As filed with the Securities and Exchange Commission on August 12, 1996
Registration No. 33-65818
File No. 811-7862
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X/
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/ / Pre-Effective Amendment No.
/ X/ Post-Effective Amendment No. 3
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X/
ACT OF 1940
/ X/ Amendment No. 5
(Check appropriate box or boxes)
CASH RESOURCE TRUST
(Exact name of registrant as specified in charter)
901 East Byrd Street
Richmond, Virginia 23219
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code (804) 782-3647
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PAUL F. COSTELLO, President
Cash Resource Trust
901 East Byrd Street
Richmond, Virginia 23219
(Name and address of agent for service)
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Copy to:
TIMOTHY W. DIGGINS, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
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It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485
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<PAGE>
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Cash Resource Trust registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 of the Investment Company Act of
1940. A Rule 24f-2 notice in respect of the Trust's fiscal year ending July 31,
1996 will be filed on or prior to September 29, 1996.
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CASH RESOURCE TRUST
CROSS REFERENCE SHEET
(as required by Rule 404(c))
Part A
<TABLE>
<CAPTION>
N-1A Item No.
Location
<S> <C>
1. Cover Page.......................................... Cover Page
2. Synopsis............................................ Cover Page; Expense summary
3. Condensed Financial Information..................... Expense summary
4. General Description of Registrant................... Cover Page; Investment
objectives;
Selection of
investments;
Risk factors;
Other
investment
practices; How
a fund's
performance is
calculated;
General
information
about the Trust
5. Management of the Fund.............................. Investment objectives; The Trust's
management; Distribution
services; General information
about the Trust
5A. Management's Discussion
of Fund Performance............................... Not Applicable
6. Capital Stock and Other
Securities........................................ Buying and selling of shares of the
Funds; Dividends; Certain tax
matters; General information about
the Trust
7. Purchase of Securities Being
Offered........................................... Buying and selling of shares of the
Funds; How to exchange shares
8. Redemption or Repurchase............................ Buying and selling of shares of
Funds; How to exchange shares;
Financial Institutions
9. Pending Legal Proceedings........................... Not Applicable
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Part B
N-1A Item No. Location
10. Cover Page........................................ Cover Page
11. Table of Contents................................. Cover Page
12. General Information and History................... Not Applicable
13. Investment Objectives and
Policies........................................ Investment Objectives and
Policies; Investment Restrictions;
Portfolio Turnover
14. Management of the Fund............................ Management of the Trust
15. Control Persons and Principal
Holders of Securities........................... Management of the Trust
16. Investment Advisory and Other
Services........................................ Management of the Trust;
Principal Underwriter; Custodian;
Independent Auditors; Experts
17. Brokerage Allocation.............................. Management of the Trust
(Brokerage and Research Services;
Brokerage Commissions)
18. Capital Stock and Other
Securities...................................... Determination of Net Asset Value;
Taxes; Dividends and
Distributions; Distribution;
Organization and Capitalization
19. Purchase, Redemption and Pricing
of Securities Being Offered..................... Management of the Trust;
Determination of Net Asset Value;
Distribution
20. Tax Status........................................ Investment Objectives and Policies
of the Trust; Taxes; Dividends and
Distributions
21. Underwriters...................................... Management of the Trust;
Principle Underwriter
22. Calculations of Yield Quotations
of Money Market Funds........................... Performance Information
23. Financial Statements.............................. Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
The Cross Reference Sheet in respect of Part A and Part B for (i) the
Cash Resource Money Market, U.S. Government Money Market, and Tax-Exempt Money
Market Funds, and (ii) the
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Prospectus in respect of the above-named Funds, which are contained in
Post-Effective Amendment No. 2 to Cash Resource Trust's Registration Statement
on Form N-1A (File No. 33- 65818) filed on September 29, 1995, are incorporated
herein by reference.
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<PAGE>
P R O S P E C T U S October , 1996
Cash Resource Trust
Cash Resource California Tax-Exempt Money Market Fund
Cash Resource New York Tax-Exempt Money Market Fund
The Cash Resource California Tax-Exempt Money Market Fund and the Cash
Resource New York Tax-Exempt Money Market Fund are designed for investors who
seek current income consistent with preservation of capital and maintenance of
liquidity. The Funds are diversified investment portfolios of Cash Resource
Trust (the "Trust".)
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE. FEDERAL LAW PERMITS THE FUNDS TO
INVEST MORE OF THEIR ASSETS IN THE SECURITIES OF A SINGLE ISSUER THAN OTHER
MONEY MARKET FUNDS; AS A RESULT, AN INVESTMENT IN THE FUNDS MAY INVOLVE GREATER
RISKS THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
This Prospectus explains concisely what you should know before investing in
a Fund. Please read it carefully and keep it for future reference. YOU CAN FIND
MORE DETAILED INFORMATION ABOUT THE FUNDS IN THE OCTOBER , 1996 STATEMENT OF
ADDITIONAL INFORMATION, AS AMENDED FROM TIME TO TIME. FOR A FREE COPY OF THE
STATEMENT, CALL 1-800-382-0016. The Statement has been filed with the Securities
and Exchange Commission and is incorporated into this Prospectus by reference.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.
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 COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing in a Fund.
The following table summarizes your maximum transaction costs from an investment
in each of the Funds. Expenses shown are based on estimates for the Funds' first
full fiscal year. The Examples show the cumulative expenses attributable to a
hypothetical $1,000 investment in each Fund over specified periods.
<TABLE>
<CAPTION>
NEW YORK CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .00%* .22%
12b-1 Fees .37%* .33%
Other Expenses .43%* .20%
Total Fund Operating Expenses .80%* .75%
</TABLE>
* After expense limitation
EXAMPLES
Your investment of $1,000 in a Fund would incur the following expenses,
assuming 5% annual return and redemption at the end of each period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
New York Tax-Exempt Money
Market Fund $8 $26 $44 $ 99
California Tax-Exempt Money
Market Fund $8 $24 $42 $ 93
</TABLE>
The table is provided to help you understand the expenses of investing in
each of the Funds and your share of the Funds' operating expenses. Mentor
Investment Advisors, L.L.C. has agreed to waive its management fee and to
reimburse or pay operating expenses of the New York Tax-Exempt Money Market Fund
to the extent Total Fund Operating Expenses exceed .80% of the Fund's average
daily net assets. In the absence of this expense limitation. Management Fees
would be .22%, 12b-1 Fees would be .50%, Other Expenses would be estimated at
.43%, and Total Fund Operating Expenses would be estimated at 1.15% for the
Fund. The Examples do not represent past or future expense levels. Actual
returns and expenses may be greater or less than those shown. Federal
regulations require the Examples to assume a 5% annual return, but actual annual
return will vary. Because of the 12b-1 fees payable by the Funds, long-term
shareholders may pay more in aggregate sales charges than the maximum initial
sales charge permitted by the National Association of Securities Dealers, Inc.
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INVESTMENT OBJECTIVES AND POLICIES
The objective of each Fund is to seek as high a rate of current TAX-EXEMPT
INCOME as Mentor Investment Advisors, L.L.C. ("Mentor Advisors") believes is
consistent with preservation of capital and maintenance of liquidity. For this
purpose, tax-exempt income means --
(Bullet) for the CASH RESOURCE CALIFORNIA TAX-EXEMPT MONEY MARKET FUND,
income exempt from federal income tax and California personal
income tax;
(Bullet) for the CASH RESOURCE NEW YORK TAX-EXEMPT MONEY MARKET FUND,
income exempt from federal income tax and New York State and City
personal income tax.
Because each of the Funds is a money market fund, it will only invest in
the types of investments described below under "Selection of Investments".
MENTOR INVESTMENT ADVISORS, L.L.C. serves as the investment manager to each
of the Funds.
Each of the Funds invests primarily in TAX-EXEMPT SECURITIES. "Tax-Exempt
Securities" are debt obligations issued by a state (including the District of
Columbia), a U.S. territory or possession, or any of their political
subdivisions, agencies, instrumentalities, or other governmental units, the
interest from which is, in the opinion of bond counsel, exempt from federal
income tax. The CALIFORNIA TAX-EXEMPT MONEY MARKET FUND will normally invest at
least 80% of its assets in California Tax-Exempt Securities, which are
Tax-Exempt Securities issued by the State of California, or any of its political
subdivisions, or its agencies, instrumentalities, or other governmental units,
the interest from which is, in the opinion of bond counsel, exempt from
California personal income tax; likewise, the NEW YORK TAX-EXEMPT MONEY MARKET
FUND will normally invest at least 80% of its assets in New York Tax-Exempt
Securities, which are Tax-Exempt Securities issued by the State of New York, or
any of its political subdivisions, or its agencies, instrumentalities, or other
governmental units (or of other governmental issuers, such as U.S. territories),
the interest from which is, in the opinion of bond counsel, exempt from New York
State and City personal income taxes. (These 80% requirements are fundamental
policies of the Funds.) The Funds may invest the remainder of their assets in
investments of any kind described under "Selection of Investments," below.
Tax-Exempt Securities are issued to obtain funds for various public
purposes, such as the construction of public facilities, the payment of general
operating expenses, or the refunding of outstanding debts. They may also be
issued to finance various private activities, including the lending of funds to
public or private institutions for the construction of housing, educational, or
medical facilities and may also include certain types of private activity and
industrial development bonds issued by public authorities to finance privately
owned or operated facilities. Short-term Tax-Exempt Securities are generally
issued as interim financing in anticipation of tax collections, revenue
receipts, or bond sales to finance various public purposes.
The two principal classifications of Tax-Exempt Securities are general
obligation and special obligation (or revenue) securities. GENERAL OBLIGATION
securities involve the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues. Their payment may
depend on an appropriation by the issuer's legislative body. The characteristics
and methods of enforcement of general obligation securities vary according to
the law applicable to the particular issuer. SPECIAL OBLIGATION securities are
payable only from the revenues derived from a particular facility or class of
facilities, or a specific revenue source, and generally are not payable from the
unrestricted revenues of the issuer. Industrial development and private activity
bonds are in most cases special obligation securities, the credit quality of
which is directly related to the private user of the facilities.
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<PAGE>
The Funds will invest in the following types of Tax-Exempt Securities: (i)
municipal notes; (ii) municipal bonds; (iii) municipal securities backed by the
U.S. Government or any of its agencies or instrumentalities; (iv) short-term
discount notes (tax-exempt commercial paper); (v) participation interests in any
of the foregoing; and (vi) unrated securities or new types of tax-exempt
instruments which become available in the future if Mentor Advisors determines
they meet the quality standards discussed below. (In the case of any such new
types of tax-exempt instruments, this Prospectus would be revised as may be
appropriate to describe such instruments.) In connection with the purchase of
Tax-Exempt Securities, a Fund may acquire stand-by commitments, which give the
Fund the right to resell the security to the dealer at a specified price.
Stand-by commitments may provide additional liquidity for a Fund but are subject
to the risk that the dealer may fail to meet its obligations. The Funds do not
generally expect to pay additional consideration for stand-by commitments or to
assign any value to them.
For purposes of the Funds' fundamental policies to invest at least 80% of
their assets in the types of Tax-Exempt Securities described above, a Fund will
not treat obligations as Tax-Exempt Securities if they would give rise to
interest income subject to federal alternative minimum tax for individuals. To
the extent that a Fund invests in these securities, individual shareholders of
the Fund, depending on their own tax status, may be subject to federal
alternative minimum tax on the part of the Fund's distributions derived from
these securities. In addition, an investment in a Fund may cause corporate
shareholders to be subject to (or result in an increased liability under) the
alternative minimum tax because tax-exempt income is generally included in the
alternative minimum taxable income of corporations.
Since the New York Tax-Exempt Money Market Fund invests primarily in New
York Tax-Exempt Securities and the California Tax-Exempt Money Market Fund
invests primarily in California Tax-Exempt Securities, the value of each Fund's
shares may be especially affected by factors pertaining to the economies of
their respective states of concentration and other factors specifically
affecting the ability of issuers of New York Tax-Exempt Securities or California
Tax-Exempt Securities, as the case may be, to meet their obligations.
The ability of governmental issuers to meet their obligations will depend
primarily on the availability of tax and other revenues to those governments and
on their fiscal conditions generally. The amounts of tax and other revenues
available to governmental issuers may be affected from time to time by economic,
political, and demographic conditions affecting a particular state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. The availability of federal, state, and local aid to
issuers of such securities may also affect their ability to meet their
obligations. Payments of principal and interest on special obligation securities
will depend on the economic condition of the facility or specific revenue source
from whose revenues the payments will be made, which in turn could be affected
by economic, political, and demographic conditions affecting a particular state.
Any reduction in the actual or perceived ability of an issuer of Tax-Exempt
Securities in a particular state to meet its obligations (including a reduction
in the rating of its outstanding securities) would likely adversely affect the
market value and marketability of its obligations and could adversely affect the
values of Tax-Exempt Securities issued by others in that state as well.
The investment objective and policies of each Fund may, unless otherwise
specifically stated, be changed by the Trustees without a vote of the
shareholders. As a matter of policy, the Trustees would not materially change
the investment objective of a Fund without shareholder approval. None of the
Funds is intended to be a complete investment program, and there is no assurance
the Funds will achieve their objectives.
4
<PAGE>
SELECTION OF INVESTMENTS
Each Fund will invest only in U.S. dollar-denominated high-quality
securities and other U.S. dollar-denominated money market instruments meeting
credit criteria which the Trustees believe present minimal credit risk.
"High-quality securities" are (i) commercial paper or other short-term
obligations rated in one of the two highest short-term rating categories by at
least two nationally recognized rating services (or, if only one rating service
has rated the security, by that service), (ii) obligations rated at least AA by
Standard & Poor's or Aa by Moody's Investors Services, Inc. at the time of
investment, and (iii) unrated securities determined by Mentor Advisors to be of
comparable quality, subject to the overall supervision of the Trustees. Each
Fund will maintain a dollar-weighted average maturity of 90 days or less and
will not invest in securities with remaining maturities of more than 397 days. A
Fund may invest in variable or floating-rate securities which bear interest at
rates subject to periodic adjustment or which provide for periodic recovery of
principal on demand. Under certain conditions, these securities may be deemed to
have remaining maturities equal to the time remaining until the next interest
adjustment date or the date on which principal can be recovered on demand. Each
of the Funds follows investment and valuation policies designed to maintain a
stable net asset value of $1.00 per share, although there is no assurance that
these policies will be successful.
Considerations of liquidity and preservation of capital mean that a Fund
may not necessarily invest in money market instruments paying the highest
available yield at a particular time. Consistent with its investment objective,
a Fund will attempt to maximize yields by portfolio trading and by buying and
selling portfolio investments in anticipation of or in response to changing
economic and money market conditions and trends. Each Fund may also invest to
take advantage of what Mentor Advisors believes to be temporary disparities in
yields of different segments of the high-grade money market or among particular
instruments within the same segment of the market. These policies, as well as
the relatively short maturity of obligations purchased by the Funds, may result
in frequent changes in the Funds' portfolios. The Funds will not usually pay
brokerage commissions in connection with the purchase or sale of portfolio
securities.
The Funds may invest in high quality taxable money market instruments at
any time when Mentor Advisors believes that market conditions make pursuing a
Fund's basis investment strategy inconsistent with the best interest of
shareholders. These instruments may include: bank certificates of deposit,
banker's acceptances, prime commercial paper, high grade short-term corporate
obligations, short-term U.S. government securities or repurchase agreements, or
any other securities Mentor Advisors considers consistent with such defensive
strategies.
The portfolio of a Fund will be affected by general changes in interest
rates resulting in increases or decreases in the values of the obligations held
by the Fund. The value of the securities in a Fund's portfolio can be expected
to vary inversely to changes in prevailing interest rates. Although the Funds'
investment policies are designed to minimize these changes and to maintain a net
asset value of $1.00 per share, there is no assurance that these policies will
be successful. Withdrawals by shareholders could require the sale of portfolio
investments at a time when such a sale might not otherwise be desirable.
DIVERSIFICATION AND CONCENTRATION POLICIES
Each Fund is a "diversified" investment company under the Investment
Company Act of 1940. This means that each Fund may invest up to 25% of its total
assets in the securities of one or more issuers, and is limited with respect to
the remaining portion of its assets to investing 5% or less of its total assets
in the securities of any one issuer (other than the U.S. government).
5
<PAGE>
Because of the relatively small number of issuers of New York and
California Tax-Exempt Securities, the Funds are more likely to invest a higher
percentage of their assets in the securities of a single issuer than investment
companies that invest in a broader range of Tax-Exempt Securities. This practice
involves an increased risk of loss to a Fund if an issuer were unable to make
interest or principal payments or if the market value of these securities were
to decline.
Neither of the Funds will invest more than 25% of its total assets in
securities of issuers in any one industry. Governmental issuers of Tax-Exempt
Securities are not considered part of any "industry." However, Tax-Exempt
Securities backed only by the assets and revenues of nongovernmental users may
for this purpose be deemed to be issued by such nongovernmental users, and the
25% limitation would apply to such obligations.
It is nonetheless possible that a Fund may invest more than 25% of its
assets in a broader segment of the Tax-Exempt Securities market, such as revenue
obligations of hospitals and other health care facilities, housing agency
revenue obligations, or airport revenue obligations. This would be the case only
if Mentor Advisors determined that the yields available from obligations in a
particular segment of the market justified the additional risks associated with
such concentration. Although such obligations could be supported by the credit
of governmental users or by the credit of nongovernmental users engaged in a
number of industries, economic, business, political, and other developments
generally affecting the revenues of such users (for example, proposed
legislation or pending court decisions affecting the financing of such projects
and market factors affecting the demand for their services or products) may have
a general adverse effect on all Tax-Exempt Securities in such a market segment.
Each Fund reserves the right to invest more than 25% of its assets in
industrial development bonds and private activity bonds or notes.
OTHER INVESTMENT PRACTICES
A FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING INVESTMENT
PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL RISKS. THE STATEMENT OF
ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION ABOUT THESE PRACTICES.
REPURCHASE AGREEMENTS. Under a repurchase agreement, a Fund purchases a
debt instrument for a relatively short period (usually not more than one week),
which the seller agrees to repurchase at a fixed time and price, representing
the Fund's cost plus interest. A Fund will enter into repurchase agreements only
with commercial banks and with registered broker-dealers who are members of a
national securities exchange or market makers in government securities, and only
if the debt instrument subject to the repurchase agreement is a U.S. Government
security. Although Mentor Advisors will monitor repurchase agreement
transactions to ensure that they will be fully collateralized at all times, a
Fund bears a risk of loss if the other party defaults on its obligation and the
Fund is delayed or prevented from exercising its rights to dispose of the
collateral. If the other party should become involved in bankruptcy or
insolvency proceedings, it is possible that a Fund may be treated as an
unsecured creditor and required to return the underlying collateral to the other
party's estate.
SECURITIES LENDING. A Fund may lend portfolio securities to broker-dealers.
These transactions must be fully collateralized at all times with cash or
short-term debt obligations, but involve some risk to a Fund if the other party
should default on its obligation and the Fund is delayed or prevented from
recovering the collateral. Any investment of collateral by a Fund would be made
in accordance with the Fund's investment objective and policies described above.
6
<PAGE>
DIVIDENDS
THE TRUST DETERMINES THE NET INCOME OF EACH FUND AS OF THE CLOSE OF REGULAR
TRADING ON THE NEW YORK STOCK EXCHANGE (THE "EXCHANGE") EACH DAY THE EXCHANGE IS
OPEN. Each determination of a Fund's net income includes (i) all accrued
interest on the Fund's investments, (ii) plus or minus all realized and
unrealized gains and losses on the Fund's investments, (iii) less all accrued
expenses of the Fund. Each Fund's investments are valued at amortized cost
according to Securities and Exchange Commission Rule 2a-7. A Fund will not
normally have unrealized gains or losses so long as it values its investments by
the amortized cost method.
DAILY DIVIDENDS. Each Fund declares all of its net interest income as a
distribution on each day it is open for business, as a dividend to shareholders
of record immediately prior to the close of regular trading on the Exchange.
Shareholders who purchase shares of a Fund at or before 12:00 noon on any day
will receive the dividend declared by the Fund for that day; shareholders who
purchase shares after 12:00 noon will begin earning dividends on the day after
the Fund accepts their order. A Fund's net income for Saturdays, Sundays, and
holidays is declared as a dividend on the preceding business day. Dividends for
the immediately preceding month will be paid on the fifteenth day of each
calendar month (or, if that day is not a business day, on the next business
day), except that a Fund's schedule for payment of dividends during the month of
December may be adjusted to assist in tax reporting and distribution
requirements. A shareholder who withdraws the entire balance of an account at
any time during the month will be paid all dividends declared through the time
of the withdrawal. Since the net income of each Fund is declared as a dividend
each time it is determined, the net asset value per share of each Fund normally
remains at $1 per share immediately after each determination and dividend
declaration.
YOU CAN CHOOSE FROM TWO DISTRIBUTION OPTIONS: (1) automatically reinvest
all distributions from a Fund in additional shares of that Fund; or (2) receive
all distributions in cash. If you wish to change your distribution option, you
should contact your Financial Institution (as defined below), who will be
responsible for forwarding the necessary instructions to the Trust's transfer
agent, Investors Fiduciary Trust Company ("IFTC"). If you do not select an
option when you open your account, all distributions will be reinvested. You
will receive a statement confirming reinvestment of distributions in additional
shares of a Fund promptly following the month in which the reinvestment occurs.
TAX INFORMATION
FEDERAL TAXES. Each Fund intends to qualify as a "regulated investment
company" for federal income tax purposes and to meet all other requirements that
are necessary for it to be relieved of federal income taxes on income (and
gains, if any) it distributes to shareholders. Each Fund will distribute
substantially all of its ordinary income (and net capital gains, if any) on a
current basis.
Dividends paid that are derived from exempt-interest income (known as
"exempt-interest dividends") are not generally subject to federal income tax.
However, if you receive social security or railroad retirement benefits, you
should consult your tax adviser to determine what effect, if any, an investment
in a Fund may have on the taxation of your benefits. In addition, an investment
in a Fund may result in liability for federal alternative minimum tax and for
state and local taxes, both for individual and corporate shareholders.
(Shareholders should consult their own tax adviser with respect to whether
exempt-interest dividends would be excludable from gross income if the
shareholder were treated as a "substantial user" of facilities financed by an
obligation held by a Fund or a "related person" to such user under the Internal
Revenue Code.) If a shareholder receives an exempt-interest dividend with
respect to any share held for six months or less, any loss on the sale or
exchange of that share will be disallowed to the extent of the amount of the
exempt-interest dividend.
7
<PAGE>
If a Fund holds certain "private activity bonds" ("industrial development
bonds" under prior law), dividends derived from interest on such obligations
will be classified as an item of tax preference which could subject certain
shareholders to alternative minimum tax liability. Corporate shareholders must
also take all exempt-interest dividends into account in determining "adjusted
current earnings" for purposes of calculating their alternative minimum tax
liability.
Each Fund's distributions other than exempt-interest dividends will be
taxable to you as ordinary income, except that any distributions of net
long-term capital gains will be taxable as such, regardless of how long you have
held your shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of distributions.
Early in each year your Fund will notify you of the amount and tax status
of distributions paid to you for the preceding year.
STATE TAXES. CALIFORNIA TAX-EXEMPT MONEY MARKET FUND. To the extent
distributions are derived from interest on California Tax-Exempt Securities,
such distributions will be exempt from California personal income tax (but not
from California franchise and corporate income tax). For California tax
purposes, distributions derived from investments in other than (i) California
Tax-Exempt Securities and (ii) obligations of the United States (or other
obligations) which pay interest exempt from California personal income taxation
under the Constitution or laws of the United States will be taxable as ordinary
income or as long-term capital gain, whether paid in cash or reinvested in
additional shares.
NEW YORK TAX-EXEMPT MONEY MARKET FUND. To the extent exempt-interest
dividends are derived from interest on New York Tax-Exempt Securities, such
distributions will also be exempt from New York State and New York City personal
income taxes. However, an investment in the Fund may result in liability for
state and/or local taxes for individual shareholders subject to taxation by
states other than New York State or cities other than New York City because the
exemption from New York State and New York City personal income taxes does not
prevent such other jurisdictions from taxing individual shareholders on
dividends received from the Fund. In addition, distributions derived from
interest on Tax-Exempt Securities other than New York Tax Exempt Securities will
be treated as taxable ordinary income for purposes of the New York State and New
York City personal income taxes.
Exempt-interest dividends, including those derived from New York Tax-Exempt
Securities, are included in a corporation's net investment income for purposes
of calculating such corporation's New York State corporate franchise tax and New
York City general corporation tax and will be subject to such taxes to the
extent that a corporation's net investment income is allocated to New York State
and/or New York City.
All or a portion of interest on indebtedness incurred or continued to
purchase or carry the Fund's shares generally will not be deductible for federal
or New York State and New York City personal income tax purposes.
For New York State and City personal income tax purposes, distributions of
net long-term gains will be taxable at the same rates as ordinary income.
GENERAL. The foregoing is a summary of certain federal, California, and New
York State and New York City, income tax consequences of investing in the Funds.
You should consult your tax adviser to determine the precise effect of an
investment in each Fund on your particular tax situation.
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BUYING AND SELLING SHARES OF THE FUNDS
HOW TO BUY SHARES. The Trust offers shares of the Funds continuously at a
price of $1.00 per share. The Trust determines net asset value twice each day,
as of 12:00 noon and as of the close of regular trading on the Exchange. The
shares of each Fund are sold at net asset value through a number of selected
financial institutions, such as investment dealers and banks (each, a "Financial
Institution"). Your Financial Institution is responsible for forwarding any
necessary documentation to IFTC. There is no sales charge on sales of shares,
nor is any minimum investment required for any of the Funds.
Because each Fund seeks to be fully invested at all times, investments must
be in Same Day Funds to be accepted. Investments which are accepted at or before
12:00 noon will be invested at the net asset value determined at that time;
investments accepted after 12:00 noon will receive the net asset value
determined at the close of regular trading on the Exchange. "Same Day Funds" are
funds credited by the applicable regional Federal Reserve Bank to the account of
the Trust at its designated bank. When payment in Same Day Funds is available to
the Trust, the Trust will accept the order to purchase shares at the net asset
value next determined.
If you are considering redeeming shares or transferring shares to another
person shortly after purchase, you should pay for those shares with wired Same
Day Funds or a certified check to avoid any delay in redemption or transfer.
Otherwise, the Trust may delay payment for shares until the purchase price of
those shares has been collected which may be up to 15 calendar days after the
purchase date.
For more information on how to purchase shares of the Funds, contact your
Financial Institution or Mentor Distributors, L.L.C. ("Mentor Distributors"),
901 East Byrd Street, Richmond, Virginia 23219, the principal underwriter of the
Trust's shares. Mentor Distributors' telephone number is 1-800-382-0016.
HOW TO SELL SHARES. You can redeem your Fund shares through your Financial
Institution any day the Exchange is open, or you may redeem your shares by check
or by mail. Redemption will be effected at the net asset value per share of the
Fund next determined after receipt of the redemption request in good order. The
Trust must receive your properly completed purchase documentation before you may
sell shares.
SELLING SHARES THROUGH YOUR FINANCIAL INSTITUTION. You may redeem your
shares through your Financial Institution. Your Financial Institution is
responsible for delivering your redemption request and all necessary
documentation to the Trust, and may charge you for its services (including, for
example, charges relating to the wiring of funds). Your Financial Institution
may accept your redemption instructions by telephone. Consult your Financial
Institution.
SELLING SHARES BY CHECK. If you would like the ability to write checks
against your investment in the Trust, you should provide the necessary
documentation to your Financial Institution and complete the signature card
which you may obtain by calling your Financial Institution or the Trust. When
the Trust receives your properly completed documentation and card, you will
receive checks drawn on your Trust account and payable through the Trust's
designated bank. These checks may be made payable to the order of any person.
You will continue to earn dividends until the check clears. When a check is
presented for payment, a sufficient number of full and fractional shares of the
Trust in your account will be redeemed to cover the amount of the check. Your
Financial Institution may limit the availability of the check-writing privilege
or assess certain fees in connection with the checkwriting privilege.
Shareholders using Trust checks are subject to the Trust's designated
bank's rules governing checking accounts. There is currently no charge to the
shareholder for the use of checks, although one may be imposed in the future.
Shareholders would be notified in advance of the imposition of any such charge.
(In addition, if you deplete your original check supply, there may be a charge
to order additional checks.) You should make sure that
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there are sufficient shares in your account to cover the amount of the check
drawn. If there is an insufficient number of shares in the account, the check
will be dishonored and returned, and no shares will be redeemed. Because
dividends declared on shares held in your account and prior withdrawals may
cause the value of your account to change, it is impossible to determine in
advance your account's total value. Accordingly, you should not write a check
for the entire value of your account or close your account by writing a check. A
shareholder may revoke check-writing authorization by written notice to IFTC.
SELLING SHARES BY MAIL. You may also sell shares of a Fund by sending a
written withdrawal request to IFTC. You must sign the withdrawal request and
include a stock power with signature(s) guaranteed by a bank, broker/dealer, or
certain other financial institutions.
IFTC may require additional documentation from shareholders which are
corporations, partnerships, agents, fiduciaries, or surviving joint owners.
Corporations, partnerships, agents, trusts, and fiduciary accounts must submit a
completed resolution in proper form before selling shares. Resolution forms are
available from IFTC and Mentor Distributors.
THE TRUST GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS DAY
AFTER YOUR REQUEST IS RECEIVED. Under unusual circumstances, the Trust may
suspend repurchases, or postpone payment for more than seven days, as permitted
by federal securities law.
HOW TO EXCHANGE SHARES
You can exchange your shares in any Fund for shares of any other Fund in
the Trust at net asset value, except as described below. Your Financial
Institution will be responsible for forwarding the necessary documentation to
IFTC. Exchange Authorization Forms are available from your Financial Institution
or Mentor Distributors. For federal income tax purposes, an exchange is treated
as a sale of shares and generally results in a capital gain or loss. The Trust
reserves the right to change or suspend the exchange privilege at any time.
Shareholders would be notified of any change or suspension. Consult your
Financial Institution or Mentor Distributors before requesting an exchange.
FINANCIAL INSTITUTIONS
Financial Institutions provide varying arrangements for their clients with
respect to the purchase and redemption of Trust shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. When you effect transactions with the Trust (including
among other things the purchase, redemption, or exchange of Fund shares) through
a Financial Institution, the Financial Institution, and not the Trust, will be
responsible for taking all steps, and furnishing all necessary documentation, to
effect such transactions. Financial Institutions have the responsibility to
deliver purchase and redemption requests to the Trust promptly. Some Financial
Institutions may establish minimum investment requirements with respect to the
Trust or any Fund. They may also establish and charge fees and other amounts to
their client for their services. Certain privileges, such as the check writing
privilege or reinvestment options, may not be available through certain
Financial Institutions or they may be available only under certain conditions.
YOUR FINANCIAL INSTITUTION MAY CHARGE FEES TO OR IMPOSE RESTRICTIONS ON YOUR
SHAREHOLDER ACCOUNT. CONSULT YOUR FINANCIAL INSTITUTION FOR INFORMATION ABOUT
ANY FEES OR RESTRICTIONS OR FOR FURTHER INFORMATION CONCERNING ITS SERVICES.
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THE TRUST'S MANAGEMENT
The Trustees are responsible for generally overseeing the conduct of the
Trust's business. MENTOR INVESTMENT ADVISORS, L.L.C. serves as investment
manager to each of the Funds, providing investment advisory services and
advising and assisting the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of the Trustees. Subject to
such policies as the Trustees may determine, Mentor Advisors furnishes a
continuing investment program for the Funds and makes investment decisions on
their behalf. Mentor Advisors is a wholly owned subsidiary of Mentor Investment
Group, L.L.C., which is in turn a subsidiary of Wheat First Butcher Singer,
Inc., a diversified financial services holding company. Mentor Advisors serves
as investment adviser to seventeen separate investment portfolios in the Mentor
Family of Funds, including the Funds and the other funds making up Cash Resource
Trust. For a copy of the prospectus relating to any of these other portfolios,
call Mentor Distributors at 1-800-382-0016. Mentor Advisors' address is 901 East
Byrd Street, Richmond, Virginia 23219.
Each Fund pays management fees to Mentor Advisors at the following annual
rates (based on the assets of the Fund): 0.22% of the first $500 million of the
Fund's average net assets; 0.20% of the next $500 million; 0.175% of the next $1
billion; 0.16% of the next $1 billion; and 0.15% of any amounts over $3 billion.
Mentor Advisors may from time to time voluntarily agree to reduce its
compensation (and, if necessary, to pay certain expenses) with respect to one or
more Funds to the extent that a Fund's expenses (other than Mentor Advisors'
compensation, brokerage, interest, taxes, deferred organizational expenses,
payments required under the Fund's Distribution Plan, and extraordinary
expenses) exceed an annual rate of the Fund's average net assets specified by
Mentor Advisors.
The Trust pays all expenses not assumed by Mentor Advisors, including
Trustees' fees, auditing, legal, custodial, investor servicing, and shareholder
reporting expenses, and payments under its Distribution Plans. General expenses
of the Trust will be charged to the assets of each Fund on a basis that the
Trustees deem fair and equitable, which may be based on the relative assets of
each Fund or the nature of the services performed and relative applicability to
each Fund. Expenses directly charged or attributable to a Fund will be paid from
the assets of that Fund.
Mentor Advisors places all orders for purchases and sales of the securities
of each Fund. In selecting broker-dealers, Mentor Advisors may consider research
and brokerage services furnished to it and its affiliates. Subject to seeking
the most favorable price and execution available, Mentor Advisors may consider
sales of shares of the Funds (and, if permitted by law, of the other funds in
the Mentor family) as a factor in the selection of broker-dealers.
DISTRIBUTION SERVICES
Each Fund has adopted a Distribution Plan (each, a "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to
permit each of the Funds to compensate Mentor Distributors for services provided
and expenses incurred by it in promoting the sale of shares of the Fund,
reducing redemptions, or maintaining or improving services provided to
shareholders by Mentor Distributors. The Plans provide for monthly payments by
the Funds to Mentor Distributors, subject to the authority of the Trustees to
reduce the amount of payments or to suspend the Plans for such periods as they
may determine. Any material increase in amounts payable under a Plan would
require shareholder approval.
In order to compensate Financial Institutions for services provided in
connection with sales of Fund shares and the maintenance of shareholder accounts
(or, in the case of certain Financial Institutions which are banking
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institutions, for certain administrative and shareholder services), Mentor
Distributors may make periodic payments (from any amounts received by it under
the Plans or from its other resources) to each qualifying Financial Institution
based on the average net asset value of shares for which the Financial
Institution is designated as the financial institution of record. Mentor
Distributors makes such payments at the annual rate of between 0.15% and 0.33%
in the case of the California Tax-Exempt Money Market Fund, and between 0.15%
and 0.50% in the case of the New York Tax-Exempt Money Market Fund. Mentor
Distributors may suspend or modify these payments at any time, and payments are
subject to the continuation of each Fund's Plan and of applicable agreements
between Mentor Distributors and the applicable Financial Institution.
HOW A FUND'S PERFORMANCE IS CALCULATED
YIELD AND EFFECTIVE YIELD DATA MAY FROM TIME TO TIME BE INCLUDED IN
ADVERTISEMENTS ABOUT ONE OR ALL OF THE FUNDS. "Yield" is calculated by dividing
a Fund's annualized net investment income per share during a recent 30-day
period by the net asset value per share on the last day of that period.
"Effective yield" compounds that yield for a year and is, for that reason,
greater than a Fund's yield. "Tax-equivalent" yield shows the effect on
performance of the tax-exempt status of distributions received from a Fund. It
reflects the approximate yield that a taxable investment must earn for
shareholders at stated income levels to produce an after-tax yield equivalent to
a Fund's tax-exempt yield. Quotations of yield for any period when an expense
limitation was in effect will be greater than if the limitation had not been in
effect. A Fund's performance may be compared to various indices. See the
Statement of Additional Information.
ALL DATA IS BASED ON A FUND'S PAST INVESTMENT RESULTS AND DOES NOT PREDICT
FUTURE PERFORMANCE. Investment performance, which will vary, is based on many
factors, including market conditions, the composition of a Fund's portfolio, and
a Fund's operating expenses. Investment performance also often reflects the
risks associated with a Fund's investment objective and policies. These factors
should be considered when comparing a Fund's investment results to those of
other mutual funds and other investment vehicles.
GENERAL INFORMATION ABOUT THE TRUST
Cash Resource Trust is a Massachusetts business trust organized on June 14,
1993. A copy of the Agreement and Declaration of Trust, which is governed by
Massachusetts law, is on file with the Secretary of State of The Commonwealth of
Massachusetts.
The Trust is an open-end management investment company with an unlimited
number of authorized shares of beneficial interest. Shares of the Trust may,
without shareholder approval, be divided into two or more series of shares
representing separate investment portfolios, and are currently divided into five
series of shares, each series representing a fund, two of which are offered by
this Prospectus. Under the Agreement and Declaration of Trust, a Fund's shares
may be further divided, without shareholder approval, into two or more classes
of shares having such preferences or special or relative rights and privileges
as the Trustees may determine. Each share has one vote, with fractional shares
voting proportionally. Shares of each Fund are freely transferable, are entitled
to dividends as declared by the Trustees, and, if a Fund were liquidated, would
receive the net assets of the Fund. The Trust may suspend the sale of shares of
any Fund at any time and may refuse any order to purchase shares. Although the
Trust is not required to hold annual meetings of its shareholders, shareholders
have the right to call a meeting to elect or remove Trustees, or to take other
actions as provided in the Agreement and Declaration of Trust.
INVESTORS FIDUCIARY TRUST COMPANY , located at 127 West 10th Street, Kansas
City, Missouri 64105, is the transfer agent and dividend-paying agent for the
Trust. IFTC may at times engage at its own expense certain firms (including
certain Financial Institutions) to perform certain bookkeeping, data processing,
and administrative services pertaining to the maintenance of shareholder
accounts.
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If you own fewer shares of a Fund than a minimum amount set by the Trustees
(presently 500 shares), the Trust may choose to redeem your shares and pay you
for them. You will receive at least 30 days written notice before the Trust
redeems your shares, and you may purchase additional shares at any time to avoid
a redemption. The Trust may also redeem shares if you own shares of any Fund or
of the Trust above any maximum amount set by the Trustees. There is presently no
maximum, but the Trustees may establish one at any time, which could apply to
both present and future shareholders.
The Trust may send a single copy of shareholder reports and communications
to an address where there is more than one registered shareholder with the same
last name, unless a shareholder at that address requests, by calling or writing
his Financial Institution, that the Trust do otherwise.
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The Statement of Additional Information of the Cash Resource Money
Market, U.S. Government Money Market, and Tax-Exempt Money Market Funds and
various financial information in respect thereof, which is included in Part B to
Cash Resource Trust's Registration Statement on Form N-1A (File No. 33-65818)
filed on September 29, 1995, is incorporated herein by reference.
FORM N-1A
PART B
CASH RESOURCE TRUST
Cash Resource California Tax-Exempt Money Market Fund
Cash Resource New York Tax-Exempt Money Market Fund
STATEMENT OF ADDITIONAL INFORMATION
October __, 1996
This Statement of Additional Information contains information which may
be of interest to investors but which is not included in the Prospectus dated
October ___, 1996 (the "Prospectus") of the Cash Resource California Tax-Exempt
Money Market Fund and the Cash Resource New York Tax-Exempt Money Market Fund
(each a "Fund" and collectively the "Funds"), each of which is a series of
shares of Cash Resource Trust (the "Trust"). This Statement is not a prospectus
and is only authorized for distribution when accompanied or preceded by the
Prospectus, as amended from time to time. This Statement should be read together
with the Prospectus. Investors may obtain a free copy of the Prospectus by
calling Mentor Distributors, L.L.C. ("Mentor Distributors"), the Trust's
distributor, at (800) 382- 0016.
Table of Contents
Part I Page
INVESTMENT RESTRICTIONS............................6
MANAGEMENT OF THE TRUST............................8
PRINCIPAL HOLDERS OF SECURITIES...................12
INVESTMENT ADVISORY AND OTHER SERVICES............12
DETERMINATION OF NET ASSET VALUE..................15
TAXES.............................................17
DIVIDENDS AND DISTRIBUTIONS.......................24
DISTRIBUTION......................................24
ORGANIZATION......................................25
PORTFOLIO TURNOVER................................26
CUSTODIAN.........................................26
INDEPENDENT AUDITORS..............................26
PERFORMANCE INFORMATION...........................27
SHAREHOLDER LIABILITY.............................31
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Except as described below under "Investment Restrictions," the
investment objectives and policies described in the Prospectus and in this
Statement are not fundamental, and the Trustees may change the investment
objectives and policies of a Fund without an affirmative vote of shareholders of
a Fund.
Except as otherwise noted below, the following descriptions of certain
investment policies and techniques are applicable to each Fund.
Mentor Investment Advisors, L.L.C. ("Mentor Advisors") is the investment
adviser to the Funds.
Tax-Exempt Securities
General description. As used in the prospectus and in this SAI, the term
"Tax-Exempt Securities" includes debt obligations issued by a state, its
political subdivisions (for example, counties, cities, towns, villages,
districts and authorities) and their agencies, instrumentalities or other
governmental units, the interest from which is, in the opinion of bond counsel,
exempt from federal income tax. "California Tax-Exempt Securities" are
Tax-Exempt Securities issued by the State of California, or any of its political
subdivisions, or its agencies, instrumentalities, or other governmental units,
the interest from which is, in the opinion of bond counsel, exempt from
California personal income tax. "New York Tax-Exempt Securities" are Tax-Exempt
Securities issued by the State of New York, or any of its political
subdivisions, or its agencies, instrumentalities, or other governmental units
(or of other governmental issuers, such as U.S. territories), the interest from
which is, in the opinion of bond counsel, exempt from New York State and City
personal income taxes. Such obligations are issued to obtain funds for various
public purposes, including the construction of a wide range of public
facilities, such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Tax-Exempt Securities may be issued include the refunding of
outstanding obligations or the payment of general operating expenses. Short-term
Tax-Exempt Securities are generally issued by state and local governments and
public authorities as interim financing in anticipation of tax collections,
revenue receipts, or bond sales to finance such public purposes. In addition,
certain types of "private activity" bonds may be issued by public authorities to
finance such projects as privately operated housing facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste disposal,
student loans, or the obtaining of funds to lend to public or private
institutions for the construction of facilities such as educational, hospital
and housing facilities. Other types of private activity bonds, the proceeds of
which are used for the construction, repair or improvement of, or to obtain
equipment for, privately operated industrial or commercial facilities, may
constitute Tax-Exempt Securities, although the current federal tax laws place
substantial limitations on the size of such issues. Tax-Exempt Securities also
include short-term discount notes (tax-exempt commercial paper), which are
promissory notes issued by municipalities to enhance their cash flows.
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Participation interests. A Fund may invest in Tax-Exempt Securities
either by purchasing them directly or by purchasing certificates of accrual or
similar instruments evidencing direct ownership of interest payments or
principal payments, or both, on TaxExempt Securities, provided that, in the
opinion of counsel to the initial seller of each such certificate or instrument,
any discount accruing on the certificate or instrument that is purchased at a
yield not greater than the coupon rate of interest on the related Tax-Exempt
Securities will be exempt from federal income tax to the same extent as interest
on the TaxExempt Securities. A Fund may also invest in Tax-Exempt Securities by
purchasing from banks participation interests in all or part of specific
holdings of Tax-Exempt Securities. These participations may be backed in whole
or in part by an irrevocable letter of credit or guarantee of the selling bank.
The selling bank may receive a fee from a Fund in connection with the
arrangement. A Fund will not purchase such participation interests unless it
receives an opinion of counsel or a ruling of the Internal Revenue Service that
interest earned by it on Tax-Exempt Securities in which it holds such
participation interests is exempt from federal income tax. No Fund expects to
invest more than 5% of its assets in participation interests.
Stand-by commitments. When a Fund purchases Tax-Exempt Securities, it
has the authority to acquire stand-by commitments from banks and broker-dealers
with respect to those Tax-Exempt Securities. A stand-by commitment may be
considered a security independent of the state tax-exempt security to which it
relates. The amount payable by a bank or dealer during the time a stand-by
commitment is exercisable, absent unusual circumstances, would be substantially
the same as the market value of the underlying Tax-Exempt Security to a third
party at any time. Each Fund expects that stand-by commitments generally will be
available without the payment of direct or indirect consideration. No Fund
expects to assign any value to stand-by commitments.
Yields. The yields on Tax-Exempt Securities depend on a variety of
factors, including general money market conditions, effective marginal tax
rates, the financial condition of the issuer, general conditions of the
tax-exempt security market, the size of a particular offering, the maturity of
the obligation and the rating of the issue. The ratings of Moody's Investors
Service, Inc. and Standard & Poor's represent their opinions as to the quality
of the TaxExempt Securities which they undertake to rate. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality. Consequently, Tax-Exempt Securities with the same maturity and interest
rate but with different ratings may have the same yield. Yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, due to such factors as changes
in the overall demand or supply of various types of Tax-Exempt Securities or
changes in the investment objectives of investors. Subsequent to purchase by a
Fund, an issue of TaxExempt Securities or other investments may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. Neither event will require the elimination of an
investment from a Fund's portfolio, but Mentor Advisors will consider such an
event in its determination of whether a Fund should continue to hold an
investment in its portfolio.
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"Moral obligation" bonds. The Funds do not currently intend to invest in
so-called "moral obligation" bonds, where repayment is backed by a moral
commitment of an entity other than the issuer, unless the credit of the issuer
itself, without regard to the "moral obligation," meets the investment criteria
established for investments by the Funds.
Additional risks. Securities in which a Fund may invest, including
Tax-Exempt Securities, are subject to the provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
federal Bankruptcy Code (including special provisions related to municipalities
and other public entities), and laws, if any, which may be enacted by Congress
or state legislatures extending the time for payment of principal or interest,
or both, or imposing other constraints upon enforcement of such obligations.
There is also the possibility that as a result of litigation or other conditions
the power, ability or willingness of issuers to meet their obligations for the
payment of interest and principal on their Tax-Exempt Securities may be
materially affected.
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax-exemption for
interest on debt obligations issued by states and their political subdivisions.
Federal tax laws limit the types and amounts of tax-exempt bonds issuable for
certain purposes, especially industrial development bonds and private activity
bonds. Such limits may affect the future supply and yields of these types of
Tax-Exempt Securities. Further proposals limiting the issuance of tax-exempt
bonds may well be introduced in the future. If it appeared that the availability
of Tax-Exempt Securities for investment by a Fund and the value of the Fund's
portfolio could be materially affected by such changes in law, the Trustees of
the Trust would reevaluate a Fund's investment objectives and policies and
consider changes in the structure of the Fund or its dissolution.
Repurchase Agreements
Each Fund may enter into repurchase agreements. A repurchase agreement
is a contract under which a Fund acquires a security for a relatively short
period (usually not more than one week) subject to the obligation of the seller
to repurchase and the Fund to resell such security at a fixed time and price
(representing a Fund's cost plus interest). It is each Fund's present intention
to enter into repurchase agreements only with member banks of the Federal
Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition established by the Trustees of a Fund
and only with respect to obligations of the U.S. Government or its agencies or
instrumentalities or other high quality short term debt obligations. Repurchase
agreements may also be viewed as loans made by a Fund which are collateralized
by the securities subject to repurchase. Mentor Advisors will monitor such
transactions to ensure that the value of the underlying securities will be at
least equal at all times to the total amount of the repurchase obligation,
including the interest factor. If the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
the sale including accrued interest are less than the resale price provided in
the agreement including interest. In addition, if the seller should be involved
in bankruptcy
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or insolvency proceedings, a Fund may incur delay and costs in selling the
underlying security or may suffer a loss of principal and interest if the Fund
is treated as an unsecured creditor and required to return the underlying
collateral to the seller's estate.
Securities Loans
A Fund may lend its portfolio securities provided: (1) the loan is
secured continuously by collateral consisting of U.S. Government securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of the securities loaned will not at any time exceed one-third of
the total assets of such Fund. In addition, it is anticipated that a Fund may
share with the borrower some of the income received on the collateral for the
loan or that it will be paid a premium for the loan. Before a Fund enters into a
loan, Mentor Advisors considers all relevant facts and circumstances including
the creditworthiness of the borrower. The risks in lending portfolio securities,
as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. Although voting rights, or rights to consent, with respect to the
loaned securities pass to the borrower, a Fund retains the right to call the
loans at any time on reasonable notice, and it will do so in order that the
securities may be voted by the Fund if the holders of such securities are asked
to vote upon or consent to matters materially affecting the investment. A Fund
will not lend portfolio securities to borrowers affiliated with the Trust.
INVESTMENT RESTRICTIONS
Each of the following restrictions is applicable to all of the Funds
(except where otherwise noted). A restriction may not be changed without the
affirmative vote of a "majority of the outstanding voting securities" of a Fund,
which is defined in the 1940 Act to mean the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Fund and (2) 67% or more of
the shares present at a meeting if more than 50% of the outstanding shares are
represented at the meeting or by proxy. A Fund may not:
1. Borrow money in excess of 10% of the value (taken at the lower of
cost or current value) of its total assets (not including the amount borrowed)
at the time the borrowing is made, and then only from banks as a temporary
measure (not for leverage) in situations which might otherwise require the
untimely disposition of portfolio investments or for extraordinary or emergency
purposes. Such borrowings will be repaid before any additional investments are
purchased.
2. Pledge, hypothecate, mortgage, or otherwise encumber its assets in
excess of 15% of its total assets (taken at the lower of cost and current value)
and then only in connection with borrowings permitted by restriction 1 above.
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3. Purchase securities on margin, expect such short-term credits as
may be necessary for the clearance of purchase and sales of securities.
4. Make short sales of securities or maintain a short position for the
account of a Fund unless at all times when a short position is open it owns an
equal amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and in equal amount to, the securities sold short.
5. Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under the federal securities laws.
6. Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by interests in
real estate, and securities representing interests in real estate, and it may
acquire and dispose of real estate or interests in real estate acquired through
the exercise of its rights as a holder of debt obligations secured by real
estate or interests therein.
7. Purchase or sell commodities or commodity contracts.
8. Make loans, except by purchase of debt obligations in which a Fund
may invest consistent with its investment policies and by entering into
repurchase agreements and securities loans.
9. Invest in securities of any issuer, if, to the knowledge of a Fund,
officers and Trustees of the Trust and officers and directors of Mentor Advisors
who beneficially own more than 0.5% of the securities of that issuer together
own more than 5% of such securities.
10. As to 75% of its assets, invest in securities of any issuer if,
immediately after such investment, more than 5% of the total assets of the Fund
(taken at current value) would be invested in the securities of such issuer;
provided that this limitation does not apply to securities issued or guaranteed
as to principal or interest by the U.S. Government or its agencies or
instrumentalities.
11. Acquire more than 10% of the voting securities of any issuer.
12. Invest more than 25% of its assets in any one industry.
13. Make investments for the purpose of gaining control of a
company's management.
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14. Issue any class of securities which is senior to a Fund's shares of
beneficial interest, except as consistent with or permitted by the Investment
Company Act of 1940 or as permitted by rule or order of the Securities and
Exchange Commission.
In addition, it is contrary to the current policy of the Trust, which
may be changed without shareholder approval, to invest in the securities of
other registered open-end investment companies.
All percentage limitations on investments will apply at the time of
investment and shall not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of such investment. Except
for the investment restrictions listed above and those designated in the
Prospectus as fundamental, the other investment policies described in the
Prospectus and this Statement are not fundamental and may be changed by approval
of the Trustees. As a matter of policy, the Trustees would not materially change
a Fund's investment objective without shareholder approval.
MANAGEMENT OF THE TRUST
<TABLE>
<CAPTION>
Principal Occupation
Position Held With During Past
Name and Address A Fund Five Years
<S> <C>
Daniel J. Ludeman*(dagger) Chairman and Chairman and Chief
901 E. Byrd Street Trustee Executive Officer since
Richmond, VA 23219 July 1991, Mentor
Investment Group, L.L.C.;
Managing Director of
Wheat, First Securities,
Inc. since August 1989;
Managing Director of
Wheat First Butcher
Singer since June 1991;
Director, Wheat First
Securities, Inc., Mentor
Income Fund, Inc., and
America's Utility Fund,
Inc.; Chairman and
Trustee, The Mentor
Funds; Chairman and
Trustee, Cash Resource
Trust.
Arnold H. Dreyfuss Trustee Trustee, The Mentor Funds
P.O. Box 18156 and Mentor Institutional
Richmond, Virginia 23226 Trust; formerly, Chairman
and Chief Executive
Officer, Hamilton
Beach/Proctor-Silex, Inc.
Thomas F. Keller Trustee Dean, Fuqua School of
Fuqua School of Business Business, Duke
Duke University University; Trustee, The
Durham, NC 27706 Mentor Funds and Mentor
Institutional Trust.
Louis W. Moelchert, Jr. Trustee Vice President of
University of Richmond Business and Finance,
Richmond, VA 23173 University of Richmond;
Trustee, The Mentor Funds
and Mentor Institutional
Trust; Director,
America's Utility Fund,
Inc.
Stanley F. Pauley Trustee Chairman and Chief
E.R. Carpenter Executive Officer, E.R.
Company, Incorporated Carpenter Company
5016 Monument Avenue Incorporated; Trustee,
Richmond, Virginia 23261 The Mentor Funds; Mentor
and Mentor Institutional
Trust.
Troy A. Peery, Jr. Trustee President, Heilig-Meyers
Heilig-Meyers Company Company; Trustee, The
2235 Staples Mill Road Mentor Funds and Mentor
Richmond, Virginia 23230 Institutional Trust.
Peter J. Quinn, Jr.*(dagger) Trustee President, Mentor
901 E. Byrd Street Distributors, L.L.C.;
Richmond, VA 23219 Managing Director, Mentor
Investment Group, L.L.C.;
Managing Director, Wheat
First Butcher Singer,
Inc.; formerly, Senior
Vice President/Director
of Mutual Funds, Wheat
First Butcher Singer,
Inc.
Paul F. Costello President Managing Director, Mentor
Investment Group, L.L.C.
and Wheat First Butcher
Singer; President, Mentor
Income Fund, The Mentor
Funds, and Cash Resource
Trust; Executive Vice
President and Chief
Administrative Officer,
America's Utility Fund,
Inc.; Director, Mentor
Perpetual Advisers,
L.L.C. and Mentor Trust
Company; formerly,
Director, President and
Chief Executive Officer,
First Variable Life
Insurance Company;
President and Chief
Financial Officer,
Variable Investors Series
Trust; President and
Treasurer, Atlantic
Capital & Research, Inc.;
Vice President and
Treasurer, Variable Stock
Portfolio, Inc., Monarch
Investment Series Trust,
and GEICO Tax Advantage
Series Trust; Vice
President, Monarch Life
Insurance Company, GEICO
Investment Services
Company, Inc., Monarch
Investment Services
Company, Inc., and
Springfield Life
Insurance Company.
Terry L. Perkins Treasurer Vice President, Mentor
901 E. Byrd Street Investment Group, L.L.C.;
Richmond, VA 23219 Treasurer, Mentor
Institutional Trust, The
Mentor Funds, and
America's Utility Fund,
Inc.; Trustee, Mentor
Income Fund, Inc.;
formerly, Treasurer and
Comptroller, Ryland
Capital Management, Inc.
John M. Ivan Secretary Managing Director and
North Park Drive Director of Compliance
Glen Allen, VA 23060 since October 1992, and
Assistant General
Counsel, Wheat, First
Securities, Inc.;
Managing Director and
Assistant Secretary,
Wheat First Butcher
Singer Inc.; Clerk,
Mentor Institutional
Trust; Secretary, Mentor
Income Fund, Inc. and The
Mentor Funds.
- -------------------------
* This Trustee is deemed to be an "interested person" of a Fund as defined in
the 1940 Act.
Except as stated above, the principal occupations of the officers and
Trustees for the last five years have been with the employers as shown above,
although in some cases they have held different positions with such employers.
The table below shows the fees paid to each Trustee by the Trust for the
1995 fiscal year and the fees paid to each Trustee by all funds in the Mentor
Family (including the Trust) during the 1995 calendar year.
Total compensation
Aggregate compensation from all
Trustees from the Trust complex funds
Daniel J. Ludeman $ 0 $ 0
Arnold H. Dreyfuss 6,000 12,200
Thomas F. Keller 6,000 12,200
Louis W. Moelchert, Jr. 6,000 12,200
Stanley F. Pauley 6,000 12,200
Troy A. Peery, Jr. 6,000 12,200
Peter J. Quinn, Jr. 0 0
The Trustees do not receive pension or retirement benefits from the
Trust.
The Agreement and Declaration of Trust of the Trust provides that the
Trust will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Trust, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have
-10-
<PAGE>
not acted in good faith in the reasonable belief that their actions were in the
best interests of the Trust or that such indemnification would relieve any
officer or Trustee of any liability to the Trust or its shareholders by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
his or her duties. The Trust, at its expense, may provide liability insurance
for the benefit of its Trustees and officers.
PRINCIPAL HOLDERS OF SECURITIES
No shares of the Cash Resource New York Tax-Exempt Money Market Fund or
the Cash Resource California Tax-Exempt Money Market Fund were outstanding as of
the date of this Statement of Additional Information.
INVESTMENT ADVISORY AND OTHER SERVICES
Under a Management Contract (the "Management Contract") between the
Trust and Mentor Investment Advisors, L.L.C. ("Mentor Advisors"), Mentor
Advisors, at its expense, provides the Funds with investment advisory services
and advises and assists the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of its Trustees regarding
the conduct of business of the Trust and each Fund. Mentor Advisors is a
wholly-owned subsidiary of Mentor Investment Group, Inc., which in turn is a
wholly-owned subsidiary of Wheat First Butcher Singer Inc., a diversified
financial services holding company.
Mentor Advisors makes available to the Trust, without expense to the
Trust, the services of such of its directors, officers, and employees as may
duly be elected Trustees or officers of the Trust, subject to their individual
consent to serve and to any limitations imposed by law. Mentor Advisors pays the
compensation and expenses of officers and executive employees of the Trust.
Mentor Advisors also provides investment advisory research and statistical
facilities and all clerical services relating to such research, statistical, and
investment work. Mentor Advisors pays the Trust's office rent.
Under the Management Contract, the Trust is responsible for all its
other expenses, including clerical salaries not related to investment
activities; fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; payment for portfolio
pricing services to a pricing agent, if any; legal expenses; auditing expenses;
accounting expenses; taxes and governmental fees; fees and expenses of the
transfer agent and investor servicing agents of the Trust; the cost of preparing
share certificates or any other expenses, including clerical expenses, incurred
in connection with the issue, sale, underwriting, redemption, or repurchase of
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of the Trustees of the Trust who are not affiliated
with Mentor Advisors; the cost of preparing and distributing reports and notices
to shareholders; public and investor relations expenses; and fees and
disbursements of custodians of a Fund's assets. The Trust is also responsible
for its expenses incurred in connection with
-11-
<PAGE>
litigation, proceedings, and claims and the legal obligation it may have to
indemnify its officers and Trustees with respect thereto.
Mentor Advisors has agreed that, if in any year the aggregate expenses
of any Fund (including fees pursuant to the Management Contract but excluding
interest, taxes, brokerage and distribution fees and, with the prior written
consent of the necessary state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over the Trust,
Mentor Advisors will reimburse the Trust for such excess expense. This expense
reimbursement obligation is not limited to the amount of Mentor Advisors' fees.
Such expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis. The most stringent state expense limitation applicable to the
Trust presently requires reimbursement of expenses in any year that such
expenses exceed the sum of 2.5% of the first $30 million of the average daily
net assets, 2.0% of the next $70 million of the average daily net assets, and
1.5% of the average daily net assets over $100 million.
The Management Contract provides that Mentor Advisors shall not be
subject to any liability to the Trust or to any shareholder for any act or
omission in the course of, or connected with, its rendering services under the
Management Contract in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its duties.
The Management Contract may be terminated without penalty by vote of the
Trustees as to any Fund or by the shareholders of that Fund, or by Mentor
Advisors on 30 days written notice. The Management Contract also terminates
without payment of any penalty in the event of its assignment. In addition, the
Management Contract may be amended only by a vote of the shareholders of the
affected Fund(s), and provides that it will continue in effect from year to year
(beginning in 1998) only so long as such continuance is approved at least
annually with respect to each Fund by vote of either the Trustees or the
shareholders of a Fund, and, in either case, by a majority of the Trustees who
are not "interested persons" of Mentor Advisors. In such a case, the vote of the
shareholders is the affirmative vote of a "majority of the outstanding voting
securities" as defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
Mentor Advisors may place portfolio transactions with broker-dealers
which furnish, without cost, certain research, statistical, and quotation
services of value to it and its affiliates in advising a Fund and other clients,
provided that it will always seek best price and execution with respect to
transactions. Certain investments may be appropriate for a Fund and for other
clients advised by Mentor Advisors. Investment decisions for the Fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment, and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be
-12-
<PAGE>
made for two or more clients of Mentor Advisors on the same day. In such event,
such transactions will be allocated among the clients in a manner believed by
Mentor Advisors to be equitable to each. In some cases, this procedure could
have an adverse effect on the price or amount of the securities purchased or
sold by the Trust. Purchase and sale orders for a Fund may be combined with
those of other clients of Mentor Advisors in the interest of achieving the most
favorable net results for the Fund.
Brokerage and Research Services. Transactions on U.S. stock exchanges
and other agency transactions involve the payment by a Fund of negotiated
brokerage commissions. Such commissions vary among different brokers. Also, a
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign securities
often involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States. There is generally no stated commission
in the case of securities traded in the over-the-counter markets, but the price
paid by a Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by a Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
Mentor Advisors places all orders for the purchase and sale of portfolio
securities for the Funds and buys and sells securities for the Funds through a
substantial number of brokers and dealers. In so doing, it uses its best efforts
to obtain for the Funds the best price and execution available. In seeking the
best price and execution, Mentor Advisors, having in mind the Funds' best
interests, considers all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience, and financial
stability of the broker-dealer involved, and the quality of service rendered by
the broker-dealer in other transactions.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research, statistical, and quotation services from broker-dealers
which execute portfolio transactions for the clients of such advisers.
Consistent with this practice, Mentor Advisors receives research, statistical,
and quotation services from many broker-dealers with which it places a Fund's
portfolio transactions. These services, which in some cases may also be
purchased for cash, include such matters as general economic and security market
reviews, industry and company reviews, evaluations of securities, and
recommendations as to the purchase and sale of securities. Some of these
services are of value to Mentor Advisors and its affiliates in advising various
of their clients (including the Funds), although not all of these services are
necessarily useful and of value in managing the Funds. The management fees paid
by the Funds are not reduced because Mentor Advisors and its affiliates receive
such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
and by the Management Contract, Mentor Advisors may cause a Fund to pay a
broker-dealer which
-13-
<PAGE>
provides brokerage and research services to Mentor Advisors an amount of
disclosed commission for effecting a securities transaction for that Fund in
excess of the commission which another broker-dealer would have charged for
effecting that transaction. Mentor Advisors's authority to cause a Fund to pay
any such greater commissions in also subject to such policies as the Trustees
may adopt from time to time.
Brokerage Commissions. It is anticipated that most purchases and sales
of portfolio investments will be with the issuer or with major dealers in money
market instruments acting as principal. Accordingly, it is not anticipated that
the Funds will pay significant brokerage commissions. In underwritten offerings,
the price paid by a Fund includes a disclosed, fixed commission or discount
retained by the underwriter. There is generally no stated commission in the case
of securities purchased from or sold to dealers, but the prices of such
securities usually include an undisclosed dealer's mark-up or mark-down.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund is determined twice each day
as of 12:00 noon and as of the close of regular trading (generally 4:00 p.m. New
York time) on each day the New York Stock Exchange is open for trading. The New
York Stock Exchange is normally closed on the following national holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving, and Christmas.
The valuation of each Fund's portfolio securities is based upon their
amortized cost, which does not take into account unrealized securities gains or
losses. This method involves initially 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. By using amortized cost valuation, each Fund seeks to
maintain a constant net asset value of $1.00 per share, despite minor shifts in
the market value of its portfolio securities. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Fund would
receive if it sold the instrument. During periods of declining interest rates,
the quoted yield on shares of a Fund may tend to be higher than a like
computation made by a fund with identical investments utilizing a method of
valuation based on market prices and estimates of market prices for all of its
portfolio instruments. Thus, if the use of amortized cost by a Fund resulted in
a lower aggregate portfolio value on a particular day, a prospective investor in
that Fund would be able to obtain a somewhat higher yield if he purchased shares
of the Fund on that day, than would result from investment in a fund utilizing
solely market values, and existing investors in a Fund would receive less
investment income. The converse would apply on a day when the use of amortized
cost by a Fund resulted in a higher aggregate portfolio value. However, as a
result of certain procedures adopted by the Trust, the Trust believes any
difference will normally be minimal.
-14-
<PAGE>
The valuation of a Fund's portfolio instruments at amortized cost is
permitted in accordance with Securities and Exchange Commission Rule 2a-7 and
certain procedures adopted by the Trustees. Under these procedures, a Fund must
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 397 days or less, and
invest in securities determined by the Trustees to be of high quality with
minimal credit risks. The Trustees have also established procedures designed to
stabilize, to the extent reasonably possible, a Fund's price per share as
computed for the purpose of distribution, redemption and repurchase at $1.00.
These procedures include review of a Fund's portfolio holdings by the Trustees,
at such intervals as they may deem appropriate, to determine whether a Fund's
net asset value calculated by using readily 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. In the event the
Trustees determine that such a deviation may result in material dilution or is
otherwise unfair to existing shareholders, they will take such corrective action
as they regard as necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
the average portfolio maturity; withholding dividends; redemption of shares in
kind; or establishing a net asset value per share by using readily available
market quotations.
Since the net income of a Fund is declared as a dividend each time it is
determined, the net asset value per share of a Fund remains at $1.00 per share
immediately after such determination and dividend declaration. Any increase in
the value of a shareholder's investment in a Fund representing the reinvestment
of dividend income is reflected by an increase in the number of shares of a Fund
in the shareholder's account on the last day of each month (or, if that day is
not a business day, on the next business day). It is expected that a Fund's net
income will be positive each time it is determined. However, if because of
realized losses on sales of portfolio investments, a sudden rise in interest
rates, or for any other reason the net income of a Fund determined at any time
is a negative amount, a Fund will offset such amount allocable to each then
shareholder's account from dividends accrued during the month with respect to
such account. If at the time of payment of a dividend by a Fund (either at the
regular monthly dividend payment date, or, in the case of a shareholder who is
withdrawing all or substantially all of the shares in an account, at the time of
withdrawal), such negative amount exceeds a shareholder's accrued dividends, the
Fund will reduce the number of outstanding shares by treating the shareholder as
having contributed to the capital of the Fund that number of full and fractional
shares which represent the amount of the excess. Each shareholder is deemed to
have agreed to such contribution in these circumstances by his or her investment
in a Fund.
Should a Fund incur or anticipate, with respect to its respective
portfolio, any unusual or unexpected significant expense or loss which would
affect disproportionately a Fund's income for a particular period, the Trustees
would at that time consider whether to adhere to the dividend policy described
above or to revise it in light of the then prevailing circumstances in order to
ameliorate to the extent possible the disproportionate effect of such expense or
loss
-15-
<PAGE>
on then existing shareholders. Such expenses or losses may nevertheless result
in a shareholder's receiving no dividends for the period during which the shares
are held and receiving upon redemption a price per share lower than that which
was paid.
The proceeds received by each Fund for each issue or sale of its shares,
and all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, will be specifically allocated to such Fund, and constitute
the underlying assets of that Fund. The underlying assets of each Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of such Fund and with a share of the general liabilities
of the Trust. Expenses with respect to any two or more Funds may be allocated in
proportion to the net asset values of the respective Funds except where
allocations of direct expenses can otherwise be fairly made.
TAXES
Each Fund intends to qualify each year and elect to be taxed as a
regulated investment company under Subchapter M of the United States Internal
Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, a Fund will not be subject to federal income tax
on any of its net investment income or net realized capital gains that are
distributed to its shareholders. As a series of a Massachusetts business trust,
the Funds under present law will not be subject to any excise or income taxes in
Massachusetts.
Other than dividends from the Funds that are excludable from income,
distributions from a Fund will be taxable to a shareholder whether received in
cash or additional shares. Such distributions that are designated as capital
gains distributions will be taxable as such, regardless of how long Fund shares
are held, while other taxable distributions will be taxed as ordinary income.
Loss on the sale of Fund shares held for less than six months will be treated as
a long term capital loss to the extent of any capital gain distribution received
with respect to such shares (and will be disallowed to the extent of
exempt-interest dividends received with respect to such shares). Also interest
on indebtedness incurred to purchase shares of the Funds may be nondeductible.
In order to qualify as a "regulated investment company," a Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies;
(b) derive less than 30% of its gross income from the sale or other disposition
of certain assets (including stock and securities) held less than three months;
(c) diversify its holdings so that, at the close of each quarter of its taxable
year, (i) at least 50% of the value of
-16-
<PAGE>
its total assets consists of cash, cash items, U.S. Government Securities, and
other securities limited generally with respect to any one issuer to not more
than 5% of the total assets of a Fund and not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any issuer (other than U.S. Government
Securities). In order to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, moreover, a Fund must in general
distribute at least 90% of its interest, dividends, net short-term capital gain,
and certain other income each year. To satisfy these requirements, a Fund may
engage in investment techniques that affect the amount, timing and character of
its income and distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any,
of each Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. Each Fund
intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by a Fund during October, November or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.
Each Fund is required to withhold 31% of all income dividends and
capital gain distributions, and 31% of the gross proceeds of all redemptions of
Fund shares, in the case of any shareholder who does not provide a correct
taxpayer identification number, about whom a Fund is notified that the
shareholder has underreported income in the past, or who fails to certify to a
Fund that the shareholder is not subject to such withholding. Tax-exempt
shareholders are not subject to these back-up withholding rules so long as they
furnish the Fund with a proper certification.
Exempt-interest dividends. A Fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the close of each
quarter of the Fund's taxable year, at least 50% of the total value of the
Fund's assets consists of obligations the interest on which is exempt from
federal income tax. Distributions that a Fund properly designates as
exempt-interest dividends are treated as interest excludable from shareholders'
gross income for federal income tax purposes but may be taxable for federal
alternative minimum tax purposes and for state and local purposes. If a Fund
intends to be qualified to pay exempt-interest dividends, the Fund may be
limited in its ability to enter into taxable transactions involving forward
commitments, repurchase agreements, financial futures and options contracts on
financial futures, tax-exempt bond indices and other assets.
Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a Fund paying
exempt-interest dividends is not deductible. The portion of interest that is not
deductible is equal to the total interest paid or
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<PAGE>
accrued on the indebtedness, multiplied by the percentage of a Fund's total
distributions (not including distributions from net long-term capital gains)
paid to the shareholder that are exempt-interest dividends. Under rules used by
the Internal Revenue Service for determining when borrowed funds are considered
used for the purpose of purchasing or carrying particular assets, the purchase
of shares may be considered to have been made with borrowed funds even though
such funds are not directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any, attributable to interest
received on certain private activity obligations and certain industrial
development bonds will not be tax-exempt to any shareholders who are
"substantial users" of the facilities financed by such obligations or bonds or
who are "related persons" of such substantial users.
A Fund which is qualified to pay exempt-interest dividends will inform
investors within 60 days of the Fund's fiscal year-end of the percentage of its
income distributions designated as tax-exempt. The percentage is applied
uniformly to all distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be substantially
different from the percentage of a Fund's income that was tax-exempt during the
period covered by the distribution.
Securities issued or purchased at a discount. A Fund's investment in
securities issued at a discount and certain other obligations will (and
investments in securities purchased at a discount may) require the Fund to
accrue and distribute income not yet received. In order to generate sufficient
cash to make the requisite distributions, a Fund may be required to sell
securities in its portfolio that it otherwise would have continued to hold.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions. Dividends and distributions also may be subject to state
and federal taxes. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state or local taxes. The foregoing
discussion relates solely to U.S. federal income tax law. Non-U.S. investors
should consult their tax advisers concerning the tax consequences of ownership
of shares of the Fund, including the possibility that distributions may be
subject to a 30% United States withholding tax (or a reduced rate of withholding
provided by treaty).
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<PAGE>
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES
California Tax-Exempt Money Market Fund
The table below shows the effect of the tax status of California Tax-Exempt
Securities on the effective yield received by their individual holders under the
federal income tax and California personal income tax laws currently in effect
for 1996. It gives the approximate yield a taxable security must earn at various
income levels to produce after-tax yields equivalent to those of California
Tax-Exempt Securities yielding from 2.0% to 9.0%.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Combined
Taxable Income* California Tax-exempt yield
______________ and __________________________________________________
Federal
Joint*** Single*** Rate** 2% 3% 4% 5% 6%
- ------------------------------------------------------------------------------------------------------------
Equivalent taxable yield
<S> <C>
$0 - 9,662 $0 - 4,831 15.85% 2.38% 3.57% 4.75% 5.94% 7.13%
9,663 - 22,898 4,832 - 11,449 16.70% 2.40% 3.60% 4.80% 6.00% 7.20%
22,899 - 36,136 11,450 - 18,068 18.40% 2.45% 3.68% 4.90% 6.13% 7.35%
36,137 - 40,100 18,069 - 24,000 20.10% 2.50% 3.75% 5.01% 6.26% 7.51%
40,101 - 50,166 24,001 - 25,083 32.32% 2.96% 4.43% 5.91% 7.39% 8.87%
50,167 - 63,400 25,084 - 31,700 33.76% 3.02% 4.53% 6.04% 7.55% 9.06%
63,401 - 96,900 31,701 - 58,150 34.70% 3.06% 4.59% 6.13% 7.66% 9.19%
96,901 - 147,700 58,151 - 109,936 37.42% 3.20% 4.79% 6.39% 7.99% 9.59%
--- 109,937 - 121,300 37.90% 3.22% 4.83% 6.44% 8.05% 9.66%
147,701 - 219,872 --- 41.95% 3.45% 5.17% 6.89% 8.61% 10.34%
219,873 - 263,750 121,301 - 219,872 42.40% 3.47% 5.21% 6.94% 8.68% 10.42%
--- 219,873 - 263,750 43.04% 3.51% 5.27% 7.02% 8.78% 10.53%
263,751 - 439,744 --- 45.64% 3.68% 5.52% 7.36% 9.20% 11.04%
over 439,744 over 263,750 46.24% 3.72% 5.58% 7.44% 9.30% 11.16%
</TABLE>
________________________________
7% 8% 9%
- ---------------------------------
8.32% 9.51% 10.70%
8.40% 9.60% 10.80%
8.58% 9.80% 11.03%
8.76% 10.01% 11.26%
10.34% 11.82% 13.30%
10.57% 12.08% 13.59%
10.72% 12.25% 13.78%
11.19% 12.78% 14.38%
11.27% 12.86% 14.49%
12.06% 13.70% 15.50%
12.15% 13.89% 15.63%
12.29% 14.04% 15.80%
12.88% 14.72% 16.56%
13.02% 14.88% 16.74%
- ------------------
* This amount represents taxable income as defined in the Internal Revenue
Code of 1986, as amended (the "Code"). It assumes that taxable income as
defined in the Code is the same as under the California Revenue and
Taxation Code; however, California taxable income may differ due to
differences in exemptions, itemized deductions, and other items.
** For federal tax purposes, these combined rates reflect the marginal
rates on taxable income currently in effect for 1996. For California
personal income tax purposes, the table reflects the tax rates currently
in effect for 1995; the brackets for 1996 may change due to the indexing
provisions of California law, and the 1996 California personal income
tax rates have not yet been released. (These combined rates include the
effect of deducting state income taxes on your federal return).
*** The amount of taxable income in certain brackets may be affected by the
phase-out of personal exemptions and the limitation on itemized
deductions based upon adjusted gross income under the Code, and under
the California Revenue and Taxation Code.
-19-
<PAGE>
Of course, there is no assurance that the Fund will achieve any specific
tax-exempt yield. While it is expected that the Fund will invest principally in
obligations which pay interest exempt from federal income tax and California
personal income tax, other income received by the Fund may be taxable. The table
does not take into account any state or local taxes payable on Fund
distributions except for California personal income tax.
-20-
<PAGE>
New York Tax-Exempt Money Market Fund
The tables below show the effect of the tax status of New York Tax-Exempt
Securities on the effective yield received by their individual holders, in the
case of table 1, under the federal income tax and New York State personal income
tax laws currently in effect for 1996, and in the case of table 2, under the
federal, New York State and New York City personal income tax laws currently in
effect for 1996. The tables give the approximate yield a taxable security must
earn at various income levels to produce after-tax yields equivalent to those of
New York Tax-Exempt Securities yielding from 3.0% to 8.0%.
<TABLE>
<CAPTION>
TABLE 1
- -----------------------------------------------------------------------------------------------------------------------------
1996 Combined
Taxable Income* New York State New York Tax-Exempt Security Yield of
__________________________ and Federal ______________________________________________________________
Single Joint Tax Rate** 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
- -----------------------------------------------------------------------------------------------------------------------------
Equivalent taxable yield if double tax-exempt
<S> <C>
$0 - 5,500 $0 - 11,000 18.40% 3.68% 4.90% 6.13% 7.35% 8.58% 9.80%
5,501 - 8,000 11,001 - 16,000 19.25% 3.72% 4.95% 6.19% 7.43% 8.67% 9.91%
8,001 - 11,000 16,001 - 22,000 20.10% 3.75% 5.01% 6.26% 7.51% 8.76% 10.01%
11,001 - 24,000 22,001 - 40,100 21.06% 3.80% 5.07% 6.33% 7.60% 8.87% 10.13%
24,001 - 58,150 40,101 - 96,900 33.13% 4.49% 5.98% 7.48% 8.97% 10.47% 11.96%
58,151 - 121,300*** 96,901 - 147,700*** 35.92% 4.68% 6.24% 7.80% 9.36% 10.93% 12.48%
121,301 - 263,750*** 147,701 - 263,750*** 40.56% 5.05% 6.73% 8.41% 10.09% 11.78% 13.46%
over - 263,750*** over - 263,750*** 43.90% 5.35% 7.13% 8.91% 10.70% 12.58% 14.26%
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
- -----------------------------------------------------------------------------------------------------------------------------
1996 Combined
New York State,
Taxable Income* New York City New York Tax-Exempt Security Yield of
__________________________ and Federal ________________________________________________________________
Single Joint Tax Rate** 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
- ----------------------------------------------------------------------------------------------------------------------------
Equivalent taxable yield if double tax-exempt
<S> <C>
5,501 - 8,000 11,001 - 14,400 21.77% 3.83% 5.11% 6.39% 7.67% 8.95% 10.23%
14,001 - 16,000 22.65% 3.88% 5.17% 6.46% 7.76% 9.05% 10.34%
8,001 - 8,400 23.01% 3.90% 5.20% 6.49% 7.79% 9.09% 10.39%
8,401 - 11,000 16,001 - 22,000 23.50% 3.92% 5.23% 6.54% 7.84% 9.15% 10.46%
11,001 - 15,000 22,001 - 27,000 24.46% 3.97% 5.30% 6.62% 7.94% 9.27% 10.59%
15,001 - 24,000 27,001 - 40,100 24.79% 3.99% 5.32% 6.65% 7.98% 9.31% 10.64%
24,001 - 25,000 40,101 - 45,000 36.29% 4.71% 6.28% 7.85% 9.42% 10.99% 12.56%
25,001 - 58,150 45,001 - 96,900 36.30% 4.71% 6.28% 7.85% 9.42% 10.99% 12.56%
58,151 - 60,000 96,901 - 108,000 38.95% 4.91% 6.55% 8.19% 9.83% 11.47% 13.10%
60,001 - 121,300*** 108,001 - 147,700*** 38.99% 4.92% 6.56% 8.20% 9.84% 11.47% 13.11%
117,951 - 256,500*** 147,001 - 263,750*** 43.41% 5.30% 7.07% 8.84% 10.60% 12.37% 14.14%
over 263,750*** over 263,750*** 46.60% 5.62% 7.49% 9.36% 11.24% 13.11% 14.98%
- ------------------
</TABLE>
* This amount represents taxable income as defined in the Code. It is
assumed that the definition of taxable income in the Code is the same as
under the New York State and City Personal Income Tax law. However, New
York State and City taxable income may differ due to differences in
exemptions, itemized deductions, and other items.
** For federal tax purposes, these combined rates reflect the marginal
rates on taxable income currently in effect for 1996. These rates
include the effect of deducting state and, for the second table, state
and city taxes on your federal return. For New York purposes, these
combined rates reflect the expected New York State and New York City
income tax rates and the New York City surcharge rates for 1996.
*** The amount of taxable income in this bracket may be affected by the
phase-out of personal exemptions and the limitation on itemized
deductions, based upon adjusted gross income, under the Code. A
supplemental New York State tax is also phased in for New York adjusted
gross income between $100,000 and $150,000 and fully eliminates the
benefit of the lower marginal brackets for taxpayers with New York
adjusted gross income of $150,000 or more. This adjustment is not
reflected in the tables above.
-22-
<PAGE>
Of course, there is no assurance that the Fund will achieve any specific
tax-exempt yield. While it is expected that the Fund will invest principally in
obligations which pay interest exempt from federal income tax and New York State
and City personal income taxes, other income received by the Fund may be
taxable. The tables do not take into account any state or local taxes payable on
Fund distributions except for the New York State and for table 2, New York City
personal income taxes.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of each of the Funds is determined as of 12:00
noon and as of the close of trading on the New York Stock Exchange (generally
4:00 p.m. New York time) on each day on which the Exchange is open for business.
All of the net investment income so determined normally will be declared as a
dividend daily to shareholders of record as of the close of trading on the
Exchange after the purchase and redemption of shares. Unless the business day
before a weekend or holiday is the last day of an accounting period, the
dividend declared on that day will include an amount in respect of a Fund's
income for the subsequent non-business day or days. No daily dividend will
include any amount of net income in respect of a subsequent semi-annual
accounting period. Dividends commence on the next business day after the date of
purchase. Dividends declared during any month will be invested as described in
the Prospectus.
Net income of a Fund consists of all interest income accrued on
portfolio assets less all expenses of the Fund and amortized market premium.
Amortized market discount is included in interest income. The Trust does not
anticipate that any Fund will normally realize any long-term capital gains with
respect to its portfolio securities.
DISTRIBUTION
Mentor Distributors is the principal underwriter of the continually
offered shares of each of the Funds pursuant to a Distribution Agreement between
Mentor Distributors and the Trust. Mentor Distributors is not obligated to sell
any specific amount of shares of any Fund and will purchase shares of a Fund for
resale only against orders for shares.
The Trust, on behalf of each Fund, has adopted a Distribution Plan and
Agreement pursuant to Rule 12b-1 under the 1940 Act (each, a "Plan"). The
purpose of each Plan is to permit a Fund to compensate Mentor Distributors for
services provided and expenses incurred by it in promoting the sale of shares of
the Funds, reducing redemptions, or maintaining or improving services provided
to shareholders by Mentor Distributors or Financial Institutions. Each Plan
provides for payments by each Fund to Mentor Distributors at the annual rate of
up to 0.33% of the Fund's average net assets (in the case of the California
Tax-Exempt Money Market Fund) and 0.50% of the Fund's average net assets (in the
case of the New York TaxExempt Money Market Fund), subject to the authority of
the Trustees to reduce the amount of payments or to suspend the Plans as to a
Fund for such periods as they may determine.
-23-
<PAGE>
Subject to these limitations, the amount of such payments and the specific
purposes for which they are made shall be determined by the Trustees.
Continuance of a Plan is subject to annual approval by a vote of the
Trustees, including a majority of the Trustees who are not interested persons of
the Trust, and have no direct or indirect financial interest in the operation of
the Plan and related agreements (the "Qualified Trustees"), cast in person at a
meeting called for that purpose. All material amendments to a Plan must be
likewise approved by the Trustees and the Qualified Trustees.
A Plan may not be amended in order to increase materially the costs
which a Fund may bear for distribution pursuant to the Plan without also being
approved by a majority of the outstanding voting securities of that Fund. Each
Plan terminates automatically in the event of its assignment and may be
terminated as to any Fund without penalty, at any time, by a vote of a majority
of the outstanding voting securities of the Fund or by a vote of a majority of
the Qualified Trustees.
In order to compensate selected financial institutions, such as
investment dealers and banks through which shares of each Fund are sold
("Financial Institutions") for services provided in connection with sales of
shares of each Fund and/or for administrative services and the maintenance of
shareholder accounts, Mentor Distributors may make periodic payments to
qualifying Financial Institutions based on the average net asset value of shares
of a Fund which are attributable to shareholders for whom the Financial
Institutions are designated as the Financial Institution of record. Mentor
Distributors may make such payments at the annual rate of up to 0.33% and 0.50%
of the average net asset value of such shares, respectively, for the Cash
Resource California Tax-Exempt Money Market Fund and the Cash Resource New York
Tax-Exempt Money Market Fund. For this purpose, "average net assets"
attributable to a shareholder account means the product of (i) the average daily
share balance of the Fund account times (ii) the Fund's average daily net asset
value per share. For administrative reasons, Mentor Distributors may enter into
agreements with certain Financial Institutions providing for the calculation of
"average net assets" on the basis of assets of the accounts of the Financial
Institutions' customers on an established day in this period. Mentor
Distributors may suspend or modify these payments at any time, and payments are
subject to the continuation of the Fund's Distribution Plan described below and
the terms of related agreements between Financial Institutions and Mentor
Distributors.
ORGANIZATION
The Trust is an open-end investment company established under the laws
of The Mentor Advisors of Massachusetts by Agreement and Declaration of Trust
dated June 14, 1993.
Shares entitle their holders to one vote per share, with fractional
shares voting proportionally; however, separate votes will be taken by each Fund
on matters affecting an individual Fund. For example, a change in a fundamental
investment policy for the Cash
-24-
<PAGE>
Resource California Tax-Exempt Money Market Fund would be voted upon only by
shareholders of that Fund. Additionally, approval of the Management Contract is
a matter to be determined separately by each Fund. Approval by the shareholders
of one Fund is effective as to that Fund. Shares have noncumulative voting
rights. Although a Fund is not required to hold annual meetings of its
shareholders, shareholders have the right to call a meeting to elect or remove
Trustees or to take other actions as provided in the Declaration of Trust.
Shares have no preemptive or subscription rights, and are transferable. Shares
are entitled to dividends as declared by the Trustees, and if a Fund were
liquidated, the shares of that Fund would receive the net assets of that Fund.
The Trust may suspend the sale of shares at any time and may refuse any order to
purchase shares.
Additional Funds may be created from time to time with different
investment objectives. Any additional Funds may be managed by investment
advisers or sub-advisers other than Mentor Advisors. In addition, the Trustees
have the right, subject to any necessary regulatory approvals, to create more
than one class of shares in a Fund, with the classes being subject to different
charges and expenses and having such other different rights as the Trustees may
prescribe and to terminate any Fund of the Trust.
PORTFOLIO TURNOVER
The portfolio turnover rate of a Fund is defined by the Securities and
Exchange Commission as the ratio of the lesser of annual sales or purchases to
the monthly average value of the portfolio, excluding from both the numerator
and the denominator securities with maturities at the time of acquisition of one
year or less. Under that definition, the Funds will have no portfolio turnover.
Fund turnover generally involves some expense to a Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities.
CUSTODIAN
Investors Fiduciary Trust Company is the custodian of the Trust's
assets. The custodian's responsibilities include safeguarding and controlling
the Trust's cash and securities, handling the receipt and delivery of
securities, and collecting interest and dividends on the Trust's investments.
The custodian does not determine the investment policies of the Trust or decide
which securities the Trust will buy or sell.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, located at 99 High Street, Boston, Massachusetts
02110, are the Trust's independent auditors, providing audit services, tax
return preparation and other tax consulting services and assistance and
consultation in connection with the review of various Securities and Exchange
Commission filings.
-25-
<PAGE>
PERFORMANCE INFORMATION
The yield of each Fund is computed by determining the percentage net
change, excluding capital changes, in the value of an investment in one share of
such Fund over the base period, and multiplying the net change by 365/7 (or
approximately 52 weeks). A Fund's effective yield represents a compounding of
the yield by adding 1 to the number representing the percentage change in value
of the investment during the base period, raising that sum to a power equal to
365/7, and subtracting 1 from the result.
A Fund's tax-equivalent yield during the base period may be presented
for shareholders in one or more stated tax brackets. Tax-equivalent yield is
calculated by adjusting the Fund's tax-exempt yield by a factor designed to show
the approximate yield that a taxable investment would have to earn to produce an
after-tax yield equal, for that shareholder, to the Fund's tax-exempt yield. A
Fund's tax-equivalent yield will differ for shareholders in other tax brackets.
From time to time, Mentor Advisors may reduce its compensation or assume
expenses of a Fund in order to reduce a Fund's expenses, as described in the
Trust's current prospectus. Any such waiver or assumption would increase that
Fund's yield during the period of the waiver or assumption.
Independent statistical agencies measure a Fund's investment performance
and publish comparative information showing how the Fund, and other investment
companies, performed in specified time periods. Three agencies whose reports are
commonly used for such comparisons are set forth below. From time to time, a
Fund may distribute these comparisons to its shareholders or to potential
investors. The agencies listed below measure performance based on their own
criteria rather than on the standardized performance measures described in the
preceding section.
Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated
by Lipper, reflecting generally changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of
performance periods, for example year-to-date, 1-year, 5- year, and
10-year performance. Lipper classifies mutual funds by investment
objective and asset category.
Morningstar, Inc. distributes mutual fund ratings twice a month. the
ratings are divided into five groups: highest, above average, neutral,
below average and lowest. They represent a fund's historical risk/reward
ratio relative to other funds with similar objectives. The performance
factor is a weighted-average assessment of the Fund's 3- year, 5-year,
and 10-year total return performance (if available) reflecting deduction
of expenses and sales charges. Performance is adjusted using
quantitative techniques to reflect the risk profile of the fund. The
ratings are derived from a purely quantitative
-26-
<PAGE>
system that does not utilize the subjective criteria customarily
employed by rating agencies such as Standard & Poor's Corporation and
Moody's Investor Service, Inc.
Weisenberger's Management Results publishes mutual fund rankings and is
distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year performance. Mutual funds are ranked in
general categories (e.g., international bond, international equity,
municipal bond, and maximum capital gain). Weisenberger rankings do not
reflect deduction of sales charges or fees.
Independent publications may also evaluate a Fund's performance. Certain
of those publications are listed below, at the request of Mentor Distributors,
which bears full responsibility for their use and the descriptions appearing
below. From time to time any or all of the Funds may distribute evaluations by
or excerpts from these publications to its shareholders or to potential
investors. The following illustrates the types of information provided by these
publications.
Business Week publishes mutual fund rankings in its Investment Figures
of the Week column. The rankings are based on 4-week and 52-week total
return reflecting changes in net asset value and the reinvestment of all
distributions. They do not reflect deduction of any sales charges. Funds
are not categorized; they compete in a large universe of over 2,000
funds. The source for rankings is data generated by Morningstar, Inc.
Investor's Business Daily publishes mutual fund rankings on a daily
basis. The rankings are depicted as the top 25 funds in a given
category. The categories are based loosely on the type of fund, e.g.,
growth funds, balanced funds, U.S. government funds, GNMA funds, growth
and income funds, corporate bond funds, etc. Performance periods for
sector equity funds can vary from 4 weeks to 39 weeks; performance
periods for other fund groups vary from 1 year to 3 years. Total return
performance reflects changes in net asset value and reinvestment of
dividends and capital gains. The rankings are based strictly on total
return. They do not reflect deduction of any sales charges Performance
grades are conferred from A+ to E. An A+ rating means that the fund has
performed within the top 5% of a general universe of over 2000 funds; an
A rating denotes the top 10%; an A- is given to the top 15%, etc.
Barron's periodically publishes mutual fund rankings. The rankings are
based on total return performance provided by Lipper Analytical
Services. The Lipper total return data reflects changes in net asset
value and reinvestment of distributions, but does not reflect deduction
of any sales charges. The performance periods vary from short-term
intervals (current quarter or year-to-date, for example) to long-term
periods (five-year or ten-year performance, for example). Barron's
classifies the funds using the Lipper
-27-
<PAGE>
mutual fund categories, such as Capital Appreciation Funds, Growth
Funds, U.S. Government Funds, Equity Income Funds, Global Funds, etc.
Occasionally, Barron's modifies the Lipper information by ranking the
funds in asset classes. "Large funds" may be those with assets in excess
of $25 million; "small funds" may be those with less than $25 million in
assets.
The Wall Street Journal publishes its Mutual Fund Scorecard on a daily
basis. Each Scorecard is a ranking of the top-15 funds in a given Lipper
Analytical Services category. Lipper provides the rankings based on its
total return data reflecting changes in net asset value and reinvestment
of distributions and not reflecting any sales charges. The Scorecard
portrays 4-week, year-to-date, one-year and 5-year performance; however,
the ranking is based on the one-year results. The rankings for any given
category appear approximately once per month.
Fortune magazine periodically publishes mutual fund rankings that have
been compiled for the magazine by Morningstar, Inc. Funds are placed in
stock or bond fund categories (for example, aggressive growth stock
funds, growth stock funds, small company stock funds, junk bond funds,
Treasury bond funds etc.), with the top-10 stock funds and the top-5
bond funds appearing in the rankings. The rankings are based on 3-year
annualized total return reflecting changes in net asset value and
reinvestment of distributions and not reflecting sales charges.
Performance is adjusted using quantitative techniques to reflect the
risk profile of the fund.
Money magazine periodically publishes mutual fund rankings on a database
of funds tracked for performance by Lipper Analytical Services. The
funds are placed in 23 stock or bond fund categories and analyzed for
five-year risk adjusted return. Total return reflects changes in net
asset value and reinvestment of all dividends and capital gains
distributions and does not reflect deduction of any sales charges.
Grades are conferred (from A to E): the top 20% in each category receive
an A, the next 20% a B, etc. To be ranked, a fund must be at least one
year old, accept a minimum investment of $25,000 or less and have had
assets of at least $25 million as of a given date.
Financial World publishes its monthly Independent Appraisals of Mutual
Funds, a survey of approximately 1000 mutual funds. Funds are
categorized as to type, e.g., balanced funds, corporate bond funds,
global bond funds, growth and income funds, U.S. government bond funds,
etc. To compete, funds must be over one year old, have over $1 million
in assets, require a maximum of $10,000 initial investment, and should
be available in at least 10 states in the United States. The funds
receive a composite past performance rating, which weighs the
intermediate - and long-term past performance of each fund versus its
category, as well as taking into account its risk, reward to risk, and
fees. An A+ rated fund is one of the best, while a D- rated fund is
-28-
<PAGE>
one of the worst. The source for Financial World rating is Schabacker
investment management in Rockville, Maryland.
Forbes magazine periodically publishes mutual fund ratings based on
performance over at least two bull and bear market cycles. The funds are
categorized by type, including stock and balanced funds, taxable bond
funds, municipal bond funds, etc. Data sources include Lipper Analytical
Services and CDA Investment Technologies. The ratings are based strictly
on performance at net asset value over the given cycles. Funds
performing in the top 5% receive an A+ rating; the top 15% receive an A
rating; and so on until the bottom 5% receive an F rating. Each fund
exhibits two ratings, one for performance in "up" markets and another
for performance in "down" markets.
Kiplinger's Personal Finance Magazine (formerly Changing Times),
periodically publishes rankings of mutual funds based on one-, three-
and five-year total return performance reflecting changes in net asset
value and reinvestment of dividends and capital gains and not reflecting
deduction of any sales charges. Funds are ranked by tenths: a rank of 1
means that a fund was among the highest 10% in total return for the
period; a rank of 10 denotes the bottom 10%. Funds compete in categories
of similar funds -- aggressive growth funds, growth and income funds,
sector funds, corporate bond funds, global governmental bond funds,
mortgage-backed securities funds, etc. Kiplinger's also provides a
risk-adjusted grade in both rising and falling markets. Funds are graded
against others with the same objective. The average weekly total return
over two years is calculated. Performance is adjusted using quantitative
techniques to reflect the risk profile of the fund.
U.S. News and World Report periodically publishes mutual fund rankings
based on an overall performance index (OPI) devised by Kanon Bloch Carre
& Co., a Boston research firm. Over 2000 funds are tracked and divided
into 10 equity, taxable bond and tax-free bond categories. Funds compete
within the 10 groups and three broad categories. The OPI is a number
from 0-100 that measures the relative performance of funds at least
three years old over the last 1, 3, 5 and 10 years and the last six bear
markets. Total return reflects changes in net asset value and the
reinvestment of any dividends and capital gains distributions and does
not reflect deduction of any sales charges. Results for the longer
periods receive the most weight.
The 100 Best Mutual Funds You Can Buy (1992), authored by Gordon K.
Williamson. The author's list of funds is divided into 12 equity and
bond fund categories, and the 100 funds are determined by applying four
criteria. First, equity funds whose current management teams have been
in place for less than five years are eliminated. (The standard for bond
funds is three years.) Second, the author excludes any fund that ranks
in the bottom 20 percent of its category's risk level. Risk is
determined by analyzing how many months over the past three years the
fund has underperformed a bank CD or a U.S. Treasury bill. Third, a fund
must have
-29-
<PAGE>
demonstrated strong results for current three-year and five-year
performance. Fourth, the fund must either possess, in Mr. Williamson's
judgment, "excellent" risk-adjusted return or "superior" return with low
levels of risk. Each of the 100 funds is ranked in five categories:
total return, risk/volatility, management, current income and expenses.
The rankings follow a five-point system: zero designates "poor"; one
point means "fair"; two points denote "good"; three points qualify as a
"very good"; four points rank as "superior"; and five points mean
"excellent.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation, or instrument entered into or executed
by the Trust or the Trustee. The Agreement and Declaration of Trust provides for
indemnification out of a Fund's property for all loss and expense of any
shareholder held personally liable for the obligations of a Fund. Thus the risk
of a shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which a Fund would be unable to meet its
obligations.
-30-
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
<TABLE>
<CAPTION>
<S> <C>
(a) Financial Statements
Included in Parts A and B:
(1) Statements of Assets and Liabilities - July 31, 1995.(5)
Statements of Operations - year ended July 31, 1995.(5)
Statements of Changes in net assets -- year ended July 31,
1995.(5) Financial Highlights.(5) Notes to Financial
Statements - Included in Part A. Report of Independent
Auditors.(5)
Included in Part C: None.
(b) Exhibits
(1) (A) Agreement and Declaration of Trust(1)
(B) Amendments to Agreement and Declaration of
Trust(2)(3)
(2) Bylaws(1)
(3) Inapplicable
(4) (A) Forms of certificate representing shares of beneficial
interest(1)
(B) Portions of Agreement and Declaration of Trust Relating
to Shareholders' Rights(1)
(C) Portions of Bylaws Relating to Shareholders' Rights(1)
(5) (A) Management Contract dated December 17, 1993(4)
(B) Subadviser Contract dated December 17, 1993(4)
(6) Distribution Agreement dated December 17, 1993(4)
(7) Inapplicable
(8) Custody Agreement dated December 20, 1993(4)
(9) (A) Agency Agreement dated December 20, 1993(4)
(B) Draft Processing Agency Agreement dated December 20,
1993(4)
(10) Opinion and Consent of Ropes & Gray(2)
(11) Consent of Independent Auditors(6)
(12) Inapplicable
(13) Initial Capital Agreement dated December 17, 1993(4)
(14) Inapplicable
(15) (A) Distribution Plan and Agreement on behalf of Cash
Resource Money Market Fund dated December 17, 1993(4)
(B) Distribution Plan and Agreement on behalf of Cash
Resource U.S. Government Money Market Fund dated
December 17, 1993(4)
-1-
<PAGE>
(C) Distribution Plan and Agreement on behalf of Cash
Resource Tax-Exempt Money Market Fund dated
December 17, 1993(4)
(D) Form of Distribution Plan and Agreement on behalf of
Cash Resource New York Tax-Exempt Money Market Fund (6)
(E) Form of Distribution Plan and Agreement on behalf of
Cash Resource California Tax-Exempt Money Market
Fund (6)
(16) Schedule of Computation of Performance(5)
(17) Financial Data Schedules(5)
(A) Cash Resource Money Market Fund
(B) Cash Resource U.S. Government Money Market Fund
(C) Cash Resource Tax-Exempt Money Market Fund
</TABLE>
(1) Incorporated by reference from the Registrant's Registration Statement
on Form N-1A under the Securities Act of 1993, as amended, filed on July
7, 1993.
(2) Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1993, as amended, filed on October 15, 1993 (File No. 33-65818).
(3) Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, filed on November 5, 1993 (File No. 33- 65818).
(4) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, filed on October 3, 1994 (File No. 33- 65818).
(5) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, filed on September 29, 1995 (File No. 33-
65818).
(6) Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Record Holders of Securities
The following table shows the number of holders of record shares of
beneficial interest of the Funds as of July 31, 1996. No shares of Cash Resource
New York Tax-Exempt Money Market Fund or Cash Resource California Tax-Exempt
Money Market Fund were outstanding as of that date.
Number of Record
Series Holders
Cash Resource Money Market Fund 76,703
Cash Resource U.S. Government
Money Market Fund 191,637
Cash Resource Tax-Exempt Money
Market Fund 15,141
-2-
<PAGE>
Item 27. Indemnification
The information required by this item is incorporated herein by reference
from the Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended (File No. 33-65818).
Item 28. Business and Other Connections of Investment Adviser
(a) Mentor Investment Advisors, L.L.C. ("Mentor Advisors"), located at
901 East Byrd Street, Richmond, Virginia 23219, serves as the Registrant's
investment adviser. It is a wholly-owned subsidiary of Mentor Investment Group,
L.L.C. ("Mentor"), which is a subsidiary of Wheat First Butcher Singer, Inc.
("Wheat First Butcher Singer"), a diversified financial services holding
company. Commonwealth Investment Counsel, Inc., the predecessor to Mentor
Advisors, was incorporated under the laws of Virginia in 1991.
The business and other connections of each director, officer, or partner
of Mentor Advisors in which such director, officer, or partner is or has been,
at any time during the past two fiscal years, engaged for his own account or in
the capacity of director, officer, employee, partner, or trustee are set forth
in the following table.
The business and other connections of each director, officer, or partner
of Commonwealth in which such director, officer, or partner is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner, or trustee are set forth in
the following table.
<TABLE>
<CAPTION>
Other Substantial
Position with the Business, Profession,
Name Investment Adviser Vocation or Employment*
<S> <C>
John G. Davenport President None
William F. Johnston, III Senior Vice President None
R. Preston Nuttall Senior Vice President Formerly, Senior Vice President,
Capitoline Investment Services,
919 East Main Street, Richmond, VA 23219
Mary A. Beeghly Vice President None
John J. Kelly Vice President None
Steven C. Henderson Vice President None
Stephen R. McClelland Associate Vice
President Formerly, Associate Vice President,
Investment Management Group, Inc.
Thomas L. Souders Treasurer Managing Director and Chief Financial
Officer, Wheat, First Securities, Inc.;
formerly, Manager of Internal Audit,
Heilig-Myers; formerly, Manager,
Peat Marwick & Mitchell & Company
John M. Ivan Secretary Managing Director, Senior Vice President
and Assistant General Counsel, Wheat, First
Securities, Inc.; Managing Director and
Assistant Secretary, Wheat First Butcher
Singer, Inc.; Clerk, Cash Resource Trust;
Secretary, Mentor Income Fund, Inc. and
The Mentor Funds
</TABLE>
* The address of Mentor Investment Group, L.L.C. Wheat, First Securities, Inc.,
Wheat First Butcher Singer, Inc., The Mentor Funds, and Mentor Income Fund,
Inc., is 901 East Byrd Street, Richmond, VA 23219. The address of Ryland
Capital Management, Inc. and RAC Income Fund, Inc. is 11000 Broken Land Parkway,
Columbia, MD 21044.
Item 29. Principal Underwriters
(a) Mentor Distributors, L.L.C. acts as the principal underwriter for the Trust.
<TABLE>
<CAPTION>
(b)
Name and Principal Positions and Offices with Positions and Offices with
Business Address Underwriters Registrant
<S> <C>
Peter J. Quinn, Jr. President and Director Trustee
901 East Byrd Street
Richmond, VA 23219
Paul F. Costello Senior Vice President President
901 East Byrd Street
Richmond, VA 23219
Thomas L. Souders Treasurer Trustee
901 East Byrd Street
Richmond, VA 23219
John M. Harris Secretary None
901 East Byrd Street
Richmond, VA 23219
John M. Ivan Assistant Secretary Clerk
901 East Byrd Street
Richmond, VA 23219
</TABLE>
(c) Inapplicable
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder are Registrant's Clerk, John M.
Ivan; Registrant's investment adviser, Mentor Advisors; and Registrant's
transfer agent and custodian, Investors Fiduciary Trust Company. The address of
the Clerk and Mentor Advisors is 901 East Byrd Street, Richmond, Virginia 23219.
The address of the transfer agent and custodian is 127 West 10th Street, Kansas
City, Missouri 64105-1716.
Item 31. Management Services
None.
Item 32. Undertakings
(a) The Registrant undertakes to file a post-effective amendment
within four to six months from the effective date of this
Registration Statement for the purpose of providing unaudited
financial statements in respect of the Cash Resource California
Tax-Exempt Money Market Fund and the Cash Resource New York
Tax-Exempt Money Market Fund.
(b) The Registrant undertakes, if requested to do so by the holders
of at least 10% of the Registrant's outstanding shares of
beneficial interest, to call a meeting of shareholders for the
purpose of voting upon the question of removal of a
-5-
<PAGE>
Trustee or Trustees and to assist in communications with other
shareholders as required by Section 16(c) of the Investment
Company Act of 1940.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus of the Registrant is delivered a copy of the
Registrant's latest annual report to shareholders, upon request
and without charge.
NOTICE
A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of State of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Registrant by an
officer of the Registrant as an officer and not individually and that the
obligations of or arising out of this instrument are not binding upon any of the
Trustees, officers, or shareholders individually but are binding only upon the
assets and property of the Registrant.
-6-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
be signed on behalf of the undersigned, thereunto duly authorized, in the City
of Richmond, and the Commonwealth of Virginia on this 9th day of August, 1996.
CASH RESOURCE TRUST
By: /s/ Paul F. Costello
Name: Paul F. Costello
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 9th day of August, 1996.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
* Chairman; Trustee
Daniel J. Ludeman
* Trustee
Arnold H. Dreyfuss
Trustee
Thomas F. Keller
* Trustee
Louis W. Moelchert, Jr.
Trustee
Stanley F. Pauley
* Trustee
Troy A. Peery, Jr.
<PAGE>
Trustee
Peter J. Quinn, Jr.
/s/ Paul F. Costello President; Principal Executive
Paul F. Costello Officer
/s/ Terry L. Perkins Treasurer; Principal Financial
Terry L. Perkins Officer; Principal Accounting Officer
*By: /s/ Paul F. Costello
Paul F. Costello
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(11) Consent of Independent Auditors
(15) (D) Form of Distribution Plan and
Agreement on behalf of Cash
Resource New York Tax-Exempt
Money Market Fund
(E) Form of Distribution Plan and
Agreement on behalf of Cash
Resource California Tax-Exempt
Money Market Fund
</TABLE>
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
The Trustees and Shareholders
Cash Resource Trust
We consent to the use of our report dated September 8, 1995, incorporated
by reference herein, and to the references to our firm under the caption
"INDEPENDENT AUDITORS" in the statement of additional information.
KPMG Peat Marwick LLP
Boston, Massachusetts
August 9, 1996
EXHIBIT 15 (D)
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the Distribution Plan of
Cash Resource New York Tax-Exempt Money Market Fund (the "Fund"), a series of
shares of beneficial interest of Cash Resource Trust, a Massachusetts business
trust (the "Trust"), adopted pursuant to the provisions of Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act"), and the related
agreement between the Trust and Mentor Distributors, L.L.C. ("Mentor
Distributors"), the principal underwriter of the Trust's shares. During the
effective term of this Plan, the Trust may make payments to Mentor Distributors
upon the terms and conditions hereinafter set forth:
Section 1. The Fund may make payments to Mentor Distributors, in the form
of fees or reimbursements, to compensate Mentor Distributors for services
provided and expenses incurred by it for purposes of promoting the sale of
shares of the Fund, reducing redemptions of shares, or maintaining or improving
services provided to shareholders by Mentor Distributors and financial
institutions, including without limitation investment dealers. The amount of
such payments and the purposes for which they are made shall be determined by
the Qualified Trustees. Payments under this Plan shall not exceed in any fiscal
year the annual rate of 0.33% of the average net asset value of the Fund, as
determined at the close of each business day during the year. A majority of the
Qualified Trustees (as defined below) may, at any time and from time to time,
reduce the amount of such payments, or may suspend the operation of the Plan for
such period or periods of time as they may determine.
Section 2. This Plan shall not take effect until:
(a) it has been approved by a vote of a majority of the outstanding
voting securities of the Fund; and
(b) it has been approved, together with any related agreements, by
votes, of the majority (or whatever greater percentage may, from time to
time, be required by Section 12(b) of the Act or the rules and regulations
thereunder) of both (i) the Trustee of the Trust, and (ii) the Qualified
Trustees of the Trust, cast in person at a meeting called for the purpose
of voting on this Plan or such agreement.
Section 3. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2(b).
Section 4. Mentor Distributors shall provide to the Trustees of the Trust,
and the Trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made.
<PAGE>
Section 5. This Plan may be terminated at any time by vote of a majority
of the Qualified Trustees, or by vote of a majority of the Fund's outstanding
voting securities.
Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Qualified Trustees or
by vote of a majority of the Fund's outstanding voting securities, on not
more than 60 days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event
of its assignment.
Section 7. This Plan may not be amended to increase materially the amount
of distribution expenses permitted pursuant to Section 1 hereof without the
approval of a majority of the outstanding voting securities of the Fund, and all
material amendments to this Plan shall be approved in the manner provided for
approval of this Plan in Section 2(b).
Section 8. As used in this Plan, (a) the term "Qualified Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment", "interested
person", and "vote of a majority of the outstanding voting securities" shall
have the respective meaning specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
Section 9. A copy of the Agreement and Declaration of Trust of the Trust
is on file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually, and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees,
officers, or shareholders individually but are binding only upon the assets and
property of the Fund.
Executed as of _________________, 1996.
MENTOR DISTRIBUTORS, L.L.C. CASH RESOURCE TRUST
on behalf of
Cash Resource New York
Tax-Exempt Money Market Fund
By: ___________________________ By: ________________________
EXHIBIT 15 (E)
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the Distribution Plan of
Cash Resource California Tax-Exempt Money Market Fund (the "Fund"), a series of
shares of beneficial interest of Cash Resource Trust, a Massachusetts business
trust (the "Trust"), adopted pursuant to the provisions of Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act"), and the related
agreement between the Trust and Mentor Distributors, L.L.C. ("Mentor
Distributors"), the principal underwriter of the Trust's shares. During the
effective term of this Plan, the Trust may make payments to Mentor Distributors
upon the terms and conditions hereinafter set forth:
Section 1. The Fund may make payments to Mentor Distributors, in the form
of fees or reimbursements, to compensate Mentor Distributors for services
provided and expenses incurred by it for purposes of promoting the sale of
shares of the Fund, reducing redemptions of shares, or maintaining or improving
services provided to shareholders by Mentor Distributors and financial
institutions, including without limitation investment dealers. The amount of
such payments and the purposes for which they are made shall be determined by
the Qualified Trustees. Payments under this Plan shall not exceed in any fiscal
year the annual rate of 0.50% of the average net asset value of the Fund, as
determined at the close of each business day during the year. A majority of the
Qualified Trustees (as defined below) may, at any time and from time to time,
reduce the amount of such payments, or may suspend the operation of the Plan for
such period or periods of time as they may determine.
Section 2. This Plan shall not take effect until:
(a) it has been approved by a vote of a majority of the outstanding
voting securities of the Fund; and
(b) it has been approved, together with any related agreements, by
votes, of the majority (or whatever greater percentage may, from time to
time, be required by Section 12(b) of the Act or the rules and regulations
thereunder) of both (i) the Trustee of the Trust, and (ii) the Qualified
Trustees of the Trust, cast in person at a meeting called for the purpose
of voting on this Plan or such agreement.
Section 3. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2(b).
Section 4. Mentor Distributors shall provide to the Trustees of the Trust,
and the Trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made.
<PAGE>
Section 5. This Plan may be terminated at any time by vote of a majority
of the Qualified Trustees, or by vote of a majority of the Fund's outstanding
voting securities.
Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Qualified Trustees or
by vote of a majority of the Fund's outstanding voting securities, on not
more than 60 days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event
of its assignment.
Section 7. This Plan may not be amended to increase materially the amount
of distribution expenses permitted pursuant to Section 1 hereof without the
approval of a majority of the outstanding voting securities of the Fund, and all
material amendments to this Plan shall be approved in the manner provided for
approval of this Plan in Section 2(b).
Section 8. As used in this Plan, (a) the term "Qualified Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment", "interested
person", and "vote of a majority of the outstanding voting securities" shall
have the respective meaning specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
Section 9. A copy of the Agreement and Declaration of Trust of the Trust
is on file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually, and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees,
officers, or shareholders individually but are binding only upon the assets and
property of the Fund.
Executed as of _________________, 1996.
MENTOR DISTRIBUTORS, L.L.C. CASH RESOURCE TRUST
on behalf of
Cash Resource California
Tax-Exempt Money Market Fund
By: ___________________________ By: ________________________
