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Registration No. 33-46137 / 811-06575
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. [9] [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [12] [X]
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
(Exact name of Registrant as Specified in Charter)
905 Marconi Avenue
Ronkonkoma, NY 11779
(Address of Principal Executive Office) (ZIP Code)
Registrant's Telephone Number: (510) 460-5444
William M. Sullivan
905 Marconi Avenue
Ronkonkoma, NY 11779
(Name and Address of Agent for Service)
Copy to:
William G. Pusch
Davis Wright Tremaine LLP
2600 Century Square, 1501 Fourth Avenue
Seattle, WA 98101-1688
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on [date] pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on [date] pursuant to paragraph (a)(2) of Rule 485
[X] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
An indefinite number of shares has been registered by this Registration
Statement pursuant to Rule 24f-2 under the Investment Company Act of 1940. A
Form 24F-2 was filed on February 25, 1997 for the fiscal year ending December
31, 1996.
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CADRE NETWORK HEALTH
FINANCIAL SERVICES TRUST
CROSS-REFERENCE SHEET
Between Items Enumerated in Part A
of Form N-1A and Prospectus
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ITEM NUMBER LOCATION
OF FORM N-1A IN PROSPECTUS
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1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Financial Highlights
Information
4. General Description The Trust; Eligible
of Registrant Participants: Description of
the Fund
5. Management of Fund Management of the Fund
5A. Management's Discussion *
of Fund Performance
6. Capital Stock and General Information
Other Securities
7. Purchase of Securities How to Invest in the Fund
Being Offered
8. Redemption or Redemptions
Repurchase
9. Pending Legal Proceedings *
<CAPTION>
Between Items Enumerated in Part B
of Form N-1A and Statement of Additional Information
ITEM NUMBER LOCATION IN STATEMENT
OF FORM N-1A OF ADDITIONAL INFORMATION
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information *
and History
13. Investment Objectives Investment Objective and
and Policies Management Policies
14. Management of the Fund Management of the Fund
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<TABLE>
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15. Control Persons and Management of the Fund
Principal Holders of
Securities
16. Investment Advisory Management Agreement;
and Other Services Consulting Agreements
17. Brokerage Allocation Portfolio Transactions
and Other Practices
18. Capital Stock and Information About the Fund
Other Securities
19. Purchase, Redemption Determination of Net Asset
and Pricing of Value
Securities Being
Offered
20. Tax Status *
21. Underwriters Distribution Agreement
22. Calculation of Fund Performance
Performance Data
23. Financial Statements Financial Statements
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* Omitted since answer is negative or inapplicable
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PART A - PROSPECTUS
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PROSPECTUS , 1998
CADRE NETWORK HEALTH FINANCIAL SERVICES
LIQUID ASSET FUND
The Cadre Network Health Financial Services Liquid Asset Fund (the "Fund")
is an investment portfolio of the Cadre Network Health Financial Services Trust
(the "Trust"), which is an open-end, diversified management investment company.
The Fund operates as a money market mutual fund, with the goal to provide as
high a level of current income as is consistent with the preservation of capital
and liquidity.
Participants may invest or redeem shares at any time without charge or
penalty. Free and unlimited checkwriting redemption privileges are available to
Participants.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Fund will be able to maintain a
stable net asset value of $1.00 per share.
This Prospectus sets forth concisely information about the Fund that a
person should know before investing. It should be read and retained for future
reference. Additional information about the Fund, contained in the Statement of
Additional Information dated , 1998, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. For a free copy, write to the address or call the telephone number
listed under "General Information" in this Prospectus.
TABLE OF CONTENTS
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EXPENSE SUMMARY......................................................................... 2
FINANCIAL HIGHLIGHTS.................................................................... 3
THE TRUST............................................................................... 3
DESCRIPTION OF THE FUND................................................................. 3
HOW TO INVEST IN THE FUND............................................................... 6
REDEMPTIONS............................................................................. 7
SHAREHOLDER SERVICES.................................................................... 7
MANAGEMENT OF THE FUND.................................................................. 8
YIELD INFORMATION....................................................................... 9
DISTRIBUTIONS AND TAXES................................................................. 9
GENERAL INFORMATION..................................................................... 10
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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EXPENSE SUMMARY
The purpose of the following table is to assist you in understanding the
various costs and expenses borne by the Fund, and therefore indirectly by
investors, the payment of which will reduce investors' return on an annual
basis.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
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Management Fees (After Reimbursement)(1)................................ 40%
Other Expenses (After Reimbursement)(2)................................. 39%
Total Fund Operating Expenses (After Reimbursement)(3).................. 79%
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(1) Management fees are payable at an annual rate of .40% for the first
$250,000,000 of the average daily net assets, .3675% of the next
$250,000,000 of such assets, and .3350% of such assets in excess of
$500,000,000. Subject to revision or termination upon 90 days' notice to the
Fund, Cadre Financial Services, Inc. ("Cadre Financial") has agreed not to
impose all or a portion of its management fee and to take other action, to
the extent necessary, to maintain the annualized expenses at not more than
85% of average net assets of the Fund.
(2) Other Expenses include custodian, legal, audit, reimbursement of
organizational expenses, insurance and trustee expenses paid to
non-interested parties. See "Management of the Fund -- Trust Expenses."
(3) Based on the level of total Fund operating expenses listed above, total
expenses would be:
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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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................ $ 8.10 $ 25.53 $ 44.74 $ 101.83
</TABLE>
The amounts listed in the example should not be considered as
representative of past or future expenses and actual expenses may be greater or
less than those indicated. While the example assumes a 5% annual return, the
Fund's actual performance will vary and may result in an actual return greater
or less than 5%.
Management fees are payable to Cadre Financial Services, Inc. ("Cadre
Financial") for managing the Fund's investments and business affairs and
distributing its shares. Cadre Financial has agreed to reimburse the Fund if and
to the extent that total operating expenses (including the management and
distribution fees, but excluding interest, taxes, and extraordinary expenses)
exceed an annual rate of .85% of the Fund's average daily net assets. Please
refer to footnote (1) above and "Management of the Fund" for further
information.
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FINANCIAL HIGHLIGHTS
The financial information in the table below for the years ended December
31, 1995, December 31, 1996 and December 31, 1997 has been audited by Price
Waterhouse LLP, independent auditors, whose report for the year ended December
31, 1997 is included in the Statement of Additional Information, and for the
years ended December 31, 1993 and December 31, 1994, has been audited by KPMG
Peat Marwick LLP, independent auditors.
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YEAR ENDED DECEMBER 31,
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1997 1996 1995 1994 1993
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Per Share Data:
Net asset value, beginning of
period......................... $ 1,000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income............. 0.048 0.048 0.058 0.042 0.030
Less Distributions................ (0.048) (0.048) (0.058) (0.042) (0.030)
------- ------- ------- ------- -------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return.............. 4.91% 5.00% 5.83% 5.83% 3.06%
Ratio to Average Net Assets
(Annualized Basis):
Expenses, beforevz
reimbursement/waiver........... 0.79% 0.68% 0.67% 1.24% 1.58%
Expenses, net of
reimbursement/waiver........... 0.79% 0.65% 0.27% 0.26% 0.19%
Net investment income, before
reimbursement/waiver........... 4.81% 4.78% 6.05% 3.24% 1.61%
Net investment income, net of
reimbursement/waiver........... 4.81% 4.81% 5.78% 4.22% 3.00%
Net Assets at end of period (in
thousands)..................... $42,828 $40,085 $41,864 $20,540 $ 8,914
======= ======= ======= ======= =======
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* Unannualized
THE TRUST
The Cadre Network Health Financial Services Trust (the "Trust") is a
California trust. The Fund is an investment portfolio of the Trust.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE. The objective of the Fund is to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity. There an be no assurance that the Fund's investment objective will be
achieved. Securities in which the Fund will invest will be of high quality and
may not earn as high a level of current income as long-term or lower quality
securities which generally have less liquidity, greater market risk and more
fluctuation in market value.
MANAGEMENT POLICIES. To achieve its goal, the Fund invests in short-term
money market instruments, consisting exclusively of securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, time
deposits and certificates of deposit, bankers' acceptances, repurchase
agreements and high grade corporate obligations, including commercial paper,
corporate bonds, and notes with remaining maturities of 13 months or less.
The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Fund uses the amortized cost method of
valuing its securities pursuant to Rule 2a-7 under the Investment
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Company Act of 1940, certain requirements of which are summarized in the
following paragraphs. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share. The Board of Trustees will
review the Fund's holdings to determine whether the net asset value calculated
by using available market quotations deviates from $1.00 per share. See
"Determination of Net Asset Value" in the Fund's Statement of Additional
Information.
The Fund is required to maintain a dollar-weighted average portfolio
maturity of 90 days or less and purchase only instruments having remaining
maturities of 13 months or less. It will invest only in U.S. dollar denominated
securities which present minimal credit risks, as determined in accordance with
procedures established by the Board of Trustees, and which are high-quality
securities. To be considered high quality, a security must be issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities;
or be rated in one of the highest rating categories for debt obligations by at
least two nationally recognized statistical rating organizations (or one rating
organization if the instrument was rated by only one such organization); or, if
unrated, be of comparable quality as determined in accordance with procedures
established by the Board of Trustees. No assets may be invested in securities
rated only in the second highest such rating category or, if unrated, only of
comparable quality. The nationally recognized statistical rating organizations
currently rating instruments of the type the Fund may purchase are Moody's
Investors Service, Inc., Standard & Poor's Corporation, Duff and Phelps, Inc.,
and Fitch Investors Services, Inc. Their rating criteria are described in the
Appendix to the Fund's Statement of Additional Information.
In addition, the Fund will not invest more than 5% of its total assets in
the securities (including the securities collateralizing a repurchase agreement)
of, or subject to puts issued by, a single issuer, except that (i) the Fund may
invest more than 5% of its total assets in a single issuer for a period of up to
three business days in certain limited circumstances, (ii) the Fund may invest
in obligations issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities without any such limitation, and (iii) the
limitation with respect to puts does not apply to unconditional puts if no more
than 10% of the Fund's total assets is invested in securities issued or
guaranteed by the issuer of the unconditional put. As to each security, these
percentages are measured at the time the Fund purchases the security. For
further information regarding the amortized cost method of valuing securities,
see "Determination of Net Asset Value" in the Fund's Statement of Additional
Information.
PORTFOLIO SECURITIES.
U.S. Government Securities. U.S. government securities are obligations of,
or are guaranteed by, the U.S. government, its agencies or instrumentalities.
These include bills, certificates or indebtedness, notes, and bonds issued by
the U.S. Treasury or by agencies or instrumentalities of the U.S. government.
Some U.S. government securities, such as Treasury bills and bonds, are supported
by the full faith and credit of the U.S. Treasury; others are supported by the
right of the issuer to borrow from the U.S. Treasury; others, such as those of
the Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations, and
others, such as those of the Student Loan Marketing Association and the Federal
Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality. While the U.S. government provides financial support to U.S.
government sponsored agencies or instrumentalities, no assurance can be given
that it will always do so since it is not an obligation by law. The Fund will
invest in such securities only when the Fund is satisfied that the credit risk
with respect to the issuer is minimal. Also, U.S. government obligations and
guaranteed obligations will have fluctuating market values.
Time Deposits. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time (in no event longer than
seven days) at a stated interest rate.
Certificates of Deposit. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time.
Bankers' Acceptances. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligations both of the bank and of the drawer to
pay the face amount of the instrument upon maturity.
4
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Repurchase Agreements. Repurchase agreements involve the acquisition by the
Fund of an underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Fund to resell, the instrument at a fixed price. The Fund's
custodian will have custody of, and will hold in a segregated account,
securities acquired by the Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange Commission
to be loans by the Fund. In an attempt to reduce the risk of incurring a loss on
a repurchase agreement, the Fund will enter into repurchase agreements only with
domestic banks with total assets in excess of one billion dollars or primary
government securities dealers reporting to the Federal Reserve Bank of New York
with respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. Cadre Financial will
monitor on a daily basis the value of the collateral to assure that it always
equals or exceeds the repurchase price. Certain costs may be incurred by the
Fund in connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by the Fund may be delayed or limited.
Cadre Financial will consider on an ongoing basis and in accordance with
guidelines established by the Board of Trustees the creditworthiness of the
institutions with which the Fund enters into repurchase agreements.
Commercial Paper. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial paper
purchased by the Fund may consist of direct obligations issued by domestic and
foreign entities.
Corporate Bonds. Corporate bonds and medium term notes are normally
unsecured debt obligations of the issuer with original terms to maturity in
excess of one year. However, the Fund will not purchase any such corporate
obligations which have a remaining maturity in excess of 13 months. The Fund
will not invest in floating or variable rate demand obligations or in securities
that are not readily marketable.
Lending of Securities. Security loan transactions involve the lending of
securities to a broker-dealer or institutional investor for its use in
connection with short sales, arbitrages, or other securities transactions. Loans
of securities will be made in strictest conformity with applicable federal and
state rules and regulations. Since there may be delays in recovery of loaned
securities or even a loss of rights in collateral supplied should the borrower
fail financially, loans will be made only to firms deemed by Cadre Financial to
be of good standing and will not be made unless, in the judgment of Cadre
Financial, the consideration to be earned from such loans would justify the
risk.
CERTAIN FUNDAMENTAL POLICIES. The Fund (i) will not borrow money in an
amount that exceeds 33 1/3% of the value of the Fund's total assets (including
the amount borrowed) valued at the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made, but
within such limit will borrow from banks only for temporary or emergency (not
leveraging or investment) purposes or by engaging in reverse repurchase
agreements (and when borrowings exceed 5% of the value of the Fund's assets, the
Fund will not make any additional investments); (ii) will not pledge its assets
in an amount which exceeds 33 1/2% of the value of its total assets, and within
such limit will pledge assets only to secure borrowings for temporary or
emergency purposes; (iii) will not invest more than 10% of its total assets in
repurchase agreements not entitling the holder to payment of principal and
interest within seven days and in securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market; (iv) except in the case of securities issued or guaranteed by
the U.S. Government, will not invest more than 5% of its total assets in the
securities of any one issuer; (v) will not lend any security or make any other
loan if, as a result, more than 33 1/2% of the Fund's total assets would be lent
to other parties, except (a) through the purchase of a portion of an issue of
debt securities in accordance with its investment objective, policies and
limitations, or (b) by engaging in repurchase agreements with respect to
portfolio securities; and (vi) under normal conditions, may invest more than 25%
of its total assets in obligations issued by domestic banks, and may invest up
to 25% of its total assets in the securities of issuers in a single industry,
provided that there is no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. This
paragraph described certain fundamental policies of the Fund which cannot be
changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of
5
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the Fund's outstanding voting shares. See "Investment Objective and Management
Policies" in the Statement of Additional Information for other fundamental
policies of the Fund.
The Fund attempts to increase yields by trading to take advantage of
short-term market variations. This policy is expected to result in high
portfolio turnover but should not adversely affect the Fund since the Fund
usually does not pay brokerage commissions when it purchases short-term debt
obligations. The value of the portfolio securities held by the Fund will vary
inversely to changes in prevailing interest rates. Thus, if interest rates have
increased from the time a security was purchased, such security, if sold, might
be sold at a price less than its purchase cost. Similarly, if interest rates
have declined from the time a security was purchased, such security, if sold,
might be sold at a price greater than its purchase cost. In either instance, if
the security was purchased at face value and held to maturity, no gain or loss
would be realized.
RISK FACTORS. The Fund's portfolio will be affected by general changes in
interest rates which will result in increases or decreases in the value of the
securities held by the Fund. The market value of the securities in the Fund's
portfolio can be expected to vary inversely to changes in prevailing interest
rates. Investors also should recognize that, in periods of declining interest
rates, the Fund's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, the Fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Fund from the continuous sale of its shares will likely be invested
in portfolio instruments producing lower yields than the balance of its
portfolio, thereby reducing the Fund's current yield. In periods of rising
interest rates, the opposite can be expected to occur. In addition, securities
in which the Fund may invest may not yield as high a level of current income as
might be achieved by investing in securities with less liquidity and safety and
longer maturities. The risks associated with lending portfolio securities, as
with other extensions of credit, consist of possible loss of rights in the
collateral should the borrower fail financially. To the extent the Fund invests
in obligations of foreign entities, there may be additional risks including
future unfavorable political and economic developments, possible withholding
taxes or other governmental restrictions which might adversely affect payment of
principal or interest. Also, less public information may be available about
foreign entities.
HOW TO INVEST IN THE FUND
An initial investment in the Fund must be preceded or accompanied by a
properly completed registration form. A properly completed registration form
must be on file when making a redemption from an account. Registrations should
be forwarded to:
Cadre Financial Services, Inc.
905 Marconi Avenue
Ronkonkoma, New York 11779
Participants may make an investment into their Fund account by the
following two methods:
- Wire Transfer -- Participants will begin earning on their investment the
same day by calling the Fund's toll-free number 1-800-221-4524, EXT 2, by
12:00 noon New York Time provided the Fund's custodian bank receives the
wire transfer through the Federal Reserve Wire System prior to its close
that day.
- Automated Clearing House Credits (ACH) -- Participants will begin earning
on their investment the following day by calling the Custodian's
toll-free number 1-800-568-1300 by 3:00 p.m. Central Time, and requesting
an investment through the use of an ACH instrument.
No minimum investment is required for wire transfers, DTC's or ACH's.
Participants making investments by use of an ACH or DTC may not redeem such
investments for a period of five business days following the deposit. If a
participant desires earlier withdrawal privileges, the Fund recommends use of
the Federal Reserve Wire System.
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REDEMPTIONS
GENERAL. Participants may request redemption of shares at any time.
Redemptions requests should be transmitted to Cadre Financial Services, Inc.,
905 Marconi Avenue, Ronkonkoma, New York 11779. When a request is received in
proper form, the Fund will redeem the shares at the next determined net asset
value. Written redemption requests must be signed by an authorized person noted
on the registration form.
Redemption proceeds of $10,000 or more will be wired to any member bank of
the Federal Reserve System, for deposit in a Participant's account, in
accordance with the redemption request. Amounts under $10,000 will be paid by
check.
CHECK REDEMPTION PRIVILEGE. Participants may use the Fund's unlimited
checkwriting services by filling out a checkwriting authorization form and
signing the custodian bank's certificate of authority form. Participants may
issue checks in any dollar amount. Checks will be honored only if they are
properly signed by a person authorized on the certificate of authority. There is
a charge for stop-payments or if the Fund cannot honor a redemption check due to
insufficient funds or other valid reasons. Checkwriting privileges may be
modified or terminated at any time by the Fund.
REDEMPTION BY WIRE OR TELEPHONE. Shares may be redeemed by wire or
telephone as long as the person requesting such withdrawal has been authorized
on the registration form. Wire or telephone requests will be honored the same
day as long as the Fund is notified by 12:00 noon New York Time (earnings stop
the same day). The redemption proceeds will be wired to the participant's
authorized bank account, so long as the amount is $10,000 or more. If less, a
check will be issued in payment for the redemption. No charge is imposed for
wiring redemptions proceeds.
In order to assure that a person requesting a share redemption by telephone
is authorized by a participant, the Fund will wire redemption proceeds only to
bank accounts previously specified by the participant on its registration form.
If the Fund fails to follow these confirmation procedures, it could be liable
for losses due to unauthorized or fraudulent telephone redemption instructions.
REDEMPTION BY AUTOMATED CLEARING HOUSE (ACH). Shares may be redeemed by use
of an ACH as long as the person requesting the ACH debit is authorized on the
registration form. A participant may call the Fund's toll-free number
1-800-221-4524, EXT 2, by 5:00 p.m. New York Time, and request an ACH
withdrawal. Such withdrawal will become effective the following business day and
will be in the Participant's designated bank account in "collected funds."
Earnings on the participant's account continue the day the withdrawal request is
initiated but stop the next business day. There is no minimum amount required on
an ACH redemption.
SHAREHOLDER SERVICES
Participants may open as many accounts with the Fund as they desire. Each
account may utilize the Fund's unlimited checkwriting services.
Participants may call the Fund's toll-free number 1-800-221-4524, EXT 2,
prior to 12:00 noon New York Time any business day to make an internal transfer
between their different Fund accounts the same day. (Earnings stop accruing in
the account the withdrawal is made from and start in the account receiving such
transfer.) Participants may call up to 5:00 p.m. New York Time to make an
internal transfer for the following business day. (Earnings continue to accrue
until the transfer takes place.)
Participants will receive a daily confirmation reflecting an opening
balance, activity and closing balance each day their account has activity. A
monthly statement will be sent to each participant within ten days after the end
of each month reflecting an opening share balance, all transactions for the
month and a closing share balance. In addition, the statement will reflect the
earnings for the month (also year-to-date) and capital gains for the year.
Participants will receive the Fund's unaudited financial statements within
40 days after the end of each calendar quarter. Once a year, participants will
receive the Fund's audited annual financial statements.
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Board of Trustees of the Trust is responsible for
the supervision of the management of the business and affairs of the Trust. The
Board of Trustees will perform duties and undertake responsibilities similar to
those of a board of directors of a corporation.
MANAGER AND INVESTMENT ADVISER. Cadre Financial Services, Inc., located at
905 Marconi Avenue, Ronkonkoma, New York 11779, serves as the Fund's investment
adviser and manager. Subject to the direction of the Board of Trustees, it is
responsible for the overall management of the Trust's business and investment
affairs under the terms of a Management and Investment Advisory Agreement.
Cadre Financial Services, Inc. is a subsidiary of AMBAC Inc., a leading
insurer of municipal and structured finance obligations and provider of
investment contracts and investment rate swaps to states, municipalities and
municipal authorities. AMBAC Inc. is a publicly held company whose shares are
traded on the New York Stock Exchange. Cadre Financial Services, Inc. also
serves as the investment adviser of AMBAC Treasurers Trust, a registered
investment company with three investment portfolios (including two money market
funds) and total assets of approximately $150 million as of December 31, 1997.
In addition, it manages and is investment adviser to collective, short-term
investment programs for a number of local governmental and municipal entities
which had total assets of approximately $1.8 billion as of December 31, 1997.
None of those programs is registered under the Investment Company Act of 1940.
Cadre Financial Services, Inc. will be paid fees monthly for its services
as investment adviser and manager calculated as a percentage of the Fund's
average daily assets. Such fees are payable at an annual rate of .40% for the
first $250,000,000 of such assets, .3675% of the next $250,000,000, and .3350%
of such assets in excess of $500,000,000.
Subject to revision or termination upon 90 days' notice to the Fund, Cadre
Financial Services, Inc. has agreed not to impose all or a portion of its
management fee and to take other action, to the extent necessary, to maintain
the Fund's aggregate operating expenses (excluding interest, taxes, and
extraordinary expenses) at an annual rate of not more than .85% of the average
daily net assets for any fiscal year. This has the effect of lowering the
overall expense ratio of the Fund and increasing the yield to the participants
at the time such amounts are reimbursed. The Fund will not pay Cadre Financial
Services, Inc. at a later time for any operating expenses which have been
previously reimbursed.
DISTRIBUTOR. Cadre Securities, Inc., an affiliate of Cadre Financial
Services, Inc., is the Fund's distributor. Its principal business address is 905
Marconi Avenue, Ronkonkoma, New York, 11779.
CUSTODIAN. First Trust National Association, Pioneer Building, 6th Floor,
336 North Robert Street, St. Paul, Minnesota 55164 is the Fund's custodian. The
custodian takes no part in determining the investment policies of the Fund or in
deciding which securities are purchased are purchased or sold by the Fund.
TRANSFER AGENT. Cadre Financial Services, Inc. is the Fund's transfer agent
and dividend disbursing agent.
TRUST EXPENSES. Pursuant to the Management and Investment Advisory
Agreement, Cadre Financial Services, Inc. will pay all of the costs and expenses
incurred to provide to the Fund the management and investment advisory services,
including the expense of all employees and office space and facilities necessary
to provide such services and all brokerage fees and commissions. The Fund will
pay expenses not assumed by Cadre Financial Services, Inc. , including
insurance, interest and taxes, expenses of those Trustees who are not
"interested persons" Cadre Financial Services, Inc. or the Trust, legal and
audit expenses and custodial fees.
8
<PAGE> 13
ADMINISTRATIVE SERVICES PLAN. The Trust has adopted an Administrative
Services Plan pursuant to which securities, dealers, brokers, financial
institutions, other industry professionals (such as investment advisors,
accountants, and estate planning firms) and others may be paid fees for
providing administrative support services to the Fund. Such fees may not exceed
..05% of the Fund's average daily assets and will be computed on the basis of
such assets attributable to Shares owned of record or beneficially by each
service provider's customers.
YIELD INFORMATION
From time to time the Fund advertises its yield and effective yield. Both
yield figures are based on historical earning and are not intended to indicate
future performance. It can be expected that these yields will fluctuate
substantially. The yield of the Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then annualized. That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52 week period and is shown as a percentage of the investment.
The effective yield is calculated similarly, but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment. The Fund's yield and effective yield may reflect
absorbed expenses pursuant to any undertaking that may be in effect.
Yield information is useful in reviewing the Fund's performance, but
because yields will fluctuate, under certain conditions such information may not
provide a basis for comparison with domestic bank deposits, other investments
which pay a fixed yield for a stated period of time, or other investment
companies which may use a different method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report and other industry
publications.
DISTRIBUTIONS AND TAXES
DIVIDENDS. The Fund declares dividends from net investment income daily and
pays such dividends monthly. The Fund intends to distribute substantially all of
its net investment income and capital gains, if any, to Participants within each
calendar year as well as on a fiscal year basis.
Dividends from the Fund will not normally qualify for the
dividends-received deduction available to corporations, since the Fund's income
is primarily derived from interest income and short-term capital gains.
Depending upon state law, a portion of the dividends attributable to interest
income derived from U.S. Government securities may be exempt from state and
local taxation. The Fund will provide information on the portion, if any, that
qualifies for this exemption.
CAPITAL GAIN DISTRIBUTIONS. The Fund may distribute short-term capital
gains once a year or more often as necessary to maintain its net asset value at
$1.00 per share or to comply with distribution requirements under federal tax
law. The Fund does not anticipate earning long-term capital gains on securities
held in its Portfolio.
FEDERAL TAXES. Dividends derived from net investment income and short-term
capital gains are taxable as ordinary income. Distributions are taxable when
paid, except that distributions declared in December and paid in January are
taxable as if paid on December 31, whether investors receive distributions in
cash or reinvest them in additional shares. The Fund will send investors an IRS
Form 1099-DIV by January 31 of each year showing their taxable distributions for
the prior calendar year.
TAX STATUS OF THE FUND. The Fund intends to qualify as "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the Code), so that the Fund will not be liable for federal income or
excise taxes on net investment income or capital gains to the extent that these
are distributed to shareholders in accordance with applicable provisions of the
Code.
9
<PAGE> 14
OTHER TAX INFORMATION. The information above is only a summary of some of
the federal tax consequences generally affecting the Fund and its participants
and no attempt has been made to discuss the participants' tax consequences. In
addition to federal taxes, participants may be subject to state or local taxes
on their investment. Participants should consult their tax advisers.
When participants sign their registration form, they will be asked to
certify that their Social Security or Taxpayer Identification Number in correct
and that they are not subject to back-up withholding for failing to report
income to the IRS. If participants do not comply with IRS regulations, the IRS
can require the Fund to withhold 20% of distributions from their account.
GENERAL INFORMATION
The Trust was organized as a California trust under a Declaration of Trust
dated February 12, 1992 and commenced operations on November 1, 1992 under the
name Hospital and Health Facilities Trust. Effective April 30, 1997, the Trust's
name was changed to Cadre Network Health Financial Services Trust. The
Declaration of Trust permits the Board of Trustees to issue an unlimited number
of full and fractional shares and to create an unlimited number of investment
portfolios ("Portfolio") which may issue shares. The Fund does not intend to
issue share certificates. The Fund is the initial Portfolio of the Trust.
Each share is entitled to one vote (and fractional shares are entitled to
proportionate fractional votes) on all matters submitted for a vote of
shareholders. Shares have equal voting rights, except that shares of a
particular Portfolio are entitled to vote on matters affecting only that
Portfolio when required by the Investment Company Act of 1940 or the matter
affects an interest of less than all Portfolios. Shares do not have cumulative
voting rights.
Unless otherwise required by the Investment Company Act of 1940, ordinarily
it will not be necessary for the Fund to hold annual meetings of shareholders.
As a result, Fund shareholders may not consider each year the election of
Trustees or the appointment of auditors. However, pursuant to the Declaration of
Trust, the holders of at least 10% of the shares outstanding and entitled to
vote may require the Trustees to initiate a vote of shareholders as to any
matter with regard to which shareholders have a right to vote, including a
meeting for the purpose of removing the Trustees. The Trustees will call a
meeting of shareholders for the purpose of electing Trustees if, at any time,
less than a majority of the Trustees holding office at the time had been elected
by shareholders.
Cadre Financial Services, Inc. maintains a record of share ownership and
sends investors confirmations and statements of account. Shareholder inquiries
may be made by writing to the Fund at 905 Marconi Avenue, Ronkonkoma, New York
11779, or by calling 1-800-221-4524, EXT 2.
NO PERSON HAS BEEN AUTHORIZE TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
10
<PAGE> 15
MANAGER AND INVESTMENT ADVISER
AND TRANSFER AGENT
Cadre Financial Services, Inc.
905 Marconi Avenue
Ronkonkoma, New York 11779
DISTRIBUTOR
Cadre Securities, Inc.
905 Marconi Avenue
Ronkonkoma, New York 11779
CUSTODIAN
First Trust National Association
Pioneer Building, 6th Floor
336 North Robert Street
St. Paul, MN 55164
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
201 North Service Road
Melville, New York 11747
LEGAL COUNSEL
Davis Wright Tremaine LLP
2600 Century Square
1501 Fourth Avenue
Seattle, Washington 98101-1688
- ------------------------------------------------------
PROSPECTUS
- ------------------------------------------------------
------------------------, 1998
CADRE NETWORK HEALTH FINANCIAL SERVICES
LIQUID ASSET FUND
(800) 221-4524
[LOGO]
CADRE NETWORK HEALTH FINANCIAL SERVICES
---------------------------------------
LIQUID ASSET FUND
<PAGE> 16
PART B - STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 17
================================================================================
CADRE NETWORK HEALTH FINANCIAL SERVICES LIQUID ASSET FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read in conjunction
with the current Prospectus of the Cadre Network Health Financial Services
Liquid Asset Fund (the "Fund"), an investment portfolio of the Cadre Network
Health Financial Services Trust (the "Trust") dated _________, 1998. To obtain a
copy of the Prospectus, please write to Cadre Financial Services, Inc. at 905
Marconi Avenue, Ronkonkoma, New York 11779 or call (800) 221-4524, Ext. 2. This
Statement of Additional Information is not a prospectus.
The Fund operates as a money market mutual fund which seeks to maintain
a stable net asset value of $1.00 per share and to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
Investors may invest or redeem shares at any time without charge or penalty.
Investment in the Fund is limited to investors who are either a hospital, health
system, health facility, medical group, health insuring organization, or other
health care institution, provider or payor.
An investment in the Fund is neither insured or guaranteed by the U.S.
Government. There can be no assurance that the Fund will be able to maintain a
stable net asset value of $1.00 per share.
Cadre Financial Services, Inc. serves as the Fund's investment adviser
and transfer and dividend disbursing agent. Cadre Securities, Inc., an affiliate
of Cadre Financial Services, Inc., is the Fund's distributor.
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES...................... 1
MANAGEMENT OF THE FUND............................................ 3
INVESTMENT ADVISORY AND MANAGEMENT SERVICES...................... 3
DISTRIBUTION AGREEMENT............................................ 6
ADMINISTRATIVE SERVICES PLAN...................................... 6
DETERMINATION OF NET ASSET VALUE.................................. 7
FUND PERFORMANCE.................................................. 8
PORTFOLIO TRANSACTIONS............................................ 10
INFORMATION ABOUT THE FUND........................................ 11
CUSTODIAN, COUNSEL AND INDEPENDENT AUDITORS....................... 12
INDEPENDENT AUDITORS' REPORT...................................... F-1
APPENDIX ......................................................... A-1
_________, 1998
================================================================================
<PAGE> 18
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the Fund's assets that may be invested
in any security or other asset, or sets forth a policy regarding quality
standards, such standard or percentage limitation shall be determined
immediately after and as a result of the Fund's acquisition of such security or
other asset. Accordingly, any later increase or decrease beyond the specified
policy or limitation resulting from a change in values, net assets, or other
circumstances will not be considered when determining whether the investment
complies with the Fund's investment policies and limitations.
The Fund's fundamental investment limitations cannot be changed without
approval of a "majority of the outstanding voting securities" (as defined in the
Investment Company Act of 1940) of the Fund. However, except for the fundamental
investment limitations set forth below and those identified as such in the
Prospectus, the investment policies and limitations described in this Statement
of Additional Information and the Prospectus are not fundamental and may be
changed without shareholder approval.
The following and those described as "certain fundamental policies" in
the Prospectus are the Fund's fundamental investment limitations. The Fund may
not:
(1) Purchase common stocks, preferred stocks, warrants, other equity
securities.
(2) Borrow money, except (i) from banks for temporary or emergency (not
leveraging or investment) purposes or (ii) by engaging in reverse repurchase
agreements, provided that (i) and (ii) in combination ("borrowings") do not
exceed 33-1/3% of the value of the Fund's total assets (including the amount
borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made. When
borrowings exceed 5% of the value of the Fund's total assets, the Fund will not
make any additional investments.
(3) Sell securities short, or write or purchase put or call options.
(4) Underwrite the securities of other issuers or purchase securities
subject to restrictions on disposition under the Securities Act of 1933 (so
called "restricted securities").
(5) Purchase or sell real estate unless acquired as the result of
ownership of securities (but this shall not prevent the Fund from purchasing and
selling marketable securities issued by companies or other entities or
investment vehicles that deal in
1
<PAGE> 19
real estate or interests therein, nor shall this prevent the Fund from
purchasing interest in pools of real estate mortgage loans).
(6) Make loans to others, except through the purchase of debt
obligations and through repurchase agreements as described in the Prospectus.
(7) Purchase the securities of any issuer (other than obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of a single issuer, or it would own
more than 10% of the outstanding voting securities of a single issuer.
(8) Purchase the securities of any issuer (other than obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities) if, as result, more than 25% of the Fund's total assets would
be invested in the securities of issuers having their principal business
activities in the same industry, except that the Fund may invest more than 25%
of its assets in obligations issued by domestic banks.
While domestic branches of foreign banks may, under certain
circumstances, be considered domestic banks, the Fund does not currently intend
to invest in obligations issued by such branches. Should this policy be changed,
the Fund will invest only in instruments issued by those domestic branches which
are subject to the same regulation as United States banks.
Also, while foreign branches of domestic banks may, under certain
circumstances, be considered domestic banks, the Fund does not currently intend
to invest in obligations issued by such branches. Should this policy be changed,
the Fund's investment adviser must disclose that the investment risk associated
with investing in instruments issued by the foreign branch of a domestic bank is
the same as that of investing in instruments issued by a domestic parent, in
that the domestic parent would be unconditionally liable in the event that the
foreign failed to pay on its instruments for any reason.
(9) Invest in companies for the purpose of exercising control.
(10) Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets to
the extent permitted by Section 12(d)(1) of the Investment Company Act of 1940.
(11) Purchase or sell commodities or commodity contracts, including
futures contracts.
(12) Issue bonds or any other class of securities preferred over or
senior to shares of the Fund in respect of the Fund's
2
<PAGE> 20
assets or earnings, except that the Trust may establish additional series of
shares in accordance with its Declaration of Trust.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with their ages and
information as to their principal business occupations during at least the last
five years, are shown below.
WILLIAM T. SULLIVAN, JR., CHAIR AND TRUSTEE*. Chairman and CEO,
Cadre Financial Services, Inc. since 1996. Chairman and CEO of
Cadre Financial Services, Inc.'s predecessor since 1983. His
address is 905 Marconi Avenue, Ronkonkoma, New York 11779. Age: 51.
HARVEY A. FEIN, VICE CHAIR AND TRUSTEE. Chief Financial Officer,
Molina Medical Centers since 1995; Financial Consultant 1994-1995; Director of
Finance, Blue Cross of California-Wellpoint Health Networks, Inc. 1990-1994.
His address is One Golden Shore, Long Beach, California 90802. Age: 51.
JENETE M. MASLONKA, SECRETARY, TREASURER AND TRUSTEE. Chief Operating
Officer, Network Health Financial Services since 1996; Banking consultant
1993-1994; Compliance Officer 1993-1994 and Senior Vice President, Operations
1989-1993, First Professional Bank. Her address is 11835 W. Olympic Boulevard,
Suite 650E, Los Angeles, California 90064. Age: 43.
ALAN H. ANDERSON, TRUSTEE. President, South Coast Health Care
Management, Inc. His address is 3901 E. 4th Street, Long Beach, California
90814. Age: 54.
J. KENDALL ANDERSON, TRUSTEE. President and Chief Executive Officer of
the John Muir-Mt. Diablo Health Systems. His address is 1601 Ygnacio Valley
Road, Walnut Creek, California 94598. Age: 54.
LORI BLOOMFIELD, TRUSTEE. Chief Operating Officer, The Medical
Quality Commission. Her address is 3010 Old Ranch Parkway, Suite 205, Seal
Beach, California 90740. Age: 33.
ELIZABETH SUZANNE CURTIS, TRUSTEE. Executive Director of Sharp
Community Medical Group since April 1994. Vice President of Physician
Services, Sharp Healthcare, San Diego, California from March 1989 to March
1991; and Director of Finance, Sharp Memorial Hospital, San Diego, California,
from November 1987 to March 1989. Her address is 8665 Gibbs Drive, Suite 201,
San Diego, California 92123. Age: 39.
<PAGE> 21
FRANK E. GIBSON, TRUSTEE. President and Chief Executive Officer of
Hospital Consortium of San Mateo County since 1981. CEO, Sequoia Health Care
District since 1996. His address is 1600 Trousdale Drive, Burlingame,
California 94010. Age: 54.
TERRY HARTSHORN, TRUSTEE. Chairman since 1993 and President and CEO
1976-1993, PacifiCare Health Systems; President and CEO UniHealth January
1997-1993. His address is 3120 Lake Center Drive, P.O. Box 25186, Santa Ana,
California 92799. Age: 52.
JAMES O. HILLMAN, TRUSTEE. Senior Vice President, Physicians Group
Council, Health Care Association of Southern California, since April 30, 1997;
Chief Operating Officer, American Medical Group Association April 1996-1997;
Executive Director, Unified Medical Group Association 1988-1996. His address
is 515 S. Figueroa Street, Suite 1300, Los Angeles, California 90071. Age: 62.
MARTIN L. HOPP, TRUSTEE. Otolaryngologist, Head and Neck Surgeon on
staff of Cedars-Sinai Medical Center, Century City Hospital and Midway
Hospital; Chief Operating Officer, Beverly Hills Care. His address is 8631 W.
Third Street, Suite 440E, Los Angeles, California 90048. Age: 47.
JAY HUDSON, TRUSTEE. President and Chief Executive Officer of Community
Hospital of the Monterey Peninsula since 1990; Chief Operating Officer from 1987
to 1990; and Senior Vice President from 1982 to 1987. President and Chief
Executive Officer of Community Hospital Foundation since 1995. His address is
P.O. Box HH, Monterey, California 93942. Age: 60.
* Mr. Sullivan is an "interested person" of the Trust, as defined in the
Investment Company Act of 1940, by virtue of his affiliation with Cadre
Financial Services, Inc.
Trustees who are not "interested persons" are reimbursed for expenses
incurred to attend meetings of the Board of Trustees and receive no attendance
fees or other compensation.
INVESTMENT ADVISORY AND MANAGEMENT SERVICES
Cadre Financial Services, Inc., with offices at 905 Marconi Avenue,
Ronkonkoma, New York 11779, is the Fund's investment adviser and manager. It is
a wholly-owned subsidiary of AMBAC Capital Corporation which, in turn, is a
wholly-owned
3
<PAGE> 22
subsidiary of AMBAC Inc. Through its subsidiaries, AMBAC Inc. is a leading
insurer of municipal and structured finance obligations and a provider of
investment contracts and interest rate swaps to states, municipalities and
municipal authorities. AMBAC Inc. is a publicly held company whose shares are
traded on the New York Stock Exchange.
Cadre Financial Services, Inc. also serves as the investment
adviser of AMBAC Treasurers Trust, a registered investment company with three
investment portfolios (including two money market funds) and total assets of
approximately $150 million as of December 31, 1997. In addition, it manages and
is investment adviser to collective, short-term investment programs for a number
of local governmental and municipal entities. Those programs are not registered
under the Investment Company Act of 1940 and had total assets of approximately
$1.8 billion as of December 31, 1997.
Pursuant to a Management and Investment Advisory Agreement (the
"Advisory Agreement") with the Trust dated December 30, 1996, Cadre Financial
Services, Inc. acts as investment adviser and, subject to the supervision of the
Board of Trustees, directs the investments of the Fund in accordance with its
investment objective, policies and limitations. Cadre Financial Services, Inc.
also acts as the Fund's transfer and dividend disbursing agent. It provides the
Fund with all necessary office facilities and personnel for servicing the Fund's
investments, and pays the salaries of all personnel of Cadre Financial Services,
Inc. and its affiliates performing services relating to research, statistical
and investment activities. In addition, Cadre Financial Services, Inc. or its
affiliates, subject to the supervision of the Board of Trustees, provides the
management and administrative services necessary for the operation of the Fund,
including transfer and dividend disbursing agent services. These services
include providing facilities for maintaining the Fund's organization,
supervising relations with custodians, accountants, and other persons dealing
with the Fund, preparing all general shareholder communications and conducting
shareholder relations, maintaining the Fund's records and the registration of
the Fund's shares under federal and state law, developing management and
shareholder services for the Fund and furnishing reports, evaluations and
analysis for the Board of Trustees.
Cadre Financial Services, Inc. is responsible for the payment of
expenses and costs incurred to provide the Fund with management and investment
advisory services, brokerage fees and commissions in connection with the Fund's
investments. The expenses of the Fund which have not been assumed by Cadre
Financial Services, Inc., including
4
<PAGE> 23
interest and taxes, expenses of those Trustees who are not "interested
persons," legal and audit expense, custodial fees, insurance and expenses of
preparing and filing (but not printing and mailing) amendments to the Fund's
registration statements, reports, notices and meeting material to shareholders,
are paid by the Fund. Cadre Financial Services, Inc. also provides portfolio and
general accounting record maintenance.
The Advisory Agreement was approved by the Board of Trustees of the
Trust, including a majority of the Trustees who are not "interested persons " of
the Trust, as defined by the Investment Company Act of 1940 (the "Independent
Trustees"), at a meeting held in person on October 22, 1996. The Advisory
Agreement was also approved by the shareholders of the Fund at a meeting held on
November 26, 1996. The Advisory Agreement will continue in effect until December
30, 1998, and may be continued in effect from year to year thereafter upon the
approval of the Fund's shareholders or the Board of Trustees. Each annual
continuance also requires approval by a vote of a majority of the Independent
Trustees cast in person at a meeting called for the purpose of voting on such
continuance. The Advisory Agreement may be terminated at any time, without the
payment of any penalty, by the Board of Trustees or by vote of a majority (as
defined in the Investment Company Act of 1940) of the outstanding shares of the
Fund, or by Cadre Financial Services, Inc., in each case on 60 days' written
notice. The Advisory Agreement will automatically terminate in the event of its
assignment (as defined in the Investment Company Act of 1940 and rules
thereunder).
For the services of Cadre Financial Services, Inc. under the Advisory
Agreement, the Fund pays Cadre Financial Services, Inc. a monthly management fee
at an annual rate of .40% of the first $250,000,000 of its average net assets,
..3675% of the next $250,000,000 of such average assets, and .3350% of such
assets in excess of $500,000,000.
During the period ending December 31, 1997, and thereafter subject to
revision or termination upon 90 days' notice to the Fund, Cadre Financial
Services, Inc. has agreed to not impose all or a portion of its management fee
and to take other action, to the extent necessary, to maintain the Fund's
aggregate operating expenses (excluding interest, taxes and extraordinary
expenses) at an
5
<PAGE> 24
annual rate of not more than .85% of the average daily net assets for any fiscal
year or for a portion of such year if the Agreement is terminated or revised.
The Fund paid its current and prior adviser and manager fees for
advisory and management services during the years ended December 31, 1997, 1996
and 1995 of $167,367, $177,658 and $-0-, respectively, pursuant to a Management
and Investment Advisory Agreement providing for management fees at the same rate
as the current Advisory Agreement. As described in the Prospectus, the Fund's
former adviser and manager waived certain portions of its management fees during
some of those years.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement (the "Distribution Agreement")
with the Trust dated April 23, 1997, Cadre Securities, Inc., an affiliate of
Cadre Financial Services, Inc., acts as the Fund's distributor. The Distribution
Agreement was approved by the Board of Trustees of the Trust, including the
Independent Trustees, at a meeting held in person on October 22, 1996. The
Distribution Agreement will continue in effect until December 30, 1998, and may
be continued in effect from year to year thereafter upon the approval of the
Fund's shareholders or the Board of Trustees. Each annual continuance also
requires approval by a vote of a majority of the Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance. The
Distribution Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Trustees or a majority (as defined in the Investment
Company Act of 1940 ) of the outstanding shares of the Fund, or by Cadre
Securities, Inc., in each case on sixty (60) days' written notice. The
Distribution Agreement will automatically terminate in the event of its
assignment (as defined in the Investment Company Act of 1940 and rules
thereunder).
Cadre Securities, Inc. provides services under the Distribution
Agreement in consideration of the fees paid by the Fund to its affiliate, Cadre
Financial Services, Inc., for the advisory and management services provided
pursuant to the Advisory Agreement.
ADMINISTRATIVE SERVICES PLAN
The Trust has adopted an Administrative Services Plan pursuant to which
securities, dealers, brokers, financial institutions, other industry
professionals (such as investment advisors, accountants, and estate planning
firms) and others may be paid fees for providing administrative support
services to the Fund. Such fees may not exceed .05% of the Fund's average
daily assets and will be computed on the basis of such assets attributable to
Shares owned of record or beneficially by each service provider's customers.
6
<PAGE> 25
DETERMINATION OF NET ASSET VALUE
The Fund's investments are valued on the basis of amortized cost. This
technique involves valuing an instrument at its cost 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.
While this method provides certainty in valuation, it may result in valuations
that are higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of the Fund, computed as described above, may tend to be higher than a
like computation made by a fund with identical investments using a method of
valuation based upon market prices and estimates of market prices for all of its
portfolio instruments. Thus, if use of amortized costs by the Fund resulted in a
lower aggregate portfolio value on a particular day, a prospective investor in
the Fund would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values, and existing investors in
the Fund would receive less investment income. The converse would apply in a
period of rising interest rates.
The valuation of the Fund's instruments based upon amortized cost and
the concomitant maintenance of the Fund's net asset value at $1 per share is
permitted in accordance with Rule 2a-7 under the Investment Company Act of 1940,
pursuant to which the Fund must adhere to certain conditions described in the
Prospectus under "Description of the Fund-Management Policies."
The Board of Trustees monitors adherence to SEC rules and regulations
concerning money market funds, and has established procedures designed to
stabilize, to the extent reasonably possible, the Fund's net asset value
calculated on the basis of amortized cost. The Trustees will review the Fund's
holdings, at such intervals as they deem appropriate, to determine whether the
net asset value calculated by using available market quotations deviates from
$1.00 per share and, if so, whether such deviation may result in material
dilution or is otherwise unfair to existing shareholders. If the Trustees
determine that such a deviation exists, they have agreed to take such corrective
action, if any, as they deem necessary or appropriate, which may include selling
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity, withholding dividends, redeeming shares in
kind, or establishing net asset value by using available market quotations.
7
<PAGE> 26
FUND PERFORMANCE
The Fund may quote its performance in various ways. All performance
information supplied by the Fund in advertising is historical and is not
intended to indicate future returns. The Fund's yield and total return fluctuate
in response to market conditions and other factors.
YIELD CALCULATIONS. The seven day yield for the period ending December
31, 1997 was 5.15% and the effective yield for the same period was 5.28%.
The yield quotation based upon the foregoing seven day period was
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical preexisting account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from shareholder accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return.
The base period return is then multiplied by (365/7), with the resulting yield
figure carried to the nearest hundredth of one percent.
Yield = ending value - beginning value x 365
------------------------------ ---
beginning value 7
The effective yield based upon the foregoing seven day period was
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical preexisting account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from shareholder accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return.
The base period return is then compounded by adding 1, raising the sum to a
power of 365 divided by 7, and subtracting 1 from the result, with the resulting
effective yield figure carried to the nearest hundredth of one percent.
365/7
Effective Yield = [(Base Period Return + 1) ] -1
The net change in value used to compute yield and effective yield
reflects reinvested distributions, fees, and expenses. Yields fluctuate in
response to market conditions. The numbers quoted are historical and are not
intended to indicate future yields.
Yield information may be useful in reviewing the Fund's performance and
in providing a basis for comparison with other investment alternatives. However,
the Fund's yield fluctuates, unlike investments that pay a fixed interest rate
over a stated period of time. Yields for the Fund are calculated on the same
basis as other money market funds, as required by regulation.
8
<PAGE> 27
When comparing investment alternatives, investors should also note the quality
and maturing of the portfolio securities held by the respective investment
companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
the Fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the Fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Fund from the continuous sale of its shares will likely be invested
in instruments producing lower yields than the balance of the Fund's portfolio,
thereby reducing the current yield of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
The Fund may quote unaveraged or cumulative total returns reflecting
the simple change in value of an investment over a stated period. Average annual
and cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of investments,
and/or a series of redemptions over any time period. Total returns may be broken
down into their components of income and capital (including capital gains and
changes in share price, if any) in order to illustrate the relationship of these
factors and their contributions to total return. Total returns, yields, and
other performance information may be quoted numerically or in a table, graph, or
similar illustration.
The Fund's performance may be compared in advertising to the
performance of other mutual funds in general or to the performance of particular
types of mutual funds, especially those with similar objectives. This
comparative performance could be expressed as a ranking prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service that monitors the
performance of mutual funds. The Lipper performance analysis ranks funds on the
basis of total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared without
regard to tax consequences. In addition to performance rankings, the Fund may
compare its total expense ratio to the average total expense ratio of all money
market funds as tracked by Lipper. A fund's total expense ratio is a significant
factor in comparing money market investments because of its effect on net yield.
The Fund may also compare its performance to several products offered
by banks. Unlike the Fund, certain bank products such as Money Market Deposit
Accounts, Super NOW Accounts, and Certificates of Deposit are insured by the
Federal Deposit Insurance Corporation. The Fund may compare its yield, both the
7-day annualized current yield and the effective yield, to those of Money Market
Accounts, Super NOW Accounts, and Certificates of Deposit quoted in the Bank
Rate Monitor National Index, an average of the quoted rates for 100 leading
banks and
9
<PAGE> 28
thrifts in 10 U.S. cities, chosen to represent the 10 largest Consumer
Metropolitan Statistical Areas. In addition, the Fund may compare its yield to
the Auction Average Discount Rate for 182-day Treasury Bills. Six-month Treasury
Bills are issued at a discount from their face value in weekly auctions.
Consequently, their yield is quoted as a yield to maturity reflecting the
accretion of the discount as the bill matures. The Fund may also compare its
yield to the Federal Funds rate, which is the interest rate that banks charge
each other for overnight loans through the Federal Reserve System to meet
reserve requirements. Both the yield on 6-month Treasury Bills and the Federal
Funds rate are considered to be sensitive indicators of interest rates trends.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased directly from the issuer
or an underwriter or a market maker for the securities. Usually no brokerage
commissions are paid by the Fund for such purchases. Purchases from underwriters
of portfolio securities include a concession paid by the issuer to the
underwriter and the purchase price paid to market makers for the securities may
include the spread between the bid and asked price.
Transactions are allocated to various dealers by Ambac Cadre Financial
in its best judgment. The primary consideration is prompt and effective
execution of orders at the most favorable price. Subject to that primary
consideration, dealers may be selected for research, statistical or other
services to enable Ambac Cadre Financial to supplement its own research and
analysis with the views and information of other securities firms. Securities
transactions are not directed to securities firms in consideration of sales of
Fund shares or of shares of other funds advised by Ambac Cadre Financial.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by Ambac Cadre Financial in advising other
funds it advises and, conversely, research services furnished to Cadre Financial
by brokers in connection with other funds Ambac Cadre Financial advises may be
used by Ambac Cadre Financial in advising the Fund. Although it is not possible
to place a dollar value on these services, it is the opinion of Ambac Cadre
Financial that the receipt and study of such services should not reduce the
overall expenses of its research department.
10
<PAGE> 29
INFORMATION ABOUT THE FUND
The Fund is a portfolio of the Cadre Network Health Financial Services
Trust, which was organized as a California trust on February 12, 1992, and
commenced operations on November 1, 1992 under the name Hospital and Health
Facilities Trust. Effective April 30, 1997, the Trust's name was changed to
Cadre Network Health Financial Services Trust. The Declaration of Trust permits
the Board of Trustees to create additional series (portfolios), each of which
will issue a separate class of shares. At this time, the Fund is the only
portfolio that has been created. The assets of the Trust received for the issue
or sale of the shares of each portfolio and all income, earnings, profits, and
proceeds thereof, subject only to the rights of creditors, are especially
allocated to such portfolio, and constitute the underlying assets of such
portfolio. The underlying assets of each portfolio are segregated on the books
of account, and are to be charged with the liabilities with respect to such
portfolio and with a share of the general liabilities of the Trust. Expenses
with respect to the portfolios are to be allocated in proportion to the net
assets of the respective portfolios except where allocations of direct expense
can otherwise be fairly made. The Board of Trustees has the power to determine
which liabilities are allocable to a given portfolio, or which are general or
allocable to all of the portfolios. In the event of the dissolution or
liquidation of the Trust, the holders of the shares of each portfolio are
entitled to receive as a class the underlying assets of such portfolio available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Under California law shareholders of
such a trust may, under certain circumstances, be held personally liable for the
obligations of the trust. The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust. The
Declaration of Trust provides for indemnification out of the portfolios'
property of any shareholder held personally liable for the obligations of the
portfolios, and requires the Trust to reimburse a Shareholder for all legal and
other expenses reasonably incurred in connection with any liability. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which a portfolio itself would be
unable to meet its obligations. The Trust believes that, in view of the above,
the risk of personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of bad faith, willful misconduct, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
11
<PAGE> 30
VOTING RIGHTS. The Trust's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion rights; the voting and
dividend rights, the right of redemption, and the privilege of exchange are
described in the Prospectus. Shares are fully paid and nonassessable, except as
set forth under the heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of the Trust's shares may, as set forth in
the Declaration of Trust, initiate a vote of Shareholders as to any matter with
regard to which Shareholders have a right to vote.
CUSTODIAN, COUNSEL AND INDEPENDENT AUDITORS
First Trust National Association, Pioneer Building, 6th Floor, 336
North Robert Street, St. Paul, Minnesota 55164 is the Fund's custodian. The
custodian has no part in determining the investment policies of the Fund or
which securities are to be purchased or sold by the Fund.
Davis Wright Tremaine LLP, as counsel for the Fund, has rendered its
opinion as to certain legal matters regarding the due authorization and valid
issuance of the shares being sold pursuant to the Fund's Prospectus.
Price Waterhouse LLP, 201 North Service Road, Melville, New York 11747,
has been selected as the Fund's independent auditor for fiscal year
1997.
12
<PAGE> 31
[PRICE WATERHOUSE LLP LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
JANUARY 21, 1998
TO THE BOARD OF TRUSTEES AND PARTICIPANTS OF THE
CADRE NETWORK HEALTH FINANCIAL SERVICES LIQUID ASSET FUND
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Cadre Network Health Financial
Services Liquid Asset Fund (formerly the California Hospital and Health
Facilities Liquid Asset Fund) (the "Fund"), one of the portfolios constituting
the Cadre Network Health Financial Services Trust at December 31, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at December 31, 1997 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above. The financial statements of the Fund for the years
ended December 31, 1994 and 1993, were audited by other independent accountants
whose report dated February 17, 1995, expressed an unqualified opinion on those
statements.
Price Waterhouse LLP
F-1
<PAGE> 32
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
CADRE NETWORK HEALTH FINANCIAL SERVICES LIQUID ASSET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT DESCRIPTION/ MATURITY ON DATE VALUE
(IN THOUSANDS) MATURITY DATE OF PURCHASE (NOTE 2)
- -------------- ------------- ---------------- --------
<S> <C> <C> <C>
BANKERS ACCEPTANCES - 22.64%
$ 250 Bank Boston 5.81% $ 248,172
February 17, 1998
1,000 Bank of America 5.92 996,605
January 22, 1998
1,000 Bank of America 5.92 996,443
January 23, 1998
105 Citibank 5.95 104,398
January 9, 1998
129 Citibank 6.19 128,857
January 12, 1998
177 Citibank 5.99 176,050
January 20, 1998
1,000 Citibank 5.83 995,013
February 2, 1998
171 Citibank 6.14 169,859
February 10, 1998
159 Citibank 6.18 156,854
March 16, 1998
400 Citibank 6.06 391,171
May 18, 1998
310 Fifth Third Bank 5.84 308,686
February 2, 1998
190 Fifth Third Bank 5.91 188,298
February 26, 1998
2,000 Morgan Guaranty 5.84 1,982,329
February 26, 1998
1,000 Nationsbanc 5.82 994,775
February 3, 1998
1,864 PNC Bank 5.90 1,862,742
January 6, 1998
------ ----------
$9,755 Total bankers' acceptances $9,700,252
====== (amortized cost - $9,700,252) ----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-2
<PAGE> 33
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
CADRE NETWORK HEALTH FINANCIAL SERVICES LIQUID ASSET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Principal Yield to
Amount Description/ Maturity on Date Value
(in thousands) Maturity Date of Purchase (Note 2)
- ----------------- --------------------------------------- ------------------ -----------------
<S> <C> <C> <C>
Commercial paper - 63.36%
$2,000 AKZO Nobel 5.86% $1,984,800
February 18, 1998
1,200 Associates Corporation 5.85 1,189,965
February 23, 1998
1,214 Bankers Trust, NY 5.88 1,190,184
May 6, 1998
1,000 Bear Stearns 5.87 994,449
February 5, 1998
2,000 Beneficial Finance 5.83 1,987,333
February 10, 1998
2,000 CIT Group Holdings 5.85 1,992,042
January 26, 1998
1,000 CS First Boston 5.86 996,504
January 23, 1998
1,168 Fingerhut Owner Trust 6.32 1,163,977
January 21, 1998
2,000 Ford Motor Credit Europe PLC 5.85 1,992,083
January 26, 1998
1,600 General Electric Capital Services 5.85 1,590,880
February 6, 1998
1,000 Goldman Sachs 5.92 997,583
January 16, 1998
1,000 Goldman Sachs 5.88 993,144
February 13, 1998
1,000 Household Finance 5.87 990,325
March 3, 1998
1,000 IBM Credit Corporation 5.96 997,725
January 15, 1998
2,000 Merrill Lynch & Company 5.78 1,998,745
January 5, 1998
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
F-3
<PAGE> 34
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
CADRE NETWORK HEALTH FINANCIAL SERVICES LIQUID ASSET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Principal Yield to
Amount Description/ Maturity on Date Value
(in thousands Maturity Date of Purchase (Note 2)
- ------------- ------------- ---------------- --------
<S> <C> <C> <C>
Commercial Paper - (continued)
$ 2,000 Morgan Stanley 5.86% $ 1,993,008
January 23, 1998
1,500 National Rural Utilities 5.91 1,497,342
January 12, 1998
600 New Center Asset Trust 5.87 595,908
February 13, 1998
2,000 Riverwoods Funding Corporation 5.83 1,991,465
-----------
- ------ January 28, 1998
$27,282 Total commercial paper 27,137,462
======= ===========
(amortized cost - $27,137,462)
Securities Purchased Under Agreement to Resell - 11.66%
$ 4,992 HSBC Securities 6.59 4,992,000
6.50% dated December 31, 1997,
maturing January 2, 1998 to be
repurchased at $4,993,803, collateralized
by $5,180,000 in FNMA Discount
Notes, due April 2, 1998, value
$5,106,444, (cost $4,992,000)
- ------- -----------
$ 4,992 4,992,000
======= ===========
U.S. government agency obligation - 2.33%
$ 1,000 Federal Home Loan Bank 5.88 996,789
January 21, 1998
- ------- -----------
$ 1,000 (amortized cost - $996,789 996,789
======= ===========
Total investments - 99.99% $42,826,503
Cash and other assets in
excess of liabilities - .01% 1,982
-----------
Net assets - 100% $42,828,485
===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-4
<PAGE> 35
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
CADRE NETWORK HEALTH FINANCIAL SERVICES LIQUID ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investment in securities, at value (Note 2):
Bankers' acceptances $ 9,700,252
Commercial paper 27,137,462
Securities purchased under agreement to resell 4,992,000
U.S. government agency obligation 996,789
------------
Total investments 42,826,503
Receivable for cash disbursed pending liquidation of participant shares 514,318
Other assets 18,701
------------
Total assets 43,359,522
------------
LIABILITIES
Cash received from participants pending investment in Fund shares 358,685
Payable to custodian bank 115,565
Management and Investment advisory fee payable 14,953
Custodian fee payable 22,066
Audit fee payable 15,000
Legal fees payable 4,768
------------
Total liabilities 531,037
------------
NET ASSETS
Net assets (equivalent to $1.00 per share on
42,828,485 shares of beneficial interest outstanding) $ 42,828,485
============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-5
<PAGE> 36
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
CADRE NETWORK HEALTH FINANCIAL SERVICES LIQUID ASSET FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment income $ 2,346,353
Expenses (Note 3):
Manager and investment advisory fee 167,367
Custodian fee 62,629
Audit fee 15,000
Legal fee 36,977
Liability insurance 24,655
Amortization of deferred organization cost (Note 2) 13,151
Other expenses 12,600
-----------
Total expenses 332,379
-----------
Investment income - net and net increase
in net assets resulting from operations $ 2,031,974
===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-6
<PAGE> 37
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
CADRE NETWORK HEALTH FINANCIAL SERVICES LIQUID ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------------
From operations: 1997 1996
-------------- --------------
<S> <C> <C>
Investment income - net $ 2,013,974 $ 2,334,835
------------- -------------
Net increase in net assets resulting from
operations 2,013,974 2,334,835
Dividends and distributions
to participants (Note 4) (2,013,974) (2,334,835)
------------- -------------
- -
------------- -------------
From transactions in shares of beneficial
interest (at $1 per share):
Proceeds from sales of shares 398,472,454 334,687,508
Net asset value of shares issued to
participants in reinvestment of
dividends and distributions 2,013,974 2,334,835
------------- -------------
400,486,428 337,022,343
Cost of shares repurchased (397,742,811) (338,801,089)
------------- -------------
Change in net assets derived from
transactions in shares of beneficial interest 2,743,617 (1,778,746)
------------- ------------
Net (increase)/decrease in net assets 2,743,617 (1,778,746)
Net assets:
Beginning of year 4O,084,868 41,863,614
------------- -------------
End of the year $ 42,828,485 $ 40,084,868
============= =============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-7
<PAGE> 38
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
CADRE NETWORK HEALTH FINANCIAL SERVICES
LIQUID ASSET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - DESCRIPTION OF THE FUND
The Cadre Network Health Financial Services Liquid Asset Fund (the "Fund")
(formerly the California Hospital and Health Facilities Liquid Asset Fund), was
established on February 12, 1992, as a common law trust organized under the laws
of the state of California and is an investment portfolio of the Cadre Network
Health Financial Services Trust (the "Trust") (formerly, the Hospital and Health
Facilities Trust), which is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended. Shares
of the Fund are offered exclusively to hospitals, or other health care
institutions, providers or payers. The purpose of the Fund is to enable those
organizations to pool their available funds for investment. The Fund commenced
operations on November 1, 1992.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS
Portfolio securities are valued at amortized cost, which approximates market
value.
ACCOUNTING FOR INVESTMENTS
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). In computing net investment income, the Fund amortizes any
premiums or discounts on securities owned. Gains or losses realized upon the
sale of such securities are based on their amortized cost and are determined on
the identified cost method. Interest accrued on securities purchased under
agreement to resell is included in interest receivable.
INVESTMENT TRANSACTION RESTRICTIONS
The Fund is not permitted to engage in the trading of investment instruments
with or through the Manager or Investment Advisor.
F-8
<PAGE> 39
INCOME TAX STATUS
It is the Fund's policy to comply with the requirements of Subchapter M of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its participants. Therefore, no
provision for Federal income taxes has been recorded.
SECURITIES PURCHASED UNDER AGREEMENT TO RESELL
Securities purchased under agreement to resell entered into with certain broker
dealers are secured by U.S. government or agency obligations. However, due to
the short-term nature of securities purchased under agreement to resell, the
Fund does not take possession of the collateral pledged, which is held by the
Custodian. Securities purchased under agreement to resell are collateralized at
102% of the obligation's principal and interest value to ensure that the value
of the underlying collateral is at least equal to repurchase price. In the event
of default on the obligation to repurchase, the Fund has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines, realization of the
obligation by the Fund may be delayed.
DEFERRED ORGANIZATION COSTS
Deferred organization costs were amortized on a straight line basis over five
years. Such organization costs have been advanced by the Manager and Investment
Advisor, Cadre Financial Services, Inc. ("Cadre"). The Fund has reimbursed Cadre
for such costs rateably from February 8, 1995, through July 31, 1997.
USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
NOTE 3 - FUND EXPENSES
MANAGER AND INVESTMENT ADVISORY FEE
Pursuant to a Manager and Investment Advisory Agreement with the Fund, the
Manager and Investment Advisor, Cadre provides investment advice and generally
supervises the investment program of the Fund. Cadre is paid a fee at an annual
rate of 0.40% of the first $250,000,000 of the Fund's average daily net assets,
0.3675% of the average net assets in excess of $250,000,000 but less than
$500,000,000 and 0.335% of the Fund's average daily net assets in excess of
$500,000,000. Such fee is calculated daily and paid monthly.
F-9
<PAGE> 40
Cadre Securities, Inc. ("Cadre Securities"), an affiliate of Cadre, is the
Fund's transfer and dividend disbursing agent and distributor. The Fund is not
assessed fees for transfer agent services provided by Cadre Securities.
CONSULTING FEES
The Hospital Council of Northern and Central California Shared Services, Inc.,
an affiliate of the Hospital Council of Northern and Central California, which
established the Trust, provides management consulting services to Cadre. The
Fund is not obligated to pay for these management consulting services.
OTHER FUND EXPENSES
The Fund pays expenses incurred by its Trustees and officers (in connection with
the discharge of their duties), insurance for the Trustees, fees of the
Custodian, audit fees and legal fees.
NOTE 4 - DIVIDENDS AND DISTRIBUTIONS
On a daily basis, the Fund declares dividends and distributions from its net
investment income and net realized gains or losses from securities transactions,
if any. Such dividends and distributions are payable to participants of record
at the time of the previous computation of the Fund's net asset value.
NOTE 5 - SECURITIES TRANSACTIONS
During the period ended December 31, 1997, sales and purchases U.S. government
securities were $3,596,065 and $56,109,996, respectively.
F-10
<PAGE> 41
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding for each of the
five years in the period ended December 31 is as follows:
<TABLE>
<CAPTION>
Period Ended December 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment income - net 0.048 0.048 0.058 0.042 0.030
Dividends and distributions
to participants (0.048) (0.048) (0.058) (0.042) (0.030)
------- ------ ------ ------ ------
Change in net asset value - - - - -
------- ------ ------ ------ ------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== ======
Total investment return 4.91% 5.00% 5.83% 4.11% 3.06%
Expenses, before
reimbursement/waiver 0.79% 0.68% 0.67% 1.24% 1.58%
Expenses net of
reimbursement/waiver 0.79% 0.65% 0.27% 0.26% 0.19%
Net investment income, before
reimbursement waiver 4.81% 4.78% 5.38% 3.24% 1.61%
Net investment income, net
or reimbursement/waiver 4.81% 4.81% 5.78% 4.22% 3.00%
Number of shares outstanding
at end of year (in thousands) 42,828 40,085 41,864 20,540 8,914
</TABLE>
F-11
<PAGE> 42
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S COMMERCIAL PAPER
RATINGS:
PRIME-1 (or related supporting institutions) have a superior capacity
for repayment of short-term promissory obligations. Prime-1 repayment capacity
will normally be evidenced by 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.
- 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 (or related supporting institutions) have a strong capacity for
repayment of short-term promissory 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, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds which are rated Aaa are judged to be of best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or any an exceptionally
stable margin and principal is secure. While the various protective elements are
like 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
A-1
<PAGE> 43
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
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 sometime in the
future.
BAA - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds which are rated Ba are judged to have speculative elements:
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S COMMERCIAL PAPER RATINGS:
A-1 - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2 - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
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
A-2
<PAGE> 44
adverse effects of changes in circumstances and economic conditions.
BBB - Debt rated BBB is regarding as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
DESCRIPTION OF FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS:
FITCH-1 - (Highest Grade) Commercial paper assigned this rating is
regarding as having the strongest degree of assurance for timely payment.
FITCH-2 - (Very Good Grade) Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issues.
DESCRIPTION OF FITCH INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
AAA - Bonds of this rating are regarded as strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions, and
liable to but slight market fluctuation other than through changes in the money
rate. The factor last named is of importance, varying with the length of
maturity. Such bonds are mainly senior issues of strong companies, and are most
numerous in the railway and public utility fields, though some industrial
obligations have this rating. The prime feature of an AAA bond is of showing of
earnings several times or many times interest requirements with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Other features may enter, such as a wide margin of
protection through collateral security or direct lien on specific property as in
the case of high-class equipment certificates or bonds that are first mortgages
on valuable real estate. Sinking funds or voluntary reduction of the debt, by
call or purchase are often factors, while guarantee or assumption by parties
other than the original debtor may influence the rating.
AA - Bonds in this group are of safety virtually beyond question, and
as a class are readily salable while many are highly active. Their merits are
not greatly unlike those of the "AAA" class, but a bond so rated may be of
junior though strong lien - in many cases directly following an AAA bond - or
the margin of safety is strikingly broad. The issue may be the obligation of a
small company, strongly secured but influenced as to rating by the lesser
financial power of the enterprise and more local type of market.
A-3
<PAGE> 45
DESCRIPTION OF DUFF & PHELPS INC. COMMERCIAL PAPER RATINGS:
DUFF 1 - Very high certainty of timely payment. Liquidity factors are
excellent and supported by strong fundamental protection factors. Risk factors
are minor.
DUFF 2 - Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing internal funds needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
DESCRIPTION OF DUFF & PHELPS INC. CORPORATE BOND RATINGS:
DUFF 1 - Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S.
Treasury debt.
DUFF 2, 3, 4 - High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A-4
<PAGE> 46
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial information is included in the Statement of
Additional Information which is Part B to this Registration Statement.
- Schedule of Investments as of December 31, 1997
- Statement of Assets and Liabilities as of December 31, 1997
- Statement of Operations for the year ended December 31, 1997
- Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996
- Financial Highlights for the years ended December 31, 1997
through December 31, 1993
- Report of Price Waterhouse LLP, independent auditors, dated
January 21, 1997
(b) Exhibits
(1) Amended and Restated Declaration of Trust dated October 21,
1997
(4) See Declaration of Trust (Item (1) above), Articles 2, 6 and 7
(5) Management and Investment Advisory Agreement dated December
30, 1996 between Hospital and Health Facilities Trust, on
behalf of its portfolio known as California Hospital and
Health Facilities Liquid Asset Fund, and AMBAC Investment
Management, Inc., now known as Cadre Financial Services, Inc.
(Incorporated by reference from Form N-1A, Amendment No. 9,
filed on February 28, 1997)
(6) Distribution Agreement dated April 23, 1997 between Cadre
Network Health Financial Services Trust, on behalf of its
portfolio known as Cadre Network Health Financial Services
Liquid Asset Fund, and Ambac Cadre Securities, Inc., now
known as Cadre Securities, Inc. (Incorporated by reference
from Form N-1A, Amendment No. 10, filed on April 28, 1997)
(8) Custodian Agreement dated April 30, 1997 between Cadre
Network Health Financial Services Trust, on behalf of its
portfolio known as Cadre Network Health Financial Services
Liquid Asset Fund, and First Trust National Association.
(Incorporated by reference from Form N-1A, Amendment No. 10,
filed on April 28, 1997)
<PAGE> 47
(9)(a) Transfer Agent Agreement dated December 31, 1996 between
Hospital and Health Facilities Trust, on behalf of its
portfolio known as Hospital and Health Facilities Liquid Asset
Fund, and AMBAC Investment Management, Inc. (Incorporated by
reference from Form N-1A, Amendment No. 9, filed February 28,
1997)
(9)(b) Administrative Services Plan
(10) Opinion and consent of Davis Wright Tremaine LLP (Incorporated
by reference from Form N-1A, Amendment No. 3, filed on July
10, 1992)
(11) Consent of Price Waterhouse LLP, independent auditors
(13) Initial Share Purchase Agreement dated July 10, 1992
(Incorporated by reference from Form N-1A, Amendment No. 3,
filed on July 10, 1992)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Registrant may be deemed to be controlled by Cadre Financial
Services, Inc., a Delaware corporation. Cadre Financial Services, Inc.
is a wholly-owned subsidiary of AMBAC Capital Corporation, a
Delaware corporation, which is in turn a wholly-owned subsidiary of
AMBAC Inc., a Delaware corporation. Other persons who may deemed to be
under common control with Registrant include AMBAC Indemnity
Corporation, a Wisconsin stock insurance company, and HCIA Inc, a
Maryland corporation, both of which are subsidiaries of AMBAC Inc. and
the following (direct and indirect) subsidiaries of AMBAC Inc., each of
which is a Delaware corporation: AMBAC Capital Management, AMBAC
Investments, Inc., AMBAC Financial Services Holdings, Inc. and Cadre
Securities, Inc.
<PAGE> 48
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 7, 1998, the number of record holders of Fund Shares was
as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C> <C>
Shares 78
</TABLE>
ITEM 27. INDEMNIFICATION
The provisions of Section 5.3 of Article 5 of the Declaration of Trust
filed herewith as Exhibit (1) are incorporated by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant by the Registrant pursuant to the Declaration
of Trust or otherwise, the Registrant is aware that in the opinion of
the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant for expenses incurred or paid
by trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or proceeding)
is asserted by such trustees, officers or controlling persons in
connection with the Units being registered, the 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 whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issues.
Registrant hereby undertakes that it will apply the indemnification
provisions of its Declaration of Trust in a manner consistent with
Release No. 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940 so long as the interpretations of
Sections 17(b) and 17(i) of the Investment Company Act of 1940 remain
in effect and are consistently applied.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Fund" in the Prospectus constituting Part A of
this Registration Statement and "Investment Advisory and Management
Services" in the Statement of Additional Information constituting
Part B of this Registration Statement.
<PAGE> 49
The officers and directors of Cadre Financial Services, Inc. and their
business, vocation or employment of a substantial nature in the past
two fiscal years are set forth below. Except as otherwise indicated,
the principal business address of each person is 905 Marconi Avenue,
Ronkonkoma, New York 11779.
<TABLE>
<CAPTION>
Other Substantial
Name and Principal Position with Business, Vocation
Business Address Ambac Cadre Financial or Employment
- ---------------- --------------------- ------------------
<S> <C> <C>
William T. Sullivan, Jr. Director and Chairman of None
the Board/Chief Executive
Officer
Francis X. Sullivan Director, President/Chief None
Operating Officer
Frank J. Bivona Director Chief Financial Officer
One State Street Plaza and Treasurer, Ambac
New York, NY 10004 Financial Services, Inc.
Michael W. Kelly Director Managing Director, Ambac
Financial Services Swap and
Municipal Investment Contract
Subsidiaries
Richard I. Bauer Managing Director None
568 High Street
Pottstown, PA 19464
Dolores O. Miller Managing Director Senior Portfolio Manager,
Ambac Financial Services Inc.
and affiliates
Richard B. Gross Secretary General Counsel and Secretary,
One State Street Plaza Ambac Financial Services, Inc.
New York, NY 10004
Thomas J. Gandolfo Vice President, None
One State Street Plaza Assistant Treasurer and
New York, NY 10004 Assistant Controller
Joan M. Restivo First Vice President None
Beth A. Smith First Vice President None
Paul E. Brody Vice President and Director None
One State Street Plaza of Operations
New York, NY 10004
Brian Clarke Vice President and None
Assistant Treasurer
George J. Dittenhoefer Vice President None
Roisin T. Kilgallen Vice President and Treasurer Treasurer of certain Subsidiaries
One State Street Plaza of Ambac Financial Services, Inc.
New York, NY 10004
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
Other Substantial
Name and Principal Position with Business, Vocation
Business Address Cadre Financial or Employment
- ---------------- --------------- -------------
<S> <C> <C>
Richard Long Vice President None
One State Street Plaza
New York, NY 10004
Maureen Mollison Vice President None
David Nauss Vice President None
One State Street Plaza
New York, NY 10004
Evelyn R. Robertson Vice President and None
Portfolio Manager
Peter Smith Vice President None
Timothy P. Sullivan Vice President None
William M. Sullivan Vice President None
Richard Thierge Vice President None
Richard Alger Assistant Vice President None
One State Street Plaza and Assistant Controller
New York, NY 10004
Anthony Bastardi Vice President None
Doreen Mackie Assistant Vice President None
Brian Moran Assistant Vice President None
Adelade Sullivan Assistant Vice President None
Stephen D. Cooke Assistant Secretary None
Kevin P. Dolan Assistant Secretary None
Anne G. Gill Assistant Secretary None
One State Street Plaza
New York, NY 10004
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Cadre Securities, Inc., the Fund's principal underwriter, does
not act as a principal underwriter, depositor or investment
adviser to any other investment company registered under the
Investment Company Act of 1940. It does act as principal
underwriter for certain collective short-term investment
programs operated for local governmental and municipal
entities which are similar to investment companies, but are
not required to register under the Investment Company Act of
1940. See Item 28.
(b) Information with respect to directors and officers of
Cadre Securities, Inc. is set forth below. Except as otherwise
indicated, the principal business address of each person is
905 Marconi Avenue, Ronkonkoma, New York 11779.
<PAGE> 51
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ---------------- ----------
<S> <C> <C>
William T. Sullivan, Jr. Director and Chairman of None
the Board
Francis X. Sullivan Director and Vice Chairman None
of the Board
Michael W. Kelly Director and Managing None
One State Street Plaza Director and Chief
New York, NY 10004 Operating Officer
Richard I. Bauer President None
568 High Street
Pottstown, PA 19464
Richard B. Gross Secretary None
One State Street Plaza
New York, NY 10004
Thomas J. Gandolfo Chief Financial Officer None
One State Street Plaza
New York, NY 10004
James E. Clark Vice President None
One Birch Street
Bayfield, WI 54814
Robert J. Cloherty Vice President None
2 Shady Lane
Pittsburgh, PA 15235
James J. Jacobs Vice President None
852 L. Johnson
St. Peter, MN 56082
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ---------------- ----------
<S> <C> <C>
Christopher A. Rohm Vice President None
35 Regency Circle
Gettysburg, PA 17325
James H. Strong Vice President None
2420 Camino Ramon
San Ramon, CA 94582
Timothy P. Sullivan Vice President None
William M. Sullivan Vice President and General Counsel None
Beth A. Smith Vice President None
Robert D. Brison Vice President None
1940 Perryville Rd.
Cap Girardeau, MO 63701
Brian Clark Vice President None
George Dittenhoefer Vice President None
Maureen Mollison Vice President None
Bruce L. Moyer Vice President None
6907 Westmoreland Ave.
Takoma Park, MD 20912
Dr. Wallace B. Piper Vice President None
1792 Old Mill Rd.
East Lansing, MI 48823
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The names and addresses of the persons maintaining physical possession
of the accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder are as follows:
Cadre Financial Services, Inc.
905 Marconi Avenue
Ronkonkoma, NY 11779
First Trust National Association
Pioneer Building, 6th Floor
336 North Robert Street
St. Paul, MN 55164
ITEM 31. MANAGEMENT SERVICES
Not Applicable
<PAGE> 53
ITEM 32. UNDERTAKINGS
The Registrant hereby undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a trustee or
trustees when requested in writing to do so by the holders of at least
10% of the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder communications.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this Registration
Statement meets all of the requirements for effectiveness under Rule 485(b) and
that it has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Pleasanton, State
of California on the 27th day of February, 1998.
CADRE NETWORK HEALTH
FINANCIAL SERVICES TRUST
By /s/ William T. Sullivan
---------------------------------------
Its Chairman
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ WILLIAM T. SULLIVAN Chair and Member of February 27, 1998
- ----------------------------- the Board of Trustees
(William T. Sullivan) (Principal Executive
Officer)
/s/ * Vice Chair and Member of February 27, 1998
- ----------------------------- the Board of Trustees
(Harvey A. Fein)
/s/ * Secretary, Treasurer and February 27, 1998
- ----------------------------- Member of the Board of
(Jenete M. Maslonka) Trustees
/s/ * Treasurer and Member of February 27, 1998
- ----------------------------- the Board of Trustees
(J. Kendall Anderson)
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ * Member of the Board of February 27, 1998
- ----------------------------- Trustees
(Alan H. Anderson)
/s/ * Member of the Board of February 27, 1998
- ----------------------------- Trustees
(Lori Bloomfield)
/s/ * Member of the Board of February 27, 1998
- ----------------------------- Trustees
(Elizabeth S. Curtis)
/s/ * Member of the Board of February 27, 1998
- ----------------------------- Trustees
(Frank E. Gibson)
Member of the Board of ___________, 1998
- ----------------------------- Trustees
(Terry Hartshorn)
/s/ * Member of the Board of February 27, 1998
- ----------------------------- Trustees
(James O. Hillman)
/s/ * Member of the Board of February 27, 1998
- ----------------------------- Trustees
(Martin L. Hopp)
/s/ * Member of the Board of February 27, 1998
- ----------------------------- Trustees
(Jay Hudson)
*By /s/ WILLIAM T. SULLIVAN
--------------------------
William T. Sullivan
Attorney-in-fact under
powers of attorney dated
December 9, 1997
</TABLE>
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page
- ------ ------- ----
<S> <C> <C>
(1) Amended and Restated Declaration
of Trust dated October 21, 1997
(4) See Declaration of Trust (Item (1) above),
Articles 2, 6 and 7
(5) Management and Investment Advisory Agreement
dated December 30, 1996 between Hospital and
Health Facilities Trust, on behalf of its
portfolio known as California Hospital and
Health Facilities Liquid Asset Fund, and AMBAC
Investment Management, Inc., now known as
Cadre Financial Services, Inc. (Incorporated by
reference from Form N-1A, Amendment No. 9,
filed on February 28, 1997)
(6) Distribution Agreement dated April 23, 1997
between Cadre Network Health Financial Services
Trust, on behalf of its portfolio known as Cadre
Network Health Financial Services Liquid Asset
Fund, and Ambac Cadre Securities, Inc., now
known as Cadre Securities, Inc. (Incorporated
by reference from Form N-1A, Amendment No. 10,
filed on April 28, 1997)
(8) Custodian Agreement dated April 30, 1997
between Cadre Network Health Financial
Services Trust, on behalf of its portfolio
known as Cadre Network Health Financial
Services Liquid Asset Fund, and First Trust
National Association. (Incorporated by
reference from Form N-1A, Amendment No. 10,
filed on April 28, 1997)
(9)(a) Transfer Agent Agreement dated December 31,
1996 between Hospital and Health Facilities
Trust, on behalf of its portfolio known as
Hospital and Health Facilities Liquid Asset
Fund, and AMBAC Investment Management, Inc.
(Incorporated by reference from Form N-1A,
Amendment No. 9, filed February 28, 1997)
(9)(b) Administrative Services Plan
(10) Opinion and consent of Davis Wright Tremaine
LLP (Incorporated by reference from Form N-1A,
Amendment No. 3, filed on July 10, 1992)
(11) Consent of Price Waterhouse LLP, independent
auditors
(13) Initial Share Purchase Agreement dated July 10,
1992 (Incorporated by reference from Form N-1A,
Amendment No. 3, filed on July 10, 1992)
</TABLE>
<PAGE> 1
EXHIBIT (1)
================================================================================
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST,
A CALIFORNIA TRUST
______________________________________
DECLARATION OF TRUST
(AMENDED AND RESTATED)
October 21, 1997
______________________________________
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Nature of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 PORTFOLIOS, SHARES OF BENEFICIAL OWNERSHIP, ETC. . . . . . . . . . . . . . . . . . . 3
2.1 Authorized Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Powers, Preferences and Participations. . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Investment in the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Status of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 No Certificates; Nontransferability of Interests. . . . . . . . . . . . . . . . . . 5
2.6 Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 4 POWERS OF THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Legal Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Rights as Holders of Trust Property . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Delegation; Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 Fiscal Year; Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.12 Concerning the Trust and Certain Affiliates . . . . . . . . . . . . . . . . . . . . 10
4.13 Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.14 Power to Contract, Appoint, Retain and Employ . . . . . . . . . . . . . . . . . . . 11
4.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.16 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 Further Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 5 LIMITATIONS OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1 Liability to Third Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 Liability to the Trust or the Participants . . . . . . . . . . . . . . . . . . . . . 13
5.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Surety Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 Apparent Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Trust Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 Reliance on Experts, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 6 RECORD OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Share Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 No Transfers or Pledges of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Limitation of Fiduciary Responsibility . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 7 PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.1 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2 Meetings of Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.4 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.5 Record Date for Meetings and Votes . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.6 Proxies, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.7 Financial Records; Reports; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.8 Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 8 TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 Qualifications of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Term and Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.4 Resignation and Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.8 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 9 AMENDMENT OR TERMINATION OF TRUST;
DURATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Amendments to Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 Duration and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.2 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.3 Provisions in Conflict with Law . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.4 Gender; Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
ii
<PAGE> 4
DECLARATION OF TRUST
(AMENDED AND RESTATED)
THIS AMENDED AND RESTATED DECLARATION OF TRUST is made as of October
21, 1997, by the Trustees of the Cadre Network Health Financial Services Trust:
W I T N E S S E T H:
WHEREAS, a California common law trust was established and organized
by the Hospital Council of Northern and Central California, a California
nonprofit mutual benefit corporation, acting as the Declarant, pursuant to a
Declaration of Trust made as of February 12, 1992 for the joint investment of
funds in order to enhance the investment opportunities available to persons who
are Eligible Participants and become Participants;
WHEREAS, the beneficial interest in the Trust's assets are divided
into non-transferable Shares of beneficial interest which are evidenced by a
share register maintained by the Trust or its agent;
WHEREAS, the Trust was formed to act as an open-end, diversified
management investment company registered with the Securities and Exchange
Commission under the Investment Company Act of 1940; and
WHEREAS, the Declaration of Trust was amended and restated on March
14, 1997 and the Trustees desire to further amend and restate the Declaration
of Trust to eliminate the requirement that Participants must meet certain
eligibility requirements as hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that all monies,
securities, and other property now or hereafter acquired pursuant to this
Declaration of Trust shall be held and managed in trust, upon the terms and
conditions set forth in this Amended and Restated Declaration for the
proportionate benefit of the holders of record from time to time of Shares of
beneficial interest issued and to be issued hereunder.
ARTICLE 1
THE TRUST
1.1 NAME. The name of the trust (the "Trust") created by this
Declaration of Trust shall be Cadre Network Health Financial Services Trust
and, so far as may be practicable, the Trustees shall conduct the Trust's
activities under that name. The name
<PAGE> 5
of the Trust (and the word "Trust" wherever used in this Declaration, except
where the context otherwise requires) shall refer to the Trustees in their
capacity as Trustees, and not individually or personally. Should the Trustees
determine that the use of such name is not legal or convenient, they may use
such other designation or they may adopt such other name for the Trust as they
deem proper, and the Trust may hold property and conduct its activities under
such designation or name. The Trustees shall have full and complete power to
change the name of the Trust at any time and from time to time, in their sole
discretion, without the vote of the Participants; provided, that notice of any
such change of name shall be promptly given to the Participants.
1.2 NATURE OF TRUST. The Trust shall be a common law trust organized
and existing under the laws of the State of California. The Trust is not
intended to be and shall not be deemed to be a general partnership, limited
partnership, joint venture, corporation, joint stock company or other entity.
The Participants shall be beneficiaries of the Trust, and their relationship to
the Trustees shall be solely in their capacity as Participants and trust
beneficiaries in accordance with the rights conferred upon them hereunder.
1.3 DEFINITIONS. As used in this Declaration of Trust, the following
terms shall have the following meanings unless the context hereof otherwise
requires:
"AFFILIATE" shall mean, with respect to any Person, another Person
directly or indirectly controlling, controlled by or under common control with
such other Person, or any officer, director, partner or employee of such other
Person.
"ASSETS BELONGING TO" a Portfolio shall have the meaning defined in
Section 2.2(a).
"DECLARATION OF TRUST" shall mean this Amended and Restated
Declaration of Trust, as amended, restated or modified from time to time.
References in this Declaration of Trust to "Declaration", "hereof", "herein",
"hereby" and "hereunder" shall be deemed to refer to this Amended and Restated
Declaration of Trust and shall not be limited to the particular text, article
or section in which such words appear.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act of
1940, as amended, and the regulations promulgated thereunder.
"NET ASSET VALUE OF THE SHARES" and "NET ASSET VALUE OF THE RESPECTIVE
PORTFOLIOS" shall mean values determined as provided in Article 3.
2
<PAGE> 6
"PARTICIPANTS" shall have the meaning defined in Section 2.3.
"PERSON" shall mean and include natural persons, corporations,
partnerships, joint stock companies, joint ventures, associations, trusts,
business trusts and other entities.
"PORTFOLIO" shall mean an investment portfolio represented by a
separate class of Shares established by the Trustees in accordance with Article
2.
"PROSPECTUS" shall mean the prospectus for each Portfolio distributed
by the Trust to Participants and to potential Participants, as the same may be
amended from time to time.
"SHARE" or "SHARES" shall mean the unit used to denominate and measure
the respective pro rata beneficial interests of the Participants in the Trust
and any Portfolio as provided in Article 2.
"TRUST" shall have the meaning defined in Section 1.1.
"TRUSTEES" shall mean the Persons who become fiduciaries of the Trust
pursuant to Article 8.
"TRUST PROPERTY" shall mean, as of any particular time, any and all
property, real, personal or otherwise, tangible or intangible, which has been
transferred, conveyed or paid to the Trust or Trustees and all income, profits
and gains therefrom and which, at such time, is owned or held by, or for the
account of, the Trust or the Trustees.
ARTICLE 2
PORTFOLIOS, SHARES OF BENEFICIAL OWNERSHIP, ETC.
2.1 AUTHORIZED SHARES. The beneficial interest in the
Trust shall be divided into Shares and fractions thereof, and the Trust shall
have authority to issue an unlimited number of Shares without par value. The
Shares shall be divided into Portfolios. The initial Portfolio shall be known
as the "Cadre Network Health Financial Services Liquid Asset Fund," which shall
have the investment objective of seeking to obtain a high level of current
income and stability of principal by investing in short-term securities.
A portion of the assets of each Portfolio may be held, without
limitation on amount, in cash equivalents. Cash equivalents are short-term
interest-bearing instruments in which
3
<PAGE> 7
funds are invested temporarily pending longer-term investment or in which funds
are invested when market conditions dictate a more "defensive" investment
strategy. The instruments may include, but are not limited to, commercial
paper, certificates of deposit, repurchase agreements, bankers acceptances and
United States Treasury Bills.
The Trustees shall have full power and authority, without obtaining
any prior authorization or vote of any of the Participants: (i) to create and
establish any additional, Portfolio or Portfolios with preferences, voting
powers, rights and privileges as the Trustees may from time to time determine,
(ii) to divide or combine the Shares of any Portfolio or Portfolios into a
greater or less number, (iii) to classify or reclassify any issued Shares into
one or more Portfolios so long as such classification or reclassification will
not have a material adverse effect on Participants that own Shares of any of
the Portfolios, (iv) to terminate any Portfolio upon sixty (60) days' notice to
the Participants owning shares of that Portfolio in the event that the net
asset value of such Portfolio is less than $5,000,000 on the date of such
notice, and (v) take such other action with respect to the Shares of any
Portfolio or Portfolios as the Trustees may deem desirable, subject to the
terms of this Declaration.
2.2 POWERS, PREFERENCES AND PARTICIPATIONS. Each Portfolio shall
have the following powers, preferences and participating or other special
rights, and the qualifications, restrictions and limitations thereof shall be
as follows:
(a) All consideration received by the Trust for the issue
and sale of Shares of each Portfolio, together with all income, earnings,
profits and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall irrevocably belong for
all purposes to the Portfolio with respect to such assets, payments or funds
were received by the Trust, subject only to the rights of creditors of the
Trust, and shall be so handled on the books of account of the Trust. Such
assets, income, earnings, profits and proceeds derived from the sale, exchange
or liquidation and any assets derived from any reinvestment of such proceeds in
whatever form the same may be, are herein referred to as "assets belonging to"
such Portfolio.
(b) The Trustees may from time to time declare and pay
dividends or distributions to the Participants, in Shares or in cash, on all or
any of the Portfolios, the amount of such dividends or distributions, and the
payment of them, being wholly in the discretion of the Trustees. Dividends or
distributions on
4
<PAGE> 8
any Portfolio shall be paid only out of the earnings or other lawfully
available assets belonging to such Portfolio.
(c) In the event of the liquidation or dissolution of the
Trust, Participants owning Shares of each Portfolio shall be entitled to
receive, as a class, out of the assets of the Trust available for distribution
to Participants, the assets belonging to such Portfolio, and the assets so
distributed among such Participants shall be distributed among such
Participants in proportion to the number of Shares of such Portfolio held by
them and recorded on the books of the Trust. In the event that there are any
general assets not belonging to any particular Portfolio and available for
distribution, then, after the distribution of the assets belonging to each
Portfolio, a distribution of such general assets shall be made to all
Portfolios in proportion to the net asset value of the respective Portfolios
prior to the distribution of assets belonging to each Portfolio.
(d) The assets belonging to any Portfolio shall be
charged with the liabilities in respect to such Portfolio, and shall also be
charged with a share of the general liabilities of the Trust in a fair and
equitable manner under policies and procedures established by the Trustees.
The determination of the Trustees shall be conclusive as the amount of
liabilities, including accrued expenses and reserves, as to the allocation of
the same as to a given Portfolio and as to whether the same or general assets
of the Trust are allocable to one or more Portfolios.
2.3 INVESTMENT IN THE TRUST. Shares may be owned only by
Participants. A Person shall become a participant ("Participant") as of the
date on which the payment of consideration to the Trust for Shares is accepted
by the Trustees for one or more Portfolios. The Trustees in their sole
discretion may decline to accept payments of consideration from any
Participant. The Trustees may establish minimum dollar amounts of initial or
additional consideration to be paid for Shares. Shares shall be issued to
Participants on the basis of the net asset value of the Shares of such
Portfolio next determined after receipt by the Trust of the Participant's
consideration for such Shares. Any Participant may have an interest in more
than one Portfolio.
2.4 STATUS OF SHARES. Shares acquired by Participants in the
manner described in Section 2.3 shall be fully paid and nonassessable. No
Participant shall have preemptive rights.
2.5 NO CERTIFICATES; NONTRANSFERABILITY OF INTERESTS. Ownership
of Shares shall be recorded on the books of the Trust or its transfer agent as
provided in Article 6. No certificate or other document shall be issued
evidencing Shares or any
5
<PAGE> 9
interest in the Trust. No Participant shall have the right or power to sell,
assign or otherwise transfer any Share or any part of its interest in the
Trust, or use the same as security for a loan.
2.6 REDEMPTION. A Participant may require the Trust, to the
extent that the class of Shares in question has assets lawfully available
therefor and out of such assets but not otherwise, to redeem all or any part of
the Shares outstanding on the books of the Trust in the name of such
Participant, payable as provided in the Investment Company Act. Shares will be
redeemed at the net asset value of such Shares next determined after receipt by
the Trust of a request for redemption. The Trust shall make payment for any
such redemption in cash, or if in the opinion of the Trustees, which shall be
conclusive, conditions exist which make payment wholly or partly in securities
or other property belonging to the Trust, the value of which shall be
determined as provided in Article 3, provided that all distributions made as of
any one valuation date shall be made pro rata on the same basis. The Trust
may, to the extent necessary, sell or cause to be sold any securities belonging
to a Portfolio to provide cash to pay for Shares of such Portfolio that are
redeemed. The Trustees may not suspend the right of the holders of the Shares
of any Portfolio to require the Trust to redeem Shares of such Portfolio except
as permitted by the Investment Company Act.
2.7 EXCHANGES. A Participant shall be entitled, subject to such
limitations as the Trustees in their sole discretion may adopt, to convert all
or any part of the Shares of any Portfolio owned by such Participant into
Shares of any other Portfolio. Shares may be exchanged at the net asset value
next determined after receipt by the Trustees of a request for exchange in
proper form. The Trustees shall determine the net asset value of the Shares to
be converted, and within five business days after receipt of such request,
shall transfer to such Participant on the books of the Trust such number of
Shares of the Portfolio desired as, taken at the net asset value thereof
determined in the same manner and at the same time as that of the Shares
exchanged, shall equal the net asset value of the Shares exchanged. Any amount
representing a fraction of a Share shall be paid in fractional Shares. Upon
any conversion, proper transfer shall be made between the assets belonging to
the various Portfolios of Shares involved.
6
<PAGE> 10
ARTICLE 3
VALUATION
The net asset value per Share of each Portfolio shall be determined by
dividing the total value of the Portfolio's assets less any liabilities,
including the fees payable for advisory and other services, by the number of
outstanding Shares. The Portfolio shall be charged with the liabilities in
respect to such Portfolio, and shall also be charged with a share of the
general liabilities of the Trust proportionate to the net asset value of such
Portfolio. The determination of the net asset value of Shares may be delegated
by the Trustees.
The net asset value of Shares shall be determined at such time or
times and in such manner as is determined by the Trustees and as required by
the Investment Company Act. The method of determining the value of Portfolio
assets shall be established by the Trustees and shall be set forth in the
Prospectus.
ARTICLE 4
POWERS OF THE TRUSTEES
4.1 GENERAL. Subject to the rights of the Participants as provided
herein, the Trustees shall have, to the extent permitted by applicable law,
full, exclusive and absolute power, control and authority over the Trust
Property and over the affairs of the Trust to the same extent as if the
Trustees were the sole and absolute owners of the Trust Property. The Trustees
may do and perform such acts and things as in their sole judgment and
discretion are necessary and proper for conducting the affairs of the Trust or
promoting the interests of the Trust and the Participants. The enumeration of
any specific power or authority herein shall not be construed as limiting the
aforesaid general power or authority or any specific power or authority. The
Trustees may exercise or delegate to others any power authorized and granted to
them by this Declaration of Trust. Such powers of the Trustees may be
exercised without the necessity of any order of, or resort to, any court.
Except as otherwise provided in this Declaration of Trust, the
Trustees shall not be limited by any law now or hereafter in effect limiting
the investments which may be held or retained by trustees or other fiduciaries,
and they shall have full authority and power to make any and all Trust
investments within the limitations of this Declaration of Trust, that they, in
their absolute discretion, shall determine to be advisable and appropriate.
The Trustees shall have no liability for loss with respect to Trust investments
made as permitted by this Declaration of Trust, even though such investments
shall be of a
7
<PAGE> 11
character or in an amount not otherwise considered proper for the investment of
trust funds by trustees or other fiduciaries. Notwithstanding the foregoing or
anything herein to the contrary, the Trustees shall make Trust investments for
each Portfolio only in accordance with the investment objectives and policies
of such Portfolio as set forth in its Prospectus.
4.2 LEGAL TITLE. Legal title to all of the Trust Property shall
be vested in the Trustees and be held by and transferred to the Trustees,
except that the Trustees shall have full power to cause legal title to any
Trust Property to be held by or in the name of the Trust, or in the name of any
other Person as nominee, on such terms, in such manner, and with such powers as
the Trustees may determine. The right, title and interest of the Trustees in
and to the Trust Property shall vest automatically in all persons who may
hereafter become Trustees upon their due election and qualification without any
further act. Upon the resignation, disability, removal, adjudication as an
incompetent, or death of a Trustee, he (and in the event of his death, his
estate) shall automatically cease to have any right, title or interest in or to
any of the Trust Property, and the right, title and interest of such Trustee in
and to the Trust Property shall vest automatically in the remaining Trustees
without any further act.
4.3 DISPOSITION OF ASSETS. The Trustees shall have full power to
sell, exchange or otherwise dispose of any and all Trust Property free and
clear of any and all trusts, at public or private sale, for cash or on terms,
with or without advertisement, and subject to such restrictions, stipulations,
agreements and reservations as they shall deem proper, and to execute and
deliver any deed, power, assignment, bill of sale, or other instrument in
connection with the foregoing. The Trustees shall also have full power in
furtherance of the affairs and purposes of the Trust, to give consents and make
contracts relating to Trust Property or its use.
4.4 TAXES. The Trustees shall have full power: (i) to pay all taxes
or assessments, of whatever kind or nature, validly and lawfully imposed upon
or against the Trust or the Trustees in connection with the Trust Property or
upon or against the Trust Property or income or any part thereof; (ii) to
settle and compromise disputed tax liabilities; and (iii) for the foregoing
purposes to make such returns and do all such other acts and things as may be
deemed by the Trustees to be necessary or desirable.
4.5 RIGHTS AS HOLDERS OF TRUST PROPERTY. The Trustees shall have
full power to exercise all of the rights, powers and privileges appertaining to
the ownership of all Trust Property to the same extent that any individual
might, and, without limiting
8
<PAGE> 12
the generality of the foregoing, to vote or give any consent, request or notice
or waiver, any notice either in person or by proxy or power of attorney, with
or without the power of substitution, to one or more Persons, which proxies and
powers of attorney may be for meetings or actions generally, or for any
particular meeting or action, and may include the exercise of discretionary
powers.
4.6 DELEGATION; COMMITTEES. The Trustees shall have full power
(consistent with their continuing exclusive authority over the management of
the Trust, the conduct of its affairs, their duties and obligations as
Trustees, and the management and disposition of Trust Property) to delegate
from time to time to such one or more of their number (who may be designated as
constituting a Committee of the Trustees) or to officers, employees or agents
of the Trust the doing of such acts and things and the execution of such
instruments either in the name of the Trust, or the names of the Trustees or as
their attorney or attorneys, or otherwise as the Trustees may from time to time
deem expedient and appropriate in the furtherance of the business affairs and
purposes of the Trust.
4.7 COLLECTION. The Trustees shall have full power: (i) to collect,
sue for, receive and give receipt for all sums of money or other property due
to the Trust; (ii) to consent to extensions of the time for payment, or to the
renewal of any securities, investments or obligations; (iii) to engage or
intervene in, prosecute, defend, compromise, abandon or adjust by arbitration
or otherwise any actions, suits, proceedings, disputes, claims, demands or
things relating to the Trust Property; (iv) to foreclose any collateral,
security or instrument securing any investments, notes, bills, bonds,
obligations or contracts by virtue of which any sums of money are owed to the
Trust; (v) to exercise any power of sale held by them, and to convey good title
thereunder free of any and all trusts, and in connection with any such
foreclosure or sale, to purchase or otherwise acquire title to any property;
(vi) to be parties to reorganization and to transfer to and deposit with any
corporation, committee, voting trustee or other Person any securities,
investments or obligations of any Person which form a part of the Trust
Property, for the purpose of such reorganization or otherwise; (vii) to
participate in any arrangement for enforcing or protecting the interests of the
Trustees as the owners or holders of such securities, investments or
obligations and to pay any assessment levied in connection with such
reorganization or arrangement; (viii) to extend the time (with or without
security) for the payment or delivery of any debts or property and to execute
and enter into releases, agreements and other instruments; and (ix) to pay or
satisfy any debts or claims upon any evidence that the Trustees shall think
sufficient.
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<PAGE> 13
4.8 PAYMENT OF EXPENSES. The Trustees shall have full power: (i) to
incur and pay any charges or expenses which in the opinion of the Trustees are
necessary or incidental to or proper for carrying out any of the purposes of
this Declaration of Trust; (ii) to reimburse others for the payment thereof;
and (iii) to pay appropriate compensation or fees from the funds of the Trust
to Persons with whom the Trust has contracted or transacted business. The
Trustees shall fix the compensation, if any, of all officers and employees of
the Trust. The Trustees shall not be paid compensation for their general
services as Trustees hereunder. The Trustees may reimburse themselves or any
other Person for any and all charges or expenses incurred or paid by any of
them on behalf of the Trust or any Portfolio. The Trustees may allocate such
expenses among various Portfolios in such manner and proportion as appropriate
in the discretion of the Trustees.
4.9 DEPOSITS. The Trustees shall have full power to deposit any
monies or funds included in the Trust Property, and intended to be used for the
payment of expenses of the Trust or the Trustees, with one or more banks, trust
companies or other banking institutions whether or not such deposits will draw
interest so long as the depository enters into a custodian agreement acceptable
to the Trustees. Such deposits are to be subject to withdrawal in such manner
as the Trustees may determine, and the Trustees shall have no responsibility
for any loss which may occur by reason of the failure of the bank, trust
company or other banking institution with whom the monies, investments, or
securities have been deposited.
4.10 VALUATION. Subject to the requirements of the Investment
Company Act, the Trustees shall have full and complete power to determine in
good faith or cause other Persons to determine conclusively the value of any of
the Trust Property and the method by which the Trust Property is to be valued.
4.11 FISCAL YEAR; ACCOUNTS. Subject to the requirements of the
Investment Company Act, the Trustees shall have full power to determine the
fiscal year of the Trust and the method or form in which its accounts shall be
kept and from time to time to change the fiscal year or method or form of
accounts. The Trustees may establish different fiscal years for the various
Portfolios as appropriate in the discretion of the Trustees.
4.12 CONCERNING THE TRUST AND CERTAIN AFFILIATES.
(a) Subject to the requirements of the Investment Company
Act, the Trustees may (but need not), in their discretion, from time to time,
adopt standards with respect to conflicts of interest, trading on the basis of
material nonpublic information, the appropriateness of the Trust paying its
10
<PAGE> 14
distribution and marketing expenses and similar matters to govern (i) Trustees,
officers, directors, employees and agents of the Trust and their Affiliates and
(ii) such other Persons and their Affiliates as the Trustees may deem
appropriate.
(b) Any Trustee or officer, employee, or agent of the
Trust may, in his personal capacity, or in a capacity as trustee, officer,
director, stockholder, partner, member, agent, adviser or employee of any
Person, have business interests and engage in business activities in addition
to those relating to the Trust, which interests and activities may be similar
to those of the Trust and include the acquisition, syndication, holding,
management, operation or disposition of securities, investments and funds, for
his own account or for the account of such Person. Each Trustee, officer,
employee and agent of the Trust shall be free of any obligation to present to
the Trust any investment opportunity which comes to him in any capacity other
than solely as Trustee, officer, employee or agent of the Trust, even if such
opportunity is of a character which, if presented to the Trust, could be taken
by the Trust.
4.13 INVESTMENT PROGRAM. The Trustees shall use their best efforts
to obtain through qualified Persons a continuing and suitable investment
program, consistent with the investment objectives and policies of each
Portfolio. The Trustees shall also have full power to contract for or
otherwise obtain from or through qualified Persons for the benefit of, and to
make available to, the Participants of the Trust from time to time, additional
investment and noninvestment programs and services distinct from the Trust's
program of investments measured by Shares, but consistent with the objectives
of the Trust and the general purposes of this Declaration of Trust. The
Trustees shall have the power to review and approve or reject, in their sole
discretion, such additional investment and noninvestment programs as may be
presented to the Trustee by such qualified Persons.
4.14 POWER TO CONTRACT, APPOINT, RETAIN AND EMPLOY. The Trustees
shall have full power to appoint or discharge, employ or dismiss, retain or
terminate, or contract or cancel the contract with any Person as the Trustees
may deem necessary or desirable for the transaction of the affairs of the
Trust, or the transaction of the affairs of any additional investment programs
or services or noninvestment programs or services of any nature affiliated with
the Trust or otherwise contracted for or by the Trust, including any Person or
Persons who, may, among other things: (i) serve as the Trust's investment
adviser; (ii) serve as the Trustee's administrator or co-administrator; (iii)
serve as the Trust's marketing agent; (iv) furnish reports to the Trustees and
provide research, economic and statistical data in connection with the Trust's
investments; (v) act as managers,
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consultants, accountants, technical advisers, attorneys, brokers, underwriters,
corporate fiduciaries, escrow agents, depositories, custodians or agents for
collection, insurers or insurance agents, registrars for Shares or in any other
capacity deemed by the Trustees to be necessary or desirable; (vi) investigate,
select, and, on behalf of the Trust, conduct relations with Persons acting in
such capacities and pay appropriate fees to, and enter into appropriate
contracts with, or employ, or retain services performed or to be performed by,
any of them in connection with the investments acquired, sold, or otherwise
disposed of, or committed, negotiated, or contemplated to be acquired, sold or
otherwise disposed of; (vii) act as attorney-in-fact or agent in the purchase
or sale or other disposition of investments, and in the handling, prosecuting
or other enforcement of any lien or security securing investments; (viii)
assist in the performance of such ministerial functions necessary in the
management of the Trust as may be agreed upon with the Trustees; and (ix) any
of the foregoing as may be agreed upon by the Trustees with regard to any
additional investment and noninvestment programs and services for the benefit
of the Participants.
4.15 INSURANCE. The Trustees shall have full power to purchase and
pay for, entirely out of Trust Property, insurance policies insuring the Trust
and the Trustees, officers, employees and agents, of the Trust individually
against all claims and liabilities of every nature arising by reason of holding
or having held any such office or position, for by reason of any action alleged
to have been taken or omitted by the Trust or any such Person as Trustee,
officer, employee and agent, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trustee would have the
power to indemnify such Person against such liability.
4.16 INDEMNIFICATION. In addition to the mandatory indemnification
provided for in Section 5.3, the Trustees shall have full power, to the extent
permitted by applicable laws, including without limitation, the Investment
Company Act, to indemnify or enter into agreements with respect to
indemnification with any Person with whom the Trust has dealings, to such
extent as the Trustees shall determine.
4.17 REMEDIES. Notwithstanding any provision in this Declaration of
Trust, when the Trustees deem that there is a significant risk that an obligor
to the Trust may default or is in default under the terms of any obligation to
the Trust, the Trustees shall have full power to pursue any remedies permitted
by law which, in their sole judgment, are in the interests of the Trust, and
the Trustees shall have full power to enter into any investment, commitment or
obligation of the Trust resulting from
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the pursuit of such remedies as are necessary or desirable to dispose of
property acquired in the pursuit of such remedies.
4.18 FURTHER POWERS. The Trustees shall have full power to take all
such actions, do all such matters and things and execute all such instruments
as they deem necessary, proper or desirable in order to carry out, promote or
advance the interests and purposes of the Trust although such actions, matters
or things are not herein specifically mentioned. Any determination as to what
is in the best interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. The
Trustees shall not be required to obtain any court order to deal with the Trust
Property.
ARTICLE 5
LIMITATIONS OF LIABILITY
5.1 LIABILITY TO THIRD PERSONS. No Participant shall be subject to
any personal liability whatsoever, in tort, contract or otherwise, to any other
Person in connection with Trust Property or the affairs of the Trust; and no
Trustee, officer, employee of the Trust or other Person designated by the
Trustees shall be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any other Person in connection with Trust Property or
the affairs of the Trust, except for that arising from bad faith, willful
misconduct, gross negligence or reckless disregard of duties; and all such
other Persons shall look solely to the Trust Property for satisfaction of
claims of any nature arising in connection with the affairs of the Trust.
5.2 LIABILITY TO THE TRUST OR THE PARTICIPANTS. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust or to any
Participant, trustee, officer, employee or agent of the Trust for any action or
failure to act (including, without limitation, the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misconduct, gross negligence or reckless disregard of his
duties; provided, that the provisions of this Section 5.2 shall not limit the
liability of any Person with respect to breaches by it of a contract between it
and the Trust.
5.3 INDEMNIFICATION.
(a) The Trust shall indemnify and hold each Participant
harmless from and against all claims and liabilities, whether they proceed to
judgment or are settled or otherwise brought to a conclusion, to which such
Participant may become subject by reason of its being or having been a
Participant, and
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shall reimburse such Participant for all legal and other expenses reasonably
incurred by it in connection with any such claim or liability. The rights
accruing to a Participant under this Section 5.3 shall not exclude any other
right to which such Participant may be lawfully entitled, nor shall anything
herein contained restrict the right of the Trust to indemnify or reimburse a
Participant in any appropriate situation even though not specifically provided
herein.
(b) The Trust shall indemnify each of its Trustees,
officers, employees and agents and other Persons designated by the Board of
Trustees to receive such indemnification, against all liabilities and expenses
(including, without limitation, amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees) reasonably incurred by
him in connection with the defense or disposition of any action, suit or other
proceeding by the Trust or any other Person, whether civil or criminal, in
which he may be involved or with which he may be threatened, while an officer
or thereafter, by reason of his being or having been such a Trustee, officer,
employee, agent or otherwise designated person, except as to any matter as to
which he shall have been adjudicated to have acted in bad faith or with willful
misconduct or reckless disregard of his duties or gross negligence; provided,
that the provisions of this Section 5.3(b) shall not be construed to permit the
indemnification of any Person with respect to breaches by it of a contract
between it and the Trust; further provided, that as to any matters disposed of
by a compromise payment by such Trustee, officer, employee, agent or otherwise
designated Person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have determined that the officer, Trustee,
employee, agent or otherwise designated Person acted in good faith in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Trust and, with respect to any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful. The determination of whether such officer,
Trustee, employee, or agent has met the standard set forth in the preceding
sentence shall be made: (i) by the Trustees by a majority vote of a quorum
consisting of Trustees who were not parties to the action, suit or other
proceeding; (ii) if such quorum is not obtainable or if obtainable and, a
majority vote of a quorum of disinterested Trustees so directs, by independent
legal counsel in a written opinion; or (iii) by a majority vote of the
Participants. The rights accruing to any Trustee, officer, employee, agent or
otherwise designated Person under the provisions of this Section 5.3(b) shall
not exclude any other right to which he may be lawfully entitled; provided,
that no Trustee, officer, employee, agent or otherwise designated Person may
satisfy any right of indemnity or reimbursement granted herein or to which he
may be otherwise entitled except out of the
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Trust Property, and no Participant shall be personally liable to any Person
with respect to any claim for indemnity or reimbursement or otherwise. The
Trustees may make advance payments in connection with indemnification under
this Section 5.3(b), provided that the indemnified Trustee, officer, employee,
agent or otherwise designated Person shall have given a written undertaking to
reimburse the Trust in the event that it is subsequently determined that he is
not entitled to such indemnification.
(c) Any action taken by, or conduct on the part of, a
Trustee, an officer, an employee, an agent of the Trust or other Person
designated by the Trustees, in conformity with, or in good faith reliance upon,
the provisions of Section 5.7 hereof shall not, for the purpose of this
Declaration of Trust (including, without limitation, Sections 5.1, 5.2 and 5.3)
constitute bad faith, willful misconduct, gross negligence or reckless
disregard of his duties.
(d) Notwithstanding the foregoing, any indemnification
shall be made by the Trust only as permitted by the Securities Act of 1933, as
amended, and the Investment Company Act.
5.4 SURETY BONDS. No Trustee shall, as such, be obligated to give
any bond or surety or other security for the Performance of any of his duties.
5.5 APPARENT AUTHORITY. Unless otherwise required by or pursuant to
applicable law, no purchaser, seller, transfer agent or other Person dealing
with the Trustees or any officer, employee or agent of the Trust shall be bound
to make any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by such officer, employee or agent or make inquiry
concerning or be liable for the application of money or property paid,
transferred or delivered to or on the order of the Trustees or of such officer,
employee or agent.
5.6 TRUST OBLIGATIONS. Any written instrument creating an obligation
of the Trust shall be conclusively taken to have been executed by a Trustee or
an officer, employee or agent of the Trust only in his capacity as a Trustee
under this Declaration of Trust or in his capacity as an officer, employee or
agent of the Trust. Any written instrument creating an obligation of the Trust
may refer to this Declaration of Trust and contain a statement or
acknowledgement to the effect that the obligations thereunder are not
personally binding upon, nor shall resort be had to the property of, any of the
Trustees, Participants, officers, employees or agents of the Trust, and that
only the Trust Property or a specific portion thereof shall be bound; provided,
that the omission of any recital pursuant to this Section 5.6 shall not operate
to impose personal liability on any
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of the Trustees, Participants, officers, employees or agents of the Trust.
5.7 RELIANCE ON EXPERTS, ETC. Each Trustee, officer, employee and
agent of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel or upon reports made to the
Trust by any of its officers or employees or by any investment adviser,
distributor, manager, custodian, accountant, appraiser or other expert or
consultant selected with reasonable care by the Trustees or officers of the
Trust.
5.8 LIABILITY INSURANCE. The Trustees may maintain insurance for the
protection of the Trust Property, and the Trustees, Participants, officers,
employees and agents of the Trust, in such amount as the Trustees shall deem
adequate to cover all foreseeable tort and contract liability to the extent
available at reasonable rates.
ARTICLE 6
RECORD OF SHARES
6.1 SHARE REGISTER. A share register shall be kept by or on behalf
of the Trustees, and shall contain the names and addresses of the Participants,
the number of Shares held by them, and a record of all allocations and
redemptions thereof. Such share register shall be conclusive as to the
identity of the holders of the Shares. Only Participants whose ownership of
Shares is recorded on such share register shall be entitled to receive
distributions with respect to Shares or otherwise to exercise or enjoy the
rights and benefits related to the ownership of Shares. No Participant shall
be entitled to receive any distribution, nor to have notices given to it as
herein provided, until it has given its appropriate address to such officer or
agent of the Trust as shall keep the share register for entry thereon.
6.2 NO TRANSFERS OR PLEDGES OF SHARES. The beneficial interest
evidenced, represented or measured by the Shares shall not be assignable or
transferable other than to the Trust itself for purposes of redemption.
6.3 LIMITATION OF FIDUCIARY RESPONSIBILITY. The Trustees shall not,
nor shall the Participants or any officer, transfer agent or other agent of the
Trust, be bound to see the execution of any trust, express, implied or
constructive, or of any charge, pledge or equity to which any of the Shares or
any interest thereof are subject, or to ascertain or inquire whether any
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redemption of any such Shares by any Participant or its representatives is
authorized by such trust, charge, pledge or equity, or to recognize any Person
as having any interest therein except the Participant recorded as the holder of
such Shares. The receipt of the Participant in whose name any Share is
recorded or of the duly authorized agent of such Participant shall be a
sufficient discharge for all monies payable or deliverable in respect of such
Shares and from all liability to see to the proper application thereof.
6.4 NOTICES. Any and all notices to which Participants may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to Participants of record at their last
known post office addresses as recorded on the share register provided for in
Section 6.1.
ARTICLE 7
PARTICIPANTS
7.1 VOTING. On any matter submitted to a vote of the Participants,
all Shares then issued and outstanding shall be entitled to vote, shall be
voted in the aggregate and not by Portfolio, except
(a) when required by the Investment Company Act, Shares
shall be voted by individual Portfolio; and
(b) when the matter affects an interest of less than all
Portfolios, then only Participants that own Shares of the affected Portfolio or
Portfolios shall be entitled to vote.
Each Participant shall be entitled to exercise the voting rights of
Shares registered in the name of such Participant or the nominee thereof. Each
full Share shall be entitled to one vote and each fractional Share shall be
entitled to a corresponding fractional vote. All matters shall be decided by a
majority of the votes validly cast, except as otherwise required by law or this
Declaration of Trust. Participants shall not be entitled to cumulative voting.
7.2 MEETINGS OF PARTICIPANTS. Meetings of the Participants for such
purposes as may be permitted or required by law or this Declaration of Trust
shall be held at such time and place as may be determined by the Trustees and
specified in the notice of the meeting. The Participants shall, by an
instrument or concurrent instruments in writing delivered to the Board of
Trustees signed by the holders of at least ten percent (10%) of the Shares,
have the right to initiate a vote of the Participants as to any matter with
regard to which Participants have a right to vote. Within sixty (60) days of
receipt of such instrument or instruments, the
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Trustees shall cause a ballot to be sent to each Participant, setting forth the
matter to be voted on and the manner in which such ballots should be executed
and delivered or shall hold a meeting of the Participants.
7.3 QUORUM. The presence at any meeting, in person or by proxy, of
Participants that hold one-third of the issued and outstanding Shares shall
constitute a quorum for transaction of business of the Trust, except that when
a provision of law or this Declaration of Trust permits or requires that the
Shares be voted by Portfolio, then the Participants that hold one-third of the
issued and outstanding Shares of that Portfolio shall constitute a quorum for
transaction of business of that Portfolio.
In the absence of a quorum, the Participants that are present in
person or represented by proxy, by majority vote, may adjourn the meeting to
another time and place. No notice of adjournment need be given, and the
business that might have been transacted at the meeting originally called may
be transacted at any adjourned meeting at which a quorum is present.
7.4 NOTICE OF MEETINGS. Notice of meetings of the Participants,
stating the date, time, place and purposes of the meeting, and notice of any
vote without a meeting stating the purpose and method thereof, shall be given
by the Trustees by mail to each Participant at its registered address, mailed
at least ten (10) days before the date of the meeting. Only the business
stated in the notice of the meeting, shall be considered at such meeting.
7.5 RECORD DATE FOR MEETINGS AND VOTES. For the purpose of
determining the Participants that are entitled to notice of and to vote at any
meeting or any adjournment thereof, or that are entitled to participate in any
dividend or distribution, or for the purpose of any other action, the Trustees
may from time to time fix a date not more than thirty (30) days prior to the
date of any meeting or vote of Participants or other action as a record date
for the determination of Participants entitled to notice of and to vote at such
meeting or any adjournment thereof or to be treated as holders of record of
Shares for purposes of such other action. Any Participant who was a
Participant at the time so fixed shall be entitled to notice of and to vote at
such meeting, even though it holds no Shares at the time of the meeting. No
Person becoming a Participant after the record date shall be entitled to vote
at such meeting or to cast a ballot in such vote or to be treated as a holder
of record of Shares for purposes of such other action.
7.6 PROXIES, ETC. At any meeting of Participants, any Participant
entitled to vote may vote by proxy, provided that no
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proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary of the Trust, or with such other officer or agent of the
Trust as the Trustees may direct, for verification prior to the time at which
such vote shall be taken. Pursuant to a resolution of the Trustees, proxies may
be solicited in the name of one or more Trustees or nominees for Trustees. A
proxy purporting to be executed by or on behalf of a Participant shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger.
7.7 FINANCIAL RECORDS; REPORTS; ETC.
(a) The Trustees shall cause the Trust to keep full
accounts of all of its receipts and disbursements in accordance with the
requirements of the Investment Company Act and generally accepted accounting
principles. The Trustees shall at least once during each period of twelve
months cause an audit to be made of the Trust's financial records by
independent, certified public accountants responsible to the Trustees.
(b) The Trustees shall cause the Trust to maintain a
separate account on the books of the Trust for each Participant. All
transactions for such Participant shall be recorded by the Trusts in such
account. Statements showing transactions of and the number of Shares held by
each Participant shall be rendered by the Trust on a regular, periodic basis as
determined by the Trustees, but not less than annually.
(c) In addition to any reports, statements and opinions
prepared pursuant to Section 7.7(a) and (b), the Trustees may cause to be
prepared or conducted by the Trust's independent accountant such other reports
and examinations as the Trustees shall, in their discretion, deem appropriate.
7.8 INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection for reasonable purpose by Participants at all reasonable times,
provided that five (5) days written notice thereof is given to the Trustees.
ARTICLE 8
TRUSTEES AND OFFICERS
8.1 NUMBER. The number of Trustees shall be not less than five, and
the number of Trustees may be changed from time to time by the Trustees;
provided, that the number of Trustees shall in no event be less than five or
more than fifteen. No reduction in the number of Trustees shall have the
effect of removing any Trustee from office prior to the expiration of his term.
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8.2 QUALIFICATIONS OF TRUSTEES. The members of the Board of Trustees
shall be persons who are eligible to serve as directors of a registered
investment company under the Investment Company Act, including without
limitation the requirement under the Investment Company Act that a majority of
the Board of Trustees shall be persons who are not "interested persons" (as
defined in the Investment Company Act) of any Portfolio's principal
underwriters and no more than sixty percent of the Board of Trustees shall be
persons who are "interested persons" of the Trust. At least three-fourths
(3/4ths) of the members of the Board of Trustees shall consist of persons whose
principal occupations are or have been in or related to the healthcare
industry, including without limitation, positions with hospitals, health
systems, health facilities, medical groups, and health insuring organizations.
8.3 TERM AND ELECTION. Each Trustee named, elected or appointed as
provided herein shall, except as otherwise provided in Section 8.4 or 8.5, hold
office until his successor has been elected or appointed and has qualified to
serve as a Trustee.
8.4 RESIGNATION AND REMOVAL. Any Trustee may resign (without need
for prior or subsequent accounting) by an instrument in writing delivered to
the remaining Trustees and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the notice. Any Trustee
may be removed by the action of two-thirds of the other Trustees.
8.5 VACANCIES. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, bankruptcy,
adjudicated incompetence or other incapacity to exercise the duties of the
office, or removal of a Trustee. No such vacancy shall operate to annul this
Declaration of Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust, and title to any Trust Property held in
the name of such Trustee and the other Trustees or otherwise, shall, in the
event of the death, resignation, removal, bankruptcy, adjudicated incompetence
or other incapacity to exercise the duties of the office of such Trustee, vest
in the continuing or surviving Trustees without necessity of any further act or
conveyance.
In the case of a vacancy, including a vacancy resulting from an
increase in the number of Trustees, a majority of the remaining Trustees,
regardless of whether they constitute a quorum, or the Participants fill such
vacancy, and any Trustee so elected by the Trustees shall hold office until his
successor has been elected and has qualified to serve as a Trustee.
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8.6 MEETINGS.
(a) Meetings of the Trustees shall be held from time to
time upon the call of the Chairman or any three Trustees. Regular meetings of
the Trustees may be held without call or notice at a time and place fixed by
resolution of the Trustees. Notice of any other meeting shall be mailed or
otherwise given not less than 48 hours before the meeting but may be waived in
writing by any Trustee either before or after such meeting. The attendance of
a Trustee at a meeting shall constitute a waiver of notice of such meeting,
except where a Trustee attends a meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting has not been
lawfully called or convened. The Trustees may act with or without a meeting.
A quorum for all meetings of the Trustees shall be a majority of the Trustees.
Unless specifically provided otherwise in this Declaration of Trust, any action
of the Trustees may be taken at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting, by written consents of a
majority of the Trustees. Any agreement, or other instrument or writing
executed by one or more of the Trustees or by any authorized Person, shall be
valid and binding upon the Trustees and upon the Trust when authorized or
ratified by action of the Trustees as provided in this Declaration of Trust.
(b) Any committee of the Trustees, including an Executive
Committee, if any, may act with or without a meeting. A quorum for all
meetings of any such committee shall be a majority of the members thereof.
Unless otherwise specifically provided in this Declaration of Trust, any action
of any such committee may be taken at a meeting by vote of a majority of the
members present (a quorum being present) or by written consent of a majority of
the members.
(c) All or any one or more Trustees may participate in a
meeting of the Trustees or any committee thereof by utilizing conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and participation in a meeting
pursuant to such communications shall constitute presence in person at such
meeting. The minutes of any meeting of Trustees held by utilizing such
communications equipment shall be prepared in the same manner as those of a
meeting of Trustees held in person.
8.7 OFFICERS. The Trustees may elect, from among their numbers, a
Chairman who shall be the chief executive officer of the Trust, and a
Treasurer, who shall be the chief financial officer of the Trust. The Trustees
may elect or appoint, from among their number or otherwise, or may authorize
the Chairman to appoint, a Secretary, and such other officers or agents, who
shall have such powers, duties and responsibilities as the
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Trustees may deem to be advisable and appropriate. Two or more offices, except
those of Chairman and Secretary, may be held by the same person. The
Secretary, if not a Trustee, shall attend meetings of the Trustees but shall
have no voting power.
8.8 BYLAWS. The Trustees may adopt and, from time to time, amend or
repeal, Bylaws for the conduct of the business of the Trust, and in such
Bylaws, among other things, may define the duties of the respective officers,
agents, employees and representatives of the Trust.
ARTICLE 9
AMENDMENT OR TERMINATION OF TRUST;
DURATION OF TRUST
9.1 AMENDMENTS TO DECLARATION. This Declaration of Trust may be
amended by the Trustees or the Participants at any time or from time to time
and in any respect and, if determined by the Trustees or the Participants to be
necessary to comply with applicable law, retroactively; provided, that any such
amendment which amends Sections 2.1, 2.4, 5.1, 5.3, 7.1, 9.1 or 9.2 and
adversely affects the rights of the Participants shall be approved by the
Participants at a meeting or by a vote as provided in Article 7. No such
amendment shall divert any part of the Trust Property that equitably belongs to
any Participant for purposes other than the exclusive benefit of the
Participant at any time prior to the satisfaction of all liabilities with
respect to such Participant.
9.2 DURATION AND TERMINATION. This Trust shall continue until
termination of the last Portfolio existing under this Trust. Portfolios may be
terminated in the following manner:
(a) The Trustees, with the approval of Participants that
own at least a majority of the outstanding Shares of any Portfolio may sell and
convey the assets of such Portfolio to another trust or corporation organized
under the laws of any state of the United States for a consideration that may
include the assumption of all or a part of the outstanding obligations, taxes
and other liabilities, accrued or contingent, of the Portfolio and which may
include shares of beneficial interest or stock or other securities of such
trust or corporation. Upon making provision for the payment of all such
liabilities, by such assumption or otherwise, the Trustees shall distribute the
remaining proceeds ratably among the Participants owning outstanding Shares of
such Portfolio.
(b) The Trustees, with the approval of Participants that
own at least a majority of the outstanding Shares of any Portfolio, or, as
otherwise provided in Section 2.1, may
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terminate that Portfolio. Upon such termination, the Trustees shall sell and
convert into money all the assets of such Portfolio. Upon making provision for
the payment of all outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Portfolio, the Trustees shall distribute the
remaining assets of the Portfolio ratably among the Participants owning
outstanding shares of the Portfolio.
(c) Upon completion of the distribution of the remaining proceeds
or the remaining assets as provided in subsections (a) through (b), the Trust
shall terminate as to the Portfolio and the Trustees shall be discharged of any
and all further liabilities and duties hereunder with respect to such
Portfolio. Further, the right, title and interest of all parties of that
Portfolio shall be cancelled and discharged.
ARTICLE 10
MISCELLANEOUS
10.1 GOVERNING LAW. This Declaration of Trust is adopted in the
State of California and with reference to the laws thereof, and the rights of
all parties and the validity, construction and effect of every provision hereof
shall be subject to and construed according to the laws of the State of
California.
10.2 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, or of any official or
public body or office in which this Declaration of Trust may be recorded or
filed, appears to be a Trustee or the Secretary of the Trust, certifying to:
(i) the number or identity of Trustees or Participants; (ii) the due
authorization of the execution of any instrument or writing; (iii) the form of
any vote passed at a meeting of the Trustees or Participants; (iv) the fact
that the number of Trustees or Participants present at any meeting or executing
any written instrument satisfies the requirements of this Declaration of Trust;
(v) the form of any Bylaw adopted by or the identity of any officers elected by
the Trustees; or (vi) the existence of any fact or facts which in any manner
relate to the affairs of the Trust, shall be conclusive evidence as to the
matters so certified in favor of any Person dealing with the Trustees or any of
them or the Trust and the successors of such Person.
10.3 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Declaration of Trust are severable, and if the Trustees shall determine, with
the advise of counsel, that any one or more of such provisions (the
"Conflicting Provisions") are in conflict with applicable federal or California
laws, the Conflicting Provisions shall be deemed never to have constituted a
part of
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this Declaration of Trust; provided, that such determination by the Trustees
shall not affect or impair any of the remaining provisions of this Declaration
of Trust or render invalid or improper any action taken or omitted (including,
but not limited to, the election of Trustees) prior to such determination.
10.4 GENDER; SECTION HEADINGS.
(a) Words of the masculine gender shall mean and include
correlative words of the feminine and neuter gender and words importing the
singular number shall mean and include the plural number and vice versa.
(b) Any headings preceding the texts of the several
Articles and Sections of this Declaration of Trust and any table of contents or
marginal notes appended to copies hereof, shall be solely for convenience of
reference and shall neither constitute a part of this Declaration of Trust nor
affect its meaning, construction or effect.
IN WITNESS WHEREOF, the undersigned has caused this Amended and
Restated Declaration of Trust to be executed by its proper and duly authorized
officers as of the date first above written.
BOARD OF TRUSTEES OF CADRE NETWORK
HEALTH FINANCIAL SERVICES TRUST
By /s/ William T. Sullivan, Jr.
----------------------------------
Chairman of the
Board of Trustees
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EXHIBIT (9)(b)
CADRE NETWORK HEALTH FINANCIAL SERVICES TRUST
ADMINISTRATIVE SERVICES PLAN
This Administrative Services Plan (the "Plan") has been adopted by the
Board of Trustees of Cadre Network Health Financial Services Trust (the "Trust")
in connection with the shares ("Shares") of the Cadre Network Health Financial
Services Trust Liquid Asset Fund (the "Fund").
Section 1. Expenses. The Trust may incur expenses under the Plan in an
amount not to exceed: 0.05% of the average daily net assets of the Fund's
outstanding Shares.
Section 2. Administrative Services Covered by Plan. The Trust may pay
securities dealers, brokers, financial institutions, other industry
professionals (such as investment advisors, accountants, and estate planning
firms) and other entities, including any of the Trust's service providers
(severally, a "Service Organization"), for administrative support services
provided with respect to its customers' Shares. Such administrative support
services shall be provided pursuant to an Administrative Service Agreement.
Section 3. Administrative Servicing Fees Covered by Plan. Fees paid to a
Service Organization shall be in consideration for the administrative support
services provided pursuant to its Administrative Servicing Agreement and may be
paid at an annual rate of up to 0.05% of the average daily net assets of the
Fund's outstanding Shares owned of record or beneficially by that Service
Organization's customers for whom such Service Organization is the dealer of
record or holder of record or with whom it has a servicing relationship. Such
fees shall be calculated and accrued daily, paid monthly, and computed in the
manner set forth in the Administrative Servicing Agreement.
Section 4. Approval of Plan. This Plan will become effective upon the
approval by a majority of the Board of Trustees, including a majority of those
Trustees who are not "interested persons" (as defined in the Investment Company
Act of 1940) of the Trust and who have no direct or indirect financial interest
in the operation of the Plan or in any agreements entered into in connection
with the Plan (the "Disinterested Trustees"), pursuant to a vote cast at a
meeting called for the purpose of voting on the approval of the Plan.
Section 5. Continuance of Plan. Unless sooner terminated in accordance with
the terms hereof, this Plan shall continue until December, 1999, and thereafter,
shall continue in effect for so long as its continuance is specifically approved
at least annually by the Trust's Board of Trustees in the manner described in
Section 4 hereof.
Section 6. Amendments. This Plan may be amended at any time by the Board of
Trustees provided that any material amendments of the terms of the Plan shall
become effective only upon approval in the manner described in Section 4 hereof.
Section 7. Termination. This Plan is terminable without penalty at any time
as to a class of Shares by (a) a vote of a majority of the Disinterested
Trustees, or (b) a vote of a majority of such outstanding Shares of such class.
Section 8. 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.
<PAGE> 1
EXHIBIT (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 9 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 21, 1998, relating to the financial statements and financial highlights
of the Cadre Network Health Financial Services Liquid Asset Fund, which appears
in such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and "Independent Accountants" in the Prospectus
and to the reference to us under the heading "Independent Auditor" in the
Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
201 North Sarvice Road
Melville, New York 11747
February 25, 1998
