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U.S. GOVERNMENT SECURITIES
MONEY FUND
PRIME OBLIGATIONS FUND
PROSPECTUS
May 31, 1998, as supplemented August 3, 1998
MANAGED BY
Crestar Asset Management Company
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U.S. GOVERNMENT SECURITIES MONEY FUND
PRIME OBLIGATIONS FUND
Investment Adviser:
CRESTAR ASSET MANAGEMENT COMPANY
The U.S. GOVERNMENT SECURITIES MONEY FUND and the PRIME OBLIGATIONS FUND (the
"Funds") are money market funds that offer a convenient means of investing in
professionally managed diversified portfolios of short-term, high quality
securities to qualified individual or institutional customers who have a Cash
Advantage Portfolio or Liquid Asset Manager account with Crestar Asset
Management Company or Crestar Bank or other institutions having a selling
agreement with the Funds' distributor.
THE SHARES OFFERED HEREBY ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING CRESTAR BANK OR ANY OF ITS AFFILIATES OR
CORRESPONDENTS. THE SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING LOSS OF PRINCIPAL.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE UNITED
STATES GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing. The Funds are separate series
of The Arbor Fund. Investors are advised to read this Prospectus and retain it
for future reference. A Statement of Additional Information dated May 31, 1998,
has been filed with the Securities and Exchange Commission and is available
without charge by calling 1-800-342-5734. The Statement of Additional
Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
MAY 31, 1998, AS SUPPLEMENTED AUGUST 3, 1998
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EXPENSE SUMMARY
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U.S.
Government Prime
ANNUAL OPERATING EXPENSES Securities Obligations
(As a percentage of average net assets) Money Fund Fund
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<S> <C> <C>
Advisory Fees (after fee waiver) (1)(2) .12% .13%
12b-1 Fees None None
Other Expenses (after fee waiver) (1) .13% .12%
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Total Operating Expenses (after fee waiver) (1) .25% .25%
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(1) The Adviser and the Administrator have agreed to waive, on a voluntary
basis, portions of their respective fees so that Total Operating Expenses do
not exceed .25%. The Adviser and the Administrator each reserves the right
to terminate its waiver at any time in its sole discretion. Absent such
waivers, Advisory Fees for each Fund would be .20%, Other Expenses
(including Administrator's fees) would be .17% for the U.S. Government
Securities Money Fund and .16% for the Prime Obligations Money Market Fund
and Total Operating Expenses would be .37% for the U.S. Government
Securities Money Fund and .36% for the Prime Obligations Fund. Additional
information may be found under "The Adviser" and "The Administrator and
Distributor."
(2) Advisory Fees for the Funds have been restated to reflect current expenses.
EXAMPLE
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<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
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<S> <C> <C> <C> <C>
An investor 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:
U.S. Government Securities Money Fund $3 $8 $14 $32
Prime Obligations Fund $3 $8 $14 $32
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THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of the
expense table and example is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in a
Fund. A person who purchases shares through a financial institution may be
charged separate fees by that institution. Additional information may be found
under "The Adviser" and "The Administrator and Distributor."
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FINANCIAL HIGHLIGHTS THE ARBOR FUND
The following information has been derived from the financial statements of The
Arbor Fund (the "Trust"), which have been audited by Price Waterhouse LLP, as
indicated in their report dated March 13, 1998 on the Trust's financial
statements as of January 31, 1998 incorporated by reference into the Trust's
Statement of Additional Information under "Financial Statements." Additional
performance information is set forth in the 1998 Annual Report to Shareholders
and is available upon request and without charge by calling 1-800-342-5734. This
table should be read in conjunction with the Trust's financial statements and
notes thereto.
For a Share Outstanding Throughout the Periods ended January 31,
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<CAPTION>
NET
DIVIDENDS ASSET
NET ASSET NET TOTAL FROM FROM NET VALUE,
VALUE, INVESTMENT INVESTMENT INVESTMENT END OF TOTAL
BEGINNING INCOME OPERATIONS INCOME PERIOD RETURN
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<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES MONEY FUND
1998................................. $1.00 0.05 0.05 (0.05) $1.00 5.52%
1997................................. $1.00 0.05 0.05 (0.05) $1.00 5.29%
1996................................. $1.00 0.06 0.06 (0.06) $1.00 5.88%
1995 (1)............................. $1.00 0.03 0.03 (0.03) $1.00 4.98%*
PRIME OBLIGATIONS FUND
1998................................. $1.00 0.06 0.06 (0.06) $1.00 5.66%
1997................................. $1.00 0.05 0.05 (0.05) $1.00 5.45%
1996 (2)............................. $1.00 0.02 0.02 (0.02) $1.00 5.82%*
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<CAPTION>
RATIO OF
NET
RATIO OF INVESTMENT
RATIO OF EXPENSES RATIO OF INCOME TO
NET EXPENSES TO AVERAGE NET AVERAGE
ASSETS, TO NET ASSETS INVESTMENT NET ASSETS
END OF AVERAGE (EXCLUDING INCOME TO (EXCLUDING
PERIOD NET FEE AVERAGE FEE
(000) ASSETS WAIVERS) NET ASSETS WAIVERS)
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<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES MONEY FUND
1998................................. $789,410 0.20% 0.37% 5.39% 5.22%
1997................................. $586,731 0.20% 0.37% 5.17% 5.00%
1996................................. $514,870 0.20% 0.37% 5.72% 5.55%
1995 (1)............................. $579,422 0.20%* 0.38%* 4.98%* 4.80%*
PRIME OBLIGATIONS FUND
1998................................. $740,837 0.20% 0.36% 5.52% 5.36%
1997................................. $477,435 0.20% 0.38% 5.33% 5.15%
1996 (2)............................. $382,632 0.20%* 0.40%* 5.61%* 5.41%*
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* Annualized
(1) Commenced operations on August 1, 1994.
(2) Commenced operations on October 25, 1995.
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THE FUNDS AND THE TRUST
This Prospectus offers shares of the U.S. Government Securities Money Fund and
the Prime Obligations Fund (the "Funds"), both diversified portfolios. The Funds
are separate investment portfolios of The Arbor Fund (the "Trust"), an open-end
management investment company.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of each Fund is to provide high current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity. Each Fund seeks to maintain a constant net asset value of $1.00 per
share. There is no assurance that either Fund will achieve its investment
objective or be able to maintain a stable net asset value.
Each Fund intends to comply with regulations of the Securities and Exchange
Commission (the "SEC") applicable to money market funds using the amortized cost
method for calculating net asset value. These regulations impose certain
quality, maturity and diversification restraints on each Fund's investments.
Under these regulations, each Fund will invest only in U.S. dollar denominated
securities, will maintain an average maturity on a dollar-weighted basis of 90
days or less, and will acquire only "eligible securities" that present minimal
credit risks and have maturities of 397 days or less.
U.S. GOVERNMENT SECURITIES MONEY FUND
The U.S. Government Securities Money Fund will invest solely in (i) U.S.
Treasury Obligations; (ii) obligations issued or guaranteed as to principal and
interest by agencies or instrumentalities of the U.S. Government; (iii)
repurchase agreements involving any of the foregoing obligations; and (iv)
shares of registered money market funds that invest in the foregoing.
PRIME OBLIGATIONS FUND
The Prime Obligations Fund will invest in: (i) U.S. Treasury Obligations, (ii)
obligations issued or guaranteed as to principal and interest by agencies or
instrumentalities of the U.S. Government; (iii) repurchase agreements involving
any of the foregoing obligations; (iv) commercial paper of U.S. or foreign
issuers; (v) short-term corporate obligations of U.S. or foreign issuers; (vi)
certificates of deposit, time deposits and bankers' acceptances of U.S.
commercial banks, foreign branches of such banks and domestic and foreign
branches of foreign banks; (vii) obligations of foreign governments and their
agencies; (viii) obligations of supranational entities; and (ix) custodial
receipts representing investments in component parts of U.S. Treasury
Obligations. The Fund also may purchase the securities of other registered money
market funds, and may purchase bank investment contracts and guaranteed
investment contracts.
The Fund will invest only in those obligations of U.S. and foreign banks that
meet the following quality standards: (a) investments in the obligations of U.S.
banks (including their foreign branches) are limited to those banks having total
assets in excess of $1 billion and subject to regulation by the U.S. Government,
provided, however, that the Fund may invest in certificates of deposit issued by
banks insured by the Federal Deposit Insurance Corporation ("FDIC") having total
assets of less than $1 billion, if the Fund at no time owns more than an
aggregate of $100,000 in principal and interest obligations (or any higher
principal amount or principal and interest that in the future may be fully
covered by FDIC insurance) of any one such issuer; and (b) investments in
obligations of U.S. or foreign branches of foreign banks are limited to U.S.
dollar denominated obligations of foreign banks that, at the time of investment,
have more than $5 billion (or the equivalent in other currencies) in total
assets and have branches or agencies in the United States; provided further that
these obligations are limited to banks headquartered in, and to those branches
located in, the United Kingdom, France, Germany, Belgium, the Netherlands,
Italy, Switzerland, Denmark, Norway, Sweden, Australia, Japan and Canada. The
Fund's investments in foreign government obligations will be limited to those of
the governments of the foregoing countries and their respective agencies.
GENERAL INVESTMENT POLICIES
Each Fund may borrow money in amounts up to 33 1/3% of total assets for
temporary or emergency
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purposes; lend portfolio securities or enter into reverse repurchase agreements,
in either case up to 33 1/3% of total assets; purchase securities subject to
standby commitments or puts, or on a when-issued or delayed delivery basis; and
invest up to 10% of net assets in illiquid securities.
For additional information regarding permitted investments for the Funds, see
"Description of Permitted Investments and Risk Factors" in this Prospectus and
"Description of Permitted Investments" in the Statement of Additional
Information.
INVESTMENT LIMITATIONS AND
FUNDAMENTAL POLICIES
The investment objectives and the following investment limitations are
fundamental policies of each Fund. Fundamental policies cannot be changed with
respect to a Fund without the consent of the holders of a majority of that
Fund's outstanding shares.
A Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase agreements
involving such securities) if, as a result, more than 5% of the total assets of
the Fund would be invested in the securities of such issuer; provided, however,
that the Fund may invest up to 25% of its total assets without regard to this
restriction as permitted by applicable law. Money market funds are subject to
special diversification requirements. See "Description of Permitted Investments
and Risk Factors-Restraints on Investments by Money Market Funds."
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. Government or its agencies and instrumentalities, repurchase agreements
involving such securities and obligations issued by domestic branches of U.S.
banks or U.S. branches of foreign banks subject to the same regulations as U.S.
banks. For purposes of this limitation, supranational entities will be
considered to be a separate industry.
3. Make loans, except that each Fund may (a) purchase or hold debt instruments
in accordance with its investment objective and policies, (b) enter into
repurchase agreements, and (c) engage in securities lending as described in this
Prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
THE ADVISER
Crestar Asset Management Company, formerly Capitoline Investment Services
Incorporated, (the "Adviser") acts as investment adviser to the Funds. The
Adviser sets investment policies, and continuously reviews, supervises and
administers each Fund's investment program. The Adviser discharges its
responsibilities subject to the supervision of, and policies established by, the
Trustees of the Trust.
The Adviser, 919 East Main Street, Richmond, Virginia 23219, was established in
1973. As of January 31, 1998, the Adviser's total assets under management were
approximately $15.4 billion, including approximately $5.4 billion in open-end
investment companies.
The Adviser is a wholly-owned subsidiary of Crestar Bank, which is a
wholly-owned subsidiary of Crestar Financial Corporation. Crestar Financial
Corporation is a bank holding company operating in the mid-Atlantic region that
had over $24.6 billion in assets as of January 31, 1998.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .20% of the average daily net assets of the U.S. Government
Securities Money Fund and at an annual rate of .20% of the average daily net
assets of the Prime Obligations Fund. The Adviser and the Administrator have
voluntarily agreed to waive a portion of their respective fees to the extent
necessary so that the total operating expenses of each Fund do not
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exceed .25% of its respective average daily net assets. The Adviser and the
Administrator each reserves the right to terminate its voluntary fee waivers at
any time.
For the fiscal year ended January 31, 1998, the U.S. Government Securities Money
Fund and Prime Obligations Fund paid the Adviser an advisory fee of .07% and
.08%, respectively, of its average daily net assets.
The Glass-Steagall Act restricts the securities activities of banks and banks'
affiliates, such as the Adviser, but federal regulatory authorities permit such
banks to provide investment advisory and other services to mutual funds. Should
this position be challenged successfully in court or reversed by legislation,
the Funds might have to make other investment advisory arrangements.
On July 20, 1998 it was announced that Crestar Financial Corporation
("Crestar"), the parent of Crestar Bank which is the parent of Crestar Asset
Management Corporation ("CAMCO"), the Funds' investment adviser, and SunTrust
Banks ("SunTrust"), have signed a definitive agreement for the acquisition of
Crestar by SunTrust. Subject to certain conditions being met, it is currently
anticipated that Crestar will become a wholly-owned subsidiary of SunTrust in
the fourth quarter of 1998.
THE ADMINISTRATOR AND DISTRIBUTOR
SEI Fund Resources (the "Administrator"), Oaks, Pennsylvania, 19456, provides
the Funds with administrative services, including fund accounting, all
regulatory reporting, necessary office space, equipment, personnel and
facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .08% of the average daily net assets of each of
the Funds. For the fiscal year ended January 31, 1998, the U.S. Government
Securities Money Fund and the Prime Obligations Fund paid the Administrator an
administration fee of .04% and .04%, respectively, of its average daily net
assets.
SEI Investments Distribution Co. (the "Distributor"), Oaks, Pennsylvania 19456,
a wholly-owned subsidiary of SEI Investments Company and an affiliate of the
Administrator, serves as the distributor of each Fund's shares. The Distributor
receives no fee for its services.
THE TRANSFER AGENT AND CUSTODIAN
Crestar Bank, 919 East Main Street, Richmond, Virginia 23219 ("Crestar Bank," or
the "Transfer Agent"), serves as the transfer agent and dividend disbursing
agent for the Funds. The Transfer Agent also acts as the shareholder servicing
agent and custodian of the Funds. As custodian, Crestar Bank holds cash,
securities and other assets of the Funds as required by the Investment Company
Act of 1940, as amended (the "1940 Act").
HOW TO PURCHASE SHARES
Each Fund is offered to qualified individuals or institutional customers that
have a Cash Advantage Portfolio or Liquid Asset Manager account with the Adviser
or Crestar Bank or other institutions having a selling agreement with the
Distributor. Financial institutions that are the record owner of shares for the
account of their customers may impose separate fees for account services to
their customers. An institution may arrange with the Transfer Agent for
sub-accounting services and will be charged directly for the cost of such
services.
Shares of each Fund may be purchased or redeemed on any day on which the New
York Stock Exchange and the Federal Reserve wire are open for business
("Business Days"). Shares of a Fund may not be purchased by wire on federal
holidays restricting wire transfers. The minimum initial investment is
$10,000,000, unless the Shareholder has, in the opinion of a Fund, adequate
intent and availability of funds to reach a future level of investment of
$10,000,000. There is no minimum for subsequent purchases. Each Fund reserves
the right to reject any purchase order. Share certificates will not be issued.
Fund shares may be purchased by contacting an account executive at the
Shareholder's financial institution ("Account Executive") or by calling
1-800-342-5734.
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A telephone order will normally become effective at the price determined at 3:00
p.m. Eastern time (the time the Funds normally calculate their net asset
values), and the shares purchased will receive the dividend on Fund shares
declared on that day if such order is placed by 3:00 p.m. Eastern time, and
federal funds are received by the Fund by 4:00 p.m. Eastern time, on that day.
In the case of wire orders, Shareholders whose payments are received in or
converted into federal funds by 3:00 p.m. Eastern time will normally become
effective at the price determined at 3:00 p.m. Eastern time (the time the Funds
normally calculate their net asset values), and the shares purchased will
receive the dividend declared that day. Shareholders whose payments are received
in or converted into federal funds after 3:00 p.m. Eastern time will begin to
accrue dividends on the following business day.
Initial purchases of Fund shares must be accompanied by an account application
which can be obtained from an Account Executive or by calling 1-800-342-5734.
A purchase order for shares will be executed at a per share price equal to the
net asset value next determined after the purchase order is received and
accepted by a Fund. Net asset value per share is determined as of the earlier of
3:00 p.m. (Eastern Time) or the regularly-scheduled close of normal trading on
the New York Stock Exchange on each Business Day, based on the amortized cost
method described in the Statement of Additional Information. The net asset value
per share of a Fund is determined by dividing the total market value of the
Fund's investments, using amortized cost valuations, and other assets, less any
liabilities, by the total number of outstanding shares of the Fund.
HOW TO REDEEM SHARES
Shareholders may redeem their shares without charge on any Business Day by
contacting their Account Executive or by calling 1-800-342-5734. Shares will be
redeemed by wire transfer, if requested, or by check. Shares may not be redeemed
by wire on federal holidays restricting wire transfers.
Shares may be redeemed by telephone unless the Shareholder has elected not to
effect telephone redemptions on the account application. Telephone redemption
orders must be placed prior to 3:00 p.m. Eastern time, on any Business Day in
order to be effective on such day. If transfer by wire is requested and the
order is placed prior to 3:00 p.m. Eastern time, the proceeds of the redemption
ordinarily will be transmitted in federal funds on the same day and the shares
will not receive the dividend declared on that day. If the request is received
later than 3:00 p.m. Eastern time, the shares will receive the dividend on a
Fund's shares declared on that day and the proceeds of redemption, if wire
transfer is requested, ordinarily will be transmitted in federal funds on the
next Business Day.
Each Fund reserves the right to refuse any request made by telephone and may
limit the amount involved or the number of telephone redemptions. This procedure
may be modified or terminated at any time by the Fund.
Purchase and redemption orders may be made by telephone. Neither a Fund nor the
Transfer Agent will be responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone instructions that it reasonably
believes to be genuine. A Fund and the Transfer Agent will each employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, including requiring a form of personal identification prior to acting
upon instructions received by telephone and recording telephone instructions. If
market conditions are extraordinarily active, or other extraordinary
circumstances exist, Shareholders may wish to consider placing an order by other
means.
OTHER INFORMATION REGARDING REDEMPTIONS
At various times, a Fund may be requested to redeem shares for which it has not
yet received good payment. In such circumstances, proceeds will be forwarded as
soon as payment has been collected for the purchase of such shares, which may
take 10 days or more.
Each Fund reserves the right to redeem, at net asset value, the shares of any
Shareholder if,
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because of redemptions of shares by or on behalf of the Shareholder, the account
of such Shareholder decreases in value below the minimum initial purchase amount
for the shares. Accordingly, a Shareholder purchasing shares of a Fund in only
the minimum investment amount may be subject to such involuntary redemption if
it thereafter redeems any of these shares. Before a Fund exercises its right to
redeem such shares and to send the proceeds to the Shareholder, the Shareholder
will be given notice that the value of the shares in its account is less than
the minimum amount and will be allowed 60 days to make an additional investment
in the Fund in an amount which will increase the value of the account to at
least the minimum initial purchase amount.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information for examples of when the right of redemption may be suspended.
The purchase and redemption price is expected to remain constant at $1.00 per
share.
PERFORMANCE
From time to time a Fund may advertise its current yield and effective yield.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields.
The "current yield" of a Fund refers to the income generated by an investment in
the Fund over a stated 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" (also called "effective compound yield") is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The effective yield will be slightly higher than the
current yield because of the compounding effect of this assumed reinvestment.
A Fund may periodically compare performance to other mutual funds tracked by
mutual fund rating services (such as Lipper Analytical Services, Inc.), to broad
groups of comparable mutual funds or to unmanaged indices which may assume
investment of dividends but generally do not reflect deductions for account
level fees.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Funds or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes. State and local tax consequences of an investment in a Fund may differ
from the federal income tax consequences described below. Additional information
concerning taxes is set forth in the Statement of Additional Information.
TAX STATUS OF THE FUNDS
A Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other funds. Each Fund intends to qualify for the
special tax treatment afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), so
as to be relieved of federal income tax on that part of its net investment
income and net capital gain (the excess of net long-term capital gain over net
short-term capital loss) that it distributes to Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute all of its net investment income (including, for this
purpose, net short-term capital gains) to Shareholders. Dividends from net
investment company taxable income are taxable to Shareholders as ordinary income
(whether received in cash or in additional shares) and will not qualify for the
corporate dividends-received deduction. Distributions of net capital gains are
taxable to Shareholders as a 20% rate gain distribution (taxed at a rate of 20%)
or a 28% rate gain distribution (taxed at a rate of 28%), depending upon the
designation by the Portfolio (such designation being
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dependent upon the holding period of the Portfolio in the underlying asset
generating the net capital gain). Each Fund will provide annual reports to
Shareholders of the federal income tax status of all distributions.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in that month will be deemed to have
been paid by the Fund and received by the Shareholders in the year declared if
paid by the Fund at any time during the following January.
Income received on direct U.S. Government obligations is exempt from tax at the
state level when received directly and may be exempt, depending on the state,
when received by a Shareholder from a Fund provided certain conditions are
satisfied. Interest received on repurchase agreements normally is not exempt
from state taxation. Each Fund will inform Shareholders annually of the
percentage of income and distributions derived from direct U.S. Government
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from a Fund is considered tax
exempt in their particular states.
A Fund may make investments in securities (such as Separately Traded Registered
Interest and Principal Securities ("STRIPS") or zero coupon obligations) that
bear "original issue discount" or "acquisition discount." The Fund will be
required to include as part of its current income the imputed interest on such
obligations even though the Fund has not received any interest payments on such
obligations during that period. Because each Fund distributes all of its net
investment income to its Shareholders, a Fund may have to sell portfolio
securities to distribute such imputed income which may occur at a time when the
Adviser would not have chosen to sell such securities and which may result in a
taxable gain or loss.
Each Fund intends to make sufficient distributions each calendar year to avoid
liability for federal excise tax.
A sale, exchange or redemption of a Fund's shares is a taxable event to the
Shareholder.
Income that a Fund derives from obligations of foreign issuers may be subject to
foreign withholding taxes. A Fund will not be able to elect to treat
Shareholders as having paid their proportionate share of such foreign taxes.
GENERAL INFORMATION
THE TRUST
The Trust is an open-end management investment company that has diversified and
non-diversified portfolios. The Trust is organized as a Massachusetts business
trust under a Declaration of Trust dated July 24, 1992. The Declaration of Trust
permits the Trust to offer separate portfolios of shares and different classes
of shares within each portfolio.
All consideration received by the Trust for shares of any portfolio and all
assets of such portfolio belong to that portfolio and are subject to liabilities
related thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees have approved contracts
under which, as described above, certain companies provide essential management
services to the Trust.
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. Each portfolio
or class will vote separately on matters relating solely to that portfolio or
class. As a Massachusetts business trust, the Trust is not required to hold
annual meetings of
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Shareholders but approval will be sought for certain changes in the operation of
the Trust and for the election of Trustees under certain circumstances.
In addition, a Trustee may be removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
As of May 8, 1998, Hamac and Company owned controlling interests of the U.S.
Government Securities Money Fund and the Prime Obligations Fund as defined by
the Investment Company Act of 1940, as amended.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to an Account Executive.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Fund is distributed in the form of periodic dividends declared daily and
distributed monthly to Shareholders. Currently, capital gains of a Fund, if any,
will be distributed at least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional shares at the net asset value next determined
following the record date, unless the Shareholder has elected to take such
payment in cash. Shareholders may change their election by providing written
notice to their Account Executive at least 15 days prior to the distribution.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Price Waterhouse LLP
serves as the independent accountants of the Trust.
DESCRIPTION OF PERMITTED
INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investment practices for one or
more of the Funds, and the associated risk factors:
BANKERS' ACCEPTANCES - Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT - Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER - Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS - Eurodollar bank obligations are U.S.
dollar denominated certificates of deposit or time deposits issued outside the
United States by foreign branches of U.S. banks or by foreign banks. Yankee
dollar obligations are U.S. dollar denominated obligations issued in the United
States by foreign banks.
GUARANTEED INVESTMENT CONTRACTS ("GICs") - GICs are contracts issued by U.S.
insurance companies. Pursuant to such contracts, the Prime Obligations Fund
makes cash contributions to a deposit fund of the insurance company's general
account. The insurance company then credits to the
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Fund on a monthly basis guaranteed interest at either a fixed, variable or
floating rate. A GIC provides that this guaranteed interest will not be less
than a certain minimum rate. A GIC is a general obligation of the issuing
insurance company and not a separate account. The purchase price paid for a GIC
becomes part of the general assets of the issuer, and the contract is paid at
maturity from the general assets of the issuer.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance company. For this reason, an active secondary market in GICs
does not currently exist and GICs are generally considered to be illiquid
investments. However, the Fund will treat GICs with seven-day unconditonal
demand features as liquid investments.
ILLIQUID SECURITIES - Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on a Fund's books. An illiquid security includes a demand instrument
with a demand notice period exceeding seven days, where there is no secondary
market for such security, and repurchase agreements with maturities over seven
days in length.
OBLIGATIONS OF SUPRANATIONAL ENTITIES - Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank.
RECEIPTS - Receipts are sold as zero coupon securities which means that they are
sold at a substantial discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest paying investments.
REPURCHASE AGREEMENTS - Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. A Fund bears a risk
of loss in the event of the other party defaults on its obligations and the Fund
is delayed or prevented from exercising its right to dispose of the collateral
or if the Fund realizes a loss on the sale of the collateral. A Fund will enter
into repurchase agreements only with financial institutions deemed to present
minimal risk of bankruptcy during the term of the agreement based on established
guidelines. Repurchase agreements are considered loans under the 1940 Act.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS - Investments by a money market
fund are subject to limitations imposed under regulations adopted by the SEC.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risk and that are "eligible securities," which means they
are (i) rated, at the time of investment, by at least two NRSROs (one if it is
the only organization rating such obligation) in the highest rating category or,
if unrated, determined to be of comparable quality (a "first tier security"); or
(ii) rated according to the foregoing criteria in the second highest rating
category or, if unrated, determined to be of comparable quality ("second tier
security"). A security is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and security that have a
short-term rating. A money market fund may invest up to 25% of its assets in
"first tier" securities of a single issuer for a period of up to three business
days. The securities that money market funds may acquire may be supported by
credit enhancements, such as demand features or guarantees. The SEC regulations
limit the percentage of securities that a money market fund may hold for which a
single issuer provides credit enhancements.
RESTRICTED SECURITIES - Restricted securities are securities that may not be
sold freely to the public absent registration under the Securities Act of
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1933, as amended, or an exemption from registration.
REVERSE REPURCHASE AGREEMENTS - Reverse repurchase agreements are agreements by
which a Fund sells securities to financial institutions and simultaneously
agrees to repurchase those securities at a mutually agreed-upon date and price.
At the time a Fund enters into a reverse repurchase agreement, the Fund will
place liquid assets having a value equal to the repurchase price in a segregated
custodial account and monitor this account to ensure equivalent value is
maintained. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the price at which the Fund
is obligated to repurchase the securities. Reverse repurchase are considered to
be borrowings by a Fund under the 1940 Act.
SECURITIES LENDING - In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest on the investment of cash collateral.
Collateral is marked to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially or become insolvent.
SECURITIES OF FOREIGN ISSUERS - There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments (including possible governmental seizure or nationalization of
assets), the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad, and
difficulties in transaction settlements and the effect of delay on Shareholder
equity. Foreign securities may be subject to foreign taxes, and may be less
marketable than comparable U.S. securities.
STANDBY COMMITMENTS AND PUTS - Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to a Fund owning the security to which it relates. In certain cases,
a premium may be paid for a standby commitment or put, which premium will have
the effect of reducing the yield otherwise payable on the underlying security. A
Fund will limit standby commitment or put transactions to institutions believed
to present minimal credit risk.
TIME DEPOSITS - Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time Deposits with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES - Obligations issued or guaranteed by agencies of the
U.S. Government and obligations issued or guaranteed by instrumentalities of the
U.S. Government. Some of these securities 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 Treasury, while still others are supported only by the credit of
the instrumentality. Guarantees of principal by agencies or instrumentalities of
the U.S. Government may be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to maturity there might not
be a market and thus no means of realizing on the obligation prior to maturity.
Guarantees as to the timely payment of principal and interest do not extend to
the value or yield of these securities nor to the value of a Fund's shares.
U.S. TREASURY OBLIGATIONS - U.S. Treasury obligations consist of bills, notes
and bonds issued
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by the U.S. Treasury and separately traded interest and principal component
parts of such obligations that are transferable through the Federal book-entry
system known as STRIPS.
VARIABLE AND FLOATING RATE INSTRUMENTS - Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES - When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
A Fund will maintain with the custodian a separate account with liquid assets in
an amount at least equal to these commitments. The interest rate realized on
these securities is fixed as of the purchase date and no interest accrues to a
Fund before settlement. These securities are subject to market fluctuation due
to changes in market interest rates and it is possible that the market value at
the time of settlement could be higher or lower than the purchase price if the
general level of interest rates has changed. Although a Fund generally purchases
securities on a when-issued or forward commitment basis with the intention of
actually acquiring securities for its portfolio, a Fund may dispose of a
when-issued security or forward commitment prior to settlement if it deems
appropriate.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
EXPENSE SUMMARY........................................................... 2
FINANCIAL HIGHLIGHTS...................................................... 3
THE FUNDS AND THE TRUST................................................... 4
INVESTMENT OBJECTIVE AND POLICIES......................................... 4
GENERAL INVESTMENT POLICIES............................................... 4
INVESTMENT LIMITATIONS AND FUNDAMENTAL POLICIES........................... 5
THE ADVISER............................................................... 5
THE ADMINISTRATOR AND DISTRIBUTOR......................................... 6
THE TRANSFER AGENT AND CUSTODIAN.......................................... 6
HOW TO PURCHASE SHARES.................................................... 6
HOW TO REDEEM SHARES...................................................... 7
PERFORMANCE............................................................... 8
TAXES..................................................................... 8
GENERAL INFORMATION....................................................... 9
DESCRIPTION OF PERMITTED
INVESTMENTS AND RISK FACTORS.............................................. 10
</TABLE>
