As filed with the Securities and Exchange Commission on October 13, 1998
Registration No. 33-65818
File No. 811-7862
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
---
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
---
---
/ / Pre-Effective Amendment No.
---
---
Post-Effective Amendment No. 8 /X/
---
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/
ACT OF 1940 ---
---
Amendment No. 10 /X/
---
(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
---------------
PAUL F. COSTELLO, President
901 East Byrd Street
Richmond, Virginia 23219
(Name and address of agent for service)
-----------------
Copy to:
TIMOTHY W. DIGGINS, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
--------------
It is proposed that this filing will become effective (check appropriate box):
- ---
X 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)
- ---
- ---
75 days after filing pursuant to paragraph (a)(2)
- ---
- ---
on (date) pursuant to paragraph (a)(2) of Rule 485
- ---
-1-
<PAGE>
If appropriate, check the following box:
- ---
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- ---
THIS POST-EFFECTIVE AMENDMENT RELATES SOLELY TO CLASS A SHARES OF THE
REGISTRANT. NO INFORMATION RELATING TO CLASS B SHARES IS AMENDED OR SUPERSEDED
HEREBY.
-2-
<PAGE>
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................................ Not applicable
4. General Description of Registrant.............................. Investment Objectives and Policies;
Selection of Investments;
How a Fund's performance
is calculated;
General Information
5. Management of the Fund......................................... Management; Other
Services; General Information
5A. Management's Discussion
of Fund Performance.......................................... Not Applicable
6. Capital Stock and Other
Securities................................................... How to Buy Shares; How to
Sell Shares; How to Exhchange
Shares; Tax Information;
Dividends; General Information
7. Purchase of Securities Being
Offered...................................................... How to Buy Shares; How to Sell Shares;
How to Exchange Shares
8. Redemption or Repurchase....................................... How to Buy Shares; How to Sell Shares;
How to Exchange Shares;
Financial Institutions
9. Pending Legal Proceedings...................................... Not Applicable
</TABLE>
-3-
<PAGE>
Part B
<TABLE>
<CAPTION>
N-1A Item No. Location
<S> <C>
10. Cover Page.................................................... Cover Page
11. Table of Contents............................................. Cover Page
12. General Information and History............................... Not Applicable
13. Investment Objectives and
Policies.................................................... Investment Objective and Policies
of the Trust; 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;
Principal Holders of Securities
16. Investment Advisory and Other
Services.................................................... Management of the Trust;
Investment Advisory and other
Securities; Custodian; Independent
Auditors
17. Brokerage Allocation.......................................... Management of the Trust
18. Capital Stock and Other
Securities.................................................. Determination of Net Asset Value;
Taxes; Distribution; Organization
19. Purchase, Redemption and Pricing
of Securities Being Offered................................. Management of the Trust;
Determination of Net Asset Value;
Distribution
20. Tax Status.................................................... Taxes
21. Underwriters.................................................. Not applicable
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.
-4-
<PAGE>
P R O S P E C T U S October 13, 1998
Class A Shares
CASH RESOURCE TRUST
CASH RESOURCE MONEY MARKET FUND
CASH RESOURCE U.S. GOVERNMENT MONEY MARKET FUND
CASH RESOURCE TAX-EXEMPT MONEY MARKET FUND
CASH RESOURCE CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
CASH RESOURCE NEW YORK TAX-EXEMPT MONEY MARKET FUND
The Cash Resource Funds 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 the Trust 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 Cash Resource
California Tax-Exempt Money Market Fund and Cash Resource New York Tax-Exempt
Money Market Fund to invest more of their assets in the securities of a single
issuer than other money market funds; as a result, an investment in those 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 13, 1998 Statement
of Additional Information, as amended from time to time. For a free copy of the
Statement, call Mentor Services Company, Inc. at 1-800-869-6042. 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 COMMISSION 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 Class A Shares of each of the Funds and expenses incurred by each
Fund based on its most recent fiscal year. The Examples show the cumulative
expenses attributable to a hypothetical $1,000 investment in Class A Shares of
each Fund over specified periods. The information presented below does not
reflect any fees or charges imposed by Financial Institutions through which you
may invest in the Funds.
<TABLE>
<CAPTION>
CASH CASH
CASH CASH RESOURCE RESOURCE CALIFORNIA NEW YORK
RESOURCE U.S. GOVERNMENT TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND FUND
-------------- ----------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES None None None None None
Annual Fund Operating
Expenses (as a percentage
of average net assets)
Management Fees ........... .18% .18% .21% .22% .22%
12b-1 Fees ................ .38% .38% .33% .33% .38%*
Other Expenses ............ .28% .25% .17% .20% .20%
---- ----- ---- ---- -----
Total Fund Operating
Expenses ................ .84% .81% .71% .75% .80%*
---- ----- ---- ---- -----
</TABLE>
- -------------
* reflecting 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>
Cash Resource Money Market Fund ..................... $9 $27 $47 $104
Cash Resource U.S. Government Money Market
Fund .............................................. $8 $26 $45 $100
Cash Resource Tax-Exempt Money Market Fund .......... $7 $23 $40 $ 88
Cash Resource California Tax-Exempt Money
Market Fund ....................................... $8 $24 $42 $ 93
Cash Resource New York Tax-Exempt Money
Market Fund ....................................... $8 $26 $44 $ 99
</TABLE>
The table is provided to help you understand the expenses of investing in
each of the Funds and your share of the operating expenses which each of the
Funds incurs. Expenses shown for the New York Tax-Exempt Money Market Fund
reflect expense limitations currently in effect. In the absence of such
limitations, 12b-1 Fees and Total Fund Operating Expenses would be .50% and
.92%, respectively, for the New York Tax-Exempt Money Market 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.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights presented below for the Funds have been derived
from the Funds' Financial Statements which have been audited by KPMG Peat
Marwick LLP, independent auditors. The report of KPMG Peat Marwick LLP is
incorporated by reference into the Statement of Additional Information, which
may be obtained in the manner described on the cover page of this Prospectus.
Each of the Money Market, U.S. Government Money Market, and Tax-Exempt Money
Market Funds began operations on December 20, 1993; each of the California and
New York Tax-Exempt Money Market Funds commenced operations on December 9,
1996. See "Financial Statements" in the Funds' Statement of Additional
Information. During the periods shown, only Class A Shares of the Funds were
outstanding.
<TABLE>
<CAPTION>
MONEY MARKET FUND
-------------------------------------------------------------------------------------
1998 1997 1996 1995 1994*
--------------- ------------------ ------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
NET ASSET VALUE, BEGINNING
OF PERIOD ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT
OPERATIONS
Net investment income .......... 0.048 0.047 (a) 0.050 0.050 (a) 0.020
DISTRIBUTIONS
Net investment income ......... (0.048) (0.047) (0.050) (0.050)(a) (0.020)
NET ASSET VALUE, END OF
PERIOD ....................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- -------- ---------- -----------
Total Return ................... 4.95% 4.77% 4.91% 4.97% 1.83%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) ................... $3,817,705 $2,941,605 $646,500 $ 422,657 $ 192,260
Ratio of expenses to average
net assets ................... 0.84% 0.86% 0.82% 0.82% 0.89%(b)
Ratio of expenses to average
net assets excluding
waivers ...................... 0.84% 0.86% 0.82% 0.82% 0.93%(b)
Ratio of net investment
income to average net
assets ....................... 4.84% 4.67% 4.77% 4.96% 2.96%(b)
<CAPTION>
U.S. GOVERNMENT
MONEY MARKET FUND
------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994*
---------------- ------------------ --------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
NET ASSET VALUE, BEGINNING
OF PERIOD ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT
OPERATIONS
Net investment income .......... 0.048 0.046 (a) 0.050 0.050 (a) 0.020
DISTRIBUTIONS
Net investment income ......... (0.048)** (0.046)(a) (0.050) (0.050) (0.020)
NET ASSET VALUE, END OF
PERIOD ....................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- -----------
Total Return ................... 4.92% 4.72% 4.74% 4.82% 1.82%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) ................... $3,162,377 $2,918,711 $1,402,397 $1,216,690 $ 907,819
Ratio of expenses to average
net assets ................... 0.81% 0.81% 0.93% 0.88% 0.80%(b)
Ratio of expenses to average
net assets excluding
waivers ...................... 0.81% 0.81% 0.93% 0.88% 0.83%(b)
Ratio of net investment
income to average net
assets ....................... 4.80% 4.63% 4.63% 4.75% 2.91%(b)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
TAX-EXEMPT
MONEY MARKET FUND
------------------------------------------------------------------------------
1998 1997 1996 1995 1994*
------------- ------------- ------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
NET ASSET VALUE, BEGINNING
OF PERIOD ...................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT
OPERATIONS
Net investment income ........... 0.029 0.029 0.030 0.030 (a) 0.010
DISTRIBUTIONS
Net investment income .......... (0.029) (0.029) (0.030) (0.030) (0.010)
NET ASSET VALUE, END OF
PERIOD ........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------- -----------
Total Return .................... 2.96% 2.91% 2.90% 3.05% 1.16%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) .................... $815,057 $743,614 $290,891 $ 266,895 $ 195,702
Ratio of expenses to average
net assets .................... 0.71% 0.71% 0.76% 0.72% 0.65%(b)
Ratio of expenses to average
net assets excluding
waivers ....................... 0.71% 0.71% 0.76% 0.74% 0.74%(b)
Ratio of net investment
income to average net
assets ........................ 2.91% 2.88% 2.85% 3.01% 1.87%(b)
<CAPTION>
CALIFORNIA MONEY NEW YORK MONEY
MARKET FUND MARKET FUND
--------------------------------- ---------------------------------
1998 1997** 1998 1997**
------------- ------------------- ------------- -------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
NET ASSET VALUE, BEGINNING
OF PERIOD ...................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT
OPERATIONS
Net investment income ........... 0.027 0.017 0.027 0.018
DISTRIBUTIONS
Net investment income .......... (0.027) (0.017) (0.027) (0.018)
NET ASSET VALUE, END OF
PERIOD ........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- ----------- --------- -----------
Total Return .................... 2.74% 1.76%(c) 2.76% 1.77%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) .................... $ 95,698 $ 89,432 $ 15,290 $ 12,071
Ratio of expenses to average
net assets .................... 0.75% 0.75%(b) 0.80% 0.80%(b)
Ratio of expenses to average
net assets excluding
waivers ....................... 0.75% 0.75%(b) 0.92% 1.04%(b)
Ratio of net investment
income to average net
assets ........................ 2.70% 2.70%(b) 2.72% 2.77%(b)
</TABLE>
- ---------
* For the period from December 20, 1993 (commencement of operations) to
July 31, 1994.
** For the period from December 9, 1996 (commencement of operations) to July
31, 1997.
(a) Includes net realized capital gain (loss) which was under $0.001 per share.
(b) Annualized.
(c) Total return for periods less than one year are not annualized.
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Money Market Fund and the U.S. Government
Money Market Fund is to seek as high a rate of current income as Mentor
Investment Advisors, LLC, the Funds' investment advisor ("Mentor Advisors"),
believes is consistent with preservation of capital and maintenance of
liquidity. The investment objective of each of the other Funds is to seek as
high a rate of current income exempt from federal income tax (and, in the case
of the California Tax-Exempt Money Market Fund, California personal income tax,
or, in the case of the New York Tax-Exempt Money Market Fund, New York State
and City personal income taxes) as Mentor Advisors believes is consistent with
preservation of capital and maintenance of liquidity. The Funds seek their
objectives through the investment policies described below. 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."
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.
CASH RESOURCE MONEY MARKET FUND
The Money Market Fund invests in a portfolio of high-quality money market
instruments consisting exclusively of:
o bank certificates of deposit (CD's): negotiable certificates issued
against funds deposited in a commercial bank for a definite period of
time and earning a specified return.
o bankers' acceptances: negotiable drafts or bills of exchange, which
have been "accepted" by a bank, meaning, in effect, that the bank has
unconditionally agreed to pay the face value of the instrument on
maturity.
o prime commercial paper: high-grade, short-term obligations issued by
banks, corporations, and other issuers.
o corporate obligations: high-grade, short-term obligations other than
prime commercial paper.
o U.S. Government securities: marketable securities issued or
guaranteed as to principal or interest by the U.S. Government or by
its agencies or instrumentalities.
o repurchase agreements: with respect to U.S. Treasury or U.S.
Government securities.
5
<PAGE>
CASH RESOURCE U.S. GOVERNMENT MONEY MARKET FUND
The U.S. Government Money Market Fund invests exclusively in U.S. Treasury
bills, notes, and bonds, and other obligations issued or guaranteed as to
principal or interest by the U.S. Government, its agencies, or
instrumentalities, and in repurchase agreements with respect to such
obligations. Certain of these obligations, including U.S. Treasury bills,
notes, and bonds, mortgage participation certificates issued or guaranteed by
the Government National Mortgage Association, and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States. Other U.S. Government securities issued by federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States. These securities include obligations supported by the
right of the issuer to borrow from the U.S. Treasury, such as obligations of
Federal Home Loan Banks, and obligations supported only by the credit of an
instrumentality, such as Federal National Mortgage Association bonds.
Short-term U.S. Government obligations generally are considered among the
safest short-term investments. Because of their added safety, the yields
available from U.S. Government obligations are generally lower than the yields
available from comparable corporate debt securities. The U.S. Government
guarantee of securities owned by the Fund does not guarantee the net asset
value of the Fund's shares, which the Fund seeks to maintain at $1.00 per
share.
CASH RESOURCE TAX-EXEMPT MONEY MARKET FUND
The Tax-Exempt Money Market Fund invests, as a fundamental policy, at
least 80% of its net assets in Tax-Exempt Securities (as described below). The
Fund may invest the remainder of its assets in investments of any kind in which
any of the other Funds may invest.
The Fund will invest in only 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)
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 (collectively, "Tax-Exempt Securities").
(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, the 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 the Fund but are subject to the risk that the dealer may fail to
meet its obligations. The Fund does not generally expect to pay additional
consideration for stand-by commitments or to assign any value to them.
6
<PAGE>
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, the interest from which is, in the opinion of bond
counsel, exempt from federal income tax. These 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 a facility.
For purposes of the Fund's policy to invest at least 80% of its net assets
in Tax-Exempt Securities, the Fund will not treat obligations as Tax-Exempt
Securities for purposes of measuring compliance with such policy if they would
give rise to interest income subject to federal alternative minimum tax for
individuals. To the extent that the 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 the
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.
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
7
<PAGE>
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 affect
adversely 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 Fund may invest without limit in high quality taxable money market
instruments of any type in which the other Funds may invest at any time when
Mentor Advisors believes that market conditions make pursuing the Fund's basic
investment strategy inconsistent with the best interests of shareholders. It is
impossible to predict when, or for how long, the Fund will use these
alternative defensive strategies.
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
The California Tax-Exempt Money Market Fund will normally invest at least
80% of its assets in California Tax-Exempt Securities, which are debt
obligations 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 federal
income tax and California personal income tax. (This 80% requirement is a
fundamental policy of the Fund.) The Fund may invest the remainder of its
assets in investments of any kind described under "Selection of Investments"
below.
California 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 California
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 California 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.
8
<PAGE>
The Fund will invest in the following types of California 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) 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 California Tax-Exempt Securities, the 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
the Fund but are subject to the risk that the dealer may fail to meet its
obligations. The Fund does not generally expect to pay additional consideration
for stand-by commitments or to assign any value to them.
The Fund will normally invest at least 80% of its assets in debt
obligations the interest from which is, in the opinion of bond counsel, exempt
from federal income tax and that will not give rise to interest income subject
to federal alternative minimum tax for individuals. To the extent the 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 the 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 Fund invests primarily in California Tax-Exempt Securities, the
value of the Fund's shares may be especially affected by factors pertaining to
the economy of California and other factors specifically affecting the ability
of issuers of California Tax-Exempt Securities to meet their obligations; an
investment in the Fund may as a result involve greater risk than an investment
in other types of money market funds.
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 the State of California. Any reduction in the actual or perceived
ability of an issuer of California Tax-Exempt Securities to meet its
obligations (including a reduction in the rating of its outstanding securities)
would likely
9
<PAGE>
adversely affect the market value and marketability of its obligations and
could adversely affect the values of California Tax-Exempt Securities issued by
others as well.
The Fund may invest in high quality taxable money market instruments at
any time when Mentor Advisors believes that market conditions make pursuing the
Fund's basic investment strategy inconsistent with the best interest of
shareholders. These instruments may include: bank certificates of deposit,
banker's acceptances, prime commercial paper, high quality 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.
NEW YORK TAX-EXEMPT MONEY MARKET FUND
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 debt obligations
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 federal income tax and New York State
and City personal income taxes. (This 80% requirement is a fundamental policy
of the Fund.) The Fund may invest the remainder of its assets in investments of
any kind described under "Selection of Investments" below.
New York 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 New York
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 New York 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.
The Fund will invest in the following types of New York Tax-Exempt
Securities: (i) municipal notes; (ii) municipal bonds; (iii) municipal
securities backed by the U.S.
10
<PAGE>
Government or any of its agencies or instrumentalities; (iv) 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 New York Tax-Exempt
Securities, the 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 the Fund but are subject to
the risk that the dealer may fail to meet its obligations. The Fund does not
generally expect to pay additional consideration for stand-by commitments or to
assign any value to them.
The Fund will normally invest at least 80% of its assets in debt
obligations the interest from which is, in the opinion of bond counsel, exempt
from federal income tax and that will not give rise to interest income subject
to federal alternative minimum tax for individuals. To the extent the 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 the 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 Fund invests primarily in New York Tax-Exempt Securities, the
value of the Fund's shares may be especially affected by factors pertaining to
the economy of New York and other factors specifically affecting the ability of
issuers of New York Tax-Exempt Securities to meet their obligations; an
investment in the Fund may as a result involve greater risk than an investment
in other types of money market funds.
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 the State or City of
New York. 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 New York Tax-Exempt Securities 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 New York Tax-Exempt
Securities issued by others as well.
11
<PAGE>
The Fund may invest in high quality taxable money market instruments at
any time when Mentor Advisors believes that market conditions make pursuing the
Fund's basic investment strategy inconsistent with the best interest of
shareholders. These instruments may include: bank certificates of deposit,
banker's acceptances, prime commercial paper, high quality 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.
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 Ratings Service or Aa by Moody's Investors Service, Inc. at
the time of investment, and (iii) unrated securities determined by Mentor
Advisors to be of comparable quality. 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. 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.
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. Some of these securities may be supported by the right of the holders
under certain circumstances to demand that a specified bank, broker-dealer, or
other financial institution purchase the securities from the holders at par, or
otherwise to demand on short notice payment of unpaid principal and interest on
the securities. Such securities are subject to the risk that the financial
institutions in question may for any reason be unwilling or unable to meet its
obligation in respect of the securities, which would likely have an adverse
effect on the value of the securities.
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
the yields of different segments of the high-quality 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 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 values of the obligations 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
12
<PAGE>
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). However, under the current rules governing money market funds, the
Funds (other than the California and New York Tax-Exempt Money Market Funds)
generally may not invest more than 5% of their assets in any one issuer (other
than the U.S. government).
The Money Market Fund may invest without limit in obligations of domestic
branches of U.S. banks and U.S. branches of foreign banks (if it can be
demonstrated that they are subject to the same regulations as U.S. banks). At
times when the Fund has concentrated its investments in bank obligations, the
values of its portfolio securities may be especially affected by factors
pertaining to the issuers of such obligations.
Because of the relatively small number of issuers of California Tax-Exempt
Securities and New York Tax-Exempt Securities, the California and New York
Tax-Exempt 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 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 the Tax-Exempt Money Market Fund, the California Tax-Exempt Money
Market Fund nor the New York Tax-Exempt Money Market Fund (each, a "Tax-Exempt
Fund" and collectively, the "Tax-Exempt Funds") will invest more than 25% of
its total assets in any one industry. Governmental issuers of Tax-Exempt
Securities, California Tax-Exempt Securities, or New York Tax-Exempt Securities
are not considered part of any "industry." However, 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 Tax-Exempt Fund may invest more than 25%
of its assets in a broader segment of the Tax-Exempt Securities market (or the
California Tax-Exempt or New York Tax-Exempt Securities Markets, as the case
may be), 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,
13
<PAGE>
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 of the Tax-Exempt Funds reserves the
right to invest more than 25% of its assets in industrial development bonds and
private activity bonds or notes.
The Tax-Exempt Money Market Fund also reserves the right to invest more
than 25% of its assets in securities relating to any one or more states
(including the District of Columbia), U.S. territories or possessions, or any
of their political subdivisions. As a result of such an investment, the
performance of that Fund may be especially affected by factors pertaining to
the economy of the relevant state and other factors specifically affecting the
ability of issuers of such securities to meet their obligations. As a result,
the value of the Fund's shares may fluctuate more widely than the value of
shares of a fund investing in securities relating to a greater number of
different states.
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.
FOREIGN INVESTMENTS. The Money Market Fund may invest in obligations of
foreign issuers and in bank certificates of deposit and bankers' acceptances
payable in U.S. dollars and issued by foreign banks (including U.S. branches of
foreign banks) or by foreign branches of U.S. banks. These investments subject
the Fund to investment risks different from those associated with domestic
investments. Such risks include adverse political and economic developments in
foreign countries, the imposition of withholding taxes on interest income,
seizure or nationalization of foreign deposits, or the adoption of other
governmental restrictions which may adversely affect the payment of principal
and interest on such obligations. Legal remedies available to investors in
certain foreign countries may be more limited than those available with respect
to investments in the U.S. or in other foreign countries. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Fund's assets held
abroad) and expenses not present in the settlement of domestic investments. In
addition, foreign securities may be less liquid than U.S. securities, and
foreign accounting and disclosure standards may differ from U.S. standards.
Special tax considerations apply to foreign investments.
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
14
<PAGE>
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 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 exercising its rights in respect of the collateral. Any
investment of collateral by a Fund would be made in accordance with the Fund's
investment objective and policies described above.
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 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 whose purchase of shares of a Fund is accepted 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 next business 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 a 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.
15
<PAGE>
You can choose from two distribution options: (1) automatically reinvest
all distributions from a Fund in additional Class A 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 net ordinary income (and net capital gains, if any) on
a current basis.
Dividends paid by a Tax-Exempt Fund that are derived from exempt-interest
income (known as "exempt-interest dividends") and that are designated as such
may be treated by the Fund's shareholders as items of interest excludable from
their federal gross income. (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 Tax-Exempt Fund or a "related
person" to such a 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. To the
extent dividends paid to shareholders are derived from taxable income (for
example, from interest on certificates of deposit) or from gains, such
dividends will be subject to federal income tax, whether they are paid in the
form of cash or additional shares.
If a Tax-Exempt 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.
Shareholders receiving Social Security benefits or Railroad Retirement Act
benefits should note that all exempt-interest dividends will be taken into
account in determining the taxability of such benefits. Early in each year your
Fund will notify you of the amount and tax status of distributions paid to you
by the Fund for the preceding year.
STATE TAXES (CALIFORNIA TAX-EXEMPT MONEY MARKET FUND). To the extent
exempt-interest dividends are derived from interest on California Tax-Exempt
Securities, such
16
<PAGE>
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 when held by
an individual will be taxable as ordinary income or as long-term capital gain,
whether paid in cash or reinvested in additional shares. Interest derived from
California Tax-Exempt Securities is not subject to the California alternative
minimum tax on individuals, and California personal income tax does not apply
to any portion of Social Security or railroad retirement benefits. Interest on
indebtedness incurred or continued to purchase or carry the Fund's shares
generally will not be deductible for California personal income tax purposes.
An investment in the Fund may result in liability for state and/or local taxes
for shareholders subject to tax by states other than California.
STATE TAXES (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 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 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.
17
<PAGE>
BUYING AND SELLING SHARES OF THE FUNDS
HOW TO BUY SHARES. The Trust offers Class A Shares of the Funds
continuously at a price of $1.00 per share. The Trust determines the net asset
value of each Fund twice each day, as of 12:00 noon and as of the close of
regular trading on the Exchange. Class A 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.
The Funds may refuse any order to buy shares.
For more information on how to purchase shares of the Funds, contact your
Financial Institution or Mentor Services Company, Inc. ("Mentor Services
Company"), 901 East Byrd Street, Richmond, Virginia 23219. Mentor Services
Company's telephone number is 1-800-869-6042.
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.
18
<PAGE>
SELLING SHARES BY CHECK. If you would like the ability to write checks
against your investment in a Fund, 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 your Fund. When a
Fund receives your properly completed documentation and card, you will receive
checks drawn on your Fund account and payable through the Fund'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 Fund 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 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 your Financial Institution. 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.
A Fund generally sends you payment for your shares the business day after
your request is received in good order. Under unusual circumstances, a Fund 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. If you request an
exchange through your Financial Institution, your Financial Institution will be
responsible for forwarding the necessary documentation to IFTC. Exchange
Authorization Forms are available from your Financial Institution or Mentor
Services Company. For federal income tax purposes, an exchange is treated as a
sale of shares and may result in a capital gain or loss. The
19
<PAGE>
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 Services Company 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 a Fund (including
among other things the purchase, redemption, or exchange of Fund shares)
through a Financial Institution, the Financial Institution, and not the Fund,
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 a Fund promptly.
Some Financial Institutions may establish minimum investment requirements with
respect to a 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.
If your Financial Institution holds your investment in a Fund in its own name,
then your Financial Institution will be the shareholder of record in respect of
that investment; your ability to take advantage of any investment options or
services of the Fund will depend on whether, and to what extent, your Financial
Institution is willing to take advantage of them on your behalf. Financial
Institutions, including Wheat, First Securities, Inc., a subsidiary of Wheat
First Butcher Singer, Inc., and EVEREN Securities, Inc. ("EVEREN"), 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.
MANAGEMENT
The Trustees are responsible for generally overseeing the conduct of the
Trust's business. Mentor Investment Advisors, LLC, located at 901 East Byrd
Street, Richmond, Virginia 23219, serves as investment adviser 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 has over $13 billion in assets under management and is a
wholly owned subsidiary of Mentor Investment Group, LLC ("Mentor Investment
Group"), and its affiliates. Mentor Investment Group is a subsidiary of Wheat
First Butcher Singer, Inc., which is in turn a wholly owned subsidiary of First
Union Corp. ("First Union"). First Union is a leading financial services
company with approximately $172 billion in
20
<PAGE>
assets and $12 billion in total stockholders' equity as of March 31, 1998.
EVEREN Capital Corporation has a 20% ownership in Mentor Investment Group and
may acquire additional ownership based principally on the amount of Mentor
Investment Group's revenues derived from assets attributable to clients of
EVEREN Securities, Inc. and its affiliates.
Each Fund pays management fees to Mentor Advisors monthly at the following
annual rates (based on the average daily net 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.
The Funds pay all expenses not assumed by Mentor Advisors, including
Trustees' fees, auditing, legal, custodial, investor servicing, and shareholder
reporting expenses, and payments under their 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
investments 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.
The Funds receive services from a number of providers which rely on the
smooth functioning of their respective systems and the systems of others to
perform those services. It is generally recognized that certain systems in use
today may not perform their intended functions adequately after the Year 1999
because of the inability of the software to distinguish the Year 2000 from the
Year 1900. Mentor Advisors is taking steps that it believes are reasonably
designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by the Funds'
other major service providers. There can be no assurance, however, that these
steps will be sufficient to avoid any adverse impact on the Funds from this
problem.
ADMINISTRATIVE SERVICES. Mentor Investment Group, LLC, located at 901 East
Byrd Street, Richmond, Virginia 23219, provides each Fund with certain
administrative personnel and services necessary to operate each Fund, such as
bookkeeping and accounting services. Mentor Investment Group provides these
services to each of the Funds at an annual rate of 0.02% of the Fund's average
daily net assets.
21
<PAGE>
DISTRIBUTION SERVICES
Mentor Distributors, LLC ("Mentor Distributors"), 3435 Stelzer Road,
Columbus, Ohio 43219, is the distributor of the Funds' shares. Mentor
Distributors is a wholly owned subsidiary of BISYS Fund Services, Inc. Each
Fund has adopted a Distribution Plan (each, a "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 with respect to its Class A Shares.
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 Class A Shares of the Fund, reducing redemptions, or maintaining or
improving services provided to shareholders. The Plans provide for monthly
payments by the Funds to Mentor Distributors out of the Funds' assets
attributable to their Class A Shares, 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 Class A Shares and the maintenance of shareholder
accounts (or, in the case of certain Financial Institutions which are banking
institutions, for certain administrative and shareholder services), Mentor
Distributors, Mentor Advisors, or their affiliates may make periodic payments
(from any amounts received under the Plans or from their other resources) to
any qualifying Financial Institution based on the average net asset value of
Class A Shares for which the Financial Institution is designated as the
financial institution of record. Such payments may be made at an annual rate of
between 0.15% and 0.40% in the case of the Money Market Fund and the U.S.
Government Money Market Fund, between 0.15% and 0.33% in the case of the
Tax-Exempt Fund and the California Tax-Exempt Fund, and between 0.15% and 0.38%
in the case of the New York Tax-Exempt Fund. These payments may be suspended or
modified 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. Financial Institutions receiving such
payments include Wheat, First Securities, Inc. and EVEREN.
HOW A FUND'S PERFORMANCE IS CALCULATED
Yield and effective yield data may from time to time be included in
advertisements about the Class A Shares of the Funds. "Yield" is calculated by
dividing a Fund's annualized net investment income per Class A Share during a
recent seven-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
Tax-Exempt 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 the 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.
22
<PAGE>
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
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, diversified 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. 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 engages at its own expense certain Financial Institutions,
including Wheat, First Securities, Inc. and EVEREN, to perform bookkeeping,
data processing, and administrative services pertaining to the maintenance of
shareholder accounts.
There is presently no maximum or minimum share ownership requirement, but
the Trustees may establish either 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 or Mentor Services Company, that the Trust do
otherwise.
23
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT
LAWFULLY BE MADE. THIS PROSPECTUS OMITS CERTAIN INFORMATION CONTAINED IN THE
REGISTRATION STATEMENT, TO WHICH REFERENCE IS MADE, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. ITEMS WHICH ARE THUS OMITTED, INCLUDING CONTRACTS AND
OTHER DOCUMENTS REFERRED TO OR SUMMARIZED HEREIN, MAY BE OBTAINED FROM THE
COMMISSION UPON PAYMENT OF THE PRESCRIBED FEES.
ADDITIONAL INFORMATION CONCERNING THE SECURITIES OFFERED HEREBY AND
THE TRUST IS TO BE FOUND IN THE REGISTRATION STATEMENT, INCLUDING VARIOUS
EXHIBITS THERETO AND FINANCIAL STATEMENTS INCLUDED OR INCORPORATED THEREIN,
WHICH MAY BE INSPECTED AT THE OFFICE OF THE COMMISSION.
CASH RESOURCE TRUST
901 East Byrd Street
Richmond, VA 23219
(800) 869-6042
1998 MENTOR DISTRIBUTORS, LLC
CPAA 040
[MENTOR INVESTMENT GROUP LOGO]
CASH RESOURCE TRUST
-------------------------------
PROSPECTUS
CLASS A SHARES
-------------------------------
October 13, 1998
[EVEREN SECURITIES LOGO]
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT
LAWFULLY BE MADE. THIS PROSPECTUS OMITS CERTAIN INFORMATION CONTAINED IN THE
REGISTRATION STATEMENT, TO WHICH REFERENCE IS MADE, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. ITEMS WHICH ARE THUS OMITTED, INCLUDING CONTRACTS AND
OTHER DOCUMENTS REFERRED TO OR SUMMARIZED HEREIN, MAY BE OBTAINED FROM THE
COMMISSION UPON PAYMENT OF THE PRESCRIBED FEES.
ADDITIONAL INFORMATION CONCERNING THE SECURITIES OFFERED HEREBY AND
THE TRUST IS TO BE FOUND IN THE REGISTRATION STATEMENT, INCLUDING VARIOUS
EXHIBITS THERETO AND FINANCIAL STATEMENTS INCLUDED OR INCORPORATED THEREIN,
WHICH MAY BE INSPECTED AT THE OFFICE OF THE COMMISSION.
CASH RESOURCE TRUST
901 East Byrd Street
Richmond, VA 23219
(800) 869-6042
1998 MENTOR DISTRIBUTORS, LLC
SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED MAY LOSE VALUE
CASH RESOURCE TRUST
-------------------------------
PROSPECTUS
CLASS A SHARES
-------------------------------
October 13, 1998
[MENTOR INVESTMENT GROUP LOGO]
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT
LAWFULLY BE MADE. THIS PROSPECTUS OMITS CERTAIN INFORMATION CONTAINED IN THE
REGISTRATION STATEMENT, TO WHICH REFERENCE IS MADE, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. ITEMS WHICH ARE THUS OMITTED, INCLUDING CONTRACTS AND
OTHER DOCUMENTS REFERRED TO OR SUMMARIZED HEREIN, MAY BE OBTAINED FROM THE
COMMISSION UPON PAYMENT OF THE PRESCRIBED FEES.
ADDITIONAL INFORMATION CONCERNING THE SECURITIES OFFERED HEREBY AND
THE TRUST IS TO BE FOUND IN THE REGISTRATION STATEMENT, INCLUDING VARIOUS
EXHIBITS THERETO AND FINANCIAL STATEMENTS INCLUDED OR INCORPORATED THEREIN,
WHICH MAY BE INSPECTED AT THE OFFICE OF THE COMMISSION.
CASH RESOURCE TRUST
901 East Byrd Street
Richmond, VA 23219
(800) 869-6042
1998 MENTOR DISTRIBUTORS, LLC
MK 1341
[MENTOR INVESTMENT GROUP LOGO]
CASH RESOURCE TRUST
-------------------------------
PROSPECTUS
CLASS A SHARES
-------------------------------
October 13, 1998
[WHEAT FIRST UNION LOGO]
SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED MAY LOSE VALUE
Wheat First Union is a division of Wheat First Securities, Inc., a registered
broker/dealer, Member New York Stock Exchange and SIPC, and a separate non-bank
affiliate of First Union Corporation
<PAGE>
CASH RESOURCE TRUST
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
October 13, 1998
This Statement of Additional Information contains information which may be
of interest to investors but which is not included in the Prospectus dated
October 13, 1998 (the "Prospectus") of Cash Resource Money Market Fund, Cash
Resource U.S. Government Money Market Fund, Cash Resource Tax-Exempt Money
Market Fund, Cash Resource California Tax-Exempt Money Market Fund, and 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 of the Funds dated
October 13, 1998. This Statement should be read together with the Prospectus, as
amended from time to time. Investors may obtain a free copy of the Prospectus by
calling Mentor Services Company, Inc. at (800) 382-0016.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Investment Objectives and Policies of the Trust ...................... 2
Investment Restrictions .............................................. 6
Management of the Trust .............................................. 8
Principal Holders of Securities ...................................... 10
Investment Advisory and Other Services ............................... 11
Determination of Net Asset Value ..................................... 15
Taxes ................................................................ 17
Distribution ......................................................... 20
Organization ......................................................... 22
Portfolio Turnover ................................................... 23
Custodian ............................................................ 23
Independent Auditors ................................................. 23
Performance Information .............................................. 23
Investment Professionals of Mentor Investment Advisors, LLC .......... 36
Shareholder Liability ................................................ 37
Financial Statements ................................................. 37
</TABLE>
1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES OF THE TRUST
The investment objectives and policies of each of the Funds are described
in the Prospectus. This Statement contains additional information concerning
certain investment practices and investment restrictions of the Funds.
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 a vote of shareholders.
Except as otherwise noted below, the following descriptions of certain
investment policies and techniques are applicable to all of the Funds.
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 Investment Advisors, LLC (the
"Adviser") 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 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, the Adviser considers all
2
<PAGE>
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.
FOREIGN SECURITIES
Cash Resource Money Market Fund may invest in U.S. dollar denominated
foreign securities which meet the criteria applicable to the Fund's domestic
investments, and in certificates of deposit issued by U.S. branches of foreign
banks and foreign branches of U.S. banks. Investment by the Fund in foreign
securities is subject to the limitations set forth in the Prospectus.
Investments in foreign securities may involve considerations different
from investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and
possible consequent illiquidity, greater volatility in price, the possible
imposition of withholding or confiscatory taxes, the possible adoption of
foreign governmental restrictions affecting the payment of principal and
interest, expropriation of assets, nationalization, or other adverse political
or economic developments. Foreign companies may not be subject to auditing and
financial reporting standards and requirements comparable to those which apply
to U.S. companies. Foreign brokerage commissions and other fees are generally
higher than in the United States. It may be more difficult to obtain and
enforce a judgment against a foreign issuer.
In determining whether to invest in securities of foreign issuers, the
Adviser will consider the likely impact of foreign taxes on the net yield
available to the Fund and its shareholders. Income received by the Fund from
sources within foreign countries may be reduced by withholding and other taxes
imposed by such countries. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to determine
the effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested in various countries is not known, and tax laws and their
interpretations may change from time to time and may change without advance
notice. Any such taxes paid by the Fund will reduce its net income available
for distribution to shareholders.
TAX-EXEMPT SECURITIES
GENERAL DESCRIPTION. As used in the prospectus and in this Statement with
reference to Cash Resource Tax-Exempt Money Market Fund, Cash Resource
California Tax-Exempt Money Market Fund, and Cash Resource New York Tax-Exempt
Money Market Fund, 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
3
<PAGE>
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, also 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, also exempt from New York State and City personal income
taxes. For purposes of the section, the term "Tax-Exempt Securities" include
California Tax-Exempt Securities and New York Tax-Exempt Securities. 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
tax-exempt commercial paper, which are promissory notes issued by
municipalities to enhance their cash flows.
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 Tax- Exempt 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 Tax-Exempt 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, California and New York
personal income taxes, as the case may be. No Fund expects to invest more than
5% of its assets in participation interests.
4
<PAGE>
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 Tax-Exempt 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 Tax-Exempt 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.
"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. There is no assurance that any issuer of
a Tax-Exempt Security will make full or timely payments of principal or
interest or remain solvent.
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
5
<PAGE>
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.
INVESTMENT RESTRICTIONS
The Trust has adopted the following restrictions applicable to all of the
Funds (except where otherwise noted), which may not be changed without the
affirmative vote of a "majority of the outstanding voting securities" of a
Fund, which is defined in the Investment Company Act of 1940, as amended (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 in person 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. 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.
3. 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.
4. Purchase or sell commodities or commodity contracts.
5. 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.
6. 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.
6
<PAGE>
7. Acquire more than 10% of the voting securities of any issuer, except
that with respect to the Cash Resource California Tax-Exempt Money Market Fund
and Cash Resource New York Tax-Exempt Money Market Fund this restriction only
applies to 75% of such Fund's assets.
8. Invest more than 25% of its assets in any one industry, except that
Cash Resource Money Market Fund may invest without limit in obligations of
domestic branches of U.S. banks and U.S. branches of foreign banks (if it can
be demonstrated that they are subject to the same regulation as U.S. banks).
9. Issue any class of securities which is senior to a Fund's shares of
beneficial interest, except as consistent with or permitted by the 1940 Act or
as permitted by rule or order of the Securities and Exchange Commission.
Other than the Cash Resource California Tax-Exempt Money Market Fund and
Cash Resource New York Tax-Exempt Money Market Fund, a Fund may not:
1. 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.
2. Purchase securities on margin, expect such short-term credits as may be
necessary for the clearance of purchases and sales of securities.
3. 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.
4. Invest in securities of any issuer, if, to the knowledge of a Fund,
officers and Trustees of the Trust and officers and directors of the Adviser
who beneficially own more than 0.5% of the securities of that issuer together
own more than 5% of such securities.
5. Make investments for the purpose of gaining control of a company's
management.
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 as fundamental and those
designated in the Prospectus as fundamental, the 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.
7
<PAGE>
MANAGEMENT OF THE TRUST
<TABLE>
<CAPTION>
POSITION HELD
NAME AND ADDRESS WITH A FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------------- ---------------------- ------------------------------------------------------
<S> <C> <C>
Daniel J. Ludeman* Chairman and Trustee Chairman and Chief Executive Officer Mentor
901 E. Byrd Street Investment Group, Inc.; Managing Director of
Richmond, VA 23219 Wheat First Butcher Singer, Inc. Director, Wheat,
First Securities, Inc.; Chairman and Director Mentor
Income Fund, Inc., and America's Utility Fund, Inc.;
Chairman and Trustee, Mentor Funds, Mentor
Variable Investment Portfolios and Mentor
Institutional Trust.
Arnold H. Dreyfuss Trustee Chairman, Eskimo Pie Corporation; Trustee, Mentor
P.O. Box 18156 Funds, Mentor Variable Investment Portfolios and
Richmond, Virginia 23226 Mentor Institutional Trust; Director, Mentor Income
Fund, Inc. and America's Utility Fund, Inc.;
formerly, Chairman and Chief Executive Officer,
Hamilton Beach/Proctor-Silex, Inc.
Thomas F. Keller Trustee R.J. Reynolds Industries Professor of Business
Fuqua School of Business Administration and Former Dean of Fuqua School
Duke University of Business, Duke University; Director of LADD
Durham, NC 27706 Furniture, Inc., Wendy's International, Inc.,
American Business Products, Inc., Dimon, Inc., and
Biogen, Inc.; Director of Nations Balanced Target
Maturity Fund, Inc., Nations Government Income
Term Trust 2003, Inc., Nations Government Income
Term Trust 2004, Inc., Hatteras Income Securities,
Inc., Nations Institutional Reserves, Nations Fund
Trust, Nations Fund, Inc., Nations Fund Portfolios,
Inc., and Nations LifeGoal Funds, Inc. Trustee,
Mentor Funds, Mentor Variable Investment
Portfolios and Mentor Institutional Trust; Director,
Mentor Income Fund, Inc. and America's Utility
Fund, Inc.
Louis W. Moelchert, Jr. Trustee Vice President for Investments, University of
University of Richmond Richmond; Trustee, Mentor Funds, Mentor Variable
Richmond, VA 23173 Investment Portfolios and Mentor Institutional Trust;
Director, Mentor Income Fund, Inc. and America's
Utility Fund, Inc.
Troy A. Peery, Jr. Trustee President, Heilig-Meyers Company; Trustee, Mentor
Heilig-Meyers Company Funds, Mentor Variable Investment Portfolios and
2235 Staples Mill Road Mentor Institutional Trust; Director, Mentor Income
Richmond, Virginia 23230 Fund, Inc. and America's Utility Fund, Inc.
Peter J. Quinn, Jr.* Trustee Formerly, President, Mentor Distributors, Inc.;
901 E. Byrd Street Managing Director, Mentor Investment Group, LLC,
Richmond, VA 23219 and Wheat First Butcher Singer, Inc.; formerly,
Senior Vice President/Director of Mutual Funds,
Wheat First Butcher Singer, Inc.; Trustee, Mentor
Funds, Mentor Variable Investment Portfolios and
Mentor Institutional Trust; Director, Mentor Income
Fund, Inc. and America's Utility Fund, Inc.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD
NAME AND ADDRESS WITH A FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ------------------------- --------------------- -----------------------------------------------------
<S> <C> <C>
Arch T. Allen, III Trustee Attorney at law, Raleigh, North Carolina; Trustee,
c/o Cash Resource Trust Mentor Funds, Mentor Variable Investment
901 E. Byrd Street Portfolios and Mentor Institutional Trust; Director,
Richmond, VA 23219 Mentor Income Fund, Inc. and America's Utility
Fund, Inc.; formerly, Vice Chancellor for
Development and University Relations, University
of North Carolina at Chapel Hill.
Weston E. Edwards Trustee President, Weston Edwards & Associates; Trustee
c/o Cash Resource Trust Mentor Funds, Mentor Variable Investment
901 E. Byrd Street Portfolios and Mentor Institutional Trust; Director,
Richmond, VA 23219 Mentor Income Fund, Inc. and America's Utility
Fund, Inc.; Founder and Chairman, The Housing
Roundtable; formerly, President, Smart Mortgage
Access, Inc.
Jerry R. Barrentine Trustee President, J.R. Barretine & Associates; Trustee,
c/o Cash Resource Trust Mentor Funds, Mentor Variable Investment
901 E. Byrd Street Portfolios and Mentor Institutional Trust; Director,
Richmond, VA 23219 Mentor Income Fund, Inc. and America's Utility
Fund, Inc.; formerly, Executive Vice President and
Chief Financial Officer, Barclays/American
Mortgage Director Corporation; Managing Partner,
Barrentine Lott & Associates.
J. Garnett Nelson Trustee Consultant, Mid-Atlantic Holdings, LLC; Trustee,
c/o Cash Resource Trust Mentor Funds, Mentor Variable Investment
901 E. Byrd Street Portfolios and Mentor Institutional Trust; Director,
Richmond, VA 23219 Mentor Income Fund, Inc., America's Utility Fund,
Inc., GE Investment Funds, Inc., and Lawyers Title
Corporation; Member, Investment Advisory
Committee, Virginia Retirement System; formerly,
Senior Vice President, The Life Insurance Company
of Virginia.
Paul F. Costello President Managing Director, Wheat First Butcher Singer, Inc.
901 E. Byrd Street and Mentor Investment Group, LLC; President,
Richmond, VA 23219 Mentor Funds, Mentor Income Fund, Inc., Mentor
Institutional Trust, Mentor Variable Investment
Portfolios and America's Utility Fund, Inc.;
Director, Mentor Perpetual Advisors, LLC
Terry L. Perkins Treasurer Senior Vice President, Mentor Investment Group,
901 E. Byrd Street LLC; Treasurer, Mentor Institutional Trust, Mentor
Richmond, VA 23219 Funds, Mentor Variable Investment Portfolios and
Mentor Income Fund, Inc.; Treasurer and Senior
Vice President, America's Utility Fund, Inc.;
formerly, Treasurer and Comptroller, Ryland Capital
Management, Inc.
Michael Wade Assistant Treasurer Vice President, Mentor Investment Group, LLC
901 E. Byrd Street Assistant Treasurer, Mentor Income Fund, Inc.,
Richmond, VA 23219 Mentor Funds, Mentor Institutional Trust, Mentor
Variable Investment Portfolios and America's Utility
Fund; formerly, Senior Accountant, Wheat First
Butcher Singer, Inc., Audit Senior, BDO Seidman.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD
NAME AND ADDRESS WITH A FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- -------------------- -------------- -----------------------------------------------------
<S> <C> <C>
Geoffrey B. Sale Secretary Associate Vice President Mentor Investment Group,
901 E. Byrd Street LLC; Secretary, Mentor Funds, Mentor Institutional
Richmond, VA 23219 Trust, Mentor Variable Investment Portfolios; Clerk,
America's Utility Fund, Inc., Mentor Income Fund,
Inc.
</TABLE>
- -------------
* 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
1998 fiscal year and the fees paid to each Trustee by all funds in the Mentor
Family (including the Trust) during the 1997 calendar year.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION
TRUSTEES FROM THE TRUST FROM ALL COMPLEX FUNDS (28 FUNDS)
- --------------------------------- ------------------------ ----------------------------------
<S> <C> <C>
Daniel J. Ludeman ............... -- --
Arnold H. Dreyfuss .............. 17,911 15,200
Thomas F. Keller ................ 15,793 15,200
Louis W. Moelchert, Jr. ......... 17,911 26,200
Troy A. Peery, Jr. .............. 17,911 14,175
Peter J. Quinn, Jr. ............. -- --
Arch T. Allen, III+ ............. 13,967 11,000
Weston E. Edwards + ............. 13,967 28,000
Jerry R. Barrentine+ ............ 13,967 20,000
J. Garnett Nelson+ .............. 13,967 20,000
</TABLE>
- -------------
+ Elected Trustee December 22, 1997.
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 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
duties. The Trust, at its expense, provides liability insurance for the benefit
of its Trustees and officers.
PRINCIPAL HOLDERS OF SECURITIES
As of September 23, 1998, the officers and Trustees of the Trust owned as
a group less than one percent of the outstanding shares of each Fund. To the
knowledge of the Trust, no person owned of record or beneficially more than 5%
of the outstanding shares
10
<PAGE>
of any Fund as of that date except:
<TABLE>
<CAPTION>
BENEFICIAL OWNERS FUND OWNERSHIP %
- ---------------------------------- ------------------------------ --------------
<S> <C> <C>
Arthur Richenthal New York Tax-Exempt 9.36
c/o Richenthal Abrams and Idoss
122 East 42nd Street
New York, N.Y. 10168
Herb Philipson's Army & New York Tax-Exempt 6.98
Navy Stores, Inc.
300 W. Dominick St.
Rome, N.Y. 13440
RECORD OWNERS FUND OWNERSHIP %
- ---------------------------------- ------------------------------ --------------
Wheat First Securities, Inc. Money Market 32.00
10700 N. Park Drive U.S. Government Money Market 64.90
Glen Allen, VA 23060 Tax-Exempt Money Market 44.96
New York Tax-Exempt 45.63
EVEREN Securities, Inc. Money Market 67.92
111 E. Kilbourn U.S. Government Money Market 34.56
Milwaukee, WI 53202 Tax-Exempt Money Market 50.01
New York Tax-Exempt 54.37
California Tax-Exempt 9.51
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Under a Management Contract (the "Management Contract") between the Trust
and Mentor Investment Advisors, LLC ("Mentor Advisors"), Mentor Advisors, at
its expense, provides the Funds with investment advisory services.
Until November 1, 1996, Commonwealth Advisors, Inc. served as investment
advisor to each of the Funds then in existence, and Commonwealth Investment
Counsel, Inc. served as sub-adviser to each of those Funds. On that date,
Commonwealth Investment Counsel, Inc. was reorganized as Mentor Investment
Advisors, LLC, which became investment advisor to the Funds in place of
Commonwealth Advisors, Inc.
11
<PAGE>
The table below shows amounts paid to Mentor Advisors (or, for periods
prior to November 1, 1996, to Commonwealth Advisors) by each Fund for the
periods indicated (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
JULY 31, 1996 JULY 31, 1997 JULY 31, 1997
--------------- --------------- --------------
<S> <C> <C> <C>
Cash Resource Money Market Fund ......... $ 1,173 $ 4,041 $5,852
Cash Resource U.S. Government
Money Market Fund ..................... $ 2,660 $ 4,470 $5,608
Cash Resource Tax-Exempt Money
Market Fund ........................... $ 632 $ 1,326 $1,675
Cash Resource California Tax-Exempt
Money Market Fund ..................... $ -- $ 121 $ 213
Cash Resource New York Tax-Exempt
Money Market Fund ..................... $ -- $ 11 $ 28
</TABLE>
The amounts shown above as having been paid under the Management Contract
to Commonwealth Advisors, Inc. or Mentor Advisors reflect expense reductions as
follows, which are due to an expense limitation (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
JULY 31, 1996 JULY 31, 1997 JULY 31, 1998
--------------- --------------- --------------
<S> <C> <C> <C>
Cash Resource Money Market Fund ......... $ 0 $ 0 $0
Cash Resource U.S. Government
Money Market Fund ..................... $ 0 $ 0 $0
Cash Resource Tax-Exempt Money
Market Fund ........................... $ 0 $ 0 $0
Cash Resource California Tax-Exempt
Money Market Fund ..................... $-- $ 0 $0
Cash Resource New York Tax-Exempt
Money Market Fund ..................... $-- $ 11 $0
</TABLE>
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 his 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 of 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
12
<PAGE>
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 litigation, proceedings, and
claims and the legal obligation it may have to indemnify its officers and
Trustees with respect thereto.
The Management Contract provides that Mentor Advisors shall not be subject
to any liability to a Fund or to any shareholder for any act or omission in the
course of, or connected with, its rendering services under the relevant
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 February of 2000, 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 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 the Funds 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 a 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 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 a Fund.
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.
13
<PAGE>
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 may receive 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 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' 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.
14
<PAGE>
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. None of the Funds
incurred brokerage or underwriting commissions in the 1996, 1997, or 1998
fiscal years.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of a 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, Dr. Martin Luther King, Jr. 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 its
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.
The valuation of a Fund's portfolio instruments at amortized cost is
permitted by 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
15
<PAGE>
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. In the event Mentor Advisors determines that a deviation
in net asset value from $1.00 per share may result in material dilution or is
otherwise unfair to existing shareholders, it will take such corrective action
as it believes necessary and appropriate, including informing the President of
the Trust; 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 class of shares of each Fund is declared as a
dividend each time it is determined, the net asset value per share 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 the 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 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
16
<PAGE>
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 of the Trust 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 series of Massachusetts business trust, the
Funds under present law will not be subject to any excise or income taxes in
Massachusetts.
Other than exempt-interest dividends from Cash Resource Tax-Exempt Money
Market Fund, California Tax-Exempt Money Market Fund, and New York Tax-Exempt
Money Market Fund 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 dividends will be
taxable as such, regardless of how long Fund shares are held, while other
taxable distributions will be taxed as ordinary income. Also interest on
indebtedness incurred to purchase shares of Cash Resource Tax-Exempt Money
Market Fund, California Tax-Exempt Money Market Fund, or New York Tax-Exempt
Money Market Fund 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 disposition of stock, securities, or foreign currencies, and other income
(including but not limited to gains from options, futures, or forward
contracts) derived with respect to its business of investing in such stock,
securities, or currencies and (b) diversify its holdings so that, at the close
of each quarter of its taxable year, (i) at least 50% of the value of its total
assets consists of cash, cash items, U.S. Government Securities, securities of
other regulated investment companies, 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 total assets is invested in the
securities (other than those of U.S. Government Securities or other regulated
investment companies) of any issuer or of two or more issuers which the Fund
controls and which are engaged in the same, similar, or related trades or
businesses. 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 the sum of its taxable net investment income,its net
tax-exempt income, and the excess, if
17
<PAGE>
any, of net short-term capital gains over net long-term capital losses for such
year. To satisfy these requirements, a Fund may engage in investment techniques
that affect the amount, timing and character of its income and distributions.
If a Fund failed to qualify as a regulated investment company accorded
special tax treatment in any taxable year, the Fund would be subject to tax on
its taxable income at corporate rates, and all distributions from earnings and
profits, including any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to shareholders as ordinary income. In
addition, a Fund could be required to recognize unrealized gains, pay
substantial taxes and interest and make substantial distributions before
requalifying as a regulated investment company that is accorded special tax
treatment.
An excise tax at the rate of 4% will be imposed on the excess, if any, of
each Fund's "required distribution" over its 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 realized
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.
Distributions from a Fund (other than exempt-interest dividends, as
discussed below) will be taxable to shareholders as ordinary income to the
extent derived from the Fund's investment income and net short-term gains. Net
capital gain (that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year) of a Fund that is distributed and designated as a capital gain
dividend will be taxable to shareholders as long-term capital gain, generally
taxable to individuals at a 20% rate, regardless of how long a shareholder has
held the shares in the Fund. Some 1998 distributions of capital gains realized
in 1997 may be taxable to individuals at a 28% rate.
Each Fund is required to withhold 31% of all ordinary 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. Shareholders who
fail to furnish their current tax identification numbers are subject to a
penalty of $50 for each such failure unless the failure is due to reasonable
cause and not willfull neglect. An individual's taxpayer identification number
is his or her Social Security number. Tax-exempt shareholders are not subject
to these back-up withholding rules so long as they furnish the Fund with a
proper certification.
18
<PAGE>
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 accrued on the indebtedness, multiplied by
the percentage of a Fund's total distributions (not including capital gain
dividend) 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.
Each Fund seeks to maintain a stable net asset value of $1.00 per share;
however, there can be no assurance that a Fund will be able to do so. A
shareholder may therefore recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of that Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital
gain or loss and will be long-term capital gian or loss if the shares were held
for longer than one year. Long-term capital gain is generally taxable to
individuals at a 20% rate. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be disallowed to the
extent of the amount of exempt-interest dividends received on
19
<PAGE>
such shares and (to the extent not disallowed) will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares.
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, local, foreign and other taxes. Shareholders are urged to consult their
tax advisers regarding specific questions as to federal, state, local, or
foreign 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).
DISTRIBUTION
Mentor Distributors, LLC 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 (the "Plan"). The purpose
of the Plan is to permit the Funds 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. The
Plan provides for payments by each Fund to Mentor Distributors at the annual
rate of up to 0.38% of the Fund's average net assets (0.33% in the case of Cash
Resource California Tax-Exempt Money Market Fund and Cash Resource Tax-Exempt
Money Market Fund; and 0.50% in the case of Cash Resource New York Tax-Exempt
Money Market Fund), subject to the authority of the Trustees to reduce the
amount of payments or to suspend the Plans as to any Fund for such periods as
they may determine. Subject to these limitations, the amount of such payments
and the specific purposes for which they are made shall be determined by the
Trustees.
20
<PAGE>
For the periods indicated, each Fund paid the following amounts to Mentor
Distributors under its respective Plan (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
JULY 31, 1996 JULY 31, 1997 JULY 31, 1998
--------------- --------------- --------------
<S> <C> <C> <C>
Cash Resource Money
Market Fund ............... $ 2,043 $ 8,221 $12,419
Cash Resource U.S. Government
Money Market Fund ......... $ 5,016 $ 9,126 $11,802
Cash Resource Tax-Exempt
Money Market Fund ......... $ 948 $ 2,039 $ 2,598
Cash Resource California
Tax-Exempt Money
Market Fund ............... $ -- $ 181 $ 319
Cash Resource New York
Tax-Exempt Money
Market Fund ............... $ -- $ 19 $ 48
</TABLE>
Mentor Distributors paid amounts to Financial Institutions (including
affiliates of Mentor Distributors qualifying as Financial Institutions) in
respect of the Funds as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
JULY 31, 1996 JULY 31, 1997 JULY 31, 1998
--------------- --------------- --------------
<S> <C> <C> <C>
Cash Resource Money
Market Fund ............... $ 2,043 $ 8,221 $12,419
Cash Resource U.S. Government
Money Market Fund ......... $ 5,016 $ 9,126 $11,802
Cash Resource Tax-Exempt
Money Market Fund ......... $ 948 $ 2,039 $ 2,598
Cash Resource California
Tax-Exempt Money
Market Fund ............... $ -- $ 181 $ 319
Cash Resource New York
Tax-Exempt Money
Market Fund ............... $ -- $ 19 $ 63
</TABLE>
For the fiscal year ended July 31, 1998, Wheat First Butcher Singer, Inc. and
EVEREN Securities, Inc., as Financial Institutions, received $12,989,765.49 and
$14,212,179.62, respectively, of the $27,201,945.11 paid in that year by Mentor
Distributors to Financial Institutions.
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
21
<PAGE>
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 Financial Institutions for services provided in
connection with sales of Class A Shares and the maintenance of shareholder
accounts (or, in the case of certain Financial Institutions which are banking
institutions, for certain administrative and shareholder services), Mentor
Distributors, Mentor Advisors, or their affiliates may make periodic payments
(from any amounts received under the Plans or from their other resources) to
any qualifying Financial Institution based on the average net asset value of
Class A Shares for which the Financial Institution is designated as the
financial institution of record. Such payments may be made at an annual rate of
between 0.15% and 0.40% in the case of the Money Market Fund and the U.S.
Government Money Market Fund, between 0.15% and 0.33% in the case of the
Tax-Exempt Fund and the California Tax-Exempt Fund, and between 0.15% and 0.38%
in the case of the New York Tax-Exempt Fund. These payments may be suspended or
modified 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. Financial Institutions receiving such
payments include Wheat, First Securities, Inc. and EVEREN. 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.
ORGANIZATION
The Trust is an open-end investment company established under the laws of
The Commonwealth 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. Additionally, approval of the Management
Contract is a matter to be determined separately by each Fund. Shares have
noncumulative voting rights. Although a Fund is not required to hold annual
meetings of its shareholders, shareholders have the
22
<PAGE>
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 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. Portfolio 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, 127 West 10th Street, Kansas City,
Missouri 64105, 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.
PERFORMANCE INFORMATION
Based on the seven-day period ended July 31, 1998, Cash Resource Money
Market Fund's yield was 4.80% and its effective yield was 4.92%. Based on the
seven-day period
23
<PAGE>
ended July 31, 1998, Cash Resource U.S. Government Money Market Fund's yield
was 5.26% and its effective yield was 5.42%. See below for information on how
these Funds' yields and effective yields are calculated.
Based on the seven-day period ended July 31, 1998, Cash Resource
Tax-Exempt Money Market Fund's tax-exempt yield was 2.70%, and its tax-exempt
effective yield was 2.73%. A shareholder in a 31.00% federal tax bracket would
have to earn 3.91% from a taxable investment to produce an after-tax yield
equal to the Fund's tax-exempt yield of 2.70% and an effective yield of 3.96%
from a taxable investment to produce an after-tax yield equal to the Fund's
tax-exempt effective yield of 2.73%. See below for information on how the
Fund's tax-exempt yield and tax-exempt effective yield are calculated.
Based on the seven-day period ended July 31, 1998, Cash Resource
California Tax-Exempt Money Market Fund's tax-exempt yield was 2.21%, and its
tax-exempt effective yield was 2.24%. A shareholder in a 31.00% federal tax
bracket would have to earn 3.20% from a taxable investment to produce an
after-tax yield equal to the Fund's tax-exempt yield of 2.21% and an effective
yield of 3.25% from a taxable investment to produce an after-tax yield equal to
the Fund's tax-exempt effective yield of 2.24%. See below for information on
how the Fund's tax-exempt yield and tax-exempt effective yield are calculated.
Based on the seven-day period ended July 31, 1998, Cash Resource New York
Tax-Exempt Money Market Fund's tax-exempt yield was 2.42% and its tax-exempt
effective yield was 2.45% A shareholder in a 31.00% federal tax bracket would
have to earn 3.51% from a taxable investment to produce an after-tax yield
equal to the Fund's tax-exempt yield of 2.42% and an effective yield of 3.55%
from a taxable investment to produce an after-tax yield equal to the Fund's
tax-exempt effective yield of 2.45%. See below for information on how the
Fund's tax-exempt yield and tax-exempt effective yield are calculated.
The yield of each class of shares of a Fund is computed by determining the
percentage net change, excluding capital changes, in the value of an investment
in one share of that class over the base period, and multiplying the net change
by 365/7 (or approximately 52 weeks). The effective yield of a class of shares
of a Fund 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.
In the case of Cash Resource 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, the tax-equivalent yield of a class of shares of
a Fund during the base period may be presented for shareholders in one or more
stated tax brackets. Tax-equivalent yield is calculated by adjusting the
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 tax-exempt yield. Tax-equivalent yield will differ for
shareholders in other tax brackets.
24
<PAGE>
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES FOR THE CASH RESOURCE
TAX-EXEMPT MONEY MARKET FUND
The table below shows the effect of the tax status of Tax-Exempt
Securities on the effective yield received by their individual holders under
the federal income tax laws in effect for 1998. It gives the approximate yield
a taxable security must earn at various income levels to produce after-tax
yields equivalent to those of Tax-Exempt Securities yielding from 4.0% to 8.0%.
<TABLE>
<CAPTION>
FEDERAL FEDERAL EFFECTIVE
TAXABLE TAX FEDERAL
INCOME BRACKET RATE
- ------------------ ----------- ----------
<S> <C> <C>
MARRIED
$ 0-42,350 15.00% 15.00%
$ 42,351-102,300 28.00% 28.00%
$102,301-124,500 31.00% 31.00%
$124,501-155,950 31.00% 31.93%
$155,951-278,450 36.00% 37.08%
OVER $278,450 39.60% 40.79%
SINGLE
$ 0-25,350 15.00% 15.00%
$ 25,351-61,400 28.00% 28.00%
$ 61,401-124,500 31.00% 31.00%
$124,501-128,500 31.00% 31.93%
$128,101-278,450 36.00% 37.08%
OVER $278,450 39.60% 40.79%
<CAPTION>
TAX-FREE YIELD
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
FEDERAL ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TAXABLE
INCOME TAXABLE EQUIVALENT YIELD
- ------------------ --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARRIED
$ 0-42,350 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41%
$ 42,351-102,300 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42% 11.11%
$102,301-124,500 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87% 11.59%
$124,501-155,950 5.88% 6.61% 7.35% 8.08% 8.81% 9.55% 10.28% 11.02% 11.75%
$155,951-278,450 6.36% 7.15% 7.95% 8.74% 9.54% 10.33% 11.13% 11.92% 12.71%
OVER $278,450 6.76% 7.60% 8.44% 9.29% 10.13% 10.98% 11.82% 12.67% 13.51%
SINGLE
$ 0-25,350 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41%
$ 25,351-61,400 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42% 11.11%
$ 61,401-124,500 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87% 11.59%
$124,501-128,500 5.88% 6.61% 7.35% 8.08% 8.81% 9.55% 10.28% 11.02% 11.75%
$128,101-278,450 6.36% 7.15% 7.95% 8.74% 9.54% 10.33% 11.13% 11.92% 12.71%
OVER $278,450 6.76% 7.60% 8.44% 9.29% 10.13% 10.98% 11.82% 12.67% 13.51%
</TABLE>
- -------------
Note: This table reflects the following:
1 Taxable income, as reflected in the above table, equals Federal adjusted
gross income (AGI), less personal exemptions and itemized deductions.
However, certain itemized deductions are reduced by the lesser of (i) three
percent of the amount of the taxpayer's AGI over $124,500, or (ii) 80
percent of the amount of such itemized deductions otherwise allowable. The
effect of the three percent phase out on all itemized deductions and not
just those deductions subject to the phase out is reflected above in the
Federal tax rates through the use of higher effective Federal tax rates. In
addition, the effect of the 80 percent cap on overall percent cap on
overall itemized deductions is not reflected on this table. Federal income
tax rules also provide that personal exemptions are phased out at a rate of
two percent for each $2,500 (or fraction thereof) of AGI in excess of
$186,800 for married taxpayers filing a joint tax return and $124,500 for
single taxpayers. The effect of the phase out of personal exemptions is not
reflected in the above table.
2 Interest earned on municipal obligations may be subject to the federal
alternative minimum tax. This provision is not incorporated into the table.
3 The taxable equivalent yield table does not incorporate the effect of
graduated rate structures in determining yields. Instead, the tax rates
used are the highest marginal tax rates applicable to the income levels
indicated within each bracket.
4 Interest earned on all municipal obligations may cause certain investors to
be subject to tax on a portion of their Social Security and/or railroad
retirement benefits. The effect of this provision is not included in the
above table.
Of course, there is no assurance that the Tax-Exempt Money Market Fund
will achieve any specific tax-exempt yield. While it is expected that the
Tax-Exempt Money Market Fund will invest principally in obligations which pay
interest exempt from federal income tax, other income received by the
Tax-Exempt Money Market Fund may be taxable. The table does not take into
account any state or local taxes payable on Tax-Exempt Money Market Fund
distributions.
25
<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 1998. 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 4.0% to 8.0%.
<TABLE>
<CAPTION>
CALIFORNIA
FEDERAL FEDERAL EFFECTIVE STATE COMBINED
TAXABLE TAX FEDERAL TAX EFFECTIVE
INCOME BRACKET RATE RATE RATE
- ------------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
MARRIED
$ 0-10,262 15.00% 15.00% 1.00% 15.85%
$ 10,263-24,322 15.00% 15.00% 2.00% 16.70%
$ 24,323-38,386 15.00% 15.00% 4.00% 18.40%
$ 38,387-42,350 15.00% 15.00% 6.00% 20.10%
$ 42,351-53,288 28.00% 28.00% 6.00% 32.32%
$ 53,289-67,346 28.00% 28.00% 8.00% 33.76%
$ 67,347-102,300 28.00% 28.00% 9.30% 34.70%
$102,301-124,500 31.00% 31.00% 9.30% 37.42%
$124,501-155,950 31.00% 31.93% 9.30% 38.26%
$155,951-278,450 36.00% 37.08% 9.30% 42.93%
OVER $278,450 39.60% 40.79% 9.30% 46.29%
SINGLE
$ 0-5,131 15.00% 15.00% 1.00% 15.85%
$ 5,132-12,161 15.00% 15.00% 2.00% 16.70%
$ 12,162-19,193 15.00% 15.00% 4.00% 18.40%
$ 19,194-25,350 15.00% 15.00% 6.00% 20.10%
$ 25,351-26,644 28.00% 28.00% 6.00% 32.32%
$ 26,645-33,673 28.00% 28.00% 8.00% 33.76%
$ 33,674-61,400 28.00% 28.00% 9.30% 34.70%
$ 61,401-124,500 31.00% 31.00% 9.30% 37.42%
$124,501-128,100 31.00% 31.93% 9.30% 38.26%
$128,101-278,450 36.00% 37.08% 9.30% 42.93%
OVER $278,450 39.60% 40.79% 9.30% 46.29%
<CAPTION>
TAX-FREE YIELD
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
FEDERAL ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TAXABLE
INCOME TAXABLE EQUIVALENT YIELD
- ------------------- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARRIED
$ 0-10,262 4.75% 5.35% 5.94% 6.54% 7.13% 7.72% 8.32% 8.91% 9.51%
$ 10,263-24,322 4.80% 5.40% 6.00% 6.60% 7.20% 7.80% 8.40% 9.00% 9.60%
$ 24,323-38,386 4.90% 5.51% 6.13% 6.74% 7.35% 7.97% 8.58% 9.19% 9.80%
$ 38,387-42,350 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39% 10.01%
$ 42,351-53,288 5.91% 6.65% 7.39% 8.13% 8.87% 9.60% 10.34% 11.08% 11.82%
$ 53,289-67,346 6.04% 6.79% 7.55% 8.30% 9.06% 9.81% 10.57% 11.32% 12.08%
$ 67,347-102,300 6.13% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72% 11.48% 12.25%
$102,301-124,500 6.39% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19% 11.98% 12.78%
$124,501-155,950 6.48% 7.29% 8.10% 8.91% 9.72% 10.53% 11.34% 12.15% 12.96%
$155,951-278,450 7.01% 7.89% 8.76% 9.64% 10.51% 11.39% 12.27% 13.14% 14.02%
OVER $278,450 7.45% 8.38% 9.31% 10.24% 11.17% 12.10% 13.03% 13.97% 14.90%
SINGLE
$ 0-5,131 4.75% 5.35% 5.94% 6.54% 7.13% 7.72% 8.32% 8.91% 9.51%
$ 5,132-12,161 4.80% 5.40% 6.00% 6.60% 7.20% 7.80% 8.40% 9.00% 9.60%
$ 12,162-19,193 4.90% 5.51% 6.13% 6.74% 7.35% 7.97% 8.58% 9.19% 9.80%
$ 19,194-25,350 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76% 9.39% 10.01%
$ 25,351-26,644 5.91% 6.65% 7.39% 8.13% 8.87% 9.60% 10.34% 11.08% 11.82%
$ 26,645-33,673 6.04% 6.79% 7.55% 8.30% 9.06% 9.81% 10.57% 11.32% 12.08%
$ 33,674-61,400 6.13% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72% 11.48% 12.25%
$ 61,401-124,500 6.39% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19% 11.98% 12.78%
$124,501-128,100 6.48% 7.29% 8.10% 8.91% 9.72% 10.53% 11.34% 12.15% 12.96%
$128,101-278,450 7.01% 7.89% 8.76% 9.64% 10.51% 11.39% 12.27% 13.14% 14.02%
OVER $278,450 7.45% 8.38% 9.31% 10.24% 11.17% 12.10% 13.03% 13.97% 14.90%
</TABLE>
26
<PAGE>
- ---------
Note: This table reflects the following:
1 Taxable income, as reflected in the above table, equals Federal adjusted
gross income (AGI), less personal exemptions and itemized deductions
(including the deduction for state income tax). However, certain itemized
deductions are reduced by the lesser of (i) three percent of the amount of
the taxpayer's AGI over $124,500, or (ii) 80 percent of the amount of such
itemized deductions otherwise allowable. The effect of the three percent
phase out on all itemized deductions and not just those deductions subject
to the phase out is reflected above in the Federal tax rates through the use
of higher effective Federal tax rates. In addition, the effect of the 80
percent cap on overall itemized deductions is not reflected on this table.
Federal income tax rules also provide that personal exemptions are phased
out at a rate of two percent for each $2,500 (or fraction thereof) of AGI in
excess of $186,800 for married taxpayers filing a joint tax return and
$124,500 for single taxpayers. The effect of the phase out of personal
exemptions is not reflected in the table above.
2 Interest earned on municipal obligations may be subject to the federal
alternative minimum tax. The effect of this provision is not incorporated
into the table.
3 The taxable equivalent yield table does not incorporate the effect of
graduated rate structures in determining yields. Instead, the tax rates used
are the highest rates applicable to the income levels indicated within each
bracket.
4 Interest earned on all municipal obligations may cause certain investors to
be subject to tax on a portion of their Social Security and/or railroad
retirement benefits. The effect of this provision is not included in the
above table.
27
<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.
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 1998, 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 1998. 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 4.0% to
8.0%.
28
<PAGE>
TABLE 1
<TABLE>
<CAPTION>
EFFECTIVE NEW YORK
FEDERAL FEDERAL FEDERAL STATE COMBINED
TAXABLE TAX TAX TAX EFFECTIVE
INCOME BRACKET BRACKET RATE RATE
- ------------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C>
MARRIED
$ 0-16,000 15.00% 15.00% 4.00% 18.40%
$ 16,001-22,000 15.00% 15.00% 4.50% 18.83%
$ 22,001-26,000 15.00% 15.00% 5.25% 19.46%
$ 26,001-40,000 15.00% 15.00% 5.90% 20.02%
$ 40,001-42,350 15.00% 15.00% 6.85% 20.82%
$ 42,351-102,300 28.00% 28.00% 6.85% 32.93%
$ 102,301-124,500 31.00% 31.00% 6.85% 35.73%
$ 124,501-155,900 31.00% 31.93% 6.85% 36.59%
$155,951-$278,450 36.00% 37.08% 6.85% 41.39%
OVER $278,450 39.60% 40.79% 6.85% 44.84%
SINGLE
$ 0-8,000 15.00% 15.00% 4.00% 18.40%
$ 8,001-11,000 15.00% 15.00% 4.50% 18.83%
$ 11,001-13,000 15.00% 15.00% 5.25% 19.46%
$ 13,001-20,000 15.00% 15.00% 5.90% 20.02%
$ 20,001-25,350 15.00% 15.00% 6.85% 20.82%
$ 25,351-61,400 28.00% 28.00% 6.85% 32.93%
$ 61,401-124,500 31.00% 31.00% 6.85% 35.73%
$ 124,501-128,100 31.00% 31.93% 6.85% 36.59%
$128,101-$278,450 36.00% 37.08% 6.85% 41.39%
OVER $278,450 39.60% 40.79% 6.85% 44.84%
<CAPTION>
TAX-FREE YIELD
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
FEDERAL ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TAXABLE
INCOME TAXABLE EQUIVALENT YIELD
- ------------------- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARRIED
$ 0-16,000 4.90% 5.51% 6.13% 6.74% 7.35% 7.97% 8.58% 9.19% 9.80%
$ 16,001-22,000 4.93% 5.54% 6.16% 6.78% 7.39% 8.01% 8.62% 9.24% 9.86%
$ 22,001-26,000 4.97% 5.59% 6.21% 6.83% 7.45% 8.07% 8.69% 9.31% 9.93%
$ 26,001-40,000 5.00% 5.63% 6.25% 6.88% 7.50% 8.13% 8.75% 9.38% 10.00%
$ 40,001-42,350 5.05% 5.68% 6.31% 6.95% 7.58% 8.21% 8.84% 9.47% 10.10%
$ 42,351-102,300 5.96% 6.71% 7.46% 8.20% 8.95% 9.69% 10.44% 11.18% 11.93%
$ 102,301-124,500 6.22% 7.00% 7.78% 8.56% 9.34% 10.11% 10.89% 11.67% 12.45%
$ 124,501-155,900 6.31% 7.10% 7.89% 8.67% 9.46% 10.25% 11.04% 11.83% 12.62%
$155,951-$278,450 6.82% 7.68% 8.53% 9.38% 10.24% 11.09% 11.94% 12.80% 13.65%
OVER $278,450 7.25% 8.16% 9.07% 9.97% 10.88% 11.78% 12.69% 13.60% 14.50%
SINGLE
$ 0-8,000 4.90% 5.51% 6.13% 6.74% 7.35% 7.97% 8.58% 9.19% 9.80%
$ 8,001-11,000 4.93% 5.54% 6.16% 6.78% 7.39% 8.01% 8.62% 9.24% 9.86%
$ 11,001-13,000 4.97% 5.59% 6.21% 6.83% 7.45% 8.07% 8.69% 9.31% 9.93%
$ 13,001-20,000 5.00% 5.63% 6.25% 6.88% 7.50% 8.13% 8.75% 9.38% 10.00%
$ 20,001-25,350 5.05% 5.68% 6.31% 6.95% 7.58% 8.21% 8.84% 9.47% 10.10%
$ 25,351-61,400 5.96% 6.71% 7.46% 8.20% 8.95% 9.69% 10.44% 11.18% 11.93%
$ 61,401-124,500 6.22% 7.00% 7.78% 8.56% 9.34% 10.11% 10.89% 11.67% 12.45%
$ 124,501-128,100 6.31% 7.10% 7.89% 8.67% 9.46% 10.25% 11.04% 11.83% 12.62%
$128,101-$278,450 6.82% 7.68% 8.53% 9.38% 10.24% 11.09% 11.94% 12.80% 13.65%
OVER $278,450 7.25% 8.16% 9.07% 9.97% 10.88% 11.78% 12.69% 13.60% 14.50%
</TABLE>
- ---------
Note: This table reflects the following:
1 Taxable income, as reflected in the above table, equals Federal adjusted
gross income (AGI), less personal exemptions and itemized deductions
(including the deduction for state income tax). However, certain itemized
deductions are reduced by the lesser of (i) three percent of the amount of
the taxpayer's AGI over $124,500, or (ii) 80 percent of the amount of such
itemized deductions otherwise allowable. The effect of the three percent
phase out on all itemized deductions and not just those deductions subject
to the phase out is reflected above in the Federal tax rates through the use
of higher effective Federal tax rates. In addition, the effect of the 80
percent cap on overall itemized deductions is not reflected on this table.
Federal income tax rules also provide that personal exemptions are phased
out at a rate of two effective Federal tax rates. Federal income tax rules
also provide that personal exemptions are phased out at a rate of two
percent for each $2,500 (or fraction thereof) of AGI in excess of $186,800
for married taxpayers filing a joint tax return and $124,500 for single
taxpayers. The effect of the phase out of personal exemptions is not
reflected in the above table.
29
<PAGE>
2 Interest earned on municipal obligations may be subject to the federal
alternative minimum tax. The effect of this provision is not incorporated
into the table.
3 The taxable equivalent yield table does not incorporate the effect of
graduated rate structures in determining yields. Instead, the tax rates used
are the highest rates applicable to the income levels indicated within each
bracket.
4 Interest earned on all municipal obligations may cause certain investors to
be subject to tax on a portion of their Social Security and/or railroad
retirement benefits. The effect of this provision is not included in the
above table.
30
<PAGE>
TABLE 2
<TABLE>
<CAPTION>
NEW NEW NEW
EFFECTIVE YORK YORK YORK
FEDERAL FEDERAL FEDERAL STATE STATE CITY COMBINED
TAXABLE TAX TAX TAX CITY SURCHARGE EFFECTIVE
INCOME BRACKET BRACKET RATE RATE RATE RATE
- ------------------- ----------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
MARRIED
$ 0-$14,400 15.00% 15.00% 4.00% 2.70% 0.00% 20.70%
$ 14,401-16,000 15.00% 15.00% 4.00% 2.70% 0.51% 21.13%
$ 16,001-21,600 15.00% 15.00% 4.50% 2.70% 0.51% 21.55%
$ 21,601-22,000 15.00% 15.00% 4.50% 3.30% 0.51% 22.06%
$ 22,001-$26,000 15.00% 15.00% 5.25% 3.30% 0.51% 22.70%
$ 26,001-$27,000 15.00% 15.00% 5.90% 3.30% 0.51% 23.25%
$ 27,001-$40,000 15.00% 15.00% 6.85% 3.30% 0.55% 24.10%
$ 40,001-$42,350 15.00% 15.00% 6.85% 3.30% 0.55% 24.10%
$ 42,351-45,000 28.00% 28.00% 6.85% 3.30% 0.55% 35.70%
$ 45,001-90,000 28.00% 28.00% 6.85% 3.35% 0.51% 35.71%
$ 90,001-102,300 28.00% 28.00% 6.85% 3.40% 0.51% 35.75%
$ 102,301-108000 31.00% 31.00% 6.85% 3.40% 0.51% 38.42%
$ 108,001-124,500 31.00% 31.00% 6.85% 3.40% 0.51% 38.42%
$ 124,501-155,900 31.00% 31.93% 6.85% 3.40% 0.51% 39.25%
$155,951-$278,453 6.00% 37.08% 6.85% 3.40% 0.51% 43.85%
Over $278,450 39.60% 40.79% 6.85% 3.40% 0.51% 47.16%
SINGLE
$ 0-8,000 15.00% 15.00% 4.00% 2.70% 0.00% 20.70%
$ 8,001-$8,400 15.00% 15.00% 4.50% 2.70% 0.00% 21.55%
$ 8,401-$11,000 15.00% 15.00% 4.50% 2.70% 0.51% 21.55%
$ 11,001-12,000 15.00% 15.00% 5.25% 2.70% 0.51% 22.19%
$ 12,001-13,000 15.00% 15.00% 5.25% 3.30% 0.51% 22.70%
$ 13,001-$15,000 15.00% 15.00% 5.90% 3.30% 0.51% 23.29%
$ 15,001-$20,000 15.00% 15.00% 5.90% 3.30% 0.55% 23.29%
$ 20,001-$25,000 15.00% 15.00% 6.85% 3.30% 0.55% 24.06%
$ 25,001-25,350 15.00% 15.00% 6.85% 3.35% 0.51% 24.10%
$ 25,351-50,000 28.00% 28.00% 6.85% 3.35% 0.51% 35.71%
$ 50,001-61,400 28.00% 28.00% 6.85% 3.40% 0.51% 35.75%
$ 61,401-124,500 31.00% 31.00% 6.85% 3.40% 0.51% 38.42%
$ 124,501-128,100 31.00% 31.93% 6.85% 3.40% 0.51% 39.25%
$ 128,101-$278,45 36.00% 37.08% 6.85% 3.40% 0.51% 43.85%
OVER $278,450 39.60% 40.79% 6.85% 3.40% 0.51% 46.86%
<CAPTION>
FEDERAL TAX-FREE YIELD
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TAXABLE
INCOME TAXABLE EQUIVALENT YIELD
- ------------------- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARRIED
$ 0-$14,400 5.04% 5.67% 6.30% 6.94% 7.57% 8.20% 8.83% 9.46% 10.09%
$ 14,401-16,000 5.07% 5.71% 6.34% 6.97% 7.61% 8.24% 8.88% 9.51% 10.14%
$ 16,001-21,600 5.10% 5.74% 6.37% 7.01% 7.65% 8.29% 8.92% 9.56% 10.20%
$ 21,601-22,000 5.13% 5.77% 6.42% 7.06% 7.70% 8.34% 8.98% 9.62% 10.26%
$ 22,001-$26,000 5.17% 5.82% 6.47% 7.12% 7.76% 8.41% 9.06% 9.70% 10.35%
$ 26,001-$27,000 5.21% 5.86% 6.51% 7.17% 7.82% 8.47% 9.12% 9.77% 10.42%
$ 27,001-$40,000 5.27% 5.93% 6.59% 7.25% 7.90% 8.56% 9.22% 9.88% 10.54%
$ 40,001-$42,350 5.27% 5.93% 6.59% 7.25% 7.90% 8.56% 9.22% 9.88% 10.54%
$ 42,351-45,000 6.22% 7.00% 7.78% 8.55% 9.33% 10.11% 10.89% 11.66% 12.44%
$ 45,001-90,000 6.22% 7.00% 7.78% 8.56% 9.33% 10.11% 10.89% 11.67% 12.44%
$ 90,001-102,300 6.23% 7.00% 7.78% 8.56% 9.34% 10.12% 10.89% 11.67% 12.45%
$ 102,301-108000 6.50% 7.31% 8.12% 8.93% 9.74% 10.56% 11.37% 12.18% 12.99%
$ 108,001-124,500 6.50% 7.31% 8.12% 8.93% 9.74% 10.56% 11.37% 12.18% 12.99%
$ 124,501-155,900 6.58% 7.41% 8.23% 9.05% 9.88% 10.70% 11.52% 12.35% 13.17%
$155,951-$278,453 7.12% 8.01% 8.90% 9.80% 10.69% 11.58% 12.47% 13.36% 14.25%
Over $278,450 7.57% 8.52% 9.46% 10.41% 11.35% 12.30% 13.25% 14.19% 15.14%
SINGLE
$ 0-8,000 5.04% 5.67% 6.30% 6.94% 7.57% 8.20% 8.83% 9.46% 10.09%
$ 8,001-$8,400 5.10% 5.74% 6.37% 7.01% 7.65% 8.29% 8.92% 9.56% 10.20%
$ 8,401-$11,000 5.10% 5.74% 6.37% 7.01% 7.65% 8.29% 8.92% 9.56% 10.20%
$ 11,001-12,000 5.14% 5.78% 6.43% 7.07% 7.71% 8.35% 9.00% 9.64% 10.28%
$ 12,001-13,000 5.17% 5.82% 6.47% 7.12% 7.76% 8.41% 9.06% 9.70% 10.35%
$ 13,001-$15,000 5.21% 5.87% 6.52% 7.17% 7.82% 8.47% 9.12% 9.78% 10.43%
$ 15,001-$20,000 5.21% 5.87% 6.52% 7.17% 7.82% 8.47% 9.12% 9.78% 10.43%
$ 20,001-$25,000 5.27% 5.93% 6.58% 7.24% 7.90% 8.56% 9.22% 9.88% 10.53%
$ 25,001-25,350 5.27% 5.93% 6.59% 7.25% 7.91% 8.56% 9.22% 9.88% 10.54%
$ 25,351-50,000 6.22% 7.00% 7.78% 8.56% 9.33% 10.11% 10.89% 11.67% 12.44%
$ 50,001-61,400 6.23% 7.00% 7.78% 8.56% 9.34% 10.12% 10.89% 11.67% 12.45%
$ 61,401-124,500 6.50% 7.31% 8.12% 8.93% 9.74% 10.56% 11.37% 12.18% 12.99%
$ 124,501-128,100 6.58% 7.41% 8.23% 9.05% 9.88% 10.70% 11.52% 12.35% 13.17%
$ 128,101-$278,45 7.12% 8.01% 8.90% 9.80% 10.69% 11.58% 12.47% 13.36% 14.25%
OVER $278,450 7.53% 8.47% 9.41% 10.35% 11.29% 12.23% 13.17% 14.11% 15.05%
</TABLE>
31
<PAGE>
- ---------
Note: This table reflects the following:
1 Taxable income, as reflected in the above table, equals Federal adjusted
gross income (AGI), less personal exemptions and itemized deductions
(including the deduction for state income tax). However, certain itemized
deductions are reduced by the lesser of (i) three percent of the amount of
the taxpayer's AGI over $124,500, or (ii) 80 percent of the amount of such
itemized deductions otherwise allowable. The effect of the three percent
phase out on all itemized deductions and not just those deductions subject
to the phase out is reflected above in the Federal tax rates through the use
of higher effective Federal tax rates. In addition, the effect of the 80
percent cap on overall itemized deductions is not reflected on this table.
Federal income tax rules also provide that personal exemptions are phased
out at a rate of two effective Federal tax rates. Federal income tax rules
also provide that personal exemptions are phased out at a rate of two
percent for each $2,500 (or fraction thereof) of AGI in excess of $186,800
for married taxpayers filing a joint tax return and $124,500 for single
taxpayers. The effect of the phase out of personal exemptions is not
reflected in the above table.
2 Interest earned on municipal obligations may be subject to the federal
alternative minimum tax. The effect of this provision is not incorporated
into the table.
3 The taxable equivalent yield table does not incorporate the effect of
graduated rate structures in determining yields. Instead, the tax rates used
are the highest rates applicable to the income levels indicated within each
bracket.
4 Interest earned on all municipal obligations may cause certain investors to
be subject to tax on a portion of their Social Security and/or railroad
retirement benefits. The effect of this provision is not included in the
above table.
32
<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.
EXPENSE LIMITATIONS. From time to time, the Adviser 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.
COMPARATIVE INFORMATION. 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
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
33
<PAGE>
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
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.
34
<PAGE>
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 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,
35
<PAGE>
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 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."
INVESTMENT PROFESSIONALS OF MENTOR INVESTMENT ADVISORS, LLC
R. PRESTON NUTTALL, CFA
Mr. Nuttall has more than thirty years of investment management
experience. Prior to his involvement with the Mentor organization, he led
short-term fixed-income management for fifteen years at Capitoline Investment
Services, Inc. He has his undergraduate degree in economics from the University
of Richmond and his graduate degree in finance from the Wharton School at the
University of Pennsylvania.
36
<PAGE>
HUBERT R. WHITE III
Mr. White has thirteen years of investment management experience. Prior to
joining the Mentor organization, he served for five years as portfolio manager
with Capitoline Investment Services. He has his undergraduate degree in
business from the University of Richmond.
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.
FINANCIAL STATEMENTS
The Independent Auditor's Report, financial highlights, and financial
statements in respect of the Funds included in the Annual Report for the fiscal
year ended July 31, 1998 of the Trust to Shareholders on Form N-30D under the
Investment Company Act of 1940, as amended, filed electronically on October 9,
1998 (File No. 811-07862; Accession No. 916641-98-001088), are incorporated by
reference into this Statement of Additional Information.
37
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Statements of Assets and Liabilities - July 31, 1998
- Incorporated by Reference in Part B.
Statements of Operations - Year Ended July 31, 1998
Incorporated by Reference in Part B.
Statements of Changes in Net Assets -- Years or
Periods Ended July 31, 1998 and 1997 -Incorporated by
Reference in Part B.
Financial Highlights - Included in Part A. Notes to
Financial Statements - Incorporated by Reference in
Part B.
Independent Auditors Report - Incorporated by
Reference in Part B.
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) Form of Management Contract dated February 1,
1998(9)
(6) Form of Distribution Agreement dated February 1,
1998(9)
(7) Inapplicable
(8) (A) Custody Agreement dated December 20, 1993(4)
(B) Form of Administration Agreement dated
March 31, 1998 (9)
(9) (A) Agency Agreement dated December 20, 1993(4)
(B) Draft Processing Agency Agreement dated December 20,
1993(4)
(C) Form of Shareholder Servicing Plan (8)
(10) Opinion and Consent of Ropes & Gray(2)
(11) Consent of Independent Auditors (9)
(12) Inapplicable
(13) Initial Capital Agreement dated December 17, 1993(4)
(14) Inapplicable
(15) Plan of Distribution (8)
-1-
<PAGE>
(16) Schedule of Computation of Performance(5)
(27) Financial Data Schedules(9)
(A) Cash Resource Money Market Fund
(B) Cash Resource U.S. Government Money Market Fund
(C) Cash Resource Tax-Exempt Money Market Fund
(D) Cash Resource California Tax-Exempt Money Market
Fund
(E) Cash Resource New York Tax-Exempt Money Market Fund
(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) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, filed on August 12, 1996 (File No. 33- 65818).
(7) Incorporated by reference to Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended filed on September 30, 1997 (File No.
33-65818).
(8) Incorporated by reference to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended filed on January 30, 1998 (File No.
33-65818).
(9) Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
-2-
<PAGE>
Item 26. Number of Record Holders of Securities
The following table shows the number of holders of record of shares of
beneficial interest of the Funds as of September 23, 1998. There were no Class B
Shares of any Fund outstanding as of that date.
Number of Record
Series Holders
------ ----------------
Cash Resource Money Market Fund 372,229
Cash Resource U.S. Government
Money Market Fund 309,450
Cash Resource Tax-Exempt Money
Market Fund 27,216
Cash Resource California Tax-Exempt
Money Market Fund 3,294
Cash Resource New York Tax-Exempt
Money Market Fund 444
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
Mentor Investment Advisors, LLC ("Mentor Advisors"), located at 901
East Byrd Street, Richmond, Virginia 23219, serves as the Registrant's
investment adviser.
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.
-3-
<PAGE>
(a) The following is additional information with respect to the
directors and officers of Mentor Investment Advisors, LLC:
Business, Profession,
Vocation or Employment
Position with during the past
Name Investment Adviser two fiscal years
John G. Davenport Managing Director Managing Director,
Mentor Investment
Group, LLC.
R. Preston Nuttall Managing Director Managing Director,
Mentor Investment
Group, LLC.
Paul F. Costello Managing Director Managing Director,
Mentor Investment Group,
LLC; President, Mentor
Funds, Mentor
Institutional Trust,
Mentor Variable Investment
Portfolios, Cash
Resource Trust, Mentor
Income Fund, Inc.; and
America's Utility Fund,
Inc.; Senior Vice
President, Mentor
Distributors, LLC;
Managing Director, Mentor
Perpetual Advisors, LLC.
Theodore W. Price Managing Director Managing Director,
Mentor Investment
Group, LLC.
P. Michael Jones Managing Director Managing Director,
Mentor Investment
Group, LLC.
Peter J. Quinn, Jr. Managing Director Managing Director,
Mentor Investment
Group, LLC.
-4-
<PAGE>
Daniel J. Ludeman Chairman Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC.
Karen H. Wimbish Managing Director Managing Director,
Mentor Investment
Group, LLC.
Terry L. Perkins Treasurer Senior Vice President,
Mentor Investment Group,
LLC
Michael A. Wade Controller Vice President, Mentor
Investment Group, LLC.
Geoffrey B. Sale Secretary Associate Vice President,
Mentor Investment Group,
LLC; Clerk, Mentor
Institutional Trust;
Secretary, Cash Resource
Trust, Mentor Income Fund,
Inc., Mentor Funds and
Mentor Variable Investment
Portfolios.
* The address of Mentor Investment Group, Inc., Wheat, First Securities, Inc.,
Wheat First Butcher Singer, Inc., Mentor Funds, and Mentor Income Fund, Inc.,
is 901 East Byrd Street, Richmond, VA 23219.
Item 29. Principal Underwriters:
(a) Mentor Distributors, LLC, the Fund's principal underwriter, acts as
principal underwriter for the following investment companies:
The Mentor Funds
o Mentor Growth Portfolio
o Mentor Strategy Portolio
o Mentor Short-Duration Income Portfolio
o Mentor Balanced Portfolio
o Mentor Capital Growth Portfolio
o Mentor Perpetual Global Portfolio
o Mentor High Income Portfolio
o Mentor Income and Growth Portfolio
o Mentor Quality Income Portfolio
o Mentor Municipal Income Portfolio
o Mentor Institutional U.S. Government Money Market Portfolio
o Mentor Institutional Money Market Portfolio
Cash Resource Trust
o Cash Resource Money Market Fund
o Cash Resource U.S. Government Money Market Fund
o Cash Resource Tax-Exempt Money Market Fund
o Cash Resource California Tax-Exempt Money Market Fund
o Cash Resource New York Tax-Exempt Money Market Fund
Mentor Institutional Trust
o Mentor U.S. Government Cash Management Portfolio
o Mentor Fixed-Income Portfolio
o Mentor Perpetual International Portfolio
Mentor Investment Group
o Mentor Income Fund
o America's Utility Fund
Mentor Variable Investment Portfolios
o Mentor VIP Growth Portfolio
o Mentor VIP Strategy Portfolio
o Mentor VIP Balanced Portfolio
o Mentor VIP Capital Growth Portfolio
o Mentor VIP Perpetual International Portfolio
(b) Information concerning officers of Mentor Distributors, LLC:
-5-
Name And Principal Positions And Offices Positions And Offices
Business Address* With Underwriter With Registrant
- ----------------- -------------------- ---------------------
Lynn Mangum Chairman Inapplicable
D'Ray Moore President Inapplicable
Dennis Sheehan Executive Vice President Inapplicable
William J. Tomko Senior Vice President Inapplicable
Mark J. Rybarczyk Senior Vice President Inapplicable
Kevin J. Dell Vice President and Inapplicable
Secretary
Michael D. Burns Vice President Inapplicable
David Blackmore Vice President Inapplicable
Robert L. Tuch Assistant Secretary Inapplicable
Steven Ludwig Compliance Officer Inapplicable
*Principal Address for all Officers:
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-8000
(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, 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 Trustee or
Trustees and to assist in communications with other
shareholders as required by Section 16(c) of the Investment
Company Act of 1940.
(b) 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.
-6-
<PAGE>
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.
-7-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933, and has duly
caused this Amendment to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Richmond, and the Commonwealth of Virginia on
this 13th day of October, 1998.
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 13th day of October, 1998.
Signature Title
--------- -----
* Chairman; Trustee
- -----------------
Daniel J. Ludeman
* Trustee
- ------------------
Arnold H. Dreyfuss
* Trustee
- ----------------
Thomas F. Keller
* Trustee
- -----------------------
Louis W. Moelchert, Jr.
* Trustee
- ------------------
Troy A. Peery, Jr.
<PAGE>
Signature Title
--------- -----
/s/ Peter J. Quinn Trustee
- --------------------
Peter J. Quinn, Jr.
Trustee
- --------------------
Arch T. Allen, III
Trustee
- --------------------
Weston E. Edwards
Trustee
- --------------------
Jerry R. Barrentine
Trustee
- --------------------
J. Garnett Nelson
/s/ Paul F. Costello President; Principal Executive
- -------------------- Officer
Paul F. Costello
/s/ Terry L. Perkins Treasurer; Principal Financial
- -------------------- Officer; Principal Accounting Officer
Terry L. Perkins
*By:/s/ Paul F. Costello
--------------------
Paul F. Costello
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
(5) (A) Form of Management Contract
(6) Form of Distribution Agreement
(8) (B) Form of Administration Agreement
(11) Consent of Independent Auditors
(27) Financial Data Schedules
(A) Cash Resource Money Market
Fund
(B) Cash Resource U.S. Government
Money Market Fund
(C) Cash Resource Tax-Exempt
Money Market Fund
(D) Cash Resource New York Tax-
Exempt Money Market Fund
(E) Cash Resource California Tax-
Exempt Money Market Fund
Cash Resource Money Market Fund, Cash Resource U.S. Government Money
Market Fund, Cash Resource Tax-Exempt Money Market Fund, Cash Resource
California Tax-Exempt Money Market Fund, and Cash Resource New York Tax-
Exempt Money Market Fund
CASH RESOURCE TRUST
MANAGEMENT CONTRACT
This Management Contract dated as of February 1, 1998 between CASH
RESOURCE TRUST, a Massachusetts business trust (the "Trust"), and MENTOR
INVESTMENT ADVISORS, LLC, a Virginia limited liability company (the "Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an investment
program for each of the series of shares of beneficial interest of the Trust
(each, a "Fund"), will determine what investments shall be purchased, held,
sold, or exchanged by each of the Funds and what portion, if any, of the assets
of a Fund shall be held uninvested and shall, on behalf of each Fund, make
changes in the Fund's investments. In the performance of its duties, the Manager
will comply with the provisions of the Agreement and Declaration of Trust and
Bylaws of the Trust and each Fund's stated investment objectives, policies, and
restrictions, and will use its best efforts to safeguard and promote the welfare
of the Trust and to comply with other policies which the Trustees may from time
to time determine and shall exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Trust as provided in Section 1(d), will furnish all necessary investment and
related management facilities, including, salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Contract.
(c) The Manager, at its expense, shall place all orders for the purchase
and sale of portfolio investments for each Fund's account with brokers or
dealers selected by the
-1-
<PAGE>
Manager. In the selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain for each Fund the most
favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for a Fund the
most favorable price and execution available, the Manager, bearing in mind the
Trust's best interests at all times, shall consider 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 or dealer
involved, and the quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees of the Trust may
determine, the Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Contract or otherwise solely by reason of its
having caused a Fund to pay a broker or dealer that provides brokerage and
research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission that
another broker or dealer would have charged for effecting that transaction, if
the Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with respect to the Fund
and to other clients of the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases or sales of
portfolio investments for the Trust's account, neither the Manager nor any
officer, director, employee, or agent of the Manager shall act as a principal or
receive any commission other than as provided in Section 3.
(d) The Manager shall not be obligated to pay any expenses of or for the
Trust not expressly assumed by the Manager pursuant to this Section 1 other than
as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust. It is also understood that the Manager and any person controlled by
or under common control with the Manager have and may have advisory, management,
service, or other contracts with other organizations and persons, and may have
other interests and business.
-2-
<PAGE>
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust will pay to the Manager as compensation for the Manager's
services rendered, for the facilities furnished and for the expenses borne by
the Manager pursuant to Section 1, a fee in respect of each of the Funds,
computed and paid monthly at the following annual rates (based on the assets of
each Fund taken separately): 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.
Such average net asset value shall be determined by taking an average of
all of the determinations of such net asset value during such month at the close
of business on each business day during such month which this Contract is in
effect. Such fees shall be payable for each month within 7 days after the close
of such month and shall commence accruing as of the date of the initial issuance
of shares of the Trust to the public.
The fees payable by the Trust to the Manager pursuant to this Section 3
shall be reduced by any commissions, fees, brokerage, or similar payments
received by the Manager or any affiliated person of the Manager in connection
with the purchase and sale of portfolio investments of the Trust, less any
direct expenses approved by the Trustees incurred by the Manager or any
affiliate of the Manager in connection with obtaining such payments.
In the event that expenses of any Fund for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of that Fund are
qualified for offer or sale, the compensation due the Manager for such fiscal
year shall be reduced by the amount of such excess by a reduction or refund
thereof. In the event that the expenses of any Fund exceed any expense
limitation which the Manager may, by written notice to the Trust, voluntarily
declare to be effective subject to such terms and conditions as the Manager may
prescribe in such notice, the compensation due the Manager shall be reduced,
and, if necessary, the Manager shall assume expenses of that Fund, to the extent
required by such expense limitation.
If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
-3-
<PAGE>
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the affected Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of Cambridge or the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall remain
in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract as to one
or more Funds or as to the Trust as a whole by not more than sixty days nor less
than thirty days written notice delivered or mailed by registered mail, postage
prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of any Fund, and (ii) a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Contract, then this Contract shall
automatically terminate (as to the Trust as a whole or as to the affected Fund,
as the case may be) at the close of business on February 1, 1999 or the
expiration of one year from the effective date of the last such continuance,
whichever is later.
Action by the Trust under (a) above may be taken either (i) by vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the affected Fund.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority of
the outstanding shares" of a Fund means the affirmative vote, at a duly called
and held meeting of such shareholders, (a) of the holders of 67% or more of the
shares of the Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders
-4-
<PAGE>
of more than 50% of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders of more than
50% of the outstanding shares of the Fund entitled to vote at such meeting,
whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence on
the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
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 this
instrument are not binding upon any of the Trustees, officers, or shareholders
of the Trust but are binding only upon the assets and property of the Trust.
-5-
<PAGE>
IN WITNESS WHEREOF, CASH RESOURCE TRUST and MENTOR INVESTMENT ADVISORS,
LLC have each caused this instrument to be signed in duplicate in its behalf by
its President or Vice President thereunto duly authorized, all as of the day and
year first above written.
CASH RESOURCE TRUST
By:____________________________
MENTOR INVESTMENT ADVISORS, LLC
By:____________________________
-6-
CASH RESOURCE TRUST
DISTRIBUTION AGREEMENT
This Distribution Agreement is entered into as of February 1, 1998 by and
between CASH RESOURCE TRUST (the "Trust") and MENTOR DISTRIBUTIORS, LLC
("Distributor").
WHEREAS, the Trust and Distributor are desirous of entering into an
agreement providing for the distribution by Distributor of shares of beneficial
interest ("shares") of each of the series of the Trust (each, a "Portfolio");
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Trust hereby appoints Distributor as a distributor of shares of each
of the Portfolios, and Distributor hereby accepts such appointment, all as set
forth below:
1. Reservation of Right Not to Sell. The Trust reserves the right to
refuse at any time or times to sell any of its shares hereunder for any reason.
2. Payments to Distributor. In connection with the distribution of shares
of a Portfolio, Distributor will be entitled to receive: (a) payments pursuant
to any Distribution Plan from time to time in effect in respect of such
Portfolio or any particular class of shares of such Portfolio, as determined by
the Board of Trustees of the Trust, (b) any contingent deferred sales charges
applicable to the redemption of shares of such Portfolio or of any particular
class of shares of such Portfolio, determined in the manner set forth in the
then current Prospectus and Statement of Additional Information of such
Portfolio, and (c) subject to the provisions of Section 3 below, any front-end
sales charges applicable to the sale of shares of such Portfolio or of any
particular class of shares of such Portfolio, less any applicable dealer
discount.
3. Services to be provided by Distributor; Sales of Shares to Distributor
and Sales by Distributor. Distributor will provide general sales and
distribution services in respect of the shares of the Portfolios, including
without limitation reviewing advertising and sales literature and filing such
advertising and sales literature with appropriate regulatory authorities,
monitoring the Trust's continuing compliance with all applicable state
securities and Blue Sky laws, preparing reports to the officers and Trustees of
the Trust in respect of the distribution of the Portfolios' shares, performing
internal audit examinations related to the distribution function (the scope and
timing of such examinations to be as determined from time to time by the
officers of the Trust and Distributor), and providing such other services as are
customarily provided by the principal underwriter and distributor for an
open-end investment company,
-1-
<PAGE>
subject in each case to such instructions or guidelines as may be specified by
the Trustees or officers of the Trust from time to time.
Distributor will have the right, as principal, to purchase shares from a
Portfolio at their net asset value and to sell such shares to investment dealers
or the public against orders therefor (a) at the public offering price
(calculated as described below) less a discount determined by Distributor, which
discount shall not exceed the amount of the maximum sales charge permitted under
applicable law, or (b) at net asset value, in each case as provided in the
current Prospectus and Statement of Additional Information relating to such
shares. Upon receipt of an order in proper form (in accordance with the then
current prospectus) to purchase shares from an investment dealer with whom
Distributor has a sales contract, Distributor will promptly fill such order. The
public offering price of a class of shares of a Portfolio shall be the net asset
value of such shares then in effect, plus any applicable front-end sales charge
determined in the manner set forth in the then current Prospectus and Statement
of Additional Information relating to such shares or as permitted by the
Investment Company Act of 1940, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder. The net asset value
of the shares shall be determined in the manner provided in the Agreement and
Declaration of Trust of the Trust as then amended and when determined shall be
applicable to transactions as provided for in the then current Prospectus and
Statement of Additional Information relating to such shares.
Distributor will also have the right, as principal, to sell shares
otherwise subject to a front-end sales charge or a contingent deferred sales
charge not subject to such a sales charge to such persons as may be approved by
the Board of Trustees of the Trust, all such sales to comply with the provisions
of the Investment Company Act of 1940, as amended, and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder.
Upon receipt of registration instructions in proper form and payment for
shares, Distributor will transmit such instructions to the Trust or its agent
for registration of the shares purchased.
On every sale the Trust shall receive the applicable net asset value of
the shares. The net asset value of the shares of any class shall be determined
in the manner provided in the Agreement and Declaration of Trust of the Trust as
then amended and when determined shall be applicable to transactions as provided
for in the then current Prospectus and Statement of Additional Information
relating to such shares.
4. Sales of Shares by the Trust. The Trust reserves the right to issue
shares at any time directly to its shareholders as a stock dividend or stock
split and to sell shares to its shareholders or to other persons at not less
than net asset value.
5. Repurchase of Shares. Distributor will act as agent for the Trust in
connection with the repurchase of shares of the various Portfolios by the Trust
upon the terms and
-2-
<PAGE>
conditions set forth in a then current Prospectus and Statement of Additional
Information relating to such shares.
6. Basis of Purchases and Sales of Shares. Distributor will use its best
efforts to place shares sold by it on an investment basis. Distributor does not
agree to sell any specific number of shares. Shares will be sold by Distributor
only against orders therefor. Distributor will not purchase shares from anyone
other than the Trust except in accordance with Section 5, and will not take
"long" or "short" positions in shares contrary to the Agreement and Declaration
of Trust of the Trust.
7. Rules of NASD, etc. Distributor will conform to the Rules of the
National Association of Securities Dealers, Inc. and applicable securities laws
of any jurisdiction in which it sells, directly or indirectly, any shares.
Distributor also agrees to furnish to the Trust sufficient copies of any
agreements or plans it intends to use in connection with any sales of shares in
adequate time for the Trust to file and clear them with the proper authorities
before they are put in use, and not to use them until so filed and cleared.
8. Distributor Independent Contractor. Distributor shall be an independent
contractor, and neither Distributor nor any of its officers or employees, as
such, is or shall be an employee of the Trust. Distributor is responsible for
its own conduct and the employment, control, and conduct of its agents and
employees and for injury to such agents or employees or to others through its
agents or employees. Distributor assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all employer taxes
thereunder.
Distributor will maintain at its own expense insurance against public
liability in such an amount as the Board of Trustees of the Trust may from time
to time reasonably request.
9. Expenses. Distributor will pay all of its own expenses in performing
its obligations hereunder.
10. Indemnification. (a) The Trust agrees to indemnify, defend, and hold
harmless Distributor, its several partners and employees, and any person who
controls Distributor within the meaning of Section 15 of the Securities Act of
1933, as amended (the "Securities Act"), from and against any and all losses,
claims, demands, liabilities, and reasonable expenses (including the costs of
investigating or defending such losses, claims, demands, or liabilities and
reasonable counsel fees incurred in connection therewith) which Distributor, its
partners and employees, or any such controlling person may incur or to which
they or any of them may become subject under the Securities Act or under common
law or otherwise, arising out of or based upon any untrue statement, or alleged
untrue statement, of a material fact contained in any registration statement or
any prospectus of the Trust for the sale of shares of the Trust or arising out
of or based upon any omission or alleged omission to state a material fact
required to be stated in any such registration statement or prospectus or
necessary to make the statements in either thereof not misleading; provided,
however, that (i) the Trust shall be
-3-
<PAGE>
under no obligation to indemnify, defend, or hold harmless Distributor, its
partners or employees, or any such controlling person from or against any such
losses, claims, demands, liabilities, or expenses directly or indirectly arising
out of or based on any such untrue statement or alleged untrue statement or any
such omission or alleged omission made in reliance upon and in conformity with
information furnished to the Trust or its agents by Distributor or persons
acting for it or on its behalf, (ii) the Trust shall not be liable to
Distributor under this paragraph if any such losses, claims, demands,
liabilities, or expenses result from the fact that Distributor sold securities
of the Trust to any person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the then current prospectus of
the Trust relating to such securities; and (iii) the Trust shall not be liable
to Distributor under this paragraph in respect of any liability of Distributor
or any other person to the Trust or its shareholders by reason of the willful
misconduct, bad faith, or gross negligence of Distributor or any such other
person or the reckless disregard of Distributor of its obligations under this
Agreement.
(b) Distributor agrees to indemnify, defend, and hold harmless the Trust,
its several Trustees and employees, and any person who controls the Trust within
the meaning of Section 15 of the Securities Act, from and against any and all
losses, claims, demands, liabilities, and reasonable expenses (including the
costs of investigating or defending such losses, claims, demands, or liabilities
and reasonable counsel fees incurred in connection therewith) which the Trust,
its Trustees and employees, or any such controlling person may incur or to which
they or any of them may become subject under the Securities Act or under common
law or otherwise, (i) arising out of or based upon any untrue statement, or
alleged untrue statement, of a material fact contained in any registration
statement or any prospectus for the sale of shares of the Trust or arising out
of or based upon any omission or alleged omission to state a material fact
required to be stated in any such registration statement or prospectus or
necessary to make the statements in either thereof not misleading if any such
untrue statement or alleged untrue statement or any such omission or alleged
omission is made by the Trust in reliance upon and in conformity with
information furnished to the Trust or its agents by Distributor or persons
acting for it or on its behalf or (ii) arising out of or based upon any breach
or alleged breach by Distributor of any provision of this Agreement or the gross
negligence of Distributor or the reckless disregard by Distributor of its
duties.
11. Assignment Terminates this Agreement; Amendments of this Agreement.
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment. This Agreement may be amended only if
such amendment be approved either by action of the Board of Trustees of the
Trust or at a meeting of the shareholders of the affected Portfolio or
Portfolios by the affirmative vote of a majority of the outstanding shares of
such Portfolio or Portfolios, and by a majority of the Trustees of the Trust who
are not interested persons of the Trust or of Distributor by vote cast in person
at a meeting called for the purpose of voting on such approval.
-4-
<PAGE>
12. Effective Period and Termination of this Agreement. This Agreement
shall take effect upon the date first above written and shall remain in full
force and effect continuously (unless terminated automatically as set forth in
Section 11) until terminated in respect of any Portfolio or Portfolios:
(a) Either by the Trust or Distributor by not more than sixty (60)
days nor less than ten (10) days written notice delivered or mailed by
registered mail, postage prepaid, to the other party; or
(b) If the continuance of this Agreement after the date two years
from the date of this Agreement is not specifically approved at least
annually by the Board of Trustees of the Trust or the shareholders of the
affected Portfolio or Portfolios by the affirmative vote of a majority of
the outstanding shares of the affected Portfolio or Portfolios, and by a
majority of the Trustees of the Trust who are not interested persons of
the Trust or of Distributor by vote cast in person at a meeting called for
the purpose of voting on such approval.
Action by the Trust or any Portfolio under (a) above may be taken either
(i) by vote of the Board of Trustees or (ii) by the affirmative vote of a
majority of the outstanding shares of the Trust or the affected Portfolio or
Portfolios. The requirement under (b) above that continuance of this Agreement
be "specifically approved at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the rules
and regulations thereunder.
Termination of this Agreement pursuant to this Section 12 shall be without
the payment of any penalty.
13. Certain Definitions. For purposes of this Agreement, the "affirmative
vote of a majority of the outstanding shares" of the Trust or a Portfolio means
the affirmative vote, at a duly called and held meeting of shareholders of the
Trust or the Portfolio, as the case may be, (a) of the holders of 67% or more of
the shares of the Trust or the Portfolio present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Trust or the Portfolio entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders of more than
50% of the outstanding shares of the Trust or the Portfolio entitled to vote at
such meeting, whichever is less.
For the purposes of the Agreement, the terms "interested person" and
"assignment" shall have the meanings defined in the Investment Company Act of
1940, as amended, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
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
-5-
<PAGE>
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 Trust.
IN WITNESS WHEREOF, each of CASH RESOURCE TRUST and MENTOR
DISTRIBUTORS, LLC has caused this Distribution Agreement to be signed in
duplicate in its behalf, as of the day and year first above written.
CASH RESOURCE TRUST
By________________________________
MENTOR DISTRIBUTORS, LLC
By________________________________
-6-
CASH RESOURCE TRUST
901 East Byrd Street
Richmond, Virginia 23219
March 31, 1998
Mentor Investment Group, LLC
901 East Byrd Street
Richmond, Virginia 23219
Re: Administration Agreement
Dear Gentlemen:
Cash Resource Trust, a Massachusetts business trust (the "Trust"), is
engaged in the business of an investment company. The Trust desires that you act
as administrator of one or more series specified by the Trustees from time to
time on Exhibit A hereto (each, a "Specified Series") of the Trust, and you are
willing to act as such administrator and to perform such services under the
terms and conditions hereinafter set forth. Accordingly, the Trust agrees with
you as follows:
1. Delivery of Trust Documents. The Trust has furnished you with copies
properly certified or authenticated of each of the following:
(a) Agreement and Declaration of Trust of the Trust.
(b) By-laws of the Trust as in effect on the date hereof.
(c) Resolutions of the Trustees of the Trust selecting you as
administrator and approving the form of this Agreement.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
2. Administrative Services. You will continuously provide business
management services to each of the Specified Series and will generally, subject
to the general oversight of the Trustees and except as provided in the next
following paragraph, manage all of the business and affairs of each of the
Specified Series, subject always to the provisions of the Trust's Declaration of
Trust and By-laws and of the Investment Company Act of 1940, as
-1-
<PAGE>
amended (the "1940 Act"), and subject, further, to such policies and
instructions as the Trustees may from time to time establish. You shall, except
as provided in the next following paragraph, advise and assist the officers of
the Trust in taking such steps as are necessary or appropriate to carry out the
decisions of the Trustees and the appropriate committees of the Trustees
regarding the conduct of the business of each of the Specified Series.
Notwithstanding any provision of this Agreement, you will not at any time
provide, or be required to provide, to the Trust or to any person with respect
to the Trust investment research, advice, or supervision, or in any way advise
the Trust or any person acting on behalf of the Trust as to the value of
securities or other investments or as to the advisability of investing in,
purchasing, or selling securities or other investments.
3. Allocation of Charges and Expenses. You will pay the compensation and
expenses of all officers and executive employees of the Trust (other than such
persons who serve as such and who are employees of or serve at the request of
any investment adviser to the Trust) and will make available, without expense to
the Trust, the services of such of your 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. You will
provide all clerical services relating to the business of each of the Specified
Series. You will not be required to pay any expenses of the Trust other than
those specifically allocated to you in this paragraph 3. In particular, but
without limiting the generality of the foregoing, you will not be required to
pay: clerical salaries not relating to the services described in paragraph 2
above; fees and expenses incurred by the Trust in connection with membership in
investment company organizations; brokers' commissions; payment for portfolio
pricing services to a pricing agent, if any; legal, auditing, or accounting
expenses; taxes or governmental fees; the fees and expenses of the transfer
agent 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 of the Trust; the
expenses of and fees for registering or qualifying securities for sale; the fees
and expenses of Trustees of the Trust who are not affiliated with you; the cost
of preparing and distributing reports and notices to shareholders; public and
investor relations expenses; or the fees or disbursements of custodians of the
Trust's assets, including expenses incurred in the performance of any
obligations enumerated by the Agreement and Declaration of Trust or By-Laws of
the Trust insofar as they govern agreements with any such custodian.
4. Compensation. As compensation for the services performed and the
facilities furnished and expenses assumed by you, including the services of any
consultants retained by you, each Specified Series shall pay you, as promptly as
possible after the last day of each month, a fee, calculated daily, at the
annual rate of .02 of 1% of the Specified Series' average daily net assets.
The first payment of the fee shall be made as promptly as possible at the
end of the month next succeeding the effective date of this Agreement in respect
of such Specified Series, and shall constitute a full payment of the fee due you
for all services prior to that
-2-
<PAGE>
date. If this Agreement is terminated as of any date not the last day of a
month, such fee shall be paid as promptly as possible after such date of
termination, shall be based on the average daily net assets of the Specified
Series in that period from the beginning of such month to such date of
termination, and shall be that proportion of such average daily net assets as
the number of business days in such period bears to the number of business days
in such month. The average daily net assets of a Specified Series shall in all
cases be based only on business days and be computed as of the time of the
regular close of business of the New York Stock Exchange, or such other time as
may be determined by the Trustees. Each such payment shall be accompanied by a
report of the Trust prepared either by the Trust or by a reputable firm of
independent accountants which shall show the amount properly payable to you
under this Agreement and the detailed computation thereof.
5. Limitation of Liability. You shall not be liable for any error of
judgement or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates except a loss resulting from
willful misfeasance, bad faith, or gross negligence on your part in the
performance of your duties, or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Trust shall
be deemed, when acting within the scope of his or her employment by the Trust,
to be acting in such employment solely for the Trust and not as your employee or
agent.
6. Duration and Termination of this Agreement. This Agreement shall remain
in force for two years from the date first above written and continue from year
to year thereafter, but only so long as such continuance is specifically
approved at least annually with respect to each Specified Series by the vote of
a majority of the Trustees who are not interested persons of you or of the
Trust, cast in person at a meeting called for the purpose of voting on such
approval and by a vote of the Trustees. This Agreement may, on 30 days notice,
be terminated at any time without the payment of any penalty by you, and,
immediately upon notice, by the Trustees or, as to a Specified Series, by vote
of a majority of the outstanding voting securities of that Specified Series.
This Agreement shall automatically terminate in the event of its assignment. In
interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act, as modified by rule 18f-2 under the Act
(particularly the definitions of "interested person", "assignment", and
"majority of the outstanding voting securities"), as from time to time amended,
shall be applied, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission by any rule, regulation, or order.
7. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge, or termination is sought, and no amendment of this Agreement shall be
effective as to a Specified Series until approved by the Trustees, including a
majority of the Trustees who are not interested persons of you or of the Trust,
cast in person at a meeting called for the purpose of voting on such approval.
-3-
<PAGE>
8. Miscellaneous. The captions in this Agreement are included for
convenience or reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction of effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9. Limitation of Liability of the Trustees and Shareholders. A copy of the
Agreement and Declaration of Trust of the Trust is on file with the Secretary 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 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 appropriate Series.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract.
Yours very truly,
CASH RESOURCE TRUST
By: ___________________________
Title:
The foregoing Agreement is hereby accepted as of the date thereof.
MENTOR INVESTMENT GROUP, LLC
By: _____________________________
Title:
-4-
<PAGE>
EXHIBIT A
Cash Resource Money Market Fund
Cash Resource U.S. Government Money Market Fund
Cash Resource Tax-Exempt Money Market Fund
Cash Resource California Tax-Exempt Money Market Fund
Cash Resource New York Tax-Exempt Money Market Fund
-5-
Consent of Independent Auditors
The Trustees
Cash Resource Trust
We consent to the use of our report dated September 11, 1998, incorporated
herein by reference and to the references to our firm under the captions
"FINANCIAL HIGHLIGHTS" in the prospectus and "INDEPENDENT AUDITORS" in the
statement of additional information.
KPMG Peat Marwick LLP
Boston, Massachusetts
October 8, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> CASH RESOURCE MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 3,808,357
<INVESTMENTS-AT-VALUE> 3,808,357
<RECEIVABLES> 17,761
<ASSETS-OTHER> 348
<OTHER-ITEMS-ASSETS> 11
<TOTAL-ASSETS> 3,826,477
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,772
<TOTAL-LIABILITIES> 8,772
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,817,705
<SHARES-COMMON-STOCK> 3,817,735
<SHARES-COMMON-PRIOR> 2,941,635
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,817,705
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 185,696
<OTHER-INCOME> 0
<EXPENSES-NET> 27,314
<NET-INVESTMENT-INCOME> 158,382
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 158,382
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 158,382
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,482,466
<NUMBER-OF-SHARES-REDEEMED> 15,762,812
<SHARES-REINVESTED> 156,446
<NET-CHANGE-IN-ASSETS> 876,100
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,852
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27,314
<AVERAGE-NET-ASSETS> 3,271,409
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> CASH RESOURCE U.S. GOVERNMENT MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 3,150,740
<INVESTMENTS-AT-VALUE> 3,150,740
<RECEIVABLES> 18,592
<ASSETS-OTHER> 497
<OTHER-ITEMS-ASSETS> 46
<TOTAL-ASSETS> 3,169,875
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,498
<TOTAL-LIABILITIES> 7,498
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,162,377
<SHARES-COMMON-STOCK> 3,162,377
<SHARES-COMMON-PRIOR> 2,918,704
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,162,377
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 174,186
<OTHER-INCOME> 0
<EXPENSES-NET> 25,060
<NET-INVESTMENT-INCOME> 149,126
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 149,126
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 149,126
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,879,934
<NUMBER-OF-SHARES-REDEEMED> 13,784,887
<SHARES-REINVESTED> 148,626
<NET-CHANGE-IN-ASSETS> 243,666
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,608
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25,060
<AVERAGE-NET-ASSETS> 3,107,609
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> CASH RESOURCE TAX-EXEMPT MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 814,216
<INVESTMENTS-AT-VALUE> 814,216
<RECEIVABLES> 5,337
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 819,554
<PAYABLE-FOR-SECURITIES> 3,300
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,197
<TOTAL-LIABILITIES> 4,497
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 815,057
<SHARES-COMMON-STOCK> 815,060
<SHARES-COMMON-PRIOR> 743,617
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 815,057
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 28,575
<OTHER-INCOME> 0
<EXPENSES-NET> 5,644
<NET-INVESTMENT-INCOME> 22,931
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 22,931
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 22,931
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,375,194
<NUMBER-OF-SHARES-REDEEMED> 3,326,630
<SHARES-REINVESTED> 22,879
<NET-CHANGE-IN-ASSETS> 71,443
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,675
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,644
<AVERAGE-NET-ASSETS> 787,663
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> CASH RESOURCE CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 95,450
<INVESTMENTS-AT-VALUE> 95,450
<RECEIVABLES> 317
<ASSETS-OTHER> 92
<OTHER-ITEMS-ASSETS> 5
<TOTAL-ASSETS> 95,864
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166
<TOTAL-LIABILITIES> 166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,698
<SHARES-COMMON-STOCK> 95,698
<SHARES-COMMON-PRIOR> 89,432
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 95,698
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,342
<OTHER-INCOME> 0
<EXPENSES-NET> 731
<NET-INVESTMENT-INCOME> 2,611
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,611
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,611
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 412,868
<NUMBER-OF-SHARES-REDEEMED> 409,218
<SHARES-REINVESTED> 2,616
<NET-CHANGE-IN-ASSETS> 6,266
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 213
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 731
<AVERAGE-NET-ASSETS> 96,776
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> CASH RESOURCE NEW YORK TAX-EXEMPT MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 15,223
<INVESTMENTS-AT-VALUE> 15,223
<RECEIVABLES> 86
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 15,321
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31
<TOTAL-LIABILITIES> 31
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,290
<SHARES-COMMON-STOCK> 15,290
<SHARES-COMMON-PRIOR> 12,071
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 15,290
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 445
<OTHER-INCOME> 0
<EXPENSES-NET> 101
<NET-INVESTMENT-INCOME> 344
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 344
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 344
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 68,863
<NUMBER-OF-SHARES-REDEEMED> 65,984
<SHARES-REINVESTED> 340
<NET-CHANGE-IN-ASSETS> 3,219
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 28
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 116
<AVERAGE-NET-ASSETS> 12,663
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
