... 83
</TABLE>
Continued
LOGO
54
LOGO BALANCED FUND
<PAGE> 126
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Forest & Paper Products, continued:
1,500 Kimberly Clark Corp........ $ 114
4,000 Weyerhaeuser Co............ 167
--------
566
--------
Health Care--General (1.1%):
2,500 Bristol-Myers Squibb Co.... 217
5,000 Johnson & Johnson.......... 239
--------
456
--------
Hospital Supply & Management (0.5%):
4,100 Columbia/HCA Healthcare
Corp..................... 210
--------
Household--General Products (0.4%):
6,100 Rubbermaid, Inc............ 175
--------
Insurance--Life (0.3%):
2,250 Jefferson Pilot Corp....... 118
--------
Insurance--Multiline (0.9%):
1,761 Allstate Corp.............. 79
3,300 Marsh & McLennan
Cos., Inc................ 299
--------
378
--------
Insurance--Property & Casualty (1.0%):
1,500 General Re Corp............ 220
2,100 Hartford Steam Boiler
Inspection & Insurance
Co....................... 92
1,900 St. Paul Cos., Inc......... 98
--------
410
--------
Machinery & Equipment (0.5%):
4,300 Snap-On, Inc............... 191
--------
Manufacturing (0.7%):
500 Imation Corp. (b).......... 11
2,700 Ingersoll-Rand Co.......... 115
2,500 Service Corp.
International............ 138
--------
264
--------
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
COMMON STOCKS, CONTINUED:
Medical Equipment & Supplies (0.5%):
5,000 Baxter International,
Inc...................... $ 208
--------
Motor Vehicle Parts (0.3%):
2,400 Genuine Parts Co........... 102
--------
Motor Vehicles (0.5%):
5,900 Ford Motor Co.............. 192
--------
Multiple Industry (1.8%):
10,800 Corning, Inc............... 398
5,000 Minnesota Mining &
Manufacturing Co......... 325
--------
723
--------
Petroleum--Domestic (1.2%):
1,900 Atlantic Richfield Co...... 220
6,700 Phillips Petroleum Co...... 265
--------
485
--------
Petroleum--Internationals (3.2%):
4,600 Amoco Corp................. 308
5,600 Chevron Corp............... 324
2,700 Exxon Corp................. 222
2,000 Mobil Corp................. 221
2,400 Texaco, Inc................ 204
--------
1,279
--------
Petroleum--Services (0.9%):
9,300 Baker Hughes, Inc.......... 273
2,000 Halliburton Co............. 104
--------
377
--------
</TABLE>
Continued
LOGO
55
LOGO BALANCED FUND
<PAGE> 127
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Pharmaceuticals (2.3%):
2,600 Abbott Laboratories........ $ 114
3,800 Merck & Co., Inc........... 244
3,300 Pfizer, Inc................ 231
1,800 Schering-Plough Corp....... 99
4,600 Warner Lambert Co.......... 251
--------
939
--------
Photographic Equipment (0.3%):
1,600 Eastman Kodak Co........... 120
--------
Publishing (0.6%):
3,500 Gannett Co., Inc........... 230
--------
Railroad (1.0%):
3,100 Burlington Northern Santa
Fe....................... 245
2,100 Union Pacific Corp......... 144
--------
389
--------
Restaurants (0.2%):
6,800 Brinker International,
Inc. (b)................. 89
--------
Retail--General Merchandise (1.3%):
4,400 J.C. Penney, Inc........... 219
2,800 Sears Roebuck & Co......... 115
6,900 Wal-Mart Stores, Inc....... 165
--------
499
--------
Retail--Specialty Stores (0.5%):
5,500 Albany International, Class
A........................ 102
2,200 Home Depot, Inc............ 111
--------
213
--------
Tobacco (1.2%):
2,500 Phillip Morris Cos.,
Inc...................... 262
6,200 UST, Inc................... 206
--------
468
--------
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
COMMON STOCKS, CONTINUED:
Tools (0.3%):
3,800 Stanley Works.............. $ 108
--------
Toys (0.3%):
4,250 Mattel, Inc................ 105
--------
Utilities--Electric (2.5%):
4,600 FPL Group, Inc............. 209
9,500 PacifiCorp................. 198
9,000 Potomac Electric Power
Co. (b).................. 217
6,500 Public Service Enterprise
Group, Inc............... 170
5,100 Texas Utilities Co......... 214
--------
1,008
--------
Utilities--Gas & Pipeline (0.9%):
2,600 Consolidated Natural Gas
Co....................... 131
4,100 Pacific Enterprises........ 121
1,900 Tenneco, Inc............... 94
--------
346
--------
Utilities--Telephone (4.0%):
11,400 AirTouch Communications,
Inc. (b)................. 313
3,800 Ameritech Corp............. 211
4,500 AT&T Corp.................. 235
5,000 BellSouth Corp............. 205
2,100 DSC Communications
Corp. (b)................ 63
5,700 GTE Corp................... 235
400 Lucent Technologies,
Inc...................... 15
3,500 MCI Telecommunications
Corp..................... 86
</TABLE>
Continued
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56
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<PAGE> 128
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Utilities--Telephone, continued:
4,000 Network Equipment
Technologies, Inc. (b)... $ 53
6,100 U.S. West, Inc............. 185
--------
1,601
--------
Total Common Stocks 21,141
--------
CORPORATE BONDS (6.8%):
Automotive (1.6%):
$ 300,000 Ford Capital, 9.38%,
1/1/98................... 312
305,000 General Motors Acceptance
Corp., 8.00%, 10/1/99.... 315
--------
627
--------
Banking (1.1%):
215,000 Bank of America, 6.00%,
7/15/97.................. 214
100,000 Citicorp, 6.75%, 8/15/05... 96
150,000 U.S. Bancorp, 6.75%,
10/15/05................. 143
--------
453
--------
Beverages (0.2%):
95,000 Bass America, Inc., 6.75%,
8/1/99................... 95
--------
Computer Hardware (0.5%):
200,000 IBM Corp., 8.38%,11/1/19... 215
--------
Financial Services (0.2%):
100,000 Golden West Financial
Corp., 6.70%, 7/1/02..... 97
--------
Governments (Foreign) (0.8%):
$ 100,000 Hydro-Quebec, 8.05%,
7/7/24................... 106
215,000 Norske Hydro, 7.75%,
6/15/23.................. 215
--------
321
--------
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
CORPORATE BONDS, CONTINUED:
Industrial Goods & Services (0.5%):
205,000 Caterpillar Tractor Co.,
6.00%, 5/1/07............ $ 184
--------
Retail Stores (1.1%):
100,000 J.C. Penney, Inc., 6.00%,
5/1/06................... 90
150,000 Sears Roebuck Co., 9.25%,
8/1/97................... 154
200,000 Wal-Mart Stores, Inc.,
6.38%, 3/1/03............ 193
--------
437
--------
Telecommunications (0.8%):
175,000 Bell Atlantic Maryland,
8.00%,10/15/29........... 184
125,000 New England Telephone &
Telegraph Co., 7.88%,
11/15/29................. 131
--------
315
--------
Total Corporate Bonds 2,744
--------
U.S. GOVERNMENT AGENCIES (10.2%):
Federal National Mortgage Assoc.:
1,350,000 5.45%, 10/10/03............ 1,242
316,003 6.50%, 3/1/24, Pool
#276510.................. 297
999,999 8.00%, 7/1/26.............. 1,006
</TABLE>
Continued
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57
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<PAGE> 129
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Government National Mortgage Assoc.
$ 95,076 6.50%, 2/15/24, Pool
#388599.................. $ 88
484,019 7.50%, 5/15/24, Pool
#386494.................. 476
1,016,375 7.00%, 2/15/26............. 972
--------
Total U.S. Government Agencies 4,081
--------
U.S. TREASURY BONDS (6.3%):
1,150,000 7.25%, 5/15/16............. 1,171
205,000 8.75%, 8/15/20............. 244
1,125,000 7.13%, 2/15/23............. 1,130
--------
Total U.S. Treasury Bonds 2,545
--------
U.S. TREASURY NOTES (8.0%):
200,000 8.13%, 2/15/98............. 206
1,000,000 8.25%, 7/15/98............. 1,037
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------- --------
<S> <C> <C> <C>
U.S. TREASURY NOTES, CONTINUED:
$1,000,000 5.50%, 4/15/00............. $ 969
500,000 8.50%, 11/15/00............ 536
500,000 5.88%, 2/15/04............. 475
--------
Total U.S. Treasury Notes 3,223
--------
Total Investments, at value 36,273
--------
REPURCHASE AGREEMENTS (9.4%):
3,786,776 C.S. First Boston Corp.,
Repurchase Agreement,
5.62%, 8/1/96
(Collateralized by 3,033
U.S. Treasury Bonds,
10.38%, 11/15/12 , market
value $3,870)............ 3,787
--------
Total Repurchase Agreements 3,787
--------
Total (Cost--$35,946)(a) $ 40,060
========
</TABLE>
- ------------
Percentages indicated are based on net assets of $40,196.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of
approximately $14 (amount in thousands). Cost for federal income tax
purposes differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
<TABLE>
<S> <C>
Unrealized appreciation.......................................... $ 4,702
Unrealized depreciation.......................................... (602)
--------
Net unrealized appreciation...................................... $ 4,100
=======
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
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58
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<PAGE> 130
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ------
<S> <C> <C> <C>
COMMON STOCKS (98.2%):
Aerospace (2.0%):
24,565 B.F. Goodrich................ $ 890
--------
Banks (8.4%):
10,365 BankAmerica Corp............. 827
3,280 Barnett Banks, Inc........... 201
16,030 Chase Manhattan.............. 1,114
16,830 Fleet Financial Group,
Inc........................ 681
3,825 Wells Fargo & Co............. 891
--------
3,714
--------
Beverages (5.4%):
8,985 Anheuser-Busch Co............ 672
19,215 Coca-Cola Co................. 901
26,390 PepsiCo, Inc................. 834
--------
2,407
--------
Business Equipment & Services (0.3%):
9,080 OfficeMax, Inc. (b).......... 120
--------
Capital Equipment (0.5%):
3,240 Illinois Tool Works.......... 209
--------
Chemicals--Petroleum & Inorganic (0.4%):
3,750 Hercules, Inc................ 188
--------
Computers--Main & Mini (4.0%):
9,610 Ceridan Corp. (b)............ 418
14,660 Hewlett Packard Co........... 645
4,375 International Business
Machines................... 472
4,685 Silicon Graphics, Inc. (b)... 110
2,140 Sun Microsystems, Inc. (b)... 117
--------
1,762
--------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Computer Software (10.6%):
2,885 Automatic Data Processing,
Inc........................ $ 114
17,005 Cisco Systems (b)............ 880
11,888 Computer Associates
International, Inc......... 605
3,355 Computer Sciences (b)........ 228
17,770 Electronic Data Systems
Corp. (b).................. 940
11,588 First Data Corp.............. 899
3,705 Microsoft Corp. (b).......... 437
10,045 Oracle Systems Corp. (b)..... 393
5,350 Parametric Technology Corp.
(b)........................ 223
--------
4,719
--------
Computers (2.0%):
5,840 Digital Equipment (b)........ 207
14,390 Seagate Technology (b)....... 696
--------
903
--------
Consumer Goods & Services (1.6%):
21,715 Xilinx, Inc. (b)............. 703
--------
Cosmetics & Toiletries (4.1%):
4,720 Avon Products................ 208
5,485 Colgate-Palmolive Co......... 430
15,360 Gillette Co.................. 977
5,110 Ingersoll-Rand Co............ 218
--------
1,833
--------
Durable Goods (0.6%):
15,870 Coleman, Inc. (b)............ 282
--------
Electronics (0.6%):
5,170 Motorola, Inc................ 279
--------
</TABLE>
Continued
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59
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<PAGE> 131
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Electrical Equipment (6.5%):
5,480 AMP, Inc..................... $ 212
10,640 Duracell International,
Inc........................ 480
11,860 General Electric Co.......... 977
13,275 Intel Corp................... 997
14,810 National Semiconductor
Corp. (b).................. 209
--------
2,875
--------
Electronic Components (0.2%):
3,245 Applied Materials, Inc.
(b)........................ 77
--------
Electronic Instruments (0.4%):
4,220 Texas Instruments, Inc....... 183
--------
Entertainment (0.8%):
7,080 Circus Circus Enterprises,
Inc. (b)................... 217
6,715 Harrah's Entertainment (b)... 148
--------
365
--------
Financial Services (7.2%):
14,835 American Express Co.......... 649
5,745 Federal Home Loan Mortgage
Corp....................... 484
30,635 Federal National Mortgage
Assoc...................... 973
1,405 Household International,
Inc........................ 105
10,926 Mutual Risk Management
Ltd........................ 307
15,935 Travelers Corp. (b).......... 673
--------
3,191
--------
Food & Related (1.6%):
2,550 General Mills, Inc........... 138
2,950 Hershey Foods................ 242
5,397 Ralston-Purina Co............ 339
--------
719
--------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ------
COMMON STOCKS, CONTINUED:
Forest & Paper Products (1.1%):
5,605 Albany International Corp.,
Class A.................... $ 104
1,220 Georgia Pacific Corp......... 91
2,340 International Paper Co....... 89
5,280 Weyerhaeuser Co.............. 220
--------
504
--------
Healthcare--Drugs (8.1%):
4,962 Abbott Laboratories.......... 218
3,820 American Home Products
Corp....................... 217
8,501 Amgen, Inc. (b).............. 464
7,240 Merck & Co................... 465
9,090 Pfizer, Inc.................. 635
15,850 Pharmacia & Upjohn Co........ 654
11,240 Schering Plough Corp......... 620
6,270 Warner-Lambert Co............ 342
--------
3,615
--------
Healthcare--General (2.0%):
18,230 Johnson & Johnson............ 870
--------
Hospital Supply & Management (0.5%):
4,081 Columbia/HCA Healthcare
Corp....................... 209
--------
Hotel Management & Related Services (0.4%):
7,392 Promus Hotel Corp. (b)....... 202
--------
Household-General Products (0.5%):
2,270 Proctor & Gamble Co.......... 203
--------
Insurance--Multiline (0.5%):
2,547 Allstate Corp................ 114
1,400 Marsh & McLennan Cos.,
Inc........................ 127
--------
241
--------
</TABLE>
Continued
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60
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<PAGE> 132
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Insurance--Property & Casualty (2.3%):
5,955 American International Group,
Inc........................ $ 560
1,560 General Re Corp.............. 229
2,985 MBIA, Inc.................... 226
--------
1,015
--------
Leisure Time Industry (2.2%):
17,405 The Walt Disney Co........... 968
--------
Machinery & Equipment (0.4%):
5,275 Deere & Co................... 189
--------
Manufacturing (1.1%):
8,480 Service Corp.
International.............. 468
--------
Medical Equipment & Supplies (1.3%):
6,469 Chiron Corp. (b)............. 569
--------
Petroleum--Internationals (2.1%):
7,515 Amoco Corp................... 503
5,305 Exxon Corp................... 436
--------
939
--------
Petroleum--Services (1.3%):
4,835 Baker Hughes, Inc............ 142
3,655 Dresser Industries Inc....... 99
4,520 Halliburton Co............... 236
1,215 Schlumberger Ltd............. 97
--------
574
--------
Pharmaceuticals (2.0%):
17,370 ALZA Corp., Class A (b)...... 430
4,900 Astra AB, Class A (b)........ 207
4,500 SmithKline Beecham
PLC-ADR.................... 242
--------
879
--------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ------
COMMON STOCKS, CONTINUED:
Publishing (2.0%):
13,535 Gannett Co., Inc............. $ 888
--------
Restaurants (2.5%):
23,720 McDonald's Corp.............. 1,100
--------
Retail--Food Stores (0.8%):
9,425 Safeway, Inc. (b)............ 339
--------
Retail--General Merchandise (1.5%):
11,480 Price/Costco, Inc. (b)....... 235
10,625 Sears Roebuck & Co........... 436
--------
671
--------
Retail--Speciality Stores (1.4%):
8,190 Home Depot, Inc.............. 414
7,215 Toys R Us (b)................ 190
--------
604
--------
Telecommunications (1.3%):
12,585 Airtouch (b)................. 346
6,555 Lucent Technologies, Inc..... 243
--------
589
--------
Telecommunications--Equipment (0.2%):
5,115 Network Equipment
Technologies (b)........... 68
--------
Tobacco (2.3%):
8,700 Phillip Morris Cos., Inc..... 910
3,105 UST.......................... 103
--------
1,013
--------
Toys (1.4%):
25,040 Mattel, Inc.................. 620
--------
Utilities--Gas & Pipeline (0.3%):
2,305 Tenneco, Inc................. 114
--------
</TABLE>
Continued
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61
LOGO GROWTH FUND
<PAGE> 133
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Utilities--Telephone (1.5%):
3,550 Ameritech Corp............... $ 197
5,260 AT&T Corp.................... 274
4,500 GTE Corp..................... 186
--------
657
--------
Total Common Stocks 43,527
--------
Total Investments, at value 43,527
--------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
REPURCHASE AGREEMENTS (2.0%):
$ 899,983 C. S. First Boston Corp.,
5.62%, 8/1/96
(Collateralized by 825 U.S.
Treasury Bonds, 8.75%,
11/15/08, market
value--$922)............... $ 900
--------
Total Repurchase Agreements 900
--------
Total (Cost -- $40,510)(a) $ 44,427
========
</TABLE>
- ------------
Percentages indicated are based on net assets of $44,338.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of
approximately $208 (amount in thousands). Cost for federal income tax
purposes differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
<TABLE>
<S> <C>
Unrealized appreciation.......................................... $ 5,175
Unrealized depreciation.......................................... (1,466)
--------
Net unrealized appreciation...................................... $ 3,709
=======
</TABLE>
(b) Represents non-income producing securities.
ADR -- American Depository Receipt
PLC -- Public Limited Company
See notes to financial statements.
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62
LOGO GROWTH FUND
<PAGE> 134
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amounts)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMON STOCKS (94.0%):
Aerospace (0.9%):
1,600 B.F. Goodrich Co............. $ 58
--------
Air Transportation (0.9%):
500 Federal Express Corp. (b).... 39
800 Southwest Airlines Co........ 20
--------
59
--------
Banks (6.5%):
870 Banc One Corp................ 30
900 BankAmerica Corp............. 72
1,000 Chase Manhattan Corp......... 69
2,200 Fleet Financial Group,
Inc........................ 89
500 J. P. Morgan & Co............ 43
900 National City Corp........... 31
1,500 Norwest Corp................. 53
600 Wachovia Corp................ 27
--------
414
--------
Beverages (4.6%):
2,000 Anheuser-Busch Co............ 149
1,600 Coca-Cola Co................. 75
2,200 PepsiCo, Inc................. 70
--------
294
--------
Building Materials (0.9%):
2,000 Masco Corp................... 56
--------
Business Equipment & Services (0.9%):
500 Dun & Bradstreet Corp........ 29
600 Pitney Bowes, Inc............ 29
--------
58
--------
Chemicals--Petroleum & Inorganic (1.2%):
400 Dow Chemical Co.............. 30
400 du Pont (E.I.) de Nemours
Co......................... 32
500 Monsanto Corp................ 16
--------
78
--------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Chemicals--Specialty (0.5%):
700 Betz Labs, Inc............... $ 32
--------
Commercial Goods & Services (0.5%):
900 National Services Industries,
Inc........................ 34
--------
Computer (0.7%):
900 Seagate Technology, Inc.
(b)........................ 44
--------
Computer--Main & Mini (1.0%):
600 International Business
Machines Corp.............. 65
--------
Computer Software (1.9%):
600 Electronic Data Systems Corp.
(b)........................ 32
600 Microsoft Corp. (b).......... 70
400 Shared Medical Systems
Corp....................... 22
--------
124
--------
Construction Materials (0.5%):
1,100 Fleetwood Enterprises,
Inc........................ 33
--------
Cosmetics & Toiletries (1.5%):
800 Colgate-Palmolive Co......... 63
800 International Flavors &
Fragrances, Inc............ 34
--------
97
--------
Defense (1.0%):
1,300 Raytheon Co.................. 63
--------
</TABLE>
Continued
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63
LOGO INCOME & GROWTH FUND
<PAGE> 135
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amounts)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Electrical Equipment (7.7%):
1,600 AMP, Inc..................... $ 62
800 Duracell International,
Inc........................ 36
800 Emerson Electric Co.......... 67
2,100 General Electric Co.......... 173
1,600 Intel Corp................... 120
900 Thomas & Betts Corp.......... 33
--------
491
--------
Electronics (1.7%):
2,000 Motorola, Inc................ 108
--------
Electronic Instruments (0.8%):
1,200 Texas Instruments, Inc....... 52
--------
Environment Services (0.7%):
1,900 Browning-Ferris Industries,
Inc........................ 43
--------
Financial Services (2.0%):
1,900 American General Corp........ 66
2,000 Federal National Mortgage
Assoc...................... 64
--------
130
--------
Food & Related (2.7%):
1,000 General Mills, Inc........... 54
1,900 H. J. Heinz Co............... 63
300 Hershey Foods Corp........... 25
500 Ralston-Purina Co............ 31
--------
173
--------
Forest & Paper Products (3.0%):
1,000 Georgia-Pacific Corp......... 75
800 International Paper Co....... 30
400 Kimberly Clark Corp.......... 31
1,300 Weyerhaeuser Co.............. 54
--------
190
--------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
COMMON STOCKS, CONTINUED:
Health Care--General (1.9%):
600 Bristol-Myers Squibb Co...... $ 52
1,400 Johnson & Johnson............ 67
--------
119
--------
Hospital Supply & Management (0.8%):
1,000 Columbia/HCA Healthcare
Corp....................... 51
--------
Household--General Products (1.0%):
2,300 Rubbermaid, Inc.............. 66
--------
Insurance--Life (0.5%):
575 Jefferson Pilot Corp......... 30
--------
Insurance--Multiline (1.8%):
756 Allstate Corp................ 34
900 Marsh & McLennan Cos.,
Inc........................ 81
--------
115
--------
Insurance--Property & Casualty (1.6%):
300 General Re Corp.............. 44
600 Hartford Steam Boiler
Inspection & Insurance
Co......................... 26
600 St. Paul Cos., Inc........... 31
--------
101
--------
Machinery & Equipment (1.5%):
800 Ingersoll-Rand Co............ 34
1,400 Snap-On, Inc................. 62
--------
96
--------
Manufacturing (0.7%):
155 Imation Corp. (b)............ 3
700 Service Corp.
International.............. 39
--------
42
--------
Medical Equipment & Supplies (0.8%):
1,300 Baxter International, Inc.... 54
--------
</TABLE>
Continued
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64
<PAGE> 136
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amounts)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Motor Vehicle Parts (1.6%):
850 Genuine Parts Co............. $ 36
1,900 Ford Motor Co................ 62
--------
98
--------
Multiple Industry (3.1%):
2,700 Corning, Inc................. 99
1,550 Minnesota Mining &
Manufacturing Co........... 101
--------
200
--------
Petroleum--Domestic (1.5%):
300 Atlantic Richfield Co........ 35
1,600 Phillips Petroleum Co........ 63
--------
98
--------
Petroleum--Internationals (5.8%):
1,400 Amoco Corp................... 94
1,600 Chevron Corp................. 92
800 Exxon Corp................... 66
600 Mobil Corp................... 66
600 Texaco, Inc.................. 51
--------
369
--------
Petroleum--Services (1.5%):
2,300 Baker Hughes, Inc............ 68
500 Halliburton Co............... 26
--------
94
--------
Pharmaceuticals (4.6%):
700 Abbott Laboratories.......... 31
900 Merck & Co................... 58
1,200 Pacific Enterprises.......... 35
1,000 Pfizer, Inc.................. 70
600 Schering-Plough Corp......... 33
1,200 Warner-Lambert Co............ 65
--------
292
--------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Photographic Equipment (0.3%):
300 Eastman Kodak Co............. $ 22
--------
Publishing (1.1%):
1,100 Gannett Co., Inc............. 72
--------
Railroad (1.8%):
700 Burlington Northern Santa
Fe......................... 55
900 Union Pacific Corp........... 62
--------
117
--------
Restaurants (0.4%):
1,900 Brinker International, Inc.
(b)........................ 25
--------
Retail--General Merchandise (2.2%):
1,300 J.C. Penney, Inc............. 65
600 Sears Roebuck & Co........... 24
2,200 Wal-Mart Stores, Inc......... 53
--------
142
--------
Retail--Specialty Stores (1.0%):
1,600 Albany International, Class
A.......................... 30
700 Home Depot, Inc.............. 35
--------
65
--------
Telecommunications (7.1%):
1,800 AT&T Corp.................... 94
3,200 AirTouch Telecommunications
(b)........................ 88
1,100 Ameritech Corp............... 61
1,600 BellSouth Corp............... 66
1,500 General Telephone Electric
Corp. (b).................. 62
</TABLE>
Continued
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65
<PAGE> 137
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
(Amounts in Thousands, Except for Shares or Principal Amounts)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Telecommunications, continued:
100 Lucent Technologies, Inc..... $ 4
1,000 MCI Telecommunications
Corp....................... 25
1,800 U.S. West, Inc............... 55
--------
455
--------
Telecommunications--Equipment (0.6%):
700 DSC Communications Corp.
(b)........................ 21
1,200 Network Equipment
Technologies (b)........... 16
--------
37
--------
Tobacco (2.1%):
700 Phillip Morris Co., Inc...... 73
1,900 UST, Inc..................... 63
--------
136
--------
Tools (0.5%):
1,200 Stanley Works................ 34
--------
Toys (0.4%):
1,125 Mattel, Inc.................. 28
--------
Utilities--Electric (4.7%):
1,400 FPL Group, Inc............... 64
2,600 PacifiCorp................... 54
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------- ---------
<S> <C> <C> <C>
COMMON STOCKS, CONTINUED:
Utilities--Electric, continued:
2,600 Potomac Electric Power Co.
(b)........................ $ 63
2,100 Public Service Enterprise
Group, Inc................. 55
1,600 Texas Utilities Co........... 67
--------
303
--------
Utilities--Gas & Pipeline (1.0%):
800 Consolidated Natural Gas
Co......................... 40
500 Tenneco, Inc................. 25
--------
65
--------
Total Common Stocks 6,022
--------
Total Investments, at value 6,022
--------
REPURCHASE AGREEMENTS (6.0%):
$ 386,342 First Boston, 5.62%, 8/1/96
(Collateralized by 303 U.S.
Treasury Bonds, 9.88%,
11/15/15, market
value--$396)............... 386
--------
Total Repurchase Agreements 386
--------
Total (Cost--$5,355)(a) $ 6,408
========
</TABLE>
- ------------
Percentages indicated are based on net assets of $6,407.
<TABLE>
<S> <C>
(a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes
by the amount of losses recognized for financial reporting in excess of federal income tax reporting of
approximately $5 (amount in thousands). Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation................................................... 1,162
Unrealized depreciation................................................... (114)
------
Net unrealized appreciation............................................... 1,048
======
(b) Represents non-income producing securities.
</TABLE>
See notes to financial statements.
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<PAGE> 138
JULY 31, 1996
1. ORGANIZATION:
The HighMark Group (the "Group") was organized on March 10, 1987 and is
registered under the Investment Company Act of 1940 as amended (the "1940
Act"), as a diversified, open-end investment company established as a
Massachusetts business trust.
The Group is authorized to issue an unlimited number of shares which are
units of beneficial interest without par value. The Group presently offers
shares in the Diversified Obligations Fund, the U.S. Government Obligations
Fund, the 100% U.S. Treasury Obligations Fund, the California Tax-Free Fund,
the Tax-Free Fund, the Bond Fund, the Government Bond Fund, the Income
Equity Fund, the Balanced Fund, the Growth Fund and the Income & Growth Fund
(collectively, "the Funds" and individually, "a Fund"). Sales of shares may
be made to customers of Union Bank of California, NA ("Union Bank of
California") and to its affiliates, to all accounts of its correspondent
banks, to institutional investors, and to the general public. MERUS-UCA
Capital Management, ("MERUS-UCA"), a division of Union Bank of California,
serves as investment adviser to the Group.
The investment objective of the Diversified Obligations Fund, the U.S.
Government Obligations Fund, and the 100% U.S. Treasury Obligations Fund is
to seek current income with liquidity and stability of principal. The
Diversified Obligations Fund invests in obligations issued or guaranteed by
the U.S. Government, its agencies, or instrumentalities, and additionally
invests in other high-quality money market instruments and other unrated
instruments deemed to be of comparable high quality by the investment
adviser pursuant to guidelines established by the Group's Board of Trustees.
Some of the obligations and money market instruments in which the
Diversified Obligations Fund invests may be subject to repurchase
agreements. The U.S. Government Obligations Fund invests in obligations
issued or guaranteed by the U.S. Treasury, and additionally invests in
obligations issued or guaranteed by agencies or instrumentalities of the
U.S. Government. Some of the obligations in which the U.S. Government
Obligations Fund invests may be subject to repurchase agreements. The 100%
U.S. Treasury Obligations Fund invests exclusively in direct U.S. Treasury
obligations guaranteed as to timely payment of principal and interest by the
full faith and credit of the U.S. Treasury. The California Tax-Free Fund's
investment objective is to seek as high a level of current interest income
free from federal income tax and California personal income tax as is
consistent with the preservation of capital and relative stability of
principal. The Tax-Free Fund's investment objective is to seek as high a
level of current interest income free from federal income taxes as is
consistent with the preservation of capital and relative stability of
principal. The California Tax-Free Fund and the Tax-Free Fund invest
primarily in bonds and notes issued by or on behalf of states (primarily, in
the case of the California Tax-Free Fund, the State of California),
territories and possessions of the United States, and the District of
Columbia and their respective authorities, agencies, instrumentalities and
political sub-divisions ("Municipal Securities"). The investment objective
of the Bond Fund is to seek current income through investments in long-term,
fixed-income securities. The
Continued
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<PAGE> 139
JULY 31, 1996
investment objective of the Government Bond Fund is to seek current income
and relative stability of principal through investments in short- to
intermediate-term U.S. Government Securities. The investment objective of
the Income Equity Fund is to seek investments in equity securities that
provide current income through the regular payment of dividends, with the
goal that the Fund will have a high current yield and a low level of price
volatility. Opportunities for long-term growth of asset value is a secondary
consideration. The primary investment objective of the Balanced Fund is to
seek total return. Conservation of capital is a secondary objective. The
investment objective of the Growth Fund is to seek investments in equity
securities that provide opportunity for long-term capital appreciation. The
production of current income is an incidental objective. The investment
objective of the Income and Growth Fund is to seek current income above the
average current income of companies included in the Standard & Poor's 500
Stock Index (the "S&P 500") and to seek total return (dividends plus price
appreciation) at least equal to that of the S&P 500 while maintaining lower
price volatility than the S&P 500. There can, however, be no assurance that
any of the funds' investment objectives will be achieved.
On December 1, 1990, the Diversified Obligations Fund, the U.S. Government
Obligations Fund, the 100% U.S. Treasury Obligations Fund, the California
Tax-Free Fund, and the Tax-Free Fund (collectively, "the money market
funds") commenced offering Class A Shares and designated existing shares as
Class B Shares. As of June 20, 1994, Class A and Class B Shares were
designated as "Investor" and "Fiduciary" Shares, respectively. On June 20,
1994, the Bond Fund, the Government Bond Fund, the Income Equity Fund, the
Balanced Fund, the Growth Fund and the Income & Growth Fund (collectively,
"the variable net asset value funds") commenced offering Investor Shares and
designated existing shares as Fiduciary Shares. Investor and Fiduciary
Shares represent interests in the same portfolio investments of a Fund and
are identical in all respects except that Investor Shares bear the expense,
if any, of the distribution fee under the Group's Distribution Plan (the
"Distribution Plan"), which will cause the Investor Shares to have a higher
expense ratio and to pay lower dividends than Fiduciary Shares. Investor
Shares have certain exclusive voting rights with respect to the Distribution
Plan.
In addition, Investor Shares of the variable net asset value funds are
subject to initial sales charges imposed at the time of purchase, in
accordance with the Funds' prospectuses.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Group in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and
assumptions which affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Continued
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<PAGE> 140
JULY 31, 1996
SECURITIES VALUATION:
Investments in the money market funds are valued at either amortized cost,
which approximates market value, or at original cost, which when combined
with accrued interest, approximates market value. Under the amortized cost
valuation method, discount or premium is amortized on a constant basis to
the maturity of the security. In addition, the money market funds may not a)
purchase any instrument with a remaining maturity greater than thirteen
months unless such investment is subject to a demand feature, or b) maintain
a dollar weighted average portfolio maturity which exceeds 90 days.
Investments in common stocks and preferred stocks, corporate notes,
commercial paper, and U.S. Government securities of the variable net asset
value funds are valued at their market values determined on the basis of the
mean of the latest available bid prices in the principal market (closing
sales prices if the principal market is an exchange) in which such
securities are normally traded. Investments in investment companies are
valued at their net asset values as reported by such companies. Securities,
including restricted securities, for which market quotations are not readily
available, are valued at fair market value under the supervision of the
Fund's Board of Trustees. The differences between cost and market values of
investments held by the variable net asset value funds are reflected as
either unrealized appreciation or depreciation.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the accrual
basis and includes, where applicable for the money market funds, the pro
rata amortization of premium. The Funds accrete discounts of securities on
the same basis for both financial reporting and federal income tax purposes,
with the applicable portion of market discount recognized as ordinary income
upon disposition or maturity. Dividend income is recorded on the ex-dividend
date. Gains or losses realized on sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
REPURCHASE AGREEMENTS:
The Funds may enter into repurchase agreements with financial institutions,
such as banks and broker-dealers, which MERUS-UCA deems creditworthy under
guidelines approved by the Group's Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon
date and price. The repurchase price generally equals the price paid by a
Fund plus interest negotiated on the basis of current short-term rates,
which may be more or less than the rate on the underlying portfolio
securities. The seller, under a repurchase agreement, is required to pledge
securities as collateral pursuant to the agreement at not less than 102% of
the repurchase price (including accrued interest). Securities subject to
repurchase agreements are held by the Funds' custodian in
Continued
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<PAGE> 141
JULY 31, 1996
the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income are declared daily and paid monthly
for the money market funds. Distributions from net investment income are
declared and paid monthly for the variable net asset value funds.
Distributable net realized capital gains, if any, are declared and
distributed at least annually for each of the Funds.
Distributions from net investment income and from net realized capital gains
are determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments for expiring capital loss
carryforwards and deferrals of certain losses for income tax purposes.
FEDERAL INCOME TAXES:
It is the policy of each of the Funds to continue to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of net investment income and net
realized capital gains sufficient to relieve it from all, or substantially
all, federal income taxes. Accordingly, no provision for federal income tax
is required.
OTHER:
Expenses that are directly related to one of the Funds are charged directly
to that Fund and are allocated to each class of shares based on the relative
net assets of each class. Other operating expenses of the Group are prorated
to the Funds on the basis of relative net assets.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended July 31, 1996 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Bond Fund..................................................... $ 12,838,463 $ 12,390,087
Government Bond Fund.......................................... $ 2,334,192 $ 1,857,187
Income Equity Fund............................................ $120,339,920 $104,047,894
Balanced Fund................................................. $ 11,733,334 $ 4,060,963
Growth Fund................................................... $ 42,228,828 $ 27,423,180
Income & Growth Fund.......................................... $ 2,120,488 $ 3,323,657
</TABLE>
Continued
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<PAGE> 142
JULY 31, 1996
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Group for the years ended July 31,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS
DIVERSIFIED OBLIGATIONS FUND FUND
------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, 1996 JULY 31, 1995 JULY 31, 1996 JULY 31, 1995
------------- ------------- ------------- -------------
Amounts in Thousands
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR SHARES:
Proceeds from shares issued............................... $ 1,099,638 $ 646,263 $ 712,337 $ 394,176
Dividends reinvested...................................... 7,260 4,895 3,476 1,948
Shares redeemed........................................... (1,049,143) (598,685) (688,578) (371,715)
------------- ------------- ------------- -------------
Change in net assets from Investor Share transactions..... $ 57,755 $ 52,473 $ 27,235 $ 24,409
============ ============ ============ ============
FIDUCIARY SHARES:
Proceeds from shares issued............................... $ 843,405 $ 915,980 $ 1,221,391 $ 1,366,450
Dividends reinvested...................................... 66 20 11 2
Shares redeemed........................................... (869,182) (874,436) (1,229,676) (1,368,823)
------------- ------------- ------------- -------------
Change in net assets from Fiduciary Share transactions.... $ (25,711) $ 41,564 $ (8,274) $ (2,371)
============ ============ ============ ============
SHARE TRANSACTIONS:
INVESTOR SHARES:
Issued.................................................... 1,099,638 646,263 712,337 394,176
Reinvested................................................ 7,260 4,895 3,476 1,948
Redeemed.................................................. (1,049,143) (598,685) (688,578) (371,715)
------------- ------------- ------------- -------------
Change in Investor Shares................................. 57,755 52,473 27,235 24,409
============ ============ ============ ============
FIDUCIARY SHARES:
Issued.................................................... 843,405 915,980 1,221,391 1,366,450
Reinvested................................................ 66 20 11 2
Redeemed.................................................. (869,182) (874,436) (1,229,676) (1,368,823)
------------- ------------- ------------- -------------
Change in Fiduciary Shares................................ (25,711) 41,564 (8,274) (2,371)
============ ============ ============ ============
</TABLE>
Continued
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<PAGE> 143
JULY 31, 1996
<TABLE>
<CAPTION>
100% U.S. TREASURY CALIFORNIA
OBLIGATIONS FUND TAX-FREE FUND TAX-FREE FUND
------------------------------ ------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, 1996 JULY 31, 1995 JULY 31, 1996 JULY 31, 1995 JULY 31, 1996 JULY 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
Amounts in Thousands
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR SHARES:
Proceeds from shares
issued..................... $ 463,343 $ 310,873 $ 120,369 $ 99,160 $ 36,847 $ 44,420
Dividends reinvested......... 4,526 2,090 1,419 1,027 402 412
Shares redeemed.............. (455,887) (263,475) (108,705) (91,159) (33,803) (52,158)
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets from
Investor Share
transactions............... $ 11,982 $ 49,488 $ 13,083 $ 9,028 $ 3,446 $ (7,326)
============ ============ ============ ============ ============ ============
FIDUCIARY SHARES:
Proceeds from shares
issued..................... $ 541,337 $ 425,795 $ 223,524 $ 255,654 $ 95,373 $ 112,554
Dividends reinvested......... 45 16 6 8 17 17
Shares redeemed.............. (558,614) (395,970) (230,920) (264,895) (98,094) (112,034)
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets from
Fiduciary Share
transactions............... $ (17,232) $ 29,841 $ (7,390) $ (9,233) $ (2,704) $ 537
============ ============ ============ ============ ============ ============
SHARE TRANSACTIONS:
INVESTOR SHARES:
Issued....................... 463,343 310,873 120,369 99,160 36,847 44,420
Reinvested................... 4,526 2,090 1,419 1,027 402 412
Redeemed..................... (455,887) (263,475) (108,705) (91,159) (33,803) (52,158)
------------- ------------- ------------- ------------- ------------- -------------
Change in Investor Shares.... 11,982 49,488 13,083 9,028 3,446 (7,326)
============ ============ ============ ============ ============ ============
FIDUCIARY SHARES:
Issued....................... 541,337 425,795 223,524 255,654 95,373 112,554
Reinvested................... 45 16 6 8 17 17
Redeemed..................... (558,614) (395,970) (230,920) (264,895) (98,094) (112,034)
------------- ------------- ------------- ------------- ------------- -------------
Change in Fiduciary Shares... (17,232) 29,841 (7,390) (9,233) (2,704) 537
============ ============ ============ ============ ============ ============
</TABLE>
Continued
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72
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<PAGE> 144
JULY 31, 1996
<TABLE>
<CAPTION>
BOND FUND GOVERNMENT BOND FUND INCOME EQUITY FUND
------------------------------ ------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, 1996 JULY 31, 1995 JULY 31, 1996 JULY 31, 1995 JULY 31, 1996 JULY 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
Amounts in Thousands
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR SHARES:
Proceeds from shares
issued..................... $ 754 $ 626 $ 1,055 $ 97 $ 10,342 $ 4,131
Dividends reinvested......... 60 14 47 2 501 52
Shares redeemed.............. (177) (113) (33) (32) (5,008) (506)
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets from
Investor Share
transactions............... $ 637 $ 527 $ 1,069 $ 67 $ 5,835 $ 3,677
============ ============ ============ ============ ============ ============
FIDUCIARY SHARES:
Proceeds from shares
issued..................... $ 14,876 $ 10,767 $ 297 $ 1,279 $ 52,940 $ 31,913
Dividends reinvested......... 2,983 3,111 219 295 16,994 13,482
Shares redeemed.............. (16,414) (19,821) (1,002) (2,852) (49,911) (56,293)
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets from
Fiduciary Share
transactions............... $ 1,445 $ (5,943) $ (486) $ (1,278) $ 20,023 $ (10,898)
============ ============ ============ ============ ============ ============
SHARE TRANSACTIONS:
INVESTOR SHARES:
Issued....................... 71 63 110 11 721 331
Reinvested................... 6 1 5 -- 35 5
Redeemed..................... (17) (11) (3) (4) (344) (40)
------------- ------------- ------------- ------------- ------------- -------------
Change in Investor Shares.... 60 53 112 7 412 296
============ ============ ============ ============ ============ ============
FIDUCIARY SHARES:
Issued....................... 1,421 1,074 32 137 3,719 2,625
Reinvested................... 284 311 22 32 1,200 1,154
Redeemed..................... (1,563) (1,974) (104) (305) (3,529) (4,658)
------------- ------------- ------------- ------------- ------------- -------------
Change in Fiduciary Shares... 142 (589) (50) (136) 1,390 (879)
============ ============ ============ ============ ============ ============
</TABLE>
Continued
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73
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<PAGE> 145
JULY 31, 1996
<TABLE>
<CAPTION>
BALANCED FUND GROWTH FUND INCOME & GROWTH FUND
------------------------------ ------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, 1996 JULY 31, 1995 JULY 31, 1996 JULY 31, 1995 JULY 31, 1996 JULY 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
Amounts in Thousands
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR SHARES:
Proceeds from shares
issued..................... $ 526 $ 480 $ 1,796 $ 1,230 $ 213 $ 205
Dividends reinvested......... 22 2 107 5 17 1
Shares redeemed.............. (358) (20) (370) (144) (66) --
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets from
Investor Share
transactions............... $ 190 $ 462 $ 1,533 $ 1,091 $ 164 $ 206
============ ============ ============ ============ ============ ============
FIDUCIARY SHARES:
Proceeds from shares
issued..................... $ 15,314 $ 9,876 $ 17,443 $ 8,497 $ 2,710 $ 1,566
Dividends reinvested......... 1,150 984 1,858 498 417 126
Shares redeemed.............. (9,046) (9,570) (4,577) (3,450) (4,124) (788)
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets from
Fiduciary Share
transactions............... $ 7,418 $ 1,290 $ 14,724 $ 5,545 $ (997) $ 904
============ ============ ============ ============ ============ ============
SHARE TRANSACTIONS:
INVESTOR SHARES:
Issued....................... 46 45 143 115 17 18
Reinvested................... 2 -- 9 1 1 --
Redeemed..................... (31) (2) (29) (13) (5) --
------------- ------------- ------------- ------------- ------------- -------------
Change in Investor Shares.... 17 43 123 103 13 18
============ ============ ============ ============ ============ ============
FIDUCIARY SHARES:
Issued....................... 1,321 976 1,397 836 220 150
Reinvested................... 100 99 154 50 35 12
Redeemed..................... (789) (964) (365) (334) (343) (73)
------------- ------------- ------------- ------------- ------------- -------------
Change in Fiduciary Shares... 632 111 1,186 552 (88) 89
============ ============ ============ ============ ============ ============
</TABLE>
Continued
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JULY 31, 1996
5. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Group by MERUS-UCA. Under
the terms of the investment advisory agreement, Union Bank of California, of
which MERUS-UCA is a division, is entitled to receive fees based on a
percentage of the average net assets of each of the Funds. Union Bank of
California also serves as custodian, sub-transfer agent and
sub-administrator for the Group.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
an Ohio Limited Partnership, and BISYS Fund Services Ohio, Inc. ("BISYS
Ohio") are subsidiaries of The BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Group as administrator. Such officers and trustees are paid no
fees directly by the Funds for serving as officers and trustees of the
Group. Under the terms of the administration agreement, BISYS' fees are
computed daily as a percentage of the average net assets of the Funds. BISYS
also serves as the Group's distributor. As distributor, BISYS is entitled to
receive fees from the Funds for providing distribution services. For the
year ended July 31, 1996, BISYS received $212,765 for commissions earned on
sales of shares of the Group's variable net asset value funds, of which
$23,664 was reallowed to affiliated parties. BISYS Ohio, serves the Group as
transfer agent and mutual fund accountant. Transfer agent fees are computed
on a sliding scale, based upon the number of shareholders.
The Group has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act pursuant to which each Fund may pay the Distributor as compensation
for its services in connection with the Distribution Plan a distribution
fee, computed daily and paid monthly, at a maximum annual rate of
twenty-five one-hundredths of one percent (0.25%) of the average daily net
assets attributable to the Funds' Investor Shares. A Fund's Fiduciary Shares
are not subject to the Distribution Plan or a distribution fee. The
Distributor has agreed to voluntarily reduce payments to be received
pursuant to the Distribution Plan with respect to a money market fund to the
extent necessary to ensure that such payments do not exceed the income
attributable to such Fund's shares on any day.
The Group has also adopted a Shareholder Services Plan permitting payment of
compensation to financial institutions that agree to provide certain
administrative support services for their customers who are Fund
shareholders. Each Fund has entered into a specific arrangement with BISYS
for the provision of such services and reimburses BISYS for its cost of
providing these services, subject to a maximum annual rate of twenty-five
one-hundredths of one percent (0.25%) of each Fund's average daily net
assets.
Fees may be voluntarily reduced or reimbursed to assist the Funds in
maintaining competitive expense ratios. Such fees are permanently waived.
Continued
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JULY 31, 1996
Information regarding these transactions is as follows for the year ended
July 31, 1996: (amounts in thousands)
<TABLE>
<CAPTION>
DIVERSIFIED U.S. GOVERNMENT 100% U.S. TREASURY
OBLIGATIONS FUND OBLIGATIONS FUND OBLIGATIONS FUND
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee (percentage of
average net assets)................ 0.40% 1st $500 million 0.40% 1st $500 million 0.40% 1st $500 million
0.35% next $500 million 0.35% next $500 million 0.35% next $500 million
0.30% remaining 0.30% remaining 0.30% remaining
ADMINISTRATION FEES:
Annual fee (percentage of
average net assets)................ 0.20% 0.20% 0.20%
DISTRIBUTION FEES (INVESTOR SHARES):
Annual fee before voluntary
fee reductions (percentage of
average net assets)................ 0.25% 0.25% 0.25%
Voluntary fee reductions............. $ 395 $ 179 $ 267
SHAREHOLDER SERVICES FEES:
Annual fee before voluntary
fee reductions (percentage of
average net assets)................ 0.25% 0.25% 0.25%
Voluntary fee reductions............. $ 932 $ 560 $ 711
CUSTODIAN FEES: (percentage of
average net assets) 0.02% (minimum $2,500) 0.02% (minimum $2,500) 0.02% (minimum $2,500)
ACCOUNTING FEES: (percentage of
average net assets) 0.03% (minimum $40,000) 0.03% (minimum $40,000) 0.03% (minimum $40,000)
</TABLE>
Continued
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76
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<PAGE> 148
JULY 31, 1996
<TABLE>
<CAPTION>
CALIFORNIA
TAX-FREE FUND TAX-FREE FUND
----------------------- -----------------------
<S> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........................... 0.40% 1st $500 million 0.40% 1st $500 million
0.35% next $500 million 0.35% next $500 million
0.30% remaining 0.30% remaining
Voluntary fee reductions....................................... $ 266 $ 24
ADMINISTRATION FEES:
Annual fee (percentage of average net assets).................. 0.20% 0.20%
Voluntary fee reductions....................................... $ 77 $ 46
DISTRIBUTION FEES (INVESTOR SHARES):
Annual fee before voluntary fee reductions
(percentage of average net assets)........................... 0.25% 0.25%
Voluntary fee reductions....................................... $ 122 $ 36
SHAREHOLDER SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........................... 0.25% 0.25%
Voluntary fee reductions....................................... $ 359 $ 101
CUSTODIAN FEES: (percentage of average net assets) 0.02% (minimum $2,500) 0.02% (minimum $2,500)
ACCOUNTING FEES: (percentage of average net assets) 0.03% (minimum $40,000) 0.03% (minimum $40,000)
</TABLE>
Continued
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77
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<PAGE> 149
JULY 31, 1996
<TABLE>
<CAPTION>
BOND FUND GOVERNMENT BOND FUND INCOME EQUITY FUND
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee
reductions (percentage of
average net assets)................ 1.00% 1st $40 million 1.00% 1st $40 million 1.00% 1st $40 million
0.60% remaining 0.60% remaining 0.60% remaining
Voluntary fee reductions............. $ 257 $ 43 $ 33
ADMINISTRATION FEES:
Annual fee (percentage of
average net assets)................ 0.20% 0.20% 0.20%
Voluntary fee reductions............. $ 43 $ 9 --
DISTRIBUTION FEES (INVESTOR SHARES):
Annual fee before voluntary fee
reductions (percentage of
average net assets)................ 0.25% 0.25% 0.25%
Voluntary fee reductions............. $ 2 $ 2 $ 20
SHAREHOLDER SERVICES FEES:
Annual fee before voluntary fee
reductions (percentage of
average net assets)................ 0.25% 0.25% 0.25%
Voluntary fee reductions............. $ 143 $ 10 $ 613
CUSTODIAN FEES: (percentage of
average net assets) 0.02% (minimum $2,500) 0.02% (minimum $2,500) 0.02% (minimum $2,500)
Voluntary fee reductions $ 23
ACCOUNTING FEES: (percentage of
average net assets) 0.03% (minimum $40,000) 0.03% (minimum $40,000) 0.03% (minimum $40,000)
</TABLE>
Continued
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78
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<PAGE> 150
JULY 31, 1996
<TABLE>
<CAPTION>
BALANCED FUND GROWTH FUND INCOME & GROWTH FUND
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee
reductions (percentage of
average net assets)................ 1.00% 1st $40 million 1.00% 1st $40 million 1.00% 1st $40 million
0.60% remaining 0.60% remaining 0.60% remaining
Voluntary fee reductions............. $ 161 $ 182 $ 62
ADMINISTRATION FEES:
Annual fee (percentage of
average net assets)................ 0.20% 0.20% 0.20%
Voluntary fee reductions............. -- -- $ 12
DISTRIBUTION FEES (INVESTOR SHARES):
Annual fee before voluntary fee
reductions (percentage of
average net assets)................ 0.25% 0.25% 0.25%
Voluntary fee reductions............. $ 2 $ 5 $ 1
SHAREHOLDER SERVICES FEES:
Annual fee before voluntary fee
reductions (percentage of
average net assets)................ 0.25% 0.25% 0.25%
Voluntary fee reductions............. $ 82 $ 87 $ 14
CUSTODIAN FEES: (percentage of
average net assets) 0.02% (minimum $2,500) 0.02% (minimum $2,500) 0.02% (minimum $2,500)
Voluntary fee reductions............. $ 29 $ 40 $ 30
ACCOUNTING FEES: (percentage of
average net assets) 0.03% (minimum $40,000) 0.03% (minimum $40,000) 0.03% (minimum $40,000)
Voluntary fee reductions............. $ 19 $ 19 --
</TABLE>
Continued
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79
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<PAGE> 151
JULY 31, 1996
6. CONCENTRATION OF CREDIT RISK:
The California Tax-Free Fund invests substantially all of its assets in a
diversified portfolio of tax-exempt debt obligations primarily consisting of
securities issued by the State of California, its municipalities, counties,
and other taxing districts. The issuers' abilities to meet their obligations
may be affected by domestic and foreign or California economic, regional and
political developments.
At July 31, 1996, The California Tax-Free Fund had the following
concentrations by industry sector (as a percentage of total investments):
<TABLE>
<CAPTION>
TAX-EXEMPT CALIFORNIA
INDUSTRY CLASS TAX-FREE FUND
--------------------------------------------------------------------- -------------
<S> <C>
Utilities -- Electric................................................ 23.2%
Housing.............................................................. 22.1%
Hospitals............................................................ 20.7%
Pollution Control.................................................... 10.6%
Governments.......................................................... 8.2%
Money Markets........................................................ 7.8%
Utilities -- Water & Sewer........................................... 4.2%
Transportation & Shipping............................................ 3.2%
------
100.0%
</TABLE>
7. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Group designates the following eligible distributions for the dividends
received deduction for corporations for the Fund's taxable year ended July
31, 1996:
<TABLE>
<CAPTION>
INCOME BALANCED GROWTH INCOME &
EQUITY FUND FUND FUND GROWTH FUND
----------- -------- ------ -----------
<S> <C> <C> <C> <C>
Dividend Income (in thousands)...... $ 9.943 $ 549 $ 607 $ 163
Dividend Income Per Share........... $ 0.402 $0.142 $0.107 $ 0.221
</TABLE>
Continued
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80
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<PAGE> 152
JULY 31, 1996
8. EXEMPT-INTEREST INCOME DESIGNATION (UNAUDITED):
The Group designates the following exempt-interest dividends for the Fund's
taxable year ended July 31, 1996.
<TABLE>
<CAPTION>
CALIFORNIA
TAX-FREE FUND TAX-FREE FUND
------------- -------------
<S> <C> <C>
Exempt-interest dividends........................... $ 5.255 $ 1.537
Exempt-interest dividends per share................. 0.028 0.028
</TABLE>
The following information indicates by state the percentage of income earned
by the California Tax-Free Fund and the Tax-Free Fund for the year ended
July 31, 1996:
<TABLE>
<CAPTION>
CALIFORNIA
TAX-FREE FUND TAX-FREE FUND
------------- -------------
<S> <C> <C>
Alaska.............................................. 2.6%
Arizona............................................. 3.4
California.......................................... 100.0% 21.0
Colorado............................................ 2.6
Florida............................................. 6.5
Hawaii.............................................. 3.0
Illinois............................................ 4.6
Indiana............................................. 4.9
Kentucky............................................ 3.1
Louisiana........................................... 4.1
Michigan............................................ 3.8
Minnesota........................................... 0.2
Missouri............................................ 2.8
Nevada.............................................. 4.7
New Mexico.......................................... 4.2
New York............................................ 4.4
Oregon.............................................. 1.9
Pennsylvania........................................ 0.5
Rhode Island........................................ 1.3
Texas............................................... 1.2
Utah................................................ 2.3
Virginia............................................ 10.3
Wyoming............................................. 1.3
Other Territories................................... 5.3
------ ------
100.0% 100.0%
============== ==============
</TABLE>
Continued
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81
LOGO NOTES TO FINANCIAL STATEMENTS, CONTINUED
<PAGE> 153
JULY 31, 1996
For the year ended July 31, 1996, 18.9% of the income earned by the Tax-Free
Fund and 16.9% of the income earned by the California Tax-Free Fund may be
subject to the alternative minimum tax.
For California residents, 100.0% of the income earned by the California
Tax-Free Fund for the year ended July 31, 1996 is designated as tax-exempt
income.
The following information indicates by type the percentage of income earned
by the 100% U.S. Treasury Obligations Fund for the year ended July 31, 1996:
<TABLE>
<CAPTION>
100% U.S. TREASURY
TYPE OBLIGATIONS FUND
---------------------------------------------------------------- ------------------
<S> <C>
Federal obligations (such as U.S. Treasury bills, notes,
bonds)........................................................ 100.0%
===================
</TABLE>
For California residents, the 100% U.S. Treasury Obligations Fund met the
quarterly diversification tests for each fiscal quarter ended during the
year ended July 31, 1996. In addition, for California residents, 100% of the
income earned by the 100% U.S. Treasury Obligations Fund for the year ended
July 31, 1996 is designated as tax-exempt income.
Please consult your tax advisor for the proper treatment of the information
reflected in Notes 7 and 8.
9. FEDERAL INCOME TAXES:
For federal income tax purposes, the following funds have capital loss
carryforwards as of July 31, 1996, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
AMOUNT EXPIRES
---------- -------
<S> <C> <C>
Diversified Obligations Fund................................. $ 341,422 2001
29,246 2002
U.S. Government Obligations Fund............................. 174,662 2001
100% U.S. Treasury Obligations Fund.......................... 6,637 2004
California Tax-Free Fund..................................... 24,741 2002
22,777 2003
Tax-Free Fund................................................ 9,016 2002
13,234 2003
Bond Fund.................................................... 2,766,351 2003
54,397 2004
Government Bond Fund......................................... 243,536 2002
55,189 2003
10,219 2004
</TABLE>
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82
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<PAGE> 154
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------- -------------------- -------------------- -------------------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
INVESTMENT
ACTIVITIES
Net
investment
income..... 0.049 0.049 0.049 0.049 0.028 0.028 0.027 0.027 0.043 0.043
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
DISTRIBUTIONS
From net
investment
income..... (0.049) (0.049 ) (0.049) (0.049 ) (0.028) (0.028 ) (0.027) (0.027 ) (0.043) (0.043 )
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
NET ASSET
VALUE, END OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== =========== ========== =========== ========== =========== ========== =========== ========== ===========
Total
Return....... 5.01% 5.01% 4.99% 4.99% 2.88% 2.88% 2.75% 2.75% 4.41% 4.41%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of
period
(000)...... $185,952 $244,775 $128,191 $270,476 $ 75,725 $228,934 $ 77,589 $254,034 $ 17,600 $337,485
Ratio of
expenses to
average net
assets..... 0.75% 0.75% 0.74% 0.74% 0.74% 0.74% 0.72% 0.72% 0.72% 0.72%
Ratio of net
investment
income to
average net
assets..... 4.89% 4.91% 4.92% 4.88% 2.83% 2.83% 2.72% 2.72% 4.34% 4.34%
Ratio of
expenses to
average net
assets*.... 1.23% 0.99% 1.23% 0.98% 1.14% 0.89% 0.79% 0.73% 0.97% 0.72%
Ratio of net
investment
income to
average net
assets*.... 4.41% 4.67% 4.43% 4.64% 2.42% 2.67% 2.65% 2.71% 4.09% 4.34%
</TABLE>
- ---------------
*During the period, certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
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83
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<PAGE> 155
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------- -------------------- -------------------- -------------------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
INVESTMENT
ACTIVITIES
Net
investment
income..... 0.048 0.048 0.048 0.048 0.027 0.027 0.027 0.027 0.042 0.042
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
DISTRIBUTIONS
From net
investment
income..... (0.048) (0.048 ) (0.048) (0.048 ) (0.027) (0.027 ) (0.027) (0.027 ) (0.042) (0.042 )
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
NET ASSET
VALUE, END OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== =========== ========== =========== ========== =========== ========== =========== ========== ===========
Total
Return....... 4.86% 4.88% 4.86% 4.87% 2.74% 2.74% 2.72% 2.72% 4.25% 4.25%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of
period
(000)...... $ 75,714 $151,483 $ 48,474 $159,747 $ 24,055 $162,094 $ 37,332 $166,182 $ 12,527 $ 94,252
Ratio of
expenses to
average net
assets..... 0.79% 0.77% 0.78% 0.78% 0.77% 0.78% 0.71% 0.71% 0.73% 0.73%
Ratio of net
investment
income to
average net
assets..... 4.77% 4.76% 4.82% 4.76% 2.63% 2.70% 2.67% 2.67% 4.15% 4.15%
Ratio of
expenses to
average net
assets*.... 1.26% 1.00% 1.27% 1.02% 1.17% 0.94% 0.79% 0.74% 0.99% 0.74%
Ratio of net
investment
income to
average net
assets*.... 4.30% 4.53% 4.33% 4.52% 2.23% 2.54% 2.59% 2.65% 3.89% 4.14%
</TABLE>
- ---------------
*During the period, certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
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84
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<PAGE> 156
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------- -------------------- -------------------- -------------------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
INVESTMENT
ACTIVITIES
Net
investment
income..... 0.046 0.046 0.046 0.046 0.026 0.026 0.026 0.026 0.040 0.040
Net realized
and
unrealized
gains on
investments... -- -- -- -- -- -- -- -- 0.001 0.001
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
Total from
Investment
Activities.. 0.046 0.046 0.046 0.046 0.026 0.026 0.026 0.026 0.041 0.041
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
DISTRIBUTIONS
From net
investment
income..... (0.046) (0.046 ) (0.046) (0.046 ) (0.026) (0.026 ) (0.026) (0.026 ) (0.040) (0.040 )
From net
investment
income..... -- -- -- -- -- -- -- -- (0.001) (0.001 )
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
Total
Distributions... (0.046) (0.046 ) (0.046) (0.046 ) (0.026) (0.026 ) (0.026) (0.026 ) (0.041) (0.041 )
========== =========== ========== =========== ========== =========== ========== =========== ========== ===========
NET ASSET
VALUE, END OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== =========== ========== =========== ========== =========== ========== =========== ========== ===========
Total
Return....... 4.74% 4.74% 4.69% 4.69% 2.68% 2.68% 2.64% 2.64% 4.18% 4.18%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at
end of
period
(000)...... $100,623 $173,340 $ 88,660 $190,604 $ 39,157 $160,721 $ 32,629 $191,946 $ 11,551 $219,451
Ratio of
expenses to
average net
assets..... 0.74% 0.74% 0.73% 0.73% 0.74% 0.74% 0.67% 0.67% 0.65% 0.65%
Ratio of net
investment
income to
average net
assets..... 4.64% 4.64% 4.68% 4.60% 2.68% 2.63% 2.60% 2.60% 3.99% 3.99%
Ratio of
expenses to
average net
assets*.... 1.23% 0.97% 1.22% 0.97% 1.15% 0.90% 0.75% 0.72% 0.97% 0.72%
Ratio of net
investment
income to
average net
assets*.... 4.15% 4.41% 4.19% 4.36% 2.27% 2.48% 2.52% 2.55% 3.67% 3.92%
</TABLE>
- ---------------
*During the period, certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
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85
LOGO 100% U.S. TREASURY OBLIGATIONS FUND
<PAGE> 157
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------- -------------------- -------------------- -------------------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
INVESTMENT
ACTIVITIES
Net
investment
income..... 0.029 0.029 0.031 0.031 0.020 0.020 0.021 0.021 0.032 0.032
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
DISTRIBUTIONS
From net
investment
income..... (0.029) (0.029 ) (0.031) (0.031 ) (0.020) (0.020 ) (0.021) (0.021 ) (0.032) (0.032 )
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
NET ASSET
VALUE, END OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== =========== ========== =========== ========== =========== ========== =========== ========== ===========
Total
Return....... 2.91% 2.91% 3.16% 3.16% 1.99% 1.99% 2.13% 2.13% 3.20% 3.20%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at
end of
period
(000)...... $ 53,627 $ 98,352 $ 40,544 $105,742 $ 31,521 $114,993 $ 44,410 $142,939 $ 4,609 $116,062
Ratio of
expenses to
average net
assets..... 0.55% 0.55% 0.50% 0.50% 0.50% 0.50% 0.44% 0.44% 0.54% 0.54%
Ratio of net
investment
income to
average net
assets..... 2.89% 2.88% 3.14% 3.11% 1.96% 1.96% 2.08% 2.08% 3.15% 3.15%
Ratio of
expenses to
average net
assets*.... 1.25% 1.00% 1.26% 1.01% 1.18% 0.93% 0.79% 0.73% 0.99% 0.74%
Ratio of net
investment
income to
average net
assets*.... 2.19% 2.43% 2.38% 2.60% 1.28% 1.53% 1.73% 1.78% 2.70% 2.95%
</TABLE>
- ---------------
*During the period, certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
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86
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<PAGE> 158
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------- -------------------- -------------------- -------------------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INVESTMENT
ACTIVITIES
Net
investment
income..... 0.028 0.028 0.030 0.030 0.019 0.019 0.021 0.021 0.033 0.033
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
DISTRIBUTIONS
From net
investment
income..... (0.028) (0.028 ) (0.030) (0.030 ) (0.019) (0.019 ) (0.021) (0.021 ) (0.033) (0.033 )
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
NET ASSET
VALUE, END OF
PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== =========== ========== =========== ========== =========== ========== =========== ========== ===========
Total
Return....... 2.87% 2.87% 3.00% 3.00% 1.96% 1.96% 2.16% 2.16% 3.35% 3.35%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at
end of
period
(000)...... $ 16,148 $ 28,109 $ 12,702 $ 30,813 $ 20,032 $ 30,285 $ 40,010 $ 29,799 $ 23,780 $ 27,136
Ratio of
expenses to
average net
assets..... 0.77% 0.76% 0.73% 0.73% 0.69% 0.69% 0.53% 0.53% 0.57% 0.57%
Ratio of net
investment
income to
average net
assets..... 2.81% 2.86% 2.90% 2.95% 1.93% 1.95% 2.12% 2.12% 3.31% 3.31%
Ratio of
expenses to
average net
assets*.... 1.42% 1.16% 1.39% 1.14% 1.27% 1.02% 0.96% 0.84% 1.09% 0.84%
Ratio of net
investment
income to
average net
assets*.... 2.16% 2.46% 2.24% 2.54% 1.36% 1.62% 1.69% 1.82% 2.79% 3.05%
</TABLE>
- ---------------
*During the period, certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
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87
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<PAGE> 159
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JUNE 20, YEAR
1994 TO ENDED
YEAR ENDED YEAR ENDED JULY 31, JULY 31, YEAR ENDED JULY 31,
JULY 31, 1996 JULY 31, 1995 1994(A)(B) 1994(B)
---------------------- ---------------------- ---------- --------- -------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY 1993 1992
-------- --------- -------- --------- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.29 $ 10.38 $10.04 $ 10.11 $10.12 $ 11.13 $ 11.02 $ 10.29
-------- --------- -------- --------- ---------- --------- ------- -------
INVESTMENT ACTIVITIES
Net investment
income............... 0.69 0.66 0.66 0.64 0.07 0.63 0.70 0.67
Net realized and
unrealized gains
(losses) on
investments.......... (0.18) (0.16) 0.23 0.27 (0.05) (0.97) 0.35 0.77
-------- --------- -------- --------- ---------- --------- ------- -------
Total from Investment
Activities......... 0.51 0.50 0.89 0.91 0.02 (0.34) 1.05 1.44
-------- --------- -------- --------- ---------- --------- ------- -------
DISTRIBUTIONS
From net investment
income............... (0.65) (0.65) (0.64) (0.64) (0.10) (0.63) (0.70) (0.67)
From net realized
gains................ -- -- -- -- -- (0.01) (0.24) (0.04)
In excess of net
realized gains....... -- -- -- -- -- (0.04) -- --
-------- --------- -------- --------- ---------- --------- ------- -------
Total
Distributions...... (0.65) (0.65) (0.64) (0.64) (0.10) (0.68) (0.94) (0.71)
-------- --------- -------- --------- ---------- --------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $10.15 $ 10.23 $10.29 $ 10.38 $10.04 $ 10.11 $ 11.13 $ 11.02
========= =========== ========= =========== =============== =========== ======== ========
Total Return (excludes
sales charges)......... 4.95% 4.81% 9.29% 9.43% (3.81)%(c) (3.14)% 10.07% 14.43%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)......... $1,157 $60,374 $ 558 $59,758 $ 7 $64,185 $33,279 $21,651
Ratio of expenses to
average net assets... 0.89% 0.89% 0.92% 0.92% 0.99%(d) 0.86% 0.93% 0.91%
Ratio of net investment
income to average net
assets............... 6.10% 6.10% 6.29% 6.35% 5.77%(d) 6.11% 6.41% 6.23%
Ratio of expenses to
average net
assets*.............. 1.85% 1.61% 1.89% 1.64% 2.96%(d) 1.37% 1.55% 1.55%
Ratio of net investment
income to average net
assets*.............. 5.14% 5.38% 5.32% 5.62% 3.80%(d) 5.60% 5.79% 5.59%
Portfolio turnover..... 20.88%(e) 20.88%(e) 36.20%(e) 36.20%(e) 44.33%(e) 44.33%(e) 58.81% 79.56%
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Period from commencement of operations.
(b) On June 20, 1994, the Bond Fund commenced offering Investor Shares and designated existing shares as Fiduciary Shares.
(c) Represents total return for the Fiduciary shares for the period from August 1, 1993 to June 19, 1994 plus the total return
for the Investor Shares for the period from June 20, 1994 to July 31, 1994.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares
issued.
*During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
</TABLE>
See notes to financial statements.
LOGO
88
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<PAGE> 160
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JUNE 20, NOVEMBER 14,
1994 TO 1993 TO
YEAR ENDED YEAR ENDED JULY 31, JULY 31,
JULY 31, 1996 JULY 31, 1995 1994(A) 1994(A)
---------------------- ---------------------- --------- ------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 9.43 $ 9.50 $ 9.36 $ 9.44 $ 9.47 $10.00
-------- --------- -------- --------- --------- ------
INVESTMENT ACTIVITIES
Net investment income....................... 0.62 0.60 0.66 0.60 0.01 0.40
Net realized and unrealized gains (losses)
on investments............................ (0.18) (0.16) 0.01 0.06 (0.02) (0.56)
-------- --------- -------- --------- --------- ------
Total from Investment Activities 0.44 0.44 0.67 0.66 (0.01) (0.16)
-------- --------- -------- --------- --------- ------
DISTRIBUTIONS
From net investment income.................. (0.59) (0.59) (0.60) (0.60) (0.10) (0.40)
-------- --------- -------- --------- --------- ------
NET ASSET VALUE, END OF PERIOD............... $ 9.28 $ 9.35 $ 9.43 $ 9.50 $ 9.36 $ 9.44
========= =========== ========= =========== ========== ==============
Total Return (excludes sales charges)........ 4.79% 4.75% 7.47% 7.30% (2.42)%(b)(e) (1.59)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........... $1,104 $ 3,386 $ 68 $ 3,916 $ -- $5,171
Ratio of expenses to average net assets..... 0.85% 0.85% 0.85% 0.85% 0.87%(c) 0.85%(c)
Ratio of net investment income to average
net assets................................ 6.22% 6.12% 6.25% 6.32% 4.37%(c) 5.84%(c)
Ratio of expenses to average net assets*.... 4.05% 3.80% 2.54% 2.29% 0.87%(c) 3.09%(c)
Ratio of net investment income to average
net assets*............................... 3.02% 3.17% 4.56% 4.88% 4.37%(c) 3.60%(c)
Portfolio turnover (d)...................... 44.72% 44.72% 67.49% 67.49% 176.26% 176.26%
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Period from commencement of operations. On June 20, 1994, the Government Bond Fund commenced offering Investor Shares and
designated existing shares as Fiduciary Shares.
(b) Represents total return for the Fiduciary Shares from commencement of operations to June 19, 1994, plus the total return for
the Investor Shares for the period from June 20, 1994 to July 31, 1994.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares
issued.
(e) Not annualized.
*During the period, certain fees were voluntarily reduced. In addition, certain expenses were reimbursed. If such voluntary
fee reductions and expense reimbursements had not occurred, the ratios would have been as indicated.
</TABLE>
See notes to financial statements.
LOGO
89
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<PAGE> 161
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JUNE 20, YEAR
1994 TO ENDED
YEAR ENDED YEAR ENDED JULY 31, JULY 31, YEAR ENDED JULY 31,
JULY 31, 1996 JULY 31, 1995 1994(A)(B) 1994(B)
----------------------- ---------------------- ---------- --------- --------------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY 1993 1992
-------- --------- -------- --------- ---------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD............... $ 13.03 $ 13.00 $11.92 $ 11.92 $11.85 $ 12.13 $ 11.42 $ 10.22
-------- --------- -------- --------- ---------- --------- -------- -------
INVESTMENT ACTIVITIES
Net investment
income............. 0.42 0.42 0.42 0.44 0.04 0.39 0.38 0.40
Net realized and
unrealized gains on
investments........ 1.92 1.93 1.55 1.50 0.08 0.12 0.71 1.20
-------- --------- -------- --------- ---------- --------- -------- -------
Total from
Investment
Activities....... 2.34 2.35 1.97 1.94 0.12 0.51 1.09 1.60
-------- --------- -------- --------- ---------- --------- -------- -------
DISTRIBUTIONS
From net investment
income............. (0.42 ) (0.42 ) (0.44) (0.44 ) (0.05) (0.39 ) (0.38) (0.40)
From net realized
gains.............. (0.66 ) (0.66 ) (0.42) (0.42 ) -- (0.33 ) -- --
-------- --------- -------- --------- ---------- --------- -------- -------
Total
Distributions.... (1.08 ) (1.08 ) (0.86) (0.86 ) (0.05) (0.72 ) (0.38) (0.40)
-------- --------- -------- --------- ---------- --------- -------- -------
NET ASSET VALUE, END
OF PERIOD............ $ 14.29 $ 14.27 $13.03 $ 13.00 $11.92 $ 11.92 $ 12.13 $ 11.42
========= =========== ========= =========== =============== =========== ========== ========
Total Return (excludes
sales charges)....... 18.21 % 18.25 % 17.52% 17.26 % 4.23%(c) 4.23 % 9.75% 16.04%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)....... $10,143 $262,660 $3,881 $221,325 $ 24 $213,328 $104,840 $74,478
Ratio of expenses to
average net
assets............. 1.03 % 1.03 % 1.06% 1.06 % 1.10%(d) 1.06 % 1.15% 1.16%
Ratio of net
investment income
to average net
assets............. 2.89 % 2.95 % 3.06% 3.59 % 0.93%(d) 3.29 % 3.27% 3.76%
Ratio of expenses to
average net
assets*............ 1.51 % 1.27 % 1.55% 1.30 % 1.33%(d) 1.10 % 1.21% 1.29%
Ratio of net
investment income
to average net
assets*............ 2.41 % 2.71 % 2.57% 3.34 % 0.71%(d) 3.24 % 3.22% 3.64%
Portfolio turnover... 41.51 %(e) 41.51 %(e) 36.64%(e) 36.64 %(e) 33.82%(e) 33.82 %(e) 29.58% 23.05%
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Period from commencement of operations.
(b) On June 20, 1994, the Income Equity Fund commenced offering Investor Shares and designated existing shares as Fiduciary
Shares.
(c) Represents total return for the Fiduciary Shares for the period from August 1, 1993 to June 19, 1994 plus the total return
for the Investor Shares for the period from June 20, 1994 to July 31, 1994.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares
issued.
*During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
</TABLE>
See notes to financial statements.
LOGO
90
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<PAGE> 162
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JUNE 20, NOVEMBER 14,
1994 TO 1993 TO
YEAR ENDED YEAR ENDED JULY 31, JULY 31,
JULY 31, 1996 JULY 31, 1995 1994(A) 1994(A)
---------------------- ---------------------- --------- ------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $10.79 $ 10.85 $ 9.71 $ 9.76 $ 9.71 $ 10.00
-------- --------- -------- --------- --------- ------------
INVESTMENT ACTIVITIES
Net investment income....................... 0.40 0.40 0.43 0.39 -- 0.26
Net realized and unrealized gains (losses)
on investments............................ 0.77 0.79 1.04 1.09 0.06 (0.24)
-------- --------- -------- --------- --------- ------------
Total from Investment Activities.......... 1.17 1.19 1.47 1.48 0.06 0.02
-------- --------- -------- --------- --------- ------------
DISTRIBUTIONS
From net investment income.................. (0.40) (0.40) (0.39) (0.39) (0.06) (0.26)
-------- --------- -------- --------- --------- ------------
NET ASSET VALUE, END OF PERIOD............... $11.56 $ 11.64 $10.79 $ 10.85 $ 9.71 $ 9.76(e)
========= =========== ========= =========== ========== ============
Total Return (excludes sales charges)........ 10.94% 11.06% 15.60% 15.62% (0.25)%(b) 0.26%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........... $ 694 $39,502 $ 467 $29,961 -- $ 25,851
Ratio of expenses to average net assets..... 0.94% 0.94% 0.90% 0.89% -- 0.87%(c)
Ratio of net investment income to average
net assets................................ 3.48% 3.49% 3.78% 3.93% -- 3.77%(c)
Ratio of expenses to average net assets*.... 2.03% 1.78% 2.05% 1.80% -- 1.79%(c)
Ratio of net investment income to average
net assets*............................... 2.39% 2.85% 2.63% 3.02% -- 2.85%(c)
Portfolio turnover (d)...................... 12.84% 12.84% 20.70% 20.70% 44.14% 44.14%
- ---------------
(a) Period from commencement of operations. On June 20, 1994, the Balanced Fund commenced offering Investor Shares and designated
existing shares as Fiduciary Shares.
(b) Represents total return for the Fiduciary Shares from commencement of operations to June 19, 1994 plus the total return for
the Investor Shares for the period from June 20, 1994 to July 31, 1994.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares
issued.
(e) Not annualized.
*During the period, certain fees were voluntarily reduced. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
</TABLE>
See notes to financial statements.
LOGO
91
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<PAGE> 163
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JUNE 20, NOVEMBER 18,
1994 TO 1993 TO
YEAR ENDED YEAR ENDED JULY 31, JULY 31,
JULY 31, 1996 JULY 31, 1995 1994(A) 1994(A)
---------------------- ---------------------- --------- ------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $11.87 $ 11.87 $ 9.77 $ 9.76 $ 9.74 $ 10.00
-------- --------- -------- --------- --------- ------------
INVESTMENT ACTIVITIES
Net investment income....................... 0.11 0.12 0.15 0.15 -- 0.05
Net realized and unrealized gains (losses)
on investments............................ 1.38 1.35 2.25 2.26 0.04 (0.24)
-------- --------- -------- --------- --------- ------------
Total from Investment Activities.......... 1.49 1.47 2.40 2.41 0.04 (0.19)
-------- --------- -------- --------- --------- ------------
DISTRIBUTIONS
From net investment income.................. (0.12) (0.12) (0.15) (0.15) (0.01) (0.05)
From net realized gains..................... (0.64) (0.64) (0.15) (0.15) -- --
-------- --------- -------- --------- --------- ------------
Total Distributions....................... (0.76) (0.76) (0.30) (0.30) (0.01) (0.05)
-------- --------- -------- --------- --------- ------------
NET ASSET VALUE, END OF PERIOD............... $12.60 $ 12.58 11.87 $ 11.87 $ 9.77 $ 9.76
========= =========== ========= =========== ========== ============
Total Return (excludes sales charges)........ 12.88% 12.72% 25.10% 25.23% (1.77)%(b) (1.87)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........... $2,843 $41,495 $1,218 $25,096 -- $ 15,254
Ratio of expenses to average net assets..... 0.93% 0.93% 0.84% 0.79% -- 0.77%(c)
Ratio of net investment income to average
net assets................................ 0.96% 0.98% 1.17% 1.40% -- 0.86%(c)
Ratio of expenses to average net assets*.... 1.91% 1.67% 2.11% 1.92% -- 2.61%(c)
Ratio of net investment income (loss) to
average net assets*....................... (0.02)% 0.23% (0.10)% 0.26% -- (0.98)%(c)
Portfolio turnover (d)...................... 78.58% 78.58% 67.91% 67.91% 123.26% 123.26%
- ---------------
<FN>
(a) Period from commencement of operations. On June 20, 1994, the Growth Fund commenced offering Investor Shares and designated
existing shares as Fiduciary Shares.
(b) Represents total return for the Fiduciary Shares from commencement of operations to June 19, 1994 plus the total return for
the Investor Shares for the period from June 20, 1994 to July 31, 1994.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares
issued.
(e) Not annualized.
*During the period, certain fees were voluntarily reduced. In addition, certain expenses were reimbursed. If such voluntary
fee reductions and expense reimbursements had not occurred, the ratios would have been as indicated.
</TABLE>
See notes to financial statements.
LOGO
92
LOGO GROWTH FUND
<PAGE> 164
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JUNE 20, NOVEMBER 14,
1994 TO 1993 TO
YEAR ENDED YEAR ENDED JULY 31, JULY 31,
JULY 31, 1996 JULY 31, 1995 1994(A) 1994(A)
---------------------- ---------------------- --------- ------------
INVESTOR FIDUCIARY INVESTOR FIDUCIARY INVESTOR FIDUCIARY
-------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $11.75 $ 11.74 $ 9.97 $ 9.96 $ 9.86 $10.00
-------- --------- -------- --------- --------- ------
INVESTMENT ACTIVITIES
Net investment income....................... 0.22 0.25 0.27 0.25 -- 0.20
Net realized and unrealized gains (losses)
on investments............................ 1.49 1.46 1.76 1.78 0.14 (0.04)
-------- --------- -------- --------- --------- ------
Total from Investment Activities.......... 1.71 1.71 2.03 2.03 0.14 0.16
-------- --------- -------- --------- --------- ------
DISTRIBUTIONS
From net investment income.................. (0.25) (0.25) (0.25) (0.25) (0.03) (0.20)
From net realized gains..................... (0.69) (0.69) -- -- -- --
-------- --------- -------- --------- --------- ------
Total Distributions....................... (0.94) (0.94) (0.25) (0.25) (0.03) (0.20)
-------- --------- -------- --------- --------- ------
NET ASSET VALUE, END OF PERIOD............... $12.52 $ 12.51 $11.75 $ 11.74 $ 9.97 $ 9.96
========= =========== ========= =========== ========== =========
Total Return (excludes sales charges)........ 15.02% 15.04% 20.67% 20.68% 1.73%(b) 1.63%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........... $ 394 $ 6,013 $ 215 $ 6,669 -- $4,771
Ratio of expenses to average net assets..... 0.98% 0.98% 0.97% 0.97% 0.88%(c) 0.95%(c)
Ratio of net investment income to average
net assets................................ 1.96% 2.00% 2.23% 2.37% 0.88%(c) 2.86%(c)
Ratio of expenses to average net assets*.... 3.52% 3.27% 2.66% 2.41% 0.88%(c) 3.27%(c)
Ratio of net investment income (loss) to
average net assets*....................... (0.58)% (0.29)% 0.54% 0.93% 0.88%(c) 0.54%(c)
Portfolio turnover (d)...................... 36.64% 36.64% 15.01% 15.01% 97.24% 97.24%
- ---------------
<FN>
(a) Period from commencement of operations. On June 20, 1994, the Income & Growth Fund commenced offering Investor Shares and
designated existing shares as Fiduciary Shares.
(b) Represents total return for the Fiduciary Shares from commencement of operations to June 19, 1994 plus the total return for
the Investor Shares for the period from June 20, 1994 to July 31, 1994.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares
issued.
(e) Not annualized.
*During the period, certain fees were voluntarily reduced. In addition, certain expenses were reimbursed. If such voluntary
fee reductions and expense reimbursements had not occurred, the ratios would have been as indicated.
</TABLE>
See notes to financial statements.
LOGO
93
LOGO INCOME & GROWTH FUND
<PAGE> 165
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A:
-- Certain Financial Information.
Included in Part B:
-- Report of Independent Certified Public Accountants for
The HighMark Group at July 31, 1996.
-- Statements of Assets and Liabilities for The
HighMark Group at July 31, 1996.
-- Statements of Operations for The HighMark Group
for the year ended July 31, 1996.
-- Statements of Changes in Net Assets for The
HighMark Group for the year ended July 31, 1996.
-- Schedules of Portfolio Investments for The
HighMark Group at July 31, 1996.
-- Notes to Financial Statements for The HighMark
Group dated July 31, 1996.
-- Financial Highlights for The HighMark Group for
the year ended July 31, 1996. All required
financial statements are included in Part B
hereof. All other financial statements and
schedules are inapplicable.
(b) Exhibits:
(1) (a) Declaration of Trust, dated March 10, 1987, is
incorporated by reference to Exhibit (1)(a) of
Pre-Effective Amendment No. 1 (filed May 15,
1987) to Registrant's Registration Statement on
Form N-1A.
1
<PAGE> 166
(b) Amendment to Declaration of Trust, dated April
13, 1987, is incorporated by reference to Exhibit
(1)(b) of Pre-Effective Amendment No. 1 (filed
May 15, 1987) to Registrant's Registration
Statement on Form N-1A.
(c) Amendment to Declaration of Trust, dated July 13,
1987, is incorporated by reference to Exhibit
(1)(c) of Pre-Effective Amendment No. 2 (filed
July 24, 1987) to Registrant's Registration
Statement on Form N-1A.
(d) Amendment to Declaration of Trust, dated July 30,
1987, is incorporated by reference to Exhibit
(1)(d) of Pre-Effective Amendment No. 3 (filed
July 31, 1987) to Registrant's Registration
Statement on Form N-1A.
(e) Amendment to Declaration of Trust, dated October
18, 1996, is filed herewith.
(2) (a) Amended and Restated Code of Regulations, dated
June 5, 1991, is incorporated by reference to
Exhibit 2 of Post-Effective Amendment No. 7
(filed September 30, 1991) to Registrant's
Registration Statement on Form N-1A.
(b) Amendment to Amended and Restated Code of
Regulations, dated December 4, 1991, is
incorporated by reference to Exhibit 2(b) of
Post-Effective Amendment No. 8 (filed September
30, 1992) to Registrant's Registration Statement
on Form N-1A.
(3) None.
(4) None.
(5) Investment Advisory Agreement between Registrant
and Union Bank of California, N.A., dated as of
April 1, 1996 (the "Investment Advisory
Agreement"), is filed herewith.
(6) Distribution Agreement, dated August 1, 1995,
between Registrant and The Winsbury Company (the
"Distribution Agreement") is incorporated by
reference to Exhibit (6) of Post-Effective
Amendment No. 16 (filed December 1,
2
<PAGE> 167
1995) to Registrant's Registration Statement on
Form N-1A.
(7) None.
(8) (a) Custodian Agreement between Registrant and The
Bank of California, N.A., dated as of December
23, 1991, as amended as of September 15, 1992
(the "Custodian Agreement"), is incorporated by
reference to Exhibit 8 of Post-Effective
Amendment No. 8 (filed September 30, 1992) to
Registrant's Registration Statement on Form N-1A.
(b) Form of amended and restated Schedule A to the
Custodian Agreement is incorporated by reference
to Exhibit 8(b) of Post-Effective Amendment No.
14 (filed June 17, 1994) to Registrant's
Registration Statement on Form N-1A.
(9) (a) Management and Administration Agreement between
Registrant and The Winsbury Company, dated as of
August 1, 1995 (the "Management and
Administration Agreement") is incorporated by
reference to Exhibit (9)(a) of Post-Effective
Amendment No. 16 (filed December 1, 1995) to
Registrant's Registration Statement on Form N-1A.
(b) Amendment made as of June 19, 1996 to the
Management and Administration Agreement between
Registrant and The Winsbury Company dated as of
August 1, 1995 is filed herewith.
(c) Transfer Agency and Shareholder Services
Agreement between Registrant and The Winsbury
Service Corporation, dated August 1, 1995 (the
"Transfer Agency Agreement") is incorporated by
reference to Exhibit (9)(b) of Post-Effective
Amendment No. 16 (filed December 1, 1995) to
Registrant's Registration Statement on Form N-1A.
(d) Sub-Transfer Agency Agreement between The
Winsbury Service Corporation and The Bank of
California, N.A., dated February 22, 1989, as
amended as of September 15,
3
<PAGE> 168
1992 (the "Sub-Transfer Agency Agreement"), is
incorporated by reference to Exhibit 9(d) of
Post-Effective Amendment No. 8 (filed September
30, 1992) to Registrant's Registration Statement
on Form N-1A.
(e) Fund Accounting Agreement between Registrant and
The Winsbury Service Corporation, dated as of
August 1, 1995 (the "Fund Accounting Agreement")
is incorporated by reference to Exhibit (9)(d) of
Post-Effective Amendment No. 16 (filed December
1, 1995) to Registrant's Registration Statement
on Form N-1A.
(f) Amendment made as of June 19, 1996 to the Fund
Accounting Agreement between Registrant and BISYS
Fund Services Ohio, Inc. dated as of August 1,
1995 is filed herewith.
(g) Form of amended and restated Schedules A and D to
the Sub-Transfer Agency Agreement is incorporated
by reference to Exhibit 9(g) of Post-Effective
Amendment No. 14 (filed June 17, 1994) to
Registrant's Registration Statement on Form N-1A.
(h) Form of Shareholder Services Agreement
("Shareholder Services Agreement") between
Registrant and The Winsbury Company dated
December 1, 1993 is incorporated by reference to
Exhibit 9(m) of Post-Effective Amendment No. 12
(filed October 1, 1993) to Registrant's
Registration Statement on Form N-1A.
(i) Form of amended and restated Appendix A to the
Shareholder Services Agreement is incorporated by
reference to Exhibit 9(j) of Post-Effective
Amendment No. 14 (filed June 17, 1994) to
Registrant's Registration Statement on Form N-1A.
(j) Shareholder Services Plan is incorporated by
reference to Exhibit 9(n) of Post-Effective
Amendment No. 12 (filed October 1, 1993) to the
Registrant's Registration Statement on Form N-1A.
(10) Inapplicable.
4
<PAGE> 169
(11)(a) Consent of Deloitte & Touche LLP is filed
herewith.
(11)(b) Consent of Coopers & Lybrand L.L.P, is filed
herewith.
(11)(c) Consent of Ropes & Gray, is filed herewith.
(12) None.
(13) None.
(14) None.
(15) (a) Registrant's Distribution and Shareholder
Services Plan relating to the Money Market Funds
is incorporated by reference to Exhibit 15(a) of
Post-Effective Amendment No. 6 (filed September
27, 1990) to Registrant's Registration Statement
on Form N-1A.
(b) Form of Servicing Agreement With Respect to
Distribution Assistance and Shareholder Services
used in connection with Registrant's Distribution
and Shareholder Services Plan relating to the
Money Market Funds is incorporated by reference
to Exhibit 15(b) of Post-Effective Amendment No.
6 (filed September 27, 1990) to Registrant's
Registration Statement on Form N-1A.
(c) Form of Servicing Agreement With Respect to
Shareholder Services used in connection with
Registrant's Distribution and Shareholder
Services Plan relating to the Money Market Funds,
is incorporated by reference to Exhibit 15(c) of
Post-Effective Amendment No. 8 (filed September
30, 1992) to Registrant's Registration Statement
on Form N-1A.
(d) Registrant's Distribution and Shareholder
Services Plan relating to the Income Funds, the
Equity Funds and the Municipal Funds is
incorporated by reference to Exhibit 15(d) of
Post-Effective Amendment No. 13 (filed April 11,
1994) to the Registrant's Registration Statement
on Form N-1A.
5
<PAGE> 170
(e) Form of amended and restated Schedule A to the
Distribution and Shareholder Services Plan
relating to the Income Funds, the
Equity Funds and the Municipal Funds is
incorporated by reference to Exhibit 15(c) of
Post-Effective Amendment No. 14 (filed June 17,
1994) to Registrant's Registration Statement on
Form N-1A.
(16) (a) Performance Calculation Schedules concerning: the
seven-day yield and effective yield of the Class
A and Class B Shares of the U.S. Government
Obligations Fund, the Diversified Obligations
Fund, the 100% U.S. Treasury Obligations Fund,
the Tax-Free Fund, and the California Tax-Free
Fund; the seven-day tax-equivalent yield and tax-
equivalent effective yield of the Class A and
Class B Shares of the Tax-Free Fund and the
California Tax-Free Fund; and the average annual
total return of the Income Equity Fund and Bond
Fund for the one-year, five-year, and
inception-to-date periods are incorporated by
reference to Exhibit 16 of Post-Effective
Amendment No. 6 (filed September 27, 1990) to
Registrant's Registration Statement on Form N-1A.
(b) Yield Calculation Schedules concerning the
seven-day tax-equivalent yield and tax-equivalent
effective yield (for California and Oregon income
tax purposes) of the Class A and Class B Shares
of the 100% U.S. Treasury Obligations Fund are
incorporated by reference to Exhibit 16(b) of
Post-Effective Amendment No. 7 (filed September
30, 1991) to Registrant's Registration Statement
on Form N-1A.
(c) Performance Calculation Schedules concerning: (i)
the seven-day and thirty-day yield and effective
yield of the Class A and Class B Shares of the
U.S. Government Obligations Fund, the Diversified
Obligations Fund, the 100% U.S. Treasury
Obligations Fund, the Tax-Free Fund and the
California Tax-Free Fund; (ii) the seven-day and
thirty-day tax-equivalent yield (using a Federal
income tax rate of 31%) and tax-equivalent
effective yield (using a Federal income tax rate
of 31%) of the Class A and Class B Shares of the
Tax-Free Fund and the California Tax-Free Fund;
(iii) the seven-day and thirty-day tax-equivalent
yield (using a Federal income tax
6
<PAGE> 171
rate of 31% and a California income tax rate of
9.3%) and tax-equivalent effective yield (using
a Federal income tax rate of 31% and a California
income tax rate of 9.3%) of the Class A and Class
B Shares of the California Tax-Free Fund; (iv)
the average annual total return of the Class A
and Class B Shares of the U.S. Government
Obligations Fund, the Diversified Obligations
Fund, the 100% U.S. Treasury Obligations Fund,
the Tax-Free Fund and the California Tax-Free
Fund for the one-year, three-year and
inception-to-date periods and the aggregate total
return of the Class A and Class B Shares of each
such Fund for the year-to-date, quarterly and
monthly periods; (v) the thirty-day yield of the
Bond Fund; (vi) the average annual total return
of the Bond Fund and the Income Equity Fund for
the one-year, three-year, five-year and
inception-to-date periods and the aggregate total
return of each such Fund for the year-to-date,
quarterly and monthly periods; and (vii) the
distribution rate (excluding and including
capital gains) over a twelve-month period for the
Bond Fund and Income Equity Fund, are
incorporated by reference to Exhibit 16(c) of
Post-Effective Amendment No. 8 (filed September
30, 1992) to Registrant's Registration Statement
on Form N-1A.
(17) Financial Data Schedules.
(18) Multiple Class Plan for The HighMark Group
adopted by the Board of Trustees on March 20,
1996 is incorporated by reference to Exhibit 18
of Post-Effective Amendment No. 17 (filed March
29, 1996) to Registrant's Registration Statement
on Form N-1A.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
As of the effective date of this Registration Statement, there are
no persons controlled by or under common control with the U.S.
Government Obligations Fund, the Diversified Obligations Fund, the
100% U.S. Treasury Obligations Fund, the Income Equity Fund, the
Bond Fund, the Balanced Fund, the Growth Fund, the Government Bond
Fund, the Income and Growth Fund, the Tax-Free Fund and the
California Tax-Free Fund of the Registrant.
7
<PAGE> 172
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of October 1, 1996, the number of record holders of the following
series of Shares were:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
- --------------- --------------
<S> <C>
U.S. Government Obligations Fund
Investor Shares 15
Fiduciary Shares 6
Diversified Obligations Fund
Investor Shares 53
Fiduciary Shares 18
100% U.S. Treasury Obligations Fund
Investor Shares 13
Fiduciary Shares 6
Tax-Free Fund
Investor Shares 1
Fiduciary Shares 5
California Tax-Free Fund
Investor Shares 32
Fiduciary Shares 6
Income Equity Fund
Investor Shares 247
Fiduciary Shares 532
Bond Fund
Investor Shares 30
Fiduciary Shares 127
Income and Growth Fund
Investor Shares 31
Fiduciary Shares 46
Growth Fund
Investor Shares 91
Fiduciary Shares 129
Government Bond Fund
Investor Shares 11
Fiduciary Shares 14
Balanced Fund
Investor Shares 20
Fiduciary Shares 34
</TABLE>
8
<PAGE> 173
ITEM 27. INDEMNIFICATION
Article IX, Section 9.2 of the Registrant's Declaration of
Trust, filed or incorporated by reference as Exhibit (1)
hereto, provides for the indemnification of Registrant's
trustees and officers. Indemnification of the Registrant's
principal underwriter, custodian, investment adviser, manager
and administrator, transfer agent, and fund accountant is
provided for, respectively, in Section 1.11 of the
Distribution Agreement, filed or incorporated by reference as
Exhibit 6 hereto, Section 16 of the Custodian Agreement,
filed or incorporated by reference as Exhibit 8 hereto,
Section 8 of the Investment Advisory Agreement, filed or
incorporated by reference as Exhibit 5 hereto, Section 4 of
the Management and Administration Agreement, filed or
incorporated by reference as Exhibit 9(a) hereto, Section 11
of the Transfer Agency and Shareholder Service Agreement,
filed or incorporated by reference as Exhibit 9 (c) hereto,
and Section 7 of the Fund Accounting Agreement, filed or
incorporated by reference as Exhibit 9(e) hereto. Registrant
has obtained from a major insurance carrier a trustees and
officers' liability policy covering certain types of errors
and omissions. In no event will Registrant indemnify any of
its trustees, officers, employees or agents against any
liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of
his reckless disregard of the duties involved in the conduct
of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act
of 1933 and Release 11330 under the Investment Company Act of
1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees,
officers, and controlling persons of Registrant pursuant to
the foregoing provisions or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer, or controlling person
of Registrant in the successful defense of any action, suit,
or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final
adjudication of such issue.
9
<PAGE> 174
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Pacific Alliance Capital Management, a division of Union Bank
of California, N.A. (the "Advisor"), performs investment
advisory services for Registrant. Union Bank of California,
N.A. ("Union Bank of California") offers a wide range of
commercial and trust management services to its clients in
California, Oregon, and Washington and around the world.
UnionBanCal Corporation, the parent of Union Bank of
California, N.A., is a publicly held corporation, but is
principally held by The Bank of Tokyo-Mitsubishi, Ltd. Union
Bank of California, N.A. is a subsidiary of UnionBanCal
Corporation, a publicly held corporation, a majority of the
shares of which are owned by the Bank of Tokyo-Mitsubishi,
Limited.
To the knowledge of Registrant, none of the directors or
officers of Union Bank of California, except those set forth
below, is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain
directors and officers of Union Bank of California also hold
positions with UnionBanCal Corporation, The Bank of
Toyko-Mitsubishi and/or The Bank of Toyko-Mitsubishi's other
subsidiaries.
Listed below are the directors and certain principal
executive officers of UNION Bank of California, their
principal occupations and, for the prior two fiscal years,
any other business, profession, vocation, or employment
of a substantial nature engaged in by such directors and
officers:
UNION BANK OF CALIFORNIA, N.A.
<TABLE>
<CAPTION>
POSITION
WITH UNION
BANK OF PRINCIPAL TYPE OF
CALIFORNIA NAME OCCUPATION BUSINESS
- ---------- ---- ---------- --------
<S> <C> <C> <C>
Director Alexander D. Calhoun, Counsel Law Firm
Esquire of Graham & James
One Maritime Plaza, Suite 300
San Francisco, CA 94111
Director Richard D. Farman President, Chief Operating Officer
and Director
Pacific Enterprises
555 W. Fifth Street, 29th Floor
Los Angeles, CA 90013
Director Stanley F. Farrar, Partner Law Firm
Esquire Sullivan & Cromwell
12th Floor
444 So. Flower St.
Los Angeles, CA 90071
</TABLE>
10
<PAGE> 175
<TABLE>
<CAPTION>
POSITION
WITH UNION
BANK OF PRINCIPAL TYPE OF
CALIFORNIA NAME OCCUPATION BUSINESS
- ---------- ---- ---------- --------
<S> <C> <C> <C>
Director and Roy A. Henderson UnionBanCal Corporation Banking
Vice Chairman Union Bank of California
400 California Street
San Francisco, CA 94145
Director Herman E. Gallegos Independent Management Consultant Independent Management
95 Kings Road Consultant
Brisbane, CA 94005
Director Jack L. Hancock EVP (Retired) ___________
Pacific Bell
Vice Chairman Richard C. Hartnack UnionBanCal Corporation Banking
Union Bank of California, NA
445 S. Figueroa Street, 38th Floor
Los Angeles, CA 90071
Director Hon. Harry W. Low (Retired) Judicial Arbitration & Mediation ___________
Services, Inc.
2 Embarcadero, Suite 1100
San Francisco, CA 94111
Director Dr. Mary S. Metz Dean, University Extension Education
University of California
2223 Fulton Street
Berkeley, CA 94720
Director Raymond E. Miles Professor, Haas School Education
of Business
University of California
350 Barrows Hall
Berkeley, CA 94720
Vice Chairman of the Takahiro Moriguchi UnionBanCal Corporation Banking
Board and Chief Union Bank of California, NA
Financial Officer 350 California Street, 12th Floor
San Francisco, CA 94104-1476
Director Shin Nakahara Chief Executive Officer Banking
North American Headquarters
The Bank of Tokyo-Mitsubishi, Ltd.
1251 Avenue of the Americas, 14th Floor
New York, NY 10020
Director J. Fernando Niebla Chairman & CEO Computer Software
Infotec Development, Inc. and Hardware
3611 S. Harbor Blvd.
Suite 260
Santa Ana, CA 94704
</TABLE>
11
<PAGE> 176
<TABLE>
<CAPTION>
POSITION
WITH UNION
BANK OF PRINCIPAL TYPE OF
CALIFORNIA NAME OCCUPATION BUSINESS
- ---------- ---- ---------- --------
<S> <C> <C> <C>
Director, Minoru Noda UnionBanCal Corporation Banking
Vice-Chairman and Union Bank of California
Chief Credit Officer 400 California Street
San Francisco, CA 94145
Deputy Chairman of Hiroo Nozawa UnionBanCal Corporation Banking
the Board, Union Bank of California
and Chief Operating 400 California Street
Officer San Francisco, CA 94145
Director Sidney R. Peterson Retired Chairman and Chief ___________
Executive Officer
Getty Oil Company
Director Carl W. Robertson, Managing Director Real Estate and
Esquire Warland Investments Investment
Company Management
Suite 300 Company
1299 Ocean Avenue
Santa Monica, CA 90401
Director Charles R. Scott Chairman and Corporate
Chief Executive Officer Investor
Leadership Centers USA
365 King Road, N.W.
Atlanta, GA 30342
Director Paul W. Steere, Partner Law Firm
Esquire Bogle & Gates
Two Union Square
601 Union Street
Seattle, WA 98101-2322
Director Henry T. Swigert Chairman of the Board Equipment
ESCO Corporation Manufacturing
2141 NW 25th Avenue
Portland, OR 97210
Director Yuji Taniguchi General Manager Banking
The Bank of Tokyo-Mitsubishi, Ltd.
Los Angeles Branch
777 S. Figueroa Street, Suite 600
Los Angeles, CA 90017
Director Tsuneo Wakai Chairman Banking
The Bank of Tokyo-Mitsubishi, Ltd.
7-1, Marunouchi 2-Chome
Chiyoda-Ku
Tokyo 100, Japan
</TABLE>
12
<PAGE> 177
<TABLE>
<CAPTION>
POSITION
WITH UNION
BANK OF PRINCIPAL TYPE OF
CALIFORNIA NAME OCCUPATION BUSINESS
- ---------- ---- ---------- --------
<S> <C> <C> <C>
Vice Chairman of the Robert M. Walker UnionBanCal Corporation Banking
Board Union Bank of California, NA
350 California Street, 12th Floor
San Francisco, CA 94104-1476
Director Dr. Blenda J. Wilson President Education
California State University
Northridge
18111 Nordhoff Street
Northridge, CA 91330
Chairman of the Tamotsu Yamaguchi UnionBanCal Corporation Banking
Board Union Bank of California, NA
445 S. Figueroa Street
Los Angeles, CA 90071
Director Shota Yasuda General Manager Banking
North American Planning Division
The Bank of Tokyo-Mitsubishi, Ltd.
1251 Avenue of the Americas, 14th Floor
New York, NY 10020
Director, President Kanetaka Yoshida UnionBanCal Corporation Banking
and Chief Executive Union Bank of California, NA
Officer 350 California Street, 12th Floor
San Francisco, CA 94104-1476
Director Kenji Yoshizawa Deputy President Banking
The Bank of Tokyo-Mitsubishi, Ltd.
7-1, Marunouchi 2-Chome
Chiyoda-Ku
Tokyo 100, Japan
Executive Peter R. Butcher c/o Union Bank of California Banking
Vice President 400 California Street
and Chief San Francisco, CA
Credit Officer 94145
Executive David W. Ehlers c/o Union Bank of California Banking
Vice President 400 California Street
and Chief San Francisco, CA 94145
Financial Officer
Executive Michael Spilsbury c/o Union Bank of California Banking
Vice President 400 California Street
San Francisco, CA 94145
</TABLE>
13
<PAGE> 178
<TABLE>
<CAPTION>
POSITION
WITH Union
BANK OF PRINCIPAL TYPE OF
CALIFORNIA NAME OCCUPATION BUSINESS
- ---------- ---- ---------- --------
<S> <C> <C> <C>
Executive William R. Sweet c/o Union Bank of California Banking
Vice President 400 California Street
San Francisco, CA 94145
Executive Magan C. Patel c/o Union Bank of California Banking
Vice President 400 California Street
San Francisco, CA 94145
Executive Vice Charles Pedersen c/o Union Bank of California Banking
President 400 California Street
San Francisco, CA 94145
Executive Vice Philip Wexler c/o Union Bank of California Banking
President 400 California Street
San Francisco, CA 94145
Executive Vice Don Brunell c/o Union Bank of California Banking
President 400 California Street
San Francisco, CA 94145
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services Limited Partnership ("BISYS Fund
Services") (formerly known as The Winsbury Company
Limited Partnership) acts as distributor and administrator for
Registrant. BISYS Fund Services also distributes the
securities of The Victory Funds, The Coventry Group, The
Parkstone Group of Funds, The Sessions Group, the AmSouth
Mutual Funds, the American Performance Funds, The ARCH Fund,
Inc., the Pacific Capital Funds, the MMA Praxis Mutual Funds,
the MarketWatch Funds, The Riverfront Funds, Inc., the Summit
Investment Trust, the Qualivest Funds, the Fountain Square
Funds, the HSBC Family of Funds, The Infinity Mutual
Funds, Inc., The Kent Funds, the M.S.D.& T. Funds, The
Parkstone Advantage Funds, the Pegasus Funds, the SBSF Funds,
Inc. dba Key Mutual Funds, The Time Horizon Funds, The Victory
Portfolios, the First Choice Funds Trust, The Republic Funds
Trust, The Republic Advisors Funds Trust and the BB&T Mutual
Funds Group, each of which are management investment
companies.
(b) Partners of The BISYS Fund Services, as of November 1, 1995,
were as follows:
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH THE OFFICES WITH
BUSINESS ADDRESSES WINSBURY COMPANY REGISTRANT
- ------------------ ---------------- ----------
<S> <C> <C>
The BISYS Group, Inc. Sole Shareholder of None
150 Clove Road BISYS Fund Services, Inc.
Little Falls, NJ 07424
</TABLE>
14
<PAGE> 179
<TABLE>
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road BISYS Fund Services, Inc.
Columbus, OH 43219
WC Subsidiary Corporation Limited Partner None
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(1) Union Bank of California, N.A., 400 California
Street, San Francisco, CA 94104 (records relating to
the Advisor's functions as investment adviser and
Union Bank of California's functions as custodian
and sub-transfer agent).
(2) BISYS Fund Services, 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to its functions as
administrator and distributor).
(3) BISYS Fund Services Ohio, Inc.,3435 Stelzer Road,
Columbus, Ohio 43219 (records relating to its
functions as transfer agent and fund accountant).
(4) Ropes & Gray, One Franklin Square, 1301 K Street,
N.W., Suite 800 East, Washington, DC 20005 (the
Registrant's Declaration of Trust, Code of
Regulations and Minute Books).
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to call a meeting of the
shareholders for the purpose of voting upon the question of
removal of one or more trustees when requested to do so by
the holders of at least 10% of the outstanding shares of
Registrant and to comply with the provisions of Section 16(c)
of the Investment Company Act of 1940 relating to shareholder
communication.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and
without charge.
15
<PAGE> 180
NOTICE
A copy of the Amended and Restated Agreement and Declaration of The
HighMark Group is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is executed on
behalf of the Registrant by an officer of the Registrant as an officer and not
individually and that the obligations of or arising out of this instrument are
not binding upon any of the trustees or shareholders individually but are
binding only upon the assets and property of the Registrant.
16
<PAGE> 181
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 18 to this Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of
Washington, D.C., on the 8th day of November, 1996
THE HIGHMARK GROUP
By: /s/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 18 has been signed below by the following persons
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ Stephen G. Mintos Chairman of the November 8, 1996
- --------------------- Board, Trustee and
Stephen G. Mintos President (Principal
Executive Officer)
/s/ Michael Sakala Assistant Treasurer November 8, 1996
- -------------------------
Michael Sakala
/s/ Thomas L. Braje Trustee November 8, 1996
- ----------------------
Thomas L. Braje
/s/ David A. Goldfarb Trustee November 8, 1996
- ---------------------
David A. Goldfarb
/s/ Joseph C. Jaeger Trustee November 8, 1996
- -----------------------
Joseph C. Jaeger
/s/ Frederick J. Long Trustee November 8, 1996
- ----------------------
Frederick J. Long
*By: /s/ Martin E. Lybecker
------------------------
Martin E. Lybecker
Attorney-In-Fact
</TABLE>
18
<PAGE> 182
POWER OF ATTORNEY
The undersigned, being an Officer of The HighMark Group (the "Fund"),
does hereby constitute and appoint Stephen G. Mintos, Cynthia L. Lindsey,
Martin E. Lybecker and Francoise M. Haan, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to
do any and all acts and things and to execute any and all instruments that said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable the Fund to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, and in connection with the filing and
effectiveness of any registration statement or statement of the Fund pursuant
to said Acts and any and all amendments thereto (including post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as an officer of the Fund any and all such amendments filed with
the Securities and Exchange Commission under said Acts, any Notification of
Registration under the Investment Company Act of 1940 and any other instruments
or documents related thereto, and the undersigned does hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael S. Sakala Assistant Treasurer November 7, 1996
- ---------------------
Michael Sakala
</TABLE>
2
<PAGE> 183
POWER OF ATTORNEY
The undersigned, each being a Trustee and, in certain cases, an
Officer of The HighMark Group (the "Fund"), does hereby constitute and appoint
Stephen G. Mintos, Cynthia L. Lindsey, Martin E. Lybecker and John M. Loder,
each individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments that said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable the Fund to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof,
and in connection with the filing and effectiveness of any registration
statement or statement of the Fund pursuant to said Acts and any and all
amendments thereto (including post-effective amendments), including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a Trustee
and/or officer of the Fund any and all such amendments filed with the
Securities and Exchange Commission under said Acts, any Notification of
Registration under the Investment Company Act of 1940 and any other instruments
or documents related thereto, and the undersigned does hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Stephen G. Mintos Chairman of the November 22, 1994
- -------------------------- Board, Trustee and
Stephen G. Mintos President
</TABLE>
1
<PAGE> 184
<TABLE>
<S> <C> <C>
/s/ Cynthia L. Lindsey Vice President and November 22, 1994
- ---------------------- and Treasurer
Cynthia L. Lindsey
/s/ Kenneth B. Quintenz Trustee November 22, 1994
- -----------------------
Kenneth B. Quintenz
/s/ Thomas L. Braje Trustee November 22, 1994
- -------------------
Thomas L. Braje
/s/ David A. Goldfarb Trustee November 22, 1994
- ---------------------
David A. Goldfarb
/s/ Joseph C. Jaeger Trustee November 22, 1994
- --------------------
Joseph C. Jaeger
/s/ Frederick J. Long Trustee November 22, 1994
- ---------------------
Frederick J. Long
</TABLE>
2
<PAGE> 185
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
1(e) Amendment to Declaration of Trust, dated October 18,
1996.
5(a) Investment Advisory Agreement between the
Registrant and Union Bank of California, N.A.,
dated as of April 1, 1996.
9(b) Amendment made as of June 19, 1996 to the
Management and Administration Agreement
between Registrant and The Winsbury Company.
9(f) Amendment made as of June 19, 1996 to the
Fund Accounting Agreement between Registrant
and BISYS Fund Services Ohio, Inc.
11(a) Consent of Deloitte & Touche LLP.
11(b) Consent of Coopers & Lybrand L.L.P.
11(c) Consent of Ropes & Gray
27 Financial Data Schedules
</TABLE>
3
<PAGE> 1
EXHIBIT 1(e)
Amendment to Declaration of Trust, dated October 18, 1996
4
<PAGE> 2
SECRETARY'S CERTIFICATE
Amendment to the Declaration of Trust
The HighMark Group
(formerly The MERUS Group)
October 18, 1996
The undersigned hereby certifies that he is the Secretary of The
HighMark Group (the "Group"), a Massachusetts business trust established by
Declaration of Trust dated as of March 10, 1987; that the following is a true
and correct copy of a resolution duly adopted by the Board of Trustees on the
18th day of October, 1996, pursuant to Section 6.4 of the Group's Declaration
of Trust; that the passage of said resolution was in all respects legal; and
that said resolution is in full force and effect:
RESOLVED, that pursuant to subsection C of Section 10.8 of
the Group's Declaration of Trust, Section 6.4 of said Declaration of
Trust is hereby amended as follows:
At the end of the first sentence of the second
paragraph, add the phrase", and the Trustees may appoint an
advisory board, the members of which shall not be Trustees
and need not be Shareholders."
Dated this 18th day of October, 1996.
/s/
--------------------
George O. Martinez
Secretary
5
<PAGE> 1
EXHIBIT 5(a)
Investment Advisory Agreement between the
Registrant and Union Bank of California, N.A.,
dated as of April 1, 1996
6
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of April 1, 1996 between THE HIGHMARK GROUP, a
Massachusetts business trust (herein called the "Group:), and UNION BANK OF
CALIFORNIA, N.A., a national banking association with its principal offices in
San Francisco, California (herein called the "Investment Adviser").
WHEREAS, the Group is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, the Group desires to retain the Investment Adviser to furnish
investment advisory and administrative services to certain investment
portfolios of the Group (the "Funds") and the Investment Adviser represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Group hereby appoints the Investment Adviser to
act as investment adviser to the Funds identified on Schedule A hereto for the
period and on the terms set forth in this Agreement. The Investment Adviser
accepts such appointment and agrees to furnish the services herein set forth
for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Group has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following:
(a) the Group's Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts on March 10,
1987, and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time to time
be amended or restated, is herein called the "Declaration of Trust");
(b) the Group's Code of Regulations and amendments thereto;
(c) resolutions of the Group's Board of Trustees authorizing
the appointment of the Investment Adviser and approving this Agreement;
(d) the Group's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange
Commission on March 12, 1987 and all amendments thereto;
1
<PAGE> 3
(e) the Group's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act"), (File No. 33-12608)
and under the 1940 Act as filed with the Securities and Exchange
Commission and all amendments thereto; and
(f) the Fund's most recent prospectuses and Statement of
Additional Information (such prospectuses and Statement of Additional
Information, as presently in effect, and all amendments and
supplements thereto are herein collectively called the "Prospectus").
The Group will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject to the supervision of the Group's Board of
Trustees, the Investment Adviser will provide a continuous investment program
for each Fund, including investment research and management with respect to all
securities and investments and cash equivalents in said Funds. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Group with respect to the Funds. The
Investment Adviser will provide the services under this Agreement in accordance
with each Fund's investment objective, policies, and restrictions as stated in
the Prospectus and resolutions of the Group's Board of Trustees. The Investment
Adviser further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for
which it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission and in addition will conduct
its activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to the investment
advisory activities of the Investment Adviser;
(c) will not make loans to any person to purchase or carry
units of beneficial interest in the Group or make loans to the Group;
(d) will place orders pursuant to its investment
determinations for the Group either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers, the
Investment Adviser will attempt to obtain prompt execution of orders
in an effective manner at the most favorable price. Consistent with
this obligation, when the execution and price offered by two or more
brokers or dealers are comparable, the Investment Adviser may, in its
discretion, purchase and sell portfolio securities to and from brokers
and dealers who provide the Investment Adviser with research advice
and other services. Unless and until appropriate procedures are
adopted by the Trustees of the Group under Rule 17e-1 of the 1940 Act
and unless the provisions of such Rule are complied with, portfolio
securities will not be purchased from or sold to BISYS Fund Services,
Union Bank of California, N.A., or any affiliated person of either the
Group, BISYS Fund Services, or Union Bank of California, N.A.;
2
<PAGE> 4
(e) will maintain all books and records with respect to the
Group's securities transactions and will furnish the Group's Board of
Trustees such periodic and special reports as the Board may request;
(f) will treat confidentially and as proprietary information
of the Group all records and other information relative to the Group
and prior, present or potential interestholders; and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification
to and approval in writing by the Group, which approval shall not be
unreasonably withheld and may not be withheld where the Investment
Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Group; and
(g) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment
recommendations for the Group, the Investment Adviser's personnel will
not inquire or take into consideration whether the issuers of
securities proposed for purchase or sale for the Group's account are
customers of the Investment Adviser or of its parent or its
subsidiaries or affiliates. In dealing with such customers, the
Investment Adviser and its parent, subsidiaries, and affiliates will
not inquire or take into consideration whether securities of those
customers are held by the Group.
4. SERVICES NOT EXCLUSIVE. The investment management services
furnished by the Investment Adviser hereunder are not to be deemed exclusive,
and the Investment Adviser shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all records
which it maintains for the Group are the property of the Group and further
agrees to surrender promptly to the Group any of such records upon the Group's
request. The Investment Adviser further agrees to preserve for the periods
prescribed by Rule 31a-3 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
6. EXPENSES. During the term of this Agreement, the Investment
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Group.
7. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Investment Adviser
and the Investment Adviser will accept as full compensation therefor a fee
computed daily and paid monthly at the applicable annual rate set forth on
Schedule A hereto. Each Fund's obligation to pay the above-described fee to the
Investment Adviser will begin as of the date of the initial public sale of
shares in that Fund.
3
<PAGE> 5
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having jurisdiction over
the Group) exceed the expense limitations of any such state, the Investment
Adviser will reimburse the Fund for a portion of such excess expenses equal to
such excess times the ratios of the fees otherwise payable by the Fund to the
Investment Adviser hereunder to the aggregate fees otherwise payable by the
Fund to the Investment Adviser hereunder and to BISYS Fund Services under the
Administration Agreement between BISYS Fund Services and the Group. The
obligation of the Investment Adviser to reimburse the Funds hereunder is
limited in any fiscal year to the amount of its fee hereunder for such fiscal
year, provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Funds for such proportion of such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over
the Group so require. Such expense reimbursement, if any, will be estimated
daily and reconciled and paid on a monthly basis.
8. LIMITATION OF LIABILITY. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by the Investment Adviser
of its obligations and duties under this Agreement.
9. DURATION AND TERMINATION. This Agreement will become effective as
to a particular Fund as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities
of such Fund, in accordance with the requirements under the 1940 Act, and,
unless sooner terminated as provided herein, shall continue in effect until
___________________.
Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Fund for successive periods of twelve months each ending on
October 31st of each year, provided such continuance is specifically approved
at least annually (a) by the vote of a majority of those members of the Group's
Board of Trustees who are not parties to this Agreement or interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the vote of a majority of the
Group's Board of Trustees or by the vote of a majority of the outstanding
voting securities of such Fund. Notwithstanding the foregoing, this Agreement
may be terminated as to a particular Fund at any time on sixty days' written
notice, without the payment of any penalty, by the Group (by vote of the
Group's Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund) or by the Investment Adviser. This Agreement will
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning of such terms
in the 1940 Act.)
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
4
<PAGE> 6
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the Commonwealth of Massachusetts.
The names "The HighMark Group" and "Trustees of The HighMark Group"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of March 10, 1987 to which reference is hereby made and a copy
of which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The HighMark Group"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, interestholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any Fund of the Trust must look solely to the
assets of the Trust belonging to such Fund for the enforcement of any claims
against the Trust.
5
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE HIGHMARK GROUP
Seal By: /s/
--------------------------
Title: President
UNION BANK OF CALIFORNIA, N.A.
Seal By: /s/
--------------------------
Title: Executive Vice President
6
<PAGE> 8
Dated as of April 1, 1996
Amended and Restated
Schedule A
to the
Investment Advisory Agreement
between The HighMark Group and
Union Bank of California, N.A.
<TABLE>
<CAPTION>
Name of Fund Compensation*
- ------------ -------------
<S> <C>
The U.S. Government Obligations Fund Annual rate of forty
one-hundredths of one percent
(.40%) of the U.S. Government
Obligations Fund's first $500
million of average daily net assets,
thirty-five one-hundredths of one
percent (.35%) of the next $500
million of average daily net assets,
and thirty one-hundredths of one
percent (.30%) of the remaining
average daily net assets.
The Diversified Obligations Fund Annual rate of forty
one-hundredths of one percent
(.40%) of the Diversified
Obligations Fund's first $500
million of average daily net assets,
thirty-five one-hundredths of one
percent (.35%) of the next $500
million of average daily net assets,
and thirty one-hundredths of one
percent (.30%) of the remaining
average daily net assets.
</TABLE>
- ------------
* All fees are computed daily and paid periodically.
1
<PAGE> 9
Amended and Restated
Schedule A
to the
Investment Advisory Agreement
between The HighMark Group and
Union Bank of California, N.A.
<TABLE>
<CAPTION>
Name of Fund Compensation*
- ------------ -------------
<S> <C>
The 100% U.S. Treasury Obligations Fund Annual rate of forty
one-hundredths of one percent
(.40%) of the U.S. Treasury
Obligations Fund's first $500
million of average daily net assets,
thirty-five one-hundredths of one
percent (.35%) of the next $500
million of average daily net assets,
and thirty one-hundredths of one
percent (.30%) of the remaining
average daily net assets.
The Income Equity Fund Annual rate of one percent
(1.00%) of the first $40 million of
the Income Equity Fund's average
daily net assets and sixty
one-hundredths of one percent
(.60%) of the remaining average
daily net assets.
The Bond Fund Annual rate of one percent
(1.00%) of the first $40 million of
the Bond Fund's average daily net
assets and sixty one-hundredths of
one percent (.60%) of the
remaining average daily net assets.
</TABLE>
- ------------
* All fees are computed daily and paid periodically.
2
<PAGE> 10
Amended and Restated
Schedule A
to the
Investment Advisory Agreement
between The HighMark Group and
Union Bank of California, N.A.
<TABLE>
<CAPTION>
Name of Fund Compensation*
- ------------ -------------
<S> <C>
The Tax-Free Fund Annual rate of forty
one-hundredths of one percent
(.40%) of the Tax-Free Fund's
first $500 million of average daily
net assets, thirty-five one-
hundredths of one percent (.35%)
of the next $500 million of
average daily net assets, and thirty
one-hundredths of one percent
(.30%) of the remaining average
daily net assets.
The California Tax-Free Fund Annual rate of forty
one-hundredths of one percent
(.40%) of the California Tax-Free
Fund's first $500 million of
average daily net assets, thirty-five
one-hundredths of one percent
(.35%) of the next $500 million of
average daily net assets, and thirty
one-hundredths of one percent
(.30%) of the remaining average
daily net assets.
</TABLE>
- ------------
* All fees are computed daily and paid periodically.
3
<PAGE> 11
Amended and Restated
Schedule A
to the
Investment Advisory Agreement
between The HighMark Group and
Union Bank of California, N.A.
<TABLE>
<CAPTION>
Name of Fund Compensation*
- ------------ -------------
<S> <C>
The Balanced Fund Annual rate of one percent
(1.00%) of the first $40 million of
the Fund's average daily net assets
and sixty one-hundredths of one
percent (.60%) of the remaining
average daily net assets.
The Growth Fund Annual rate of one percent
(1.00%) of the first $40 million of
the Fund's average daily net assets
and sixty one-hundredths of one
percent (.60%) of the remaining
average daily net assets.
The Government Annual rate of one percent
(1.00%) of the first $40 million of
the Fund's average daily net assets
and sixty one-hundredths of one
percent (.60%) of the remaining
average daily net assets.
The Income and Growth Fund Annual rate of one percent
(1.00%) of the first $40 million of
the Fund's average daily net assets
and sixty one-hundredths of one
percent (.60%) of the remaining
average daily net assets.
</TABLE>
- -----------
* All fees are computed daily and paid periodically.
4
<PAGE> 12
Amended and Restated
Schedule A
to the
Investment Advisory Agreement
between The HighMark Group and
Union Bank of California, N.A.
<TABLE>
<CAPTION>
Name of Fund Compensation*
- ------------ -------------
<S> <C>
The Intermediate California Annual rate of one percent
(1.00%) of the first $40 million of
the Fund's average daily net assets
and sixty one-hundredths of one
percent (.60%) of the remaining
average daily net assets.
The Intermediate Municipal Annual rate of one percent
(1.00%) of the first $40 million of
the Fund's average daily net assets
and sixty one-hundredths of one
percent (.60%) of the remaining
average daily net assets.
THE HIGHMARK GROUP
By: /s/
--------------------------
Title: President
UNION BANK OF CALIFORNIA, N.A.
By: /s/
--------------------------
Title: Executive Vice President
</TABLE>
- ------------
* All fees are computed daily and paid periodically.
5
<PAGE> 1
EXHIBIT 9(b)
Amendment made as of June 19, 1996 to the
Management and Administration Agreement
between Registrant and The Winsbury Company
6
<PAGE> 2
AMENDMENT TO
MANAGEMENT AND ADMINISTRATION AGREEMENT
DATED AS OF AUGUST 1, 1995
AMENDMENT made as of June 19, 1996 to the MANAGEMENT AND
ADMINISTRATION AGREEMENT dated as of August 1, 1995 (the "Agreement") by and
between The HighMark Group, a Massachusetts business trust (the "Trust") and
The Winsbury Company Limited Partnership d/b/a The Winsbury Company (now known
as BISYS Fund Services) to reduce the number of days required to provide
written notice for termination of the Agreement from 120 days to 90 days.
The last sentence of Section 5 is amended to read:
This Agreement is terminable at any time with respect to a
particular Fund or the Trust as a whole by either party
without penalty for any reason upon 90 days' written notice
by the party effecting such termination to the other party.
THE HIGHMARK GROUP
By: /s/
--------------------------
Name:
Title:
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/
--------------------------
Title:
-----------------------
7
<PAGE> 1
EXHIBIT 9(f)
Amendment made as of June 19, 1996 to the
Fund Accounting Agreement between Registrant
and BISYS Fund Services Ohio, Inc.
8
<PAGE> 2
AMENDMENT TO
FUND ACCOUNTING AGREEMENT
DATED AS OF AUGUST 1, 1995
AMENDMENT made as of June 19, 1996 to the FUND ACCOUNTING AGREEMENT
dated as of August 1, 1995 (the "Agreement") by and between The HighMark Group,
a Massachusetts business trust (the "Trust") and BISYS Fund Services Ohio, Inc.
to reduce the number of days required to provide written notice for termination
of the Agreement from 120 days to 90 days.
The last sentence of Section 6 is amended to read:
This Agreement is terminable at any time with respect to a
particular Fund or the Trust as a whole by either party
without penalty for any reason only upon 90 days' prior
written notice by the party effecting said termination to the
other party.
THE HIGHMARK GROUP
By: /s/
--------------------------
Name:
Title:
BISYS FUND SERVICES OHIO, INC.
By: /s/
--------------------------
Name:
Title:
9
<PAGE> 1
EXHIBIT 11(a)
Consent of Deloitte & Touche LLP
10
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 18 to Registration
Statement under the Securities Act of 1933, filed under Registration Statement
No. 33-12608 of our report dated September 13, 1996, relating to The HighMark
Group, including Diversified Obligations Fund, U.S. Government Obligations
Fund, 100% U.S. Treasury Obligations Fund, California Tax-Free Fund, Tax-Free
Fund, Bond Fund, Government Bond Fund, Income Equity Fund, Balanced Fund,
Growth Fund, and Income & Growth Fund, included in the Statement of Additional
Information and to the reference to us under the caption "Auditors", in such
Registration Statement.
DELOITTE & TOUCHE LLP
Dayton, Ohio
November 7, 1996
11
<PAGE> 1
EXHIBIT 11(b)
Consent of Coopers & Lybrand L.L.P.
12
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our Firm under the caption "Financial
Highlights" in the Prospectuses relating to The Highmark Group (comprising
respectively, the Diversified Obligations Fund, U.S. Government Obligations
Fund, 100% U.S. Treasury Obligations Fund, California Tax-Free Fund, Tax-Free
Fund, Bond Fund, Government Bond Fund, Income Equity Fund, Balanced Fund, Growth
Fund, and Income & Growth Fund) in this Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A (File No. 33-12608).
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
November 8, 1996
<PAGE> 1
EXHIBIT 11(c)
Consent of Ropes & Gray
13
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and the references to our
firm under the caption "Legal Counsel" included in or made a part of
Post-Effective Amendment No. 18 to the Registration Statement (Nos. 33-12608
and 811-5059) of The HighMark Group on Form N-1A under the Securities Act of
1933, as amended.
Ropes & Gray
Washington, D.C.
November 8, 1996
<TABLE> <S> <C>
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<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 011
<NAME> THE HIGHMARK DIVERSIFIED OBLIGATIONS FUND
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<PERIOD-TYPE> 12-MOS
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<PERIOD-START> AUG-1-1995
<PERIOD-END> JUL-31-1996
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<INVESTMENTS-AT-VALUE> 435402
<RECEIVABLES> 2256
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 437675
<PAYABLE-FOR-SECURITIES> 5000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1948
<TOTAL-LIABILITIES> 6948
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 431097
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<SHARES-COMMON-PRIOR> 128276<F1>
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 370
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22468
<OTHER-INCOME> 0
<EXPENSES-NET> 2987
<NET-INVESTMENT-INCOME> 19481
<REALIZED-GAINS-CURRENT> 16
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 19497
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19481
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1099638<F1>
<NUMBER-OF-SHARES-REDEEMED> 1049143<F1>
<SHARES-REINVESTED> 7260<F1>
<NET-CHANGE-IN-ASSETS> 32060
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 386
<GROSS-ADVISORY-FEES> 1591
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4314
<AVERAGE-NET-ASSETS> 158401<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> 0.049<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> 0.049<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
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<PER-SHARE-NAV-END> 1.00<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>INVESTOR SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 012
<NAME> THE HIGHMARK DIVERSIFIED OBLIGATIONS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-1-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 435402
<INVESTMENTS-AT-VALUE> 435402
<RECEIVABLES> 2256
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 437675
<PAYABLE-FOR-SECURITIES> 5000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1948
<TOTAL-LIABILITIES> 6948
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 431097
<SHARES-COMMON-STOCK> 245066<F1>
<SHARES-COMMON-PRIOR> 270777<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 370
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 430727
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22468
<OTHER-INCOME> 0
<EXPENSES-NET> 2987
<NET-INVESTMENT-INCOME> 19481
<REALIZED-GAINS-CURRENT> 16
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 19497
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19481
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 843405<F1>
<NUMBER-OF-SHARES-REDEEMED> 869182<F1>
<SHARES-REINVESTED> 66<F1>
<NET-CHANGE-IN-ASSETS> 32060
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 386
<GROSS-ADVISORY-FEES> 1591
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4314
<AVERAGE-NET-ASSETS> 239255<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> 0.049<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> 0.049<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> 0.75<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>FIDUCIARY SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 021
<NAME> THE HIGHMARK U.S. GOVERNMENT OBLIGATIONS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-1-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 227621
<INVESTMENTS-AT-VALUE> 227621
<RECEIVABLES> 557
<ASSETS-OTHER> 33
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 228211
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1014
<TOTAL-LIABILITIES> 1014
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 227373
<SHARES-COMMON-STOCK> 75727<F1>
<SHARES-COMMON-PRIOR> 48492<F1>
<ACCUMULATED-NII-CURRENT> 0
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<PER-SHARE-NAV-BEGIN> 10.29<F1>
<PER-SHARE-NII> 0.69<F1>
<PER-SHARE-GAIN-APPREC> (0.18)<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>INVESTOR SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 062
<NAME> THE HIGHMARK BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
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<FN>
<F1>FIDUCIARY SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 071
<NAME> THE HIGHMARK INCOME EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
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<FN>
<F1>INVESTOR SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
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<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 072
<NAME> THE HIGHMARK INCOME EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
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<FN>
<F1>FIDUCIARY SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 081
<NAME> THE HIGHMARK BALANCED FUND
<MULTIPLIER> 1000
<S> <C>
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<EXPENSE-RATIO> 0.94<F1>
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<FN>
<F1>INVESTOR SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 082
<NAME> THE HIGHMARK BALANCED FUND
<MULTIPLIER> 1000
<S> <C>
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<FN>
<F1>FIDUCIARY SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
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<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 091
<NAME> THE HIGHMARK GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
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<FN>
<F1>INVESTOR SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811527
<NAME> THE HIGHMARK GROUP
<SERIES>
<NUMBER> 092
<NAME> THE HIGHMARK GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
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<FN>
<F1>FIDUCIARY SHARES
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 6
<CIK> 0000811257
<NAME> THE HIGHMARK GROUP
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<NUMBER> 101
<NAME> THE HIGHMARK INCOME GROWTH FUND
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<S> <C>
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<FN>
<F1>INVESTOR SHARES
</FN>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<F1>INVESTOR SHARES
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<F1>FIDUCIARY SHARES
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