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As filed with the Securities and Exchange Commission on February 29, 2000
File No. 33-75708
File No. 811-8370
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
[X] Post-Effective Amendment No. 10
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 14
McM FUNDS
(Exact Name of Registrant as Specified on Charter)
One Bush Street, Suite 800
San Francisco, CA 94104
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(Address of Principal Executive Offices)
(800) 788-9485
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(Registrant's Telephone Number)
Deane A. Nelson, CPA
Vice President
McMorgan & Company
One Bush Street, Suite 800
San Francisco, CA 94104
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(Name and Address of Agent for Service)
Copies to:
Julie Allecta, Esq. Carolyn F. Mead, Esq.
Paul, Hastings, Janofsky & Walker LLP PFPC, Inc.
345 California Street 3200 Horizon Drive
San Francisco, CA 941-4-2635 King of Prussia, PA 19406-0903
It is proposed that this filing will become effective (check appropriate box).
[ X ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
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The Prospectus dated October 13, 1999 for the McM Funds class of the McM
Principal Preservation Fund; McM Intermediate Fixed Income Fund; McM Fixed
Income Fund; McM Balanced Fund; and McM Equity Investment Fund series of the
Registrant is incorporated herein by reference to Post-Effective Amendment No.
8/10 filed with the Commission on October 13, 1999.
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McM FUNDS
McM Balanced Fund
PROSPECTUS
Broker Shares Class B
February 29, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
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Broker Shares Class B Shares are only offered through broker-dealers and
financial intermediaries that have selling agreements wih the Distributor.
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Table of Contents
The Fund
Fees and Expenses of the Fund
Management of the Fund
Your Account
Buying Shares
Selling Your Shares
Additional Information on Buying and Selling Fund Shares
Distributions and Taxes
Other Investment Strategies and Risks
Additional Information Back Cover
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McM Balanced Fund
Ticker Symbol: MCMBX
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Investment Goal
Balance of capital appreciation, income and preservation of capital
Principal Investment Strategies
The Fund invests in a diversified portfolio of equity and debt securities.
The mix of securities will change based on existing and anticipated market
conditions. The Fund's asset allocation is generally between 50% and 70% in
common stocks and at least 25% in debt securities under normal market
conditions. The Fund's target asset allocation is 60% in equity securities
and 40% in debt securities over the long term.
Equities
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The Fund seeks capital appreciation and will invest in the common stocks of
companies believed to have the potential for long-term capital growth with
an emphasis on dividend paying common stocks. The advisor selects equity
securities using a "top-down" approach to control risk at the portfolio
level. The advisor targets various sectors and industries by analyzing
factors such as market capitalization and historic capital growth. The
advisor then selects individual securities within the targeted sectors and
industries based on a risk-adjusted expected return analysis (i.e., the
difference between the absolute expected return of the portfolio and the
market, plus or minus an amount computed to compensate for the degree to
which historical volatility of the portfolio has exceeded or fallen short
of the overall market).
Debt Securities
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The Fund seeks to provide shareholders with income by investing in a broad
range of intermediate and long-term debt securities, including:
o securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities
o investment grade debt securities including fixed and variable rate
debt obligations, mortgage and asset-backed securities and
collateralized mortgage obligations
o preferred stock and securities convertible into common stock
In selecting debt securities for the Fund, the advisor first establishes a
targeted portfolio duration for the Fund equal to the Lehman Brothers
Aggregate Bond Index. The advisor may increase duration as the expected
real rate of return of the Fund increases and decrease duration as the
expected rate of return of the Fund decreases. The advisor then selects a
diversified portfolio of debt securities with the following attributes:
o high quality
o attractive yields
o yield to maturity advantage over the market
o high degree of protection from call risk
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Principal Risks
By investing in stocks and bonds, the Fund may expose you to certain risks
that could cause you to lose money. These risks include:
o interest rate risk - the risk that securities held by the Fund will
increase or decrease in value as interest rates change, causing the
Fund's value to change. Debt securities typically decrease in value
as interest rates rise, and when interest rates fall, a debt
security will typically increase in value. A fund such as this, that
may invest a significant percentage of its assets in debt
securities, may exhibit similar responses to interest rate changes.
o stock market risk - the risk that the price of a security will rise
or fall due to various unpredictable market conditions.
o credit risk - the risk that the issuer of a security may not make
timely interest payments or pay the principal upon maturity
o call risk - the risk that a debt security might be redeemed prior to
maturity
o prepayment risk - the risk the obligations underlying mortgage and
asset-backed securities may be prepaid, requiring the Fund to
reinvest the proceeds at lower interest rates. Rising interest rates
could cause prepayments to decrease, extending the life of mortgage
and asset-backed securities with lower than market interest rates.
Suitability
The Fund may be appropriate for investors who are willing to accept the
risks associated with a combination of investments in equity and fixed
income securities. The Fund is not suitable for investors who are looking
for absolute principal stability.
Past Fund Performance
The bar chart and performance table below illustrate some of the risks of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The Fund's past performance does not necessarily indicate how
the Fund will perform in the future.
The bar chart shows changes in the Fund's performance from year to year.
The table shows how the Fund's average annual returns compare with those of
its benchmarks, the S&P 500 Index (equities) and the Lehman Brothers
Aggregate Index (debt securities), two unmanaged securities indices. The
figures assume reinvestment of all dividends and distributions.
0.79% 28.71% 16.26% 23.66% 20.62% 7.04%
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1994 1995 1996 1997 1998 1999
Year-to-Date Return 7.04% as of December 31, 1999
Best Quarter 11.93% in the fouth quarter of 1998
Worst Quarter -2.63% in the third quarter of 1998
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* Returns are for a class of shares of the Fund that is not offered in
the prospectus, but that would have substantially similar annual
returns because the shares are invested in the same portfolio of
securities and the annual returns would differ only to the extent that
the classes do not have the same expenses.
Performance Table
(Average annual total returns as of December 31, 1999)
1 Year 3 Years 5 Years Since
Inception*
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McM Balanced Fund 7.04% 16.88% 19.02% 17.43%
S&P 500 Index 21.00% 27.56% 28.55% 26.44%
Lehman Brothers Aggregate Index 11.97% 18.83% 20.22% 7.08%
* Inception date July 14, 1994.
Fees and Expenses of the Fund
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Broker Shares Class B shares of the Fund. The Broker Shares Class
B shares of the Fund do not impose any front-end loads or deferred sales load,
but do impose a Rule 12b-1 distribution fee. Shareholders are not charged for
exchanging shares into other Broker Shares Class B series of the McM Funds or
reinvesting dividends.
Annual Fund Operating
Expenses:
(expenses that are deducted
from Fund assets)
Management Fees 0.45%
Distribution (12b-1) Fees 0.45%
Other Expenses* 0.19%
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Total Annual Operating
Expenses** 1.09%
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* Other Expenses are based on estimated amounts for the current fiscal year.
** These are the estimated gross fees and expenses that the Fund would have
incurred for the fiscal year ended June 30, 1999, if this class had been
operational and the advisor had not waived any fees.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
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The example assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o you redeem all of your shares at the end of each time period;
o your investment has a 5% return each year;
o all distributions are reinvested; and
o operating expenses of each Fund remain the same.
This example is for comparison only. Actual return and expenses will be
different and the Fund's performance and expenses may be higher or lower. The
one-year number is based on net-operating expenses; longer-term numbers are
based on total fund operating expenses. Based on the above assumptions, your
costs for the Fund would be:
1 year 3 years 5 years 10 years
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$111 $347 $601 $1,329
Management of the Fund
The advisor for the Fund is:
McMorgan & Company
One Bush Street, Suite 800
San Francisco, California 94104
The advisor is responsible for selecting, purchasing, monitoring and selling
securities in the Fund's investment portfolio. The advisor also arranges for the
transfer agency, custody and all other services necessary to operate the Fund.
McMorgan & Company was founded in 1969. McMorgan & Company also manages private
accounts, consisting primarily of retirement plans and health and welfare funds
for jointly trusteed plans. As of December 31, 1999, the advisor had
approximately $28 billion of assets under management, including investment
company assets of approximately $679 million.
Portfolio Management
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An investment management team at McMorgan & Company manages the Fund's
investments. No member of the investment management team is solely responsible
for making recommendations for portfolio purchases and sales.
Management Fees
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The Fund pays the advisor an annual advisory fee of 0.45% of average daily net
assets for providing investment advisory services. During the most recent fiscal
year, after taking into account fee waivers, the Fund paid 0.41% of the Fund's
average daily net assets in advisory fees to McMorgan & Company.
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The fees paid to the advisor reflect a voluntary undertaking to waive a portion
of its advisory fee. The advisor has the right to terminate this undertaking
with 60 days' notice. Any waiver by the advisor is subject to repayment by the
Fund within the following three years if the Fund is able to make the repayment
without exceeding its current expense limits.
Your Account
Buying Shares
You may buy shares in the Fund with an initial investment of $5,000 or more.
Additional investments may be made for as little as $250. SHARES OF THIS CLASS
ARE ONLY OFFERED THROUGH BROKER-DEALERS AND FINANCIAL INTERMEDIARIES THAT HAVE
SELLING AGREEMENTS WITH THE DISTRIBUTOR. The Fund has the right to waive the
minimum investment requirements for employees of the Fund's investment advisor
and its affiliates. The Fund also has the right to reject any purchase order.
Pricing of Fund Shares (Purchase Price)
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The price of the Fund's shares is based on the Net Asset Value (NAV) of the
Fund's portfolio. The Fund calculates NAV by adding the total market value of
the Fund's investments and other assets, subtracting any liabilities, and then
dividing that figure by the total number of outstanding shares of that Fund. The
Fund's NAV is calculated at the close of regular trading of the New York Stock
Exchange ("NYSE"), normally 4 p.m. Eastern time. There is no sales charge in
connection with the purchase of shares.
The portfolio securities of the Fund, except debt securities with maturities of
60 days or less, are valued at market value. If market quotations are not
available, securities are valued at fair value as determined in good faith by
the Board of Trustees.
Debt securities with maturities of less than 60 days are valued at amortized
cost. Under this method of valuation, the advisor values the security at cost
and then assumes a constant amortization of any discount or premium to maturity
of the security.
Timing of Requests
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All requests received by the transfer agent, PFPC, Inc., before 4:00 p.m.
Eastern time will be executed at that day's NAV. Orders received after 4:00 p.m.
will be executed the following day at that day's NAV. These Funds do not price
shares on days when the NYSE is closed, which currently includes New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.
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To Purchase Shares:
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Initial Investment Subsequent Investments
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<S> <C> <C>
o Complete and sign the Account o Make your check payable to the "McM
Registration Form. Balanced Fund - Broker Shares Class B."
o Make your check payable to the "McM o Fill out an investment slip from an
By Mail Balanced Fund - Broker Shares Class B." account statement, include your name
o Mail the Account Registration Form and account number. Mail to:
your check to: PFPC, Inc.
PFPC, Inc. 211 South Gulph Road
211 South Gulph Road P.O. Box 61767
P.O. Box 61503 King of Prussia, PA 19406
King of Prussia, PA 19406 o Minimum subsequent investment for all
o Minimum Initial Investment is $5,000. accounts is $250.
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o Call (800) 831-1994 to arrange for a wire o Call (800) 831-1994 to arrange for a
wire purchase. For same day purchase, the wire purchase. For same day purchase,
the wire must be received before 4:00 p.m. Eastern the wire must be received before 4:00 p.m. Eastern
By Wire time. Wire federal funds to: time. Wire federal funds to:
Boston Safe Deposit & Trust Boston Safe Deposit & Trust
ABA#: 011001234 ABA#: 011001234
For: PFPC, Inc. For: PFPC, Inc.
Credit: McM Balanced Fund Credit: McM Balanced Fund
Acct#: 004502 Acct#: 004502
FBO: (Insert Shareholder name FBO: (Insert Shareholder name
and account number). and account number).
o Mail completed Account Registration Form o Note: Your bank may charge a wire fee.
to the address above.
o Note: Your bank may charge a wire fee.
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o You may open an account by making an o You may add to an existing account by
By Exchange exchange of Broker Shares Class B shares from making an exchange from Broker Shares Class B
an existing Fund account. Exchanges can be shares of an existing Fund account.
made by mail, fax or telephone. Call (800) Exchanges can be made by mail, fax or
831-1994 for help. telephone. Call (800) 831-1994 for help.
o Note: No fee or charge will apply, but o Completed authorization form must be on
there may be a capital gain or loss. file in advance.
o Note: No fee or charge will apply, but
there may be a capital gain or loss.
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By o You must open a regular Fund account o Call (800) 831-1994 to request the form.
Automatic with $5,000 minimum prior to o Complete and return the form and any
Investment Investment plan. other required materials
o Subsequent investments will be drawn from
your bank account.
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</TABLE>
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<PAGE>
Banks, brokers, 401(k) plans, financial advisors or financial supermarkets may
charge additional transaction fees, which would not be charged if shares were
purchased directly from the Funds.
The Fund may accept telephone orders. Unless you decline telephone privileges on
your Account Registration Form, you may be responsible for any fraudulent
telephone orders as long as the Fund takes reasonable measures to verify the
orders.
Other Account Options
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Direct Deposit Program: You may buy additional shares by having certain payments
from the federal government ONLY (i.e., federal salary, Social Security and
certain veterans, military or other payments) automatically deposited in your
fund account. The minimum investment under this program is $250. To participate,
call (800) 831-1994 for an enrollment form.
Retirement Accounts: Tax deferred retirement programs such as 401(k) plans and
IRAs may invest in the Fund. Accounts established under such plans must have all
dividends reinvested in the Fund. For more information about these plans or for
an IRA application, please call 800-831-1994.
Selling Your Shares
You may sell your shares at any time. Your shares will be sold at the NAV
calculated after the Fund's transfer agent receives and accepts your order.
Timing of Requests
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Redemption requests received in good order by the transfer agent, PFPC, Inc.,
before 4:00 p.m. Eastern time on any day that the NYSE is open for business will
be executed at that day's NAV. Requests received after 4:00 p.m. will be
processed on the next business day.
Selling Recently Purchased Shares
The Fund will redeem shares that were recently purchased by check, but may delay
mailing the proceeds for up to 8 business days to allow the purchase check to
clear.
Signature Guarantees
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A signature guarantee protects you against fraud by guaranteeing your signature
is authentic. A guarantee is required on all redemption requests over $10,000 or
when the redemption proceeds are to be sent to someone other than the owner of
record or to an address or bank account other than those of record. Most banks
or financial institutions, but not a notary public, can provide you with a
signature guarantee.
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To Sell Shares:
<TABLE>
<CAPTION>
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<S> <C>
o Submit a written request for redemption with:
|X| The Fund's name;
|X| Your Fund account number;
By Mail |X| The dollar amount or number of shares or percentage of the account to be
redeemed; and
|X| Signatures of all persons required to sign for transactions, exactly as the
shares are registered.
o Mail your request to:
PFPC, Inc.
211 South Gulph Road
P.O. Box 61767
King of Prussia, PA 19406
o A check will be mailed to the name and address in which the account is registered.
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o This option must be elected either on the initial Account Registration
Form or subsequently in writing.
o Call (800) 831-1994.
By Wire o Wire redemption requests must be received before 4:00 p.m. for money to be
wired the next business day.
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o This service must be elected in advance, either on the initial Account Registration
Form or subsequently in writing.
o Call (800) 831-1994 with your request.
By Telephone o The Fund will use reasonable procedures to confirm that the request is genuine.
o Written confirmation will be provided.
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o Complete the appropriate section on the Account Registration Form or call
(800) 831-1994 to request a form to add the plan.
By Systematic o To participate, you must own or purchase shares with a value of at least $10,000.
Withdrawal o Withdrawals can be monthly, quarterly, semi-annually or annually. The
Plan minimum amount is $100.
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</TABLE>
Please note that if you use a broker-dealer or financial institution to assist
you in any of these transactions, they may charge a fee for this service, which
the Funds would not charge.
Additional Information on Buying and Selling Fund Shares
General Policies
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The Fund reserves the right to:
o reject any purchase order when the Fund determines that it is not in the
best interest of the Fund or its shareholders to accept such order.
o make redemptions-in-kind (payments in portfolio securities rather than
cash) if the amount to be redeemed is large enough to affect Fund
operations (for example, if it represents more than 1% of the Fund's
assets).
o refuse purchase or exchange requests in excess of 1% of the Fund's total
assets.
o change the minimum investment amounts.
o cancel any purchase order and impose a $20 returned check fee if the
purchase check does not clear.
o reject checks drawn on banks outside the United States or endorsed over
by a third party. All investments must be made in U.S. dollars.
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<PAGE>
Minimum Balances
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The Fund may redeem your remaining shares at net asset value if the balance of
your account falls below $500 due to redemptions. The Fund will notify you if
your balance has fallen below $500 and you will have 60 days to increase your
account balance before your shares are redeemed. The Fund may close any account
without notice if the account is inactive and the value of the account is $0.
Exchange Privileges
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Broker Shares Class B shares of the Fund may be exchanged for Broker Shares
Class B shares of any of the other series of the Trust. Exchanges are treated as
a sale of Fund shares and are subject to the minimum investment requirements.
Exchanges may be made by mail or telephone if authorized on the Account
Registration Form. Telephone exchanges may be difficult to implement in times of
drastic economic or market changes.
An exchange may result in a capital gain or loss for tax purposes. The Fund may
change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions.
Mailings to Shareholders
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The Fund mails quarterly statements summarizing the activity in your account(s)
and confirmations following each purchase or sale of your Fund shares. To reduce
expenses, whenever possible the Fund may limit mailings of most financial
reports, prospectuses and account statements to one copy for each address that
lists one or more shareholders with the same last name. If you would like
additional copies of financial reports and prospectuses or separate mailings of
account statements, please call 800-831-1994.
Distribution Plan
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The Fund has adopted a 12b-1 plan that allows it to pay distribution fees for
the sales and distribution of its Broker Shares Class B shares. Because these
fees are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
Distributions and Taxes
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The Fund generally pays dividends and distributions of its net investment income
and net capital gains, as described in the table below.
Reinvestment Option
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Dividend and capital gain distributions will be automatically reinvested in the
Fund unless you elect to receive them by check. You may change your dividend
option at any time by requesting a change in writing. You must have your
dividends reinvested if you participate in the Systematic Withdrawal Plan or any
Retirement Plan. Dividends are reinvested at the ex-dividend date at the NAV
determined at the close of business that day. There are no fees or charges on
reinvestments.
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<PAGE>
Taxes on Dividends and Distributions
- ------------------------------------
Dividends you receive from the Fund, whether reinvested or taken in cash, are
generally taxable as ordinary income. Capital gains distributions may be taxable
at different rates depending on how long the Fund held the assets that generated
the capital gain. This is true no matter how long you have owned your shares or
whether you reinvest your distributions or receive them in cash.
The sale of Fund shares or the exchange of shares between two Funds is
considered a taxable event; you may realize a capital gain or loss on these
transactions. You should consult your own tax advisor for more specific
information about federal, state and local tax consequences.
Type of Distribution Declared & Paid Federal Tax Status
- -------------------- --------------- ------------------
Dividends from Net Investment Income quarterly ordinary Income
Short-term Capital Gains annually ordinary income
Long-term Capital Gains annually capital gain
Distributions from the Fund are expected to be primarily ordinary income.
Shareholders will receive an annual statement on the source and tax status of
all distributions for federal income tax purposes. There will also be
information showing which portion of the distributions are not taxable in
certain states.
Backup Withholding
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Shareholders may have 31% of their distributions and proceeds withheld if the
Fund does not have complete, correct taxpayer information on file as required by
law.
Other Investment Strategies and Risks
The Fund's main investment strategies are set out in the front of the
prospectus. The Fund may also use other investment strategies and invest in
securities that are not discussed in this prospectus, but which are described in
detail in the Fund's Statement of Additional Information (SAI). You may obtain a
copy of the SAI without charge by calling 800-788-9485.
Other Potential Risks
- ---------------------
The Fund may, at times, invest a small portion of its assets in derivative
securities, such as future contracts and options. In addition, the Fund may
enter into interest rate, currency and mortgage swap agreements and certain
mortgage-related securities, which are deemed derivatives. Derivatives can be
illiquid, and a small investment in a derivative could have a potentially large
impact on the Fund's performance. The Fund currently does not intend to invest
in futures contracts or options.
-12-
<PAGE>
Defensive Investing
- -------------------
The Fund may occasionally take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies when the advisor
deems it necessary to respond to adverse economic, political or other
conditions. At such time, the Fund may invest temporarily and without limitation
in U. S. government obligations, money market instruments and repurchase
agreements. When the Fund takes a temporary investment position, it may not
achieve its investment goals.
Additional Information
For investors who want more information about the Fund, the following documents
are available free upon request:
Annual and Semiannual Reports: Additional information about the Fund's
investments is available in the Fund's annual and semiannual reports to
shareholders. In the annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
prospectus.
You can get free copies of these reports and the SAI, request other information
and ask questions about the Fund by contacting:
McM Funds
One Bush Street, Suite 800
San Francisco, CA 94104
Telephone: 800-788-9485
Internet address: www.mcmfunds.com
----------------
These reports and other information about the McM Funds also are available on
the EDGAR Database on the SEC's Internet site at http://www.sec.gov. In
addition, you may obtain copies of this information, after paying a duplicating
fee, by electronic request at the following E-mail address: [email protected]
or by writing the SEC's Public Reference Section, Washington, DC 20549-0102. For
more information about the operation of the SEC's Public Reference Section,
please call 1-202-942-8090.
The McM Funds' SEC File No. is 811-8370
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<PAGE>
McM FUNDS
McM Intermediate Fixed Income Fund
PROSPECTUS
Broker Shares Class B
February 29, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
-1-
- --------------------------------------------------------------------------------
Broker Shares Class B shares are only offered through broker-dealers and
financial intermediaries that have selling agreements with the Distributor.
<PAGE>
Table of Contents
The Fund
Fees and Expenses of the Fund
Management of the Fund
Your Account
Buying Shares
Selling Your Shares
Additional Information on Buying and Selling Fund Shares
Distributions and Taxes
Other Investment Strategies and Risks
Additional Information Back Cover
-2-
<PAGE>
McM Intermediate Fixed Income Fund
Ticker Symbol: MCMNX
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Investment Goal
Above average total return consistent with maintaining liquidity and
preserving capital.
Principal Investment Strategies
The Fund invests in high quality, short to intermediate-term bonds, and
other debt securities with average remaining maturities of up to 15 years.
The average weighted portfolio maturity is generally between three and ten
years.
The Fund invests at least 65% of its assets in fixed-income securities.
These securities are investment grade or issued or guaranteed by the U.S
government, its agencies or instrumentalities. The Fund may invest up to
35% of its assets in U.S. government securities, short-term debt
instruments or cash to control portfolio duration.
The advisor establishes a target duration for the portfolio that is
periodically adjusted based on the portfolio's expected real rate of
return. The advisor may increase portfolio duration as the expected real
rate of return increases and decrease portfolio duration as the expected
real rate of return decreases.
After target duration is selected, the advisor constructs a diversified
portfolio of fixed-income securities with the following attributes:
o call protection
o high quality
o undervalued
o higher yield than the market
The Fund principally invests in:
o securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities
o corporate, bank and commercial obligations
o mortgage-backed securities, including collateralized mortgage
obligations
o asset-backed securities representing interests in pools of assets
such as motor vehicle installment purchase obligations and credit
card receivables
Principal Risks
By investing in bonds, the Fund may expose you to certain risks that could
cause you to lose money. These risks include:
o interest rate risk - the risk that securities held by the Fund
will increase or decrease in value as interest rates change. Debt
securities typically decrease in value as interest rates rise and
increase in value when interest rates fall. A fund such as this
one, that invests most of its assets in debt securities, will
exhibit similar responses to interest rate changes.
-3-
<PAGE>
o credit risk - the risk that the issuer of a security may not make
timely interest payments or pay the principal upon maturity.
o call risk - the risk that a debt security might be redeemed prior
to maturity.
o prepayment risk - the risk that the obligations underlying
mortgage and asset-backed securities may be prepaid, requiring
the Fund to reinvest the proceeds at lower interest rates. Rising
interest rates could cause prepayments to decrease, extending the
life of mortgage and asset-backed securities with lower than
market interest rates.
Suitability
The Fund may be appropriate for investors who want higher returns than a
money market fund. The Fund attempts to achieve higher returns by investing
in short to intermediate-term securities that generally have higher yields
and slightly more interest rate risk. The Fund is not suitable for
investors who are looking for absolute principal stability.
Past Fund Performance
The bar chart and performance table below illustrate some of the risks of
investing in the Fund and how the Fund's total return has varied from year
to year. The Fund's past performance does not necessarily indicate how the
Fund will perform in the future.
The bar chart shows changes in the Fund's performance from year to year.
The table shows how the Fund's average annual returns compare with those of
its benchmark, the Lehman Brothers Intermediate Government/Corporate Index,
an unmanaged securities index. The figures assume reinvestment of all
dividends and distributions.
-0.43% 14.95% 4.13% 7.91% 7.81% -0.31%
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
Year-to-Date Return -0.31% as of December 31, 1999
Best Quarter 5.00% in the second quarter of 1995
Worst Quarter -0.98% in the second quarter of 1999
*Returns are for a class of shares of the Fund that is not offered in
the prospectus, but that would have substantially similar annual
returns because the shares are invested in the same portfolio of
securities and the annual returns would differ only to the extent that
the classes do not have the same expenses.
-4-
<PAGE>
Performance Table
(Average annual total returns as of December 31, 1999)
1 Year 3 Years 5 Years Since
Inception*
--------------------------------------------------------------------------
McM Intermediate Fixed Income Fund -0.31% 5.06% 6.78% 6.10%
Lehman Brothers Intermediate 0.39% 5.49% 7.09% 6.47%
Government/Corporate Index
* Inception date July 14, 1994.
[Definition of Investment Grade: An investment grade security is one
rated Baa or higher by Moody's Investor's Service, Inc., BBB or higher
by Standard & Poor's Ratings Group, or BBB or higher by Fitch Investors
Service Inc. The Fund may only invest in unrated debt securities that
the advisor believes are comparable to investment grade rated
securities.]
[Definition of Duration: Duration is the average time needed to recover
an initial cash outlay. The duration of a bond or mutual fund portfolio
may be an indication of sensitivity to changes in interest rates. In
general, the longer a fund's duration, the more it will react to
changes in interest rates and the greater the risk and return
potential.]
[Definition of Expected Real Return: Expected real return is the
difference between the current yield to maturity of fixed income
investments and the expected inflation rate.]
-5-
<PAGE>
Fees and Expenses of the Fund
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Broker Shares Class B shares of the Fund. The Broker Shares Class
B shares of the Fund do not impose any front-end loads or deferred sales load,
but do impose a Rule 12b-1 distribution fee. Shareholders are not charged for
exchanging shares into other Broker Shares Class B series of the McM Funds or
reinvesting dividends.
Annual Fund Operating
Expenses:
(expenses that are deducted
from Fund assets)
Management Fees 0.35%
Distribution (12b-1) Fees 0.45%
Other Expenses* 0.17%
-----
Total Annual Operating
Expenses** 0.97%
====
* Other Expenses are based on estimated amounts for the current fiscal year.
** These are the estimated gross fees and expenses that the Fund would have
incurred for the fiscal year ended June 30, 1999, if the class had been
operational and the advisor had not waived any fees.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o you redeem all of your shares at the end of each time period;
o your investment has a 5% return each year;
o all distributions are reinvested; and
o operating expenses of each Fund remain the same.
This example is for comparison only. Actual return and expenses will be
different and the Fund's performance and expenses may be higher or lower. The
one-year number is based on net-operating expenses; longer-term numbers are
based on total fund operating expenses. Based on the above assumptions, your
costs for the Fund would be:
1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
$99 $309 $536 $1,190
-6-
<PAGE>
Management of the Fund
The advisor for the Fund is:
McMorgan & Company
One Bush Street, Suite 800
San Francisco, California 94104
The advisor is responsible for selecting, purchasing, monitoring and selling
securities in the Fund's investment portfolio. The advisor also arranges for the
transfer agency, custody and all other services necessary to operate the Fund.
McMorgan & Company was founded in 1969. McMorgan & Company also manages private
accounts, consisting primarily of retirement plans and health and welfare funds
for jointly trusteed plans. As of December 31, 1999, the advisor had
approximately $28 billion of assets under management, including investment
company assets of approximately $679 million.
Portfolio Management
An investment management team at McMorgan & Company manages the Fund's
investments. No member of the investment management team is solely responsible
for making recommendations for portfolio purchases and sales.
Management Fees
The Fund pays the advisor an annual advisory fee of 0.35% of average daily net
assets for providing investment advisory services. During the most recent fiscal
year, after taking into account fee waivers, the Fund paid 0.33% of the Fund's
average daily net assets in advisory fees to McMorgan & Company.
The fees paid to the advisor reflect a voluntary undertaking to waive a portion
of its advisory fee. The advisor has the right to terminate this undertaking
with 60 days' notice. Any waiver by the advisor is subject to repayment by the
Fund within the following three years if the Fund is able to make the repayment
without exceeding its current expense limits.
Your Account
Buying Shares
You may buy shares in the Fund with an initial investment of $5,000 or more.
Additional investments may be made for as little as $250. SHARES OF THIS CLASS
ARE ONLY OFFERED THROUGH BROKER-DEALERS AND FINANCIAL INTERMEDIARIES THAT HAVE
SELLING AGREEMENTS WITH THE DISTRIBUTOR. The Fund has the right to waive the
minimum investment requirements for employees of the Fund's investment advisor
and its affiliates. The Fund also has the right to reject any purchase order.
-7-
<PAGE>
Pricing of Fund Shares (Purchase Price)
The price of the Fund's shares is based on the Net Asset Value (NAV) of the
Fund's portfolio. The Fund calculates NAV by adding the total market value of
the Fund's investments and other assets, subtracting any liabilities, and then
dividing that figure by the total number of outstanding shares of that Fund. The
Fund's NAV is calculated at the close of regular trading of the New York Stock
Exchange ("NYSE"), normally 4 p.m. Eastern time. There is no sales charge in
connection with the purchase of shares.
The portfolio securities of the Fund, except debt securities with maturities of
60 days or less, are valued at market value. If market quotations are not
available, securities are valued at fair value as determined in good faith by
the Board of Trustees.
Debt securities with maturities of less than 60 days are valued at amortized
cost. Under this method of valuation, the advisor values the security at cost
and then assumes a constant amortization of any discount or premium to maturity
of the security.
Timing of Requests
All requests received by the transfer agent, PFPC, Inc., before 4:00 p.m.
Eastern time will be executed at that day's NAV. Orders received after 4:00 p.m.
will be executed the following day at that day's NAV. These Funds do not price
shares on days when the NYSE is closed, which currently includes New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.
-8-
<PAGE>
To Purchase Shares:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Initial Investment Subsequent Investments
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
o Complete and sign the Account Registration o Make your check payable to the "McM Fixed
Form. Income Fund - Broker Shares Class B."
o Make your check payable to the "McM Fixed o Fill out an investment slip from an account
By Mail Income Fund - Broker Shares Class B." Mail statement, include your name and account
the Account Registration Form and your check number. Mail to:
to: PFPC, Inc.
PFPC, Inc. 211 South Gulph Road
211 South Gulph Road P.O. Box 61767
P.O. Box 61503 King of Prussia, PA 19406
King of Prussia, PA 19406 o Minimum subsequent investment for all
o Minimum Initial Investment is $5,000. accounts is $250.
- ------------------------------------------------------------------------------------------------------------------------------
o Call (800) 831-1994 to arrange for a wire o Call (800) 831-1994 to arrange for a wire
purchase. For same day purchase, the wire purchase. For same day purchase, the wire
must be received before 4:00 p.m. Eastern must be received by 4:00 p.m. Eastern time.
time. Wire federal funds to: Wire federal funds to:
Boston Safe Deposit & Trust Boston Safe Deposit & Trust
By Wire ABA#: 011001234 ABA#: 011001234
For: PFPC, Inc. For: PFPC, Inc.
Credit: McM Intermediate Fixed Income Fund Credit: McM Intermediate Fixed Income Fund
Acct#: 004502 Acct#: 004502
FBO: (Insert Shareholder name and account FBO: (Insert Shareholder name and account
number). number).
o Mail completed Account Registration Form to o Note: Your bank may charge a wire fee.
the address above.
o Note: Your bank may charge a wire fee.
- ------------------------------------------------------------------------------------------------------------------------------
o You may open an account by making an o You may add to an existing account by
By Exchange exchange of Broker Shares Class B shares from making an exchange from Broker Shares Class B
an existing Fund account. Exchanges can be shares of an existing Fund account.
made by mail, fax or telephone. Call Exchanges can be made by mail, fax or
(800) 831-1994 for help. telephone. Call (800) 831-1994 for help.
o Note: No fee or charge will apply, but o Completed authorization form must be on
there may be a capital gain or loss. file in advance.
o Note: No fee or charge will apply, but there
may be a capital gain or loss.
- ------------------------------------------------------------------------------------------------------------------------------
o You must open a regular Fund account with o Call (800) 831-1994 to request the form.
By Automatic $5,000 minimum prior to participating in this o Complete and return the form and any
Investment plan. other required materials.
o Subsequent investments will be drawn from
your bank account.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE>
Banks, brokers, 401(k) plans, financial advisors or financial supermarkets may
charge additional transaction fees, which would not be charged if shares were
purchased directly from the Funds.
The Fund may accept telephone orders. Unless you decline telephone privileges on
your Account Registration Form, you may be responsible for any fraudulent
telephone orders as long as the Fund takes reasonable measures to verify the
orders.
Other Account Options
Direct Deposit Program: You may buy additional shares by having certain payments
from the federal government ONLY (i.e., federal salary, Social Security and
certain veterans, military or other payments) automatically deposited in your
fund account. The minimum investment under this program is $250. To participate,
call (800) 831-1994 for an enrollment form.
Retirement Accounts: Tax deferred retirement programs such as 401(k) plans and
IRAs may invest in the Fund. Accounts established under such plans must have all
dividends reinvested in the Fund. For more information about these plans or for
an IRA application, please call 800-831-1146.
Selling Your Shares
You may sell your shares at any time. Your shares will be sold at the NAV
calculated after the Fund's transfer agent receives and accepts your order.
Timing of Requests
Redemption requests received in good order by the transfer agent, PFPC, Inc.,
before 4:00 p.m. Eastern time on any day that the NYSE is open for business will
be executed at that day's NAV. Requests received after 4:00 p.m. will be
processed on the next business day.
Selling Recently Purchased Shares
The Fund will redeem shares that were recently purchased by check, but may delay
mailing the proceeds for up to 8 business days to allow the purchase check to
clear.
Signature Guarantees
A signature guarantee protects you against fraud by guaranteeing your signature
is authentic. A guarantee is required on all redemption requests over $10,000 or
when the redemption proceeds are to be sent to someone other than the owner of
record or to an address or bank account other than those of record. Most banks
or financial institutions, but not a notary public, can provide you with a
signature guarantee.
-10-
<PAGE>
To Sell Shares:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
o Submit a written request for redemption with:
|X| The Fund's name;
|X| Your Fund account number;
By Mail |X| The dollar amount or number of shares or percentage of the account to be
redeemed; and
|X| Signatures of all persons required to sign for transactions, exactly as the
shares are registered.
o Mail your request to: PFPC, Inc. 211 South Gulph Road
P.O. Box 61767 King of Prussia, PA 19406
o A check will be mailed to the name and address in which the account is
registered.
- ------------------------------------------------------------------------------------------------------------------------------
o This option must be elected either on the initial Account Registration Form or
subsequently in writing.
By Wire o Call (800) 831-1994.
o Wire redemption requests must be received before 4:00 p.m. for money to be wired
the next business day.
- ------------------------------------------------------------------------------------------------------------------------------
o This service must be elected in advance, either on the initial Account
Registration Form or subsequently in writing.
By Telephone o Call (800) 831-1994 with your request.
o The Fund will use reasonable procedures to confirm that the request is genuine.
o Written confirmation will be provided.
- ------------------------------------------------------------------------------------------------------------------------------
o Complete the appropriate section on the Account Registration Form or call
(800) 831-1146 to request a form to add the plan.
By Systematic o To participate, you must own or purchase shares with a value of at least $10,000.
Withdrawal o Withdrawals can be monthly, quarterly, semi-annually or annually. The minimum
Plan amount is $100.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please note that if you use a broker-dealer or financial institution to assist
you in any of these transactions, they may charge a fee for this service, which
the Funds would not charge.
Additional Information on Buying and Selling Fund Shares
General Policies
The Fund reserves the right to:
o reject any purchase order when the Fund determines that it is not in the
best interest of the Fund or its shareholders to accept such order.
o make redemptions-in-kind (payments in portfolio securities rather than
cash) if the amount to be redeemed is large enough to affect Fund
operations (for example, if it represents more than 1% of the Fund's
assets).
o refuse purchase or exchange requests in excess of 1% of the Fund's total
assets.
o change the minimum investment amounts.
o cancel any purchase order and impose a $20 returned check fee if the
purchase check does not clear.
o reject checks drawn on banks outside the United States or endorsed over by
a third party. All investments must be made in U.S. dollars.
-11-
<PAGE>
Minimum Balances
The Fund may redeem your remaining shares at net asset value if the balance of
your account falls below $500 due to redemptions. The Fund will notify you if
your balance has fallen below $500 and you will have 60 days to increase your
account balance before your shares are redeemed. The Fund may close any account
without notice if the account is inactive and the value of the account is $0.
Exchange Privileges
Broker Shares Class B shares of the Fund may be exchanged for Broker Shares
Class B shares of any of the other series of the Trust. Exchanges are treated as
a sale of Fund shares and are subject to the minimum investment requirements.
Exchanges may be made by mail or telephone if authorized on the Account
Registration Form. Telephone exchanges may be difficult to implement in times of
drastic economic or market changes.
An exchange may result in a capital gain or loss for tax purposes. The Fund may
change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions.
Mailings to Shareholders
The Fund mails quarterly statements summarizing the activity in your account(s)
and confirmations following each purchase or sale of your Fund shares. To reduce
expenses, whenever possible the Fund may limit mailings of most financial
reports, prospectuses and account statements to one copy for each address that
lists one or more shareholders with the same last name. If you would like
additional copies of financial reports and prospectuses or separate mailings of
account statements, please call 800-831-1994.
Distribution Plan
The Fund has adopted a 12b-1 plan that allows it to pay distribution fees for
the sales and distribution of its Broker Shares Class B shares. Because these
fees are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
Distributions and Taxes
The Fund generally pays dividends and distributions of its net investment income
and net capital gains, as described in the table below.
Reinvestment Option
Dividend and capital gain distributions will be automatically reinvested in the
Fund unless you elect to receive them by check. You may change your dividend
option at any time by requesting a change in writing. You must have your
dividends reinvested if you participate in the Systematic Withdrawal Plan or any
Retirement Plan. Dividends are reinvested at the ex-dividend date at the NAV
determined at the close of business that day. There are no fees or charges on
reinvestments.
-12-
<PAGE>
Taxes on Dividends and Distributions
Dividends you receive from the Fund, whether reinvested or taken in cash, are
generally taxable as ordinary income. Capital gains distributions may be taxable
at different rates depending on how long the Fund held the assets that generated
the capital gain. This is true no matter how long you have owned your shares or
whether you reinvest your distributions or receive them in cash.
The sale of Fund shares or the exchange of shares between two Funds is
considered a taxable event; you may realize a capital gain or loss on these
transactions. You should consult your own tax advisor for more specific
information about federal, state and local tax consequences.
Type of Distribution Declared & Paid Federal Tax Status
================================================================================
Dividends from Net Investment Income monthly ordinary Income
Short-term Capital Gains annually ordinary income
Long-term Capital Gains annually capital gain
Distributions from the Fund are expected to be primarily ordinary income.
Shareholders will receive an annual statement on the source and tax status of
all distributions for federal income tax purposes. There will also be
information showing which portion of the distributions are not taxable in
certain states.
Backup Withholding
Shareholders may have 31% of their distributions and proceeds withheld if the
Fund does not have complete, correct taxpayer information on file as required by
law.
Other Investment Strategies and Risks
The Fund's main investment strategies are set out in the front of the
prospectus. The Fund may also use other investment strategies and invest in
securities that are not discussed in this prospectus, but which are described in
detail in the Fund's Statement of Additional Information (SAI). You may obtain a
copy of the SAI without charge by calling 800-788-9485.
Other Potential Risks
The Fund may, at times, invest a small portion of its assets in derivative
securities, such as future contracts and options. In addition, the Fund may
enter into interest rate, currency and mortgage swap agreements and certain
mortgage-related securities, which are deemed derivatives. Derivatives can be
illiquid, and a small investment in a derivative could have a potentially large
impact on the Fund's performance. The Fund currently does not intend to invest
in futures contracts or options.
Defensive Investing
The Fund may occasionally take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies when the advisor
deems it necessary to respond to adverse economic, political or other
conditions. At such time, the Fund may invest temporarily and without limitation
in U. S. government obligations, money market instruments and repurchase
agreements. When the Fund takes a temporary investment position, it may not
achieve its investment goals.
-13-
<PAGE>
Additional Information
For investors who want more information about the Fund, the following documents
are available free upon request:
Annual and Semiannual Reports: Additional information about the Fund's
investments is available in the Fund's annual and semiannual reports to
shareholders. In the annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
prospectus.
You can get free copies of these reports and the SAI, request other information
and ask questions about the Fund by contacting:
McM Funds
One Bush Street, Suite 800
San Francisco, CA 94104
Telephone: 800-788-9485
Internet address: www.mcmfunds.com
These reports and other information about the McM Funds also are available on
the EDGAR Database on the SEC's Internet site at http://www.sec.gov. In
addition, you may obtain copies of this information, after paying a duplicating
fee, by electronic request at the following E-mail address: [email protected]
or by writing the SEC's Public Reference Section, Washington, DC 20549-0102. For
more information about the operation of the SEC's Public Reference Section,
please call 1-202-942-8090.
The McM Funds' SEC File No. is 811-8370
-14-
<PAGE>
McM FUNDS
Broker Shares Class B
McM Fixed Income Fund
PROSPECTUS
February 29, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
-1-
- --------------------------------------------------------------------------------
Broker Shares Class B shares are only offered through broker-dealers and
financial intermediaries that have selling agreements with the Distributor.
<PAGE>
Table of Contents
The Fund
Fees and Expenses of the Fund
Management of the Fund
Your Account
Buying Shares
Selling Your Shares
Additional Information on Buying and Selling Fund Shares
Distributions and Taxes
Other Investment Strategies and Risks
Additional Information Back Cover
-2-
<PAGE>
McM Fixed Income Fund
Ticker Symbol: MCMFX
-----------------------------------------------------------------
Investment Goal
Above average total return consistent with maintaining liquidity and
preserving capital.
Principal Investment Strategies
The Fund invests in high quality, short to intermediate-term bonds, and
other debt securities with average remaining maturities of up to 30 years.
The average weighted portfolio maturity is generally between three and
fifteen years.
The Fund invests at least 65% of its assets in fixed-income securities,
which are investment grade or issued or guaranteed by the U.S government,
its agencies or instrumentalities. The Fund may invest up to 35% of its
assets in U.S. government securities, short-term money market instruments
or cash to control portfolio duration. The Fund generally invests in
100-150 securities, with special emphasis on collateralized mortgage
obligations and corporate bonds to provide incremental returns.
The advisor generally establishes a target duration for the portfolio equal
to the Lehman Brothers Aggregate Bond Index. The advisor may adjust the
portfolio's duration on the basis of the expected real return of the
portfolio's fixed income investments. The advisor may increase duration as
the expected real rate of return increases and decrease duration as the
expected real rate of return decreases.
Once a target duration is selected, the advisor constructs a diversified
portfolio of fixed income securities with the following attributes:
o call protection
o high quality
o undervalued
o higher yield than the market
The Fund principally invests in:
o securities issued or guaranteed by the U.S. government, its agencies and
instrumentalities
o corporate, bank and commercial obligations
o mortgage-backed securities, with an emphasis on collateralized mortgage
obligations
o asset-backed securities representing interests in pools of assets such as
motor vehicle installment purchase obligations and credit card
receivables
Principal Risks
By investing in bonds, the Fund may expose you to certain risks that could
cause you to lose money. These risks include:
-3-
<PAGE>
o interest rate risk - the risk that securities held by the Fund will
increase or decrease in value as interest rates change. Debt securities
typically decrease in value as interest rates rise and increase in value
when interest rates fall. A fund such as this one, that invests most of
its assets in debt securities, will exhibit similar responses to interest
rate changes.
o credit risk - the risk that the issuer of a security may not make timely
interest payments or pay the principal upon maturity.
o call risk - the risk that a debt security might be forcibly redeemed
prior to maturity due to falling interest rates.
o prepayment risk - the risk that obligations underlying mortgage and
asset-backed securities may be prepaid, requiring the Fund to reinvest
the proceeds at lower interest rates. Rising interest rates could cause
prepayments to decrease, extending the life of mortgage and asset-backed
securities with lower than market interest rates.
Suitability
The Fund may be appropriate for investors who want higher returns than a
money market fund. The Fund attempts to achieve higher returns by investing
in intermediate term securities that generally have higher yields and
slightly more interest rate risk. The Fund is not suitable for investors
who are looking for absolute principal stability.
Past Fund Performance
The bar chart and performance table below illustrate some of the risks of
investing in the Fund. The Fund's past performance does not necessarily
indicate how the Fund will perform in the future.
The bar chart shows changes in the Fund's performance from year to year.
The table shows how the Fund's average annual returns compare with those of
its benchmark, the Lehman Brothers Aggregate Index, an unmanaged securities
index. The figures assume reinvestment of all dividends and distributions.
-0.73% 19.29% 3.04% 9.53% 8.52% -2.18%
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
Year-to-Date Return -2.18% as of December 31, 1999
Best Quarter 6.65% in the second quarter of 1995
Worst Quarter -2.18% in the fourth quarter of 1999
* Returns are for a class of shares of the Fund that is not offered in
the prospectus, but that would have substantially similar annual
returns because the shares are invested in the same portfolio of
securities and the annual returns would differ only to the extent that
the classes do not have the same expenses.
-4-
<PAGE>
Performance Table
(Average annual total returns as of December 31, 1999)
1 Year 3 Years 5 Years Since
Inception*
==========================================================================
McM Fixed Income Fund -2.18% 5.15% 7.40% 6.61%
Lehman Brothers Aggregate Index -0.83% 5.73% 7.73% 7.08%
* Inception date July 14, 1994.
[Definition of Investment Grade: An investment grade security is one
rated Baa or higher by Moody's Investor's Service, Inc., BBB or higher
by Standard & Poor's Ratings Group, or BBB or higher by Fitch Investors
Service, Inc. The Fund may also invest in unrated debt securities that
the advisor believes are comparable to investment grade rated
securities.]
[Definition of Duration: Duration is the average time needed to recover
an initial cash outlay. The duration of a bond or mutual fund portfolio
may be an indication of sensitivity to changes in interest rates. In
general, the longer a fund's duration, the more it will react to
changes in interest rates and the greater the risk and return
potential.]
Fees and Expenses of the Fund
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Broker Shares Class B shares of the Fund. The Broker Shares Class
B shares of the Fund do not impose any front-end loads or deferred sales load,
but do impose a Rule 12b-1 distribution fee. Shareholders are not charged for
exchanging shares into other Broker Shares Class B series of the McM Funds or
reinvesting dividends.
Annual Fund Operating
Expenses:
(expenses that are deducted
from Fund assets)
Management Fees 0.35%
Distribution (12b-1) Fees 0.45%
Other Expenses* 0.58%
-----
Total Annual Operating
Expenses** 1.38%
=====
* Other Expenses are based on estimated amounts for the current fiscal year.
** These are the estimated gross fees and expenses that the Fund would have
incurred for the fiscal year ended June 30, 1999 if this class had been
operational and the advisor had not waived any fees.
-5-
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o you redeem all of your shares at the end of each time period;
o your investment has a 5% return each year;
o all distributions are reinvested; and
o operating expenses of each Fund remain the same.
This example is for comparison only. Actual return and expenses will be
different and the Fund's performance and expenses may be higher or lower. The
one-year number is based on net-operating expenses; longer-term numbers are
based on total fund operating expenses. Based on the above assumptions, your
costs for the Fund would be:
1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
$140 $437 $755 $1,657
Management of the Fund
The advisor for the Fund is:
McMorgan & Company
One Bush Street, Suite 800
San Francisco, California 94104
The advisor is responsible for selecting, purchasing, monitoring and selling
securities in the Fund's investment portfolio. The advisor also arranges for the
transfer agency, custody and all other services necessary to operate the Fund.
McMorgan & Company was founded in 1969. McMorgan & Company also manages private
accounts, consisting primarily of retirement plans and health and welfare funds
for jointly trusteed plans. As of December 31, 1999, the advisor had
approximately $28 billion of assets under management, including investment
company assets of approximately $679 million.
Portfolio Management
- --------------------
An investment management team at McMorgan & Company manages the Fund's
investments. No member of the investment management team is solely responsible
for making recommendations for portfolio purchases and sales.
Management Fees
- ---------------
The Fund pays the advisor an annual advisory fee of 0.35% of average daily net
assets for providing investment advisory services. During the most recent fiscal
year, after taking into account fee waivers, the Fund paid 0.00% of the Fund's
average daily net assets in advisory fees to McMorgan & Company.
-6-
<PAGE>
The fees paid to the advisor reflect a voluntary undertaking to waive a portion
of its advisory fee. The advisor has the right to terminate this undertaking
with 60 days' notice. Any waiver by the advisor is subject to repayment by the
Fund within the following three years if the Fund is able to make the repayment
without exceeding its current expense limits.
Your Account
Buying Shares
You may buy shares in the Fund with an initial investment of $5,000 or more.
Additional investments may be made for as little as $250. SHARES OF THIS CLASS
ARE ONLY OFFERED THROUGH BROKER-DEALERS AND FINANCIAL INTERMEDIARIES THAT HAVE
SELLING AGREEMENTS WITH THE DISTRIBUTOR. The Fund has the right to waive the
minimum investment requirements for employees of the Fund's investment advisor
and its affiliates. The Fund also has the right to reject any purchase order.
Pricing of Fund Shares (Purchase Price)
- ---------------------------------------
The price of the Fund's shares is based on the Net Asset Value (NAV) of the
Fund's portfolio. The Fund calculates NAV by adding the total market value of
the Fund's investments and other assets, subtracting any liabilities, and then
dividing that figure by the total number of outstanding shares of that Fund. The
Fund's NAV is calculated at the close of regular trading of the New York Stock
Exchange ("NYSE"), normally 4 p.m. Eastern time. There is no sales charge in
connection with the purchase of shares.
The portfolio securities of the Fund, except debt securities with maturities of
60 days or less, are valued at market value. If market quotations are not
available, securities are valued at fair value as determined in good faith by
the Board of Trustees.
Debt securities with maturities of less than 60 days are valued at amortized
cost. Under this method of valuation, the advisor values the security at cost
and then assumes a constant amortization of any discount or premium to maturity
of the security.
Timing of Requests
- ------------------
All requests received by the transfer agent, PFPC, Inc., before 4:00 p.m.
Eastern time will be executed at that day's NAV. Orders received after 4:00 p.m.
will be executed the following day at that day's NAV. These Funds do not price
shares on days when the NYSE is closed, which currently includes New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.
-7-
<PAGE>
<TABLE>
<CAPTION>
Purchase Shares:
- ------------------------------------------------------------------------------------------------------------------------------------
Initial Investment Subsequent Investments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
o Complete and sign the Account o Make your check payable to the "McM Fixed
Registration Form. Income Fund - Broker Shares Class B."
o Make your check payable to the "McM Fixed o Fill out an investment slip from an
By Mail Income Fund - Broker Shares Class B." account statement, include your name and
o Mail the Account Registration Form and account number. Mail to:
your check to: PFPC, Inc.
PFPC, Inc. 211 South Gulph Road
211 South Gulph Road P.O. Box 61767
P.O. Box 61503 King of Prussia, PA 19406
King of Prussia, PA 19406 o Minimum subsequent investment for all
o Minimum Initial Investment is $5,000. accounts is $250.
- ------------------------------------------------------------------------------------------------------------------------------------
o Call (800) 831-1994 to arrange for a wire o Call (800) 831-1994 to arrange for a
purchase. For same day purchase, the wire wire purchase. For same day purchse, the wire
must be received before 4:00 p.m. Eastern must be received by 4:00 p.m. Eastern time.
time. Wire federal funds to: Wire federal funds to:
Boston Safe Deposit & Trust Boston Safe Deposit & Trust
By Wire ABA#: 011001234 ABA#: 011001234
For: PFPC, Inc. For: PFPC, Inc.
Credit: McM Fixed Income Fund Credit: McM Fixed Income Fund
Acct#: 004502 Acct#: 004502
FBO: (Insert Shareholder name and FBO: (Insert Shareholder name and
account number). account number).
o Mail completed Account Registration Form o Note: Your bank may charge a wire fee.
to the address above.
o Note: Your bank may charge a wire fee.
- ------------------------------------------------------------------------------------------------------------------------------------
o You may open an account by making an o You may add to an existing account by
By Exchange exchange of Broker Shares Class B shares from making an exchange from Broker Shares Class B
an existing Fund account. Exchanges can be shares of an existing Fund account.
made by mail, fax or telephone. Call (800) Exchanges can be made by mail, fax or
831-1994 for help. telephone. Call (800) 831-1994 for help.
o Note: No fee or charge will apply, but o Completed authorization form must be on
there may be a capital gain or loss. file in advance.
o Note: No fee or charge will apply, but there
may be a capital gain or loss.
- ------------------------------------------------------------------------------------------------------------------------------------
o You must open a regular Fund account with o Call (800) 831-1994 to request the form.
By $5,000 minimum prior to participating in this o Complete and return the form and any
Automatic plan. other required materials.
Investment o Subsequent investments will be drawn from
your bank account.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
Banks, brokers, 401(k) plans, financial advisors or financial supermarkets may
charge additional transaction fees, which would not be charged if shares were
purchased directly from the Funds.
The Fund may accept telephone orders. Unless you decline telephone privileges on
your Account Registration Form, you may be responsible for any fraudulent
telephone orders as long as the Fund takes reasonable measures to verify the
orders.
Other Account Options
- ---------------------
Direct Deposit Program: You may buy additional shares by having certain payments
from the federal government ONLY (i.e., federal salary, Social Security and
certain veterans, military or other payments) automatically deposited in your
fund account. The minimum investment under this program is $250. To participate,
call (800) 831-1994 for an enrollment form.
Retirement Accounts: Tax deferred retirement programs such as 401(k) plans and
IRAs may invest in the Fund. Accounts established under such plans must have all
dividends reinvested in the Fund. For more information about these plans or for
an IRA application, please call 800-831-1994.
Selling Your Shares
You may sell your shares at any time. Your shares will be sold at the NAV
calculated after the Fund's transfer agent receives and accepts your order.
Timing of Requests
- ------------------
Redemption requests received in good order by the transfer agent, PFPC, Inc.,
before 4:00 p.m. Eastern time on any day that the NYSE is open for business will
be executed at that day's NAV. Requests received after 4:00 p.m. will be
processed on the next business day.
Selling Recently Purchased Shares
- ---------------------------------
The Fund will redeem shares that were recently purchased by check, but may delay
mailing the proceeds for up to 8 business days to allow the purchase check to
clear.
Signature Guarantees
- --------------------
A signature guarantee protects you against fraud by guaranteeing your signature
is authentic. A guarantee is required on all redemption requests over $10,000 or
when the redemption proceeds are to be sent to someone other than the owner of
record or to an address or bank account other than those of record. Most banks
or financial institutions, but not a notary public, can provide you with a
signature guarantee.
-9-
<PAGE>
To Sell Shares:
- --------------------------------------------------------------------------------
o Submit a written request for redemption with:
|X| The Fund's name;
|X| Your Fund account number;
By Mail |X| The dollar amount or number of shares or percentage of
the account to be redeemed; and
|X| Signatures of all persons required to sign for
transactions, exactly as the shares are registered.
o Mail your request to:
PFPC, Inc.
211 South Gulph Road
P.O. Box 61767
King of Prussia, PA 19406
o A check will be mailed to the name and address in which the
account is registered.
- --------------------------------------------------------------------------------
o This option must be elected either on the initial Account
Registration Form or subsequently in writing.
o Call (800) 831-1994.
By Wire o Wire redemption requests must be received before 4:00 p.m.
for money to be wired the next business day.
- --------------------------------------------------------------------------------
o This service must be elected in advance, either on the
initial Account Registration Form or subsequently in writing.
o Call (800) 831-1994 with your request.
By Telephone o The Fund will use reasonable procedures to confirm that the
request is genuine.
o Written confirmation will be provided.
- --------------------------------------------------------------------------------
o Complete the appropriate section on the Account Registration
Form or call (800) 831-1994 to request a form to add the
plan.
By Systematic o To participate, you must own or purchase shares with a value
Withdrawal of at least $10,000.
Plan o Withdrawals can be monthly, quarterly, semi-annually or
annually. The minimum amount is $100.
- --------------------------------------------------------------------------------
Please note that if you use a broker-dealer or financial institution to assist
you in any of these transactions, they may charge a fee for this service, which
the Funds would not charge.
Additional Information on Buying and Selling Fund Shares
General Policies
- ----------------
The Fund reserves the right to:
o reject any purchase order when the Fund determines that it is not in the
best interest of the Fund or its shareholders to accept such order.
o make redemptions-in-kind (payments in portfolio securities rather than
cash) if the amount to be redeemed is large enough to affect Fund
operations (for example, if it represents more than 1% of the Fund's
assets).
o refuse purchase or exchange requests in excess of 1% of the Fund's total
assets.
o change the minimum investment amounts.
o cancel any purchase order and impose a $20 returned check fee if the
purchase check does not clear.
o reject checks drawn on banks outside the United States or endorsed over
by a third party. All investments must be made in U.S. dollars.
-10-
<PAGE>
Minimum Balances
- ----------------
The Fund may redeem your remaining shares at net asset value if the balance of
your account falls below $500 due to redemptions. The Fund will notify you if
your balance has fallen below $500 and you will have 60 days to increase your
account balance before your shares are redeemed. The Fund may close any account
without notice if the account is inactive and the value of the account is $0.
Exchange Privileges
- -------------------
Broker Shares Class B shares of the Fund may be exchanged for Broker Shares
Class B shares of any of the other series of the Trust. Exchanges are treated as
a sale of Fund shares and are subject to the minimum investment requirements.
Exchanges may be made by mail or telephone if authorized on the Account
Registration Form. Telephone exchanges may be difficult to implement in times of
drastic economic or market changes.
An exchange may result in a capital gain or loss for tax purposes. The Fund may
change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions.
Mailings to Shareholders
- ------------------------
The Fund mails quarterly statements summarizing the activity in your account(s)
and confirmations following each purchase or sale of your Fund shares. To reduce
expenses, whenever possible the Fund may limit mailings of most financial
reports, prospectuses and account statements to one copy for each address that
lists one or more shareholders with the same last name. If you would like
additional copies of financial reports and prospectuses or separate mailings of
account statements, please call 800-831-1994.
Distribution Plan
- -----------------
The Fund has adopted a 12b-1 plan that allows it to pay distribution fees for
the sales and distribution of its Broker Shares Class B shares. Because these
fees are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
Distributions and Taxes
The Fund generally pays dividends and distributions of its net investment income
and net capital gains, as described in the table below.
Reinvestment Option
- -------------------
Dividend and capital gain distributions will be automatically reinvested in the
Fund unless you elect to receive them by check. You may change your dividend
option at any time by requesting a change in writing. You must have your
dividends reinvested if you participate in the Systematic Withdrawal Plan or any
Retirement Plan. Dividends are reinvested at the ex-dividend date at the NAV
determined at the close of business that day. There are no fees or charges on
reinvestments.
-11-
<PAGE>
Taxes on Dividends and Distributions
- ------------------------------------
Dividends you receive from the Fund, whether reinvested or taken in cash, are
generally taxable as ordinary income. Capital gains distributions may be taxable
at different rates depending on how long the Fund held the assets that generated
the capital gain. This is true no matter how long you have owned your shares or
whether you reinvest your distributions or receive them in cash.
The sale of Fund shares or the exchange of shares between two Funds is
considered a taxable event; you may realize a capital gain or loss on these
transactions. You should consult your own tax advisor for more specific
information about federal, state and local tax consequences.
Type of Distribution Declared & Paid Federal Tax Status
================================================================================
Dividends from Net Investment Income monthly ordinary Income
Short-term Capital Gains annually ordinary income
Long-term Capital Gains annually capital gain
Distributions from the Fund are expected to be primarily ordinary income.
Shareholders will receive an annual statement on the source and tax status of
all distributions for federal income tax purposes. There will also be
information showing which portion of the distributions are not taxable in
certain states.
Backup Withholding
- ------------------
Shareholders may have 31% of their distributions and proceeds withheld if the
Fund does not have complete, correct taxpayer information on file as required by
law.
Other Investment Strategies and Risks
The Fund's main investment strategies are set out in the front of the
prospectus. The Fund may also use other investment strategies and invest in
securities that are not discussed in this prospectus, but which are described in
detail in the Fund's Statement of Additional Information (SAI). You may obtain a
copy of the SAI without charge by calling 800-788-9485.
Other Potential Risks
- ---------------------
The Fund may, at times, invest a small portion of its assets in derivative
securities, such as future contracts and options. In addition, the Fund may
enter into interest rate, currency and mortgage swap agreements and certain
mortgage-related securities, which are deemed derivatives. Derivatives can be
illiquid, and a small investment in a derivative could have a potentially large
impact on the Fund's performance. The Fund currently does not intend to invest
in futures contracts or options.
Defensive Investing
- -------------------
The Fund may occasionally take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies when the advisor
deems it necessary to respond to adverse economic, political or other
conditions. At such time, the Fund may invest temporarily and without limitation
in U. S. government obligations, money market instruments and repurchase
agreements. When the Fund takes a temporary investment position, it may not
achieve its investment goals.
-12-
<PAGE>
Additional Information
For investors who want more information about the Fund, the following documents
are available free upon request:
Annual and Semiannual Reports: Additional information about the Fund's
investments is available in the Fund's annual and semiannual reports to
shareholders. In the annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
prospectus.
You can get free copies of these reports and the SAI, request other information
and ask questions about the Fund by contacting:
McM Funds
One Bush Street, Suite 800
San Francisco, CA 94104
Telephone: 800-788-9485
Internet address: www.mcmfunds.com
----------------
These reports and other information about the McM Funds also are available on
the EDGAR Database on the SEC's Internet site at http://www.sec.gov. In
addition, you may obtain copies of this information, after paying a duplicating
fee, by electronic request at the following E-mail address: [email protected]
or by writing the SEC's Public Reference Section, Washington, DC 20549-0102. For
more information about the operation of the SEC's Public Reference Section,
please call 1-202-942-8090.
The McM Funds' SEC File No. is 811-8370
-13-
<PAGE>
McM FUNDS
McM Equity Investment Fund
PROSPECTUS
Broker Shares Class B
February 29, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
-1-
Broker Shares Class B shares are only offered through broker-dealers and
financial intermediaries that have selling agreements with the Distributor.
<PAGE>
Table of Contents
The Fund
Fees and Expenses of the Fund
Management of the Fund
Your Account
Buying Shares
Selling Your Shares
Additional Information on Buying and Selling Fund Shares
Distributions and Taxes
Other Investment Strategies and Risks
Additional Information Back Cover
-2-
<PAGE>
McM Equity Investment Fund
Ticker Symbol: MCMEX
------------------------------------------------------------------
Investment Goal
Above-average total return consistent with reasonable risk.
Principal Investment Strategies
The Fund primarily invests in common stocks that pay dividends and offer
prospects for capital growth and income growth.
The advisor uses a "top-down" approach to monitor risk at the portfolio
level by analyzing factors such as market capitalization, and the historic
and expected growth of various sectors and industries. The advisor then
selects individual securities within these targeted sectors and industries
based on a risk-adjusted expected return analysis (i.e., the difference
between the absolute expected return of the portfolio and the market, plus
or minus an amount computed to compensate for the degree to which
historical volatility of the portfolio has exceeded or fallen short of the
overall market).
The Fund generally will be as fully invested as possible, but always at
least 65%, in equity securities of companies with the following attributes:
o ability to pay above-average dividends
o sustained earnings and growth potential
o strong management and balance sheet
o market undervaluation in light of expected future earnings
The Fund may also invest up to 35% of its assets in fixed income assets
including:
o U.S. government securities
o short-term money market instruments, including U.S. Treasury bills,
commercial paper, certificates of deposit and bankers' acceptances
o repurchase agreements
Principal Risks
By investing in stocks and bonds, the Fund may expose you to certain risks
that could cause you to lose money. These risks include:
o market risk - the risk that the price of a security (a stock or
bond) will rise or fall due to various unpredictable market
conditions
o interest rate risk - the risk that securities (principally fixed
income securities) held by the Fund will increase or decrease in
value as interest rates change
Past Fund Performance
The bar chart and performance table below illustrate some of the risks of
investing in the Fund. The Fund's past performance does not necessarily
indicate how the Fund will perform in the future.
-3-
<PAGE>
The bar chart shows changes in the Fund's performance from year to year.
The table shows how the Fund's average annual returns compare with those of
its benchmark, the S&P 500 Index, an unmanaged securities index. The
figures assume reinvestment of all dividends and distributions.
1.24% 35.94% 26.80% 33.84% 27.76% 11.54%
- -----------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
Year-to-Date Return 11.54% as of December 31, 1999
Best Quarter 20.25% in the fourth quarter of 1998
Worst Quarter -7.78% in the third quarter of 1998
* Returns are for a class of shares of the Fund that is not offered in
the prospectus, but that would have substantially similar annual
returns because the shares are invested in the same portfolio of
securities and the annual returns would differ only to the extent that
the classes do not have the same expenses.
Performance Table
(Average annual total returns as of December 31, 1999)
Since
1 Year 3 Years 5 Years Inception*
- --------------------------------------------------------------------------------
McM Equity Investment Fund 11.54% 24.01% 26.86% 24.60%
S&P 500 Index 21.00% 27.56% 28.55% 26.44%
* Inception date July 14, 1994.
Fees and Expenses of the Fund
The following table shows the fees and expenses you may pay if you buy and hold
shares of the Broker Shares Class B shares of the Fund. The Broker Shares Class
B shares of the Fund do not impose any front-end loads or deferred sales load,
but do impose a Rule 12b-1 distribution fee. Shareholders are not charged for
exchanging shares into other Broker Shares Class B series of the McM Funds or
reinvesting dividends.
Annual Fund Operating
Expenses:
(expenses that are deducted
from Fund assets)
Management Fees 0.50%
Distribution (12b-1) Fees 0.45%
Other Expenses* 0.16%
Total Annual Operating
Expenses 1.11%
=====
* "Other Expenses" are based on estimated amounts for the current fiscal year.
-4-
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o you redeem all of your shares at the end of each time period;
o your investment has a 5% return each year;
o all distributions are reinvested; and
o operating expenses of each Fund remain the same.
This example is for comparison only. Actual return and expenses will be
different and the Fund's performance and expenses may be higher or lower. The
one-year number is based on net-operating expenses; longer-term numbers are
based on total fund operating expenses. Based on the above assumptions, your
costs for the Fund would be:
1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
$113 $353 $612 $1,352
Management of the Fund
The advisor for the Fund is:
McMorgan & Company
One Bush Street, Suite 800
San Francisco, California 94104
The advisor is responsible for selecting, purchasing, monitoring and selling
securities in the Fund's investment portfolio. The advisor also arranges for the
transfer agency, custody and all other services necessary to operate the Fund.
McMorgan & Company was founded in 1969. McMorgan & Company also manages private
accounts, consisting primarily of retirement plans and health and welfare funds
for jointly trusteed plans. As of December 31, 1999, the advisor had
approximately $28 billion of assets under management, including investment
company assets of approximately $679 million.
Portfolio Management
- --------------------
An investment management team at McMorgan & Company manages the Fund's
investments. No member of the investment management team is solely responsible
for making recommendations for portfolio purchases and sales.
Management Fees
- ---------------
The Fund pays the advisor an annual advisory fee of 0.50% of average daily net
assets for providing investment advisory services. During the most recent fiscal
year, after taking into account fee waivers, the Fund paid 0.50% of the Fund's
average daily net assets in advisory fees to McMorgan & Company.
-5-
<PAGE>
The fees paid to the advisor reflect a voluntary undertaking to waive a portion
of its advisory fee. The advisor has the right to terminate this undertaking
with 60 days' notice. Any waiver by the advisor is subject to repayment by the
Fund within the following three years if the Fund is able to make the repayment
without exceeding its current expense limits.
Your Account
Buying Shares
You may buy shares in the Fund with an initial investment of $5,000 or more.
Additional investments may be made for as little as $250. SHARES OF THIS CLASS
ARE ONLY OFFERED THROUGH BROKER-DEALERS AND FINANCIAL INTERMEDIARIES THAT HAVE
SELLING AGREEMENTS WITH THE DISTRIBUTOR. The Fund has the right to waive the
minimum investment requirements for employees of the Fund's investment advisor
and its affiliates. The Fund also has the right to reject any purchase order.
Pricing of Fund Shares (Purchase Price)
- ---------------------------------------
The price of the Fund's shares is based on the Net Asset Value (NAV) of the
Fund's portfolio. The Fund calculates NAV by adding the total market value of
the Fund's investments and other assets, subtracting any liabilities, and then
dividing that figure by the total number of outstanding shares of that Fund. The
Fund's NAV is calculated at the close of regular trading of the New York Stock
Exchange ("NYSE"), normally 4 p.m. Eastern time. There is no sales charge in
connection with the purchase of shares.
The portfolio securities of the Fund, except debt securities with maturities of
60 days or less, are valued at market value. If market quotations are not
available, securities are valued at fair value as determined in good faith by
the Board of Trustees.
Debt securities with maturities of less than 60 days are valued at amortized
cost. Under this method of valuation, the advisor values the security at cost
and then assumes a constant amortization of any discount or premium to maturity
of the security.
Timing of Requests
- ------------------
All requests received by the transfer agent, PFPC, Inc., before 4:00 p.m.
Eastern time will be executed at that day's NAV. Orders received after 4:00 p.m.
will be executed the following day at that day's NAV. These Funds do not price
shares on days when the NYSE is closed, which currently includes New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.
-6-
<PAGE>
<TABLE>
<CAPTION>
To Purchase Shares:
- ------------------------------------------------------------------------------------------------------------------------------------
Initial Investment Subsequent Investments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
o Complete and sign the Account o Make your check payable to the "McM
Registration Form. Equity Investment Fund - Broker Shares
o Make your check payable to the "McM Class B."
By Mail Equity Investment Fund - Broker Shares o Fill out an investment slip from an
Class B." account statement, include your name and
o Mail the Account Registration Form and account number. Mail to:
your check to: PFPC, Inc.
PFPC, Inc. 211 South Gulph Road
211 South Gulph Road P.O. Box 61767
P.O. Box 61503 King of Prussia, PA 19406
King of Prussia, PA 19406 o Minimum subsequent investment for all
o Minimum Initial Investment is $5,000. accounts is $250.
- ------------------------------------------------------------------------------------------------------------------------------------
o Call (800) 831-1994 to arrange for a wire o Call (800) 831-1994 to arrange for a wire purchase.
purchase. For same day purchase, For same day purchase, the wire must be received by
the wire must be received before 4:00 p.m. 4:00 p.m. Eastern time. Wire federal funds to:
By Wire Eastern time. Wire federal funds to:
Boston Safe Deposit & Trust Boston Safe Deposit & Trust
ABA#: 011001234 ABA#: 011001234
For: PFPC, Inc. For: PFPC, Inc.
Credit: McM Equity Investment Fund Credit: McM Equity Investment Fund
Acct#: 004502 Acct#: 004502
FBO: (Insert Shareholder name FBO: (Insert Shareholder name
and account number). and account number).
o Mail completed Account Registration Form o Note: Your bank may charge a wire fee.
to the address above.
o Note: Your bank may charge a wire fee.
- ------------------------------------------------------------------------------------------------------------------------------------
o You may open an account by making an o You may add to an existing account by
By Exchange exchange of Broker Shares Class B shares from making an exchange from Broker Shares Class B
an existing Fund account. Exchanges can be shares of an existing Fund account.
made by mail, fax or telephone. Exchanges can be made by mail, fax or
Call (800) 831-1994 for help. telephone. Call (800) 831-1994 for help.
o Note: No fee or charge will apply, but o Completed authorization form must be on
there may be a capital gain or loss. file in advance.
o Note: No fee or charge will apply, buy there may
be a capital gain or loss.
- ------------------------------------------------------------------------------------------------------------------------------------
o You must open a regular Fund account with o Call (800) 831-1994 to request the form.
By Automatic $5,000 minimum prior to participating in this o Complete and return the form and any
Investment plan. other required materials.
o Subsequent investments will be drawn from
your bank account.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
Banks, brokers, 401(k) plans, financial advisors or financial supermarkets may
charge additional transaction fees, which would not be charged if shares were
purchased directly from the Funds.
The Fund may accept telephone orders. Unless you decline telephone privileges on
your Account Registration Form, you may be responsible for any fraudulent
telephone orders as long as the Fund takes reasonable measures to verify the
orders.
Other Account Options
- ---------------------
Direct Deposit Program: You may buy additional shares by having certain payments
from the federal government ONLY (i.e., federal salary, Social Security and
certain veterans, military or other payments) automatically deposited in your
fund account. The minimum investment under this program is $250. To participate,
call (800) 831-1994 for an enrollment form.
Retirement Accounts: Tax deferred retirement programs such as 401(k) plans and
IRAs may invest in the Fund. Accounts established under such plans must have all
dividends reinvested in the Fund. For more information about these plans or for
an IRA application, please call 800-831-1994.
Selling Your Shares
You may sell your shares at any time. Your shares will be sold at the NAV
calculated after the Fund's transfer agent receives and accepts your order.
Timing of Requests
- ------------------
Redemption requests received in good order by the transfer agent, PFPC, Inc.,
before 4:00 p.m. Eastern time on any day that the NYSE is open for business will
be executed at that day's NAV. Requests received after 4:00 p.m. will be
processed on the next business day.
Selling Recently Purchased Shares
- ---------------------------------
The Fund will redeem shares that were recently purchased by check, but may delay
mailing the proceeds for up to 8 business days to allow the purchase check to
clear.
Signature Guarantees
- --------------------
A signature guarantee protects you against fraud by guaranteeing your signature
is authentic. A guarantee is required on all redemption requests over $10,000 or
when the redemption proceeds are to be sent to someone other than the owner of
record or to an address or bank account other than those of record. Most banks
or financial institutions, but not a notary public, can provide you with a
signature guarantee.
-8-
<PAGE>
<TABLE>
<CAPTION>
To Sell Shares:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
o Submit a written request for redemption with:
|X| The Fund's name;
|X| Your Fund account number;
By Mail |X| The dollar amount or number of shares or percentage of the account to be
redeemed; and
|X| Signatures of all persons required to sign for transactions, exactly as
the shares are registered.
o Mail your request to:
PFPC, Inc.
211 South Gulph Road
P.O. Box 61767
King of Prussia, PA 19406
o A check will be mailed to the name and address in which the account is registered.
- ------------------------------------------------------------------------------------------------------------------------------------
o This option must be elected either on the initial Account Registration
Form or subsequently in writing.
o Call (800) 831-1994.
By Wire o Wire redemption requests must be received before 4:00 p.m. for money to be
wired the next business day.
- ------------------------------------------------------------------------------------------------------------------------------------
o This service must be elected in advance, either on the initial Account Registration
Form or subsequently in writing.
o Call (800) 831-1994 with your request.
By Telephone o The Fund will use reasonable procedures to confirm that the request is genuine.
o Written confirmation will be provided.
- ------------------------------------------------------------------------------------------------------------------------------------
o Complete the appropriate section on the Account Registration Form or call
(800) 831-1994 to request a form to add the plan.
By Systematic o To participate, you must own or purchase shares with a value of at least $10,000.
Withdrawal o Withdrawals can be monthly, quarterly, semi-annually or annually. The minimum amount
Plan is $100.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please note that if you use a broker-dealer or financial institution to assist
you in any of these transactions, they may charge a fee for this service, which
the Funds would not charge.
Additional Information on Buying and Selling Fund Shares
General Policies
- ----------------
The Fund reserves the right to:
o reject any purchase order when the Fund determines that it is not in the
best interest of the Fund or its shareholders to accept such order.
o make redemptions-in-kind (payments in portfolio securities rather than
cash) if the amount to be redeemed is large enough to affect Fund
operations (for example, if it represents more than 1% of the Fund's
assets).
o refuse purchase or exchange requests in excess of 1% of the Fund's total
assets.
o change the minimum investment amounts.
o cancel any purchase order and impose a $20 returned check fee if the
purchase check does not clear.
o reject checks drawn on banks outside the United States or endorsed over
by a third party. All investments must be made in U.S. dollars.
-9-
<PAGE>
Minimum Balances
- ----------------
The Fund may redeem your remaining shares at net asset value if the balance of
your account falls below $500 due to redemptions. The Fund will notify you if
your balance has fallen below $500 and you will have 60 days to increase your
account balance before your shares are redeemed. The Fund may close any account
without notice if the account is inactive and the value of the account is $0.
Exchange Privileges
- -------------------
Broker Shares Class B shares of the Fund may be exchanged for Broker Shares
Class B shares of any of the other series of the Trust. Exchanges are treated as
a sale of Fund shares and are subject to the minimum investment requirements.
Exchanges may be made by mail or telephone if authorized on the Account
Registration Form. Telephone exchanges may be difficult to implement in times of
drastic economic or market changes.
An exchange may result in a capital gain or loss for tax purposes. The Fund may
change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions.
Mailings to Shareholders
- ------------------------
The Fund mails quarterly statements summarizing the activity in your account(s)
and confirmations following each purchase or sale of your Fund shares. To reduce
expenses, whenever possible the Fund may limit mailings of most financial
reports, prospectuses and account statements to one copy for each address that
lists one or more shareholders with the same last name. If you would like
additional copies of financial reports and prospectuses or separate mailings of
account statements, please call 800-831-1994.
Distribution Plan
- -----------------
The Fund has adopted a 12b-1 plan that allows it to pay distribution fees for
the sales and distribution of its Broker Shares Class B shares. Because these
fees are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
Distributions and Taxes
The Fund generally pays dividends and distributions of its net investment income
and net capital gains, as described in the table below.
Reinvestment Option
- -------------------
Dividend and capital gain distributions will be automatically reinvested in the
Fund unless you elect to receive them by check. You may change your dividend
option at any time by requesting a change in writing. You must have your
dividends reinvested if you participate in the Systematic Withdrawal Plan or any
Retirement Plan. Dividends are reinvested at the ex-dividend date at the NAV
determined at the close of business that day. There are no fees or charges on
reinvestments.
-10-
<PAGE>
Taxes on Dividends and Distributions
- ------------------------------------
Dividends you receive from the Fund, whether reinvested or taken in cash, are
generally taxable as ordinary income. Capital gains distributions may be taxable
at different rates depending on how long the Fund held the assets that generated
the capital gain. This is true no matter how long you have owned your shares or
whether you reinvest your distributions or receive them in cash.
The sale of Fund shares or the exchange of shares between two Funds is
considered a taxable event; you may realize a capital gain or loss on these
transactions. You should consult your own tax advisor for more specific
information about federal, state and local tax consequences.
Type of Distribution Declared & Paid Federal Tax Status
- --------------------------------------------------------------------------------
Dividends from Net Investment Income quarterly ordinary Income
Short-term Capital Gains annually ordinary income
Long-term Capital Gains annually capital gain
Distributions from the Fund are expected to be primarily ordinary income.
Shareholders will receive an annual statement on the source and tax status of
all distributions for federal income tax purposes. There will also be
information showing which portion of the distributions are not taxable in
certain states.
Backup Withholding
- ------------------
Shareholders may have 31% of their distributions and proceeds withheld if the
Fund does not have complete, correct taxpayer information on file as required by
law.
Other Investment Strategies and Risks
The Fund's main investment strategies are set out in the front of the
prospectus. The Fund may also use other investment strategies and invest in
securities that are not discussed in this prospectus, but which are described in
detail in the Fund's Statement of Additional Information (SAI). You may obtain a
copy of the SAI without charge by calling 800-788-9485.
Other Potential Risks
- ---------------------
The Fund may, at times, invest a small portion of its assets in derivative
securities, such as future contracts and options. Derivatives can be illiquid,
and a small investment in a derivative could have a potentially large impact on
the Fund's performance. The Fund currently does not intend to invest in futures
contracts or options.
Defensive Investing
- -------------------
The Fund may occasionally take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies when the advisor
deems it necessary to respond to adverse economic, political or other
conditions. At such time, the Fund may invest temporarily and without limitation
in U. S. government obligations, money market instruments and repurchase
agreements. When the Fund takes a temporary investment position, it may not
achieve its investment goals.
-11-
<PAGE>
Additional Information
For investors who want more information about the Fund, the following documents
are available free upon request:
Annual and Semiannual Reports: Additional information about the Fund's
investments is available in the Fund's annual and semiannual reports to
shareholders. In the annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
prospectus.
You can get free copies of these reports and the SAI, request other information
and ask questions about the Fund by contacting:
McM Funds
One Bush Street, Suite 800
San Francisco, CA 94104
Telephone: 800-788-9485
Internet address: www.mcmfunds.com
----------------
These reports and other information about the McM Funds also are available on
the EDGAR Database on the SEC's Internet site at http://www.sec.gov. In
addition, you may obtain copies of this information, after paying a duplicating
fee, by electronic request at the following E-mail address: [email protected]
or by writing the SEC's Public Reference Section, Washington, DC 20549-0102. For
more information about the operation of the SEC's Public Reference Section,
please call 1-202-942-8090.
The McM Funds' SEC File No. is 811-8370
-12-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
February 29, 2000
- --------------------------------------------------------------------------------
McM FUNDS
- --------------------------------------------------------------------------------
MONEY MARKET FUND BALANCED FUND
McM Principal Preservation Fund McM Balanced Fund
FIXED INCOME FUNDS EQUITY FUNDS
McM Intermediate Fixed Income Fund McM Equity Investment Fund
McM Fixed Income Fund
This Statement of Additional Information dated February 29, 2000 is not a
prospectus. It should be read in conjunction with the McM Funds' McM Funds Class
Prospectus dated October 13, 1999, and the McM Funds Broker Shares Class B
Prospectuses dated February 29, 2000 which are incorporated by reference herein.
Copies of the Prospectuses may be obtained without charge by contacting either
the Advisor or the Underwriter at the addresses and telephone numbers below.
Underwriter: Advisor:
Provident Distributors, Inc. McMorgan & Company
Four Falls Corporate Center One Bush Street, Suite 800
6th Floor San Francisco, CA 94104
West Conshohocken, PA 19428 (800) 788-9485
(610) 260-6533
The Annual Report, which contains important financial information about the McM
Funds, is incorporated by reference into this Statement of Additional
Information and is also available without charge at the above phone numbers or
addresses.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
McM Funds.........................................................................................................3
Investment Policies
Mortgage-Backed Securities and Mortgage Pass-Through Securities..............................................3
Collateralized Mortgage Obligations, Real Estate Mortgage Investment Conduit
and Multi-Class Pass-Throughs..............................................................................3
Resets.......................................................................................................4
Caps and Floors..............................................................................................4
Stripped Mortgage-Backed Securities..........................................................................4
Risks of Mortgage-Backed Securities..........................................................................5
Other Mortgage-Backed Securities.............................................................................5
Asset-Backed Securities......................................................................................6
Futures Contracts and Related Options........................................................................6
Risk Factors of Options, Futures, and Forward Contracts..................................................... 6
Options......................................................................................................6
Purchasing Call Options......................................................................................7
Covered Call Writing.........................................................................................7
Purchasing Put Options.......................................................................................8
Writing Put Options..........................................................................................8
Swaps........................................................................................................9
Forward Commitments, When-Issued Securities and Delayed Delivery Transactions................................9
Variable and Floating Rate Instruments.......................................................................9
Repurchase Agreements........................................................................................9
Reverse Repurchase Agreements...............................................................................10
Borrowing...................................................................................................10
Securities Lending..........................................................................................10
Securities of Other Investment Companies....................................................................10
Foreign Securities..........................................................................................11
Restricted Securities.......................................................................................11
Rule 144A Securities........................................................................................11
Illiquid Securities.........................................................................................11
Convertible Securities......................................................................................11
Money Market Instruments....................................................................................11
Temporary Defensive Measures................................................................................12
Other Investments...........................................................................................12
Investment Restrictions..........................................................................................12
Trustees and Officers............................................................................................13
Control Persons and Principal Holders of Securities..............................................................15
Investment Advisory and Other Services
Investment Advisory Agreement...............................................................................18
Transfer Agent..............................................................................................19
Administrative Services.....................................................................................19
Accounting Services.........................................................................................19
Custodian and Custody Administrator.........................................................................20
Underwriter.................................................................................................20
Portfolio Transactions and Brokerage Commissions.................................................................21
Shares of Beneficial Interest....................................................................................21
Purchases, Redemptions and Pricing of Shares.....................................................................22
Taxes............................................................................................................23
Performance Information..........................................................................................25
Total Return Calculations...................................................................................25
Yield of Principal Preservation Fund........................................................................26
Yields of Intermediate Fixed Income Fund and Fixed Income Fund..............................................26
Other Information................................................................................................27
</TABLE>
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McM Funds - Statement of Additional Information Page 2
<PAGE>
McM FUNDS
McM Funds, One Bush Street, Suite 800, San Francisco, California, 94104, is an
open-end, diversified management investment company, registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). McM Funds offers
shares of beneficial interest (the "Shares") in the following series: McM
Principal Preservation Fund (the "Principal Preservation Fund"), McM
Intermediate Fixed Income Fund (the "Intermediate Fixed Income Fund"), McM Fixed
Income Fund (the "Fixed Income Fund"), McM Balanced Fund (the "Balanced Fund")
and McM Equity Investment Fund (the "Equity Investment Fund") (each a "Fund" and
collectively the "Funds"). The McM Intermediate Fixed Income Fund, McM Fixed
Income Fund, McM Balanced Fund and McM Equity Investment Fund offer two classes
of shares: McM Funds shares and Broker Shares Class B shares (referred to
individually as a "class" and collectively as the "classes"). The McM Principal
Preservation Fund only offers the McM Funds class of shares.
Each Fund is a separate series of McM Funds, a Delaware business trust organized
by a Trust Instrument dated February 3, 1994, as amended May 9, 1994. The
Trustees of McM Funds may establish additional series or classes of shares
without the approval of shareholders. The assets of each series belong only to
that series, and the liabilities of each series are borne solely by that series
and no other.
INVESTMENT POLICIES AND RELATED RISKS
The following supplements the information contained in the Prospectus concerning
the investment policies and related risks of the Funds. The investment practices
described below, except for the discussion of portfolio loan transactions and
borrowing, are not fundamental and may be changed by the Board of Trustees
without the approval of shareholders.
Mortgage-Backed Securities and Mortgage Pass-Through Securities
Each Fund (except Principal Preservation Fund) may invest in mortgage-backed
securities, which are interests in pools of mortgage loans, including mortgage
loans made by savings and loan institutions, mortgage bankers, commercial banks
and others. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations
as further described below. A Fund may also invest in debt securities which are
secured with collateral consisting of mortgage-backed securities (see
"Collateralized Mortgage Obligations").
The timely payment of principal and interest on mortgage-backed securities
issued or guaranteed by the Government National Mortgage Association ("GNMA") is
backed by GNMA and the full faith and credit of the U.S. Government. Also,
securities issued by GNMA and other mortgage-backed securities may be purchased
at a premium over the maturity value of the underlying mortgages. This premium
is not guaranteed and would be lost if prepayment occurs. Mortgage-backed
securities issued by U.S. Government agencies or instrumentalities other than
GNMA are not "full faith and credit" obligations. Certain obligations, such as
those issued by the Federal Home Loan Bank, are supported by the issuer's right
to borrow from the U.S. Treasury; while others, such as those issued by the
Federal National Mortgage Association, are supported only by the credit of the
issuer. Unscheduled or early payments on the underlying mortgages may shorten
the securities' effective maturities and reduce returns. A Fund may agree to
purchase or sell these securities with payment and delivery taking place at a
future date.
For federal income tax purposes, other than diversification under Subchapter M,
mortgage-backed securities are not considered to be separate securities but
rather "grantor trusts" conveying to the holder an individual interest in each
of the mortgages constituting the pool. The mortgage securities which are issued
or guaranteed by GNMA, FHLMC or FNMA are called pass-through certificates
("Certificates") because a pro rata share of both regular interest and principal
payments (less GNMA's, FHLMC's or FNMA's fees and any applicable loan servicing
fees), as well as unscheduled early prepayments on the underlying mortgage pool,
are passed through monthly to the holder of the Certificate (i.e., the Fund).
The yields provided by these mortgage securities have historically exceeded the
yields on other types of U.S. Government securities with comparable maturities
in large measure due to the risks associated with prepayment features. (See
"Risks of Mortgage Securities").
Collateralized Mortgage Obligations ("CMOs"), Real Estate Mortgage Investment
Conduits ("REMICs") and Multi-Class Pass-Throughs.
Each Fund (except Principal Preservation Fund) may also invest in certain debt
obligations which are collateralized by mortgage loans or mortgage pass-through
securities. Such securities may be issued or guaranteed by U.S. Government
agencies or issued by certain financial institutions and other mortgage lenders.
CMOs and REMICs are debt instruments issued by special purpose entities, which
are secured by pools of mortgage loans or other mortgage-backed securities.
Multi-class pass-through securities are equity interests in a trust composed of
mortgage loans or other mortgage-backed securities. Payments of principal and
interest on underlying
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 3
<PAGE>
collateral allows the payment of debt service on the CMO or REMIC or scheduled
distributions on the multi-class pass-through securities. CMOs, REMICs and
multi-class pass-through securities (collectively CMOs unless the context
indicates otherwise) may be issued by agencies or instrumentalities of the U.S.
Government or by private organizations.
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specified coupon
rate or adjustable rate tranche (to be discussed in the next paragraph) and has
a stated maturity or final distribution date. Principal prepayments on
collateral underlying a CMO may cause it to be retired substantially earlier
than the stated maturities or final distribution dates. Interest is paid or
accrues on all classes of a CMO on a monthly, quarterly or semi-annual basis.
The principal and interest on the underlying mortgages may be allocated among
several classes of a series of a CMO in many ways. In a common structure,
payments of principal, including any principal prepayments, on the underlying
mortgages are applied to the classes of a series of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment of
principal will be made on any class of a CMO until all other classes having an
earlier stated maturity or final distribution date have been paid in full.
One or more tranches of a CMO may have coupon rates which reset periodically at
a specified increment over an index such as the London Interbank Offered Rate
("LIBOR"). These adjustable rate tranches, known as "floating rate CMOs," will
be considered as adjustable rate mortgage securities (?ARMS?) by a Fund.
Floating rate CMOs may be backed by fixed-rate or adjustable rate mortgages.
Floating rate CMOs are typically issued with lifetime "caps" on the coupon rate.
These "caps," similar to the "caps" on adjustable rate mortgages, represent a
ceiling beyond which the coupon rate on a floating rate CMO may not be increased
regardless of increases in the interest rate index to which the floating rate
CMO is based.
REMICs are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities. As with CMOs, the mortgages
which collateralize the REMICs in which a Fund may invest include mortgages
backed by GNMA certificates or other mortgage pass-throughs issued or guaranteed
by the U.S. Government, its agencies or instrumentalities or issued by private
entities, which are not guaranteed by any government agency.
Yields on privately-issued CMOs as described above have been historically higher
than the yields on CMOs issued or guaranteed by U.S. Government agencies. The
risk of loss due to default on such instruments is higher because they are not
guaranteed by the U.S.
Government. McM Funds will not invest in subordinated privately-issued CMOs.
Resets
The interest rates paid on the ARMS and CMOs in which a Fund may invest
generally are readjusted at intervals of one year or less to an increment over
some predetermined interest rate index. There are three main categories of
indices: those based on U.S. Treasury securities; those derived from a
calculated measure such as a cost of funds index; or moving average of mortgage
rates.
Caps and Floors
The underlying mortgages which collateralize the ARMS and CMOs in which a Fund
invests will frequently have caps and floors that limit the maximum amount by
which the loan rate to the residential borrower may change up or down (1) per
reset or adjustment interval and (2) over the life of the loan. Some residential
mortgage loans restrict periodic adjustments by limiting changes in the
borrower's monthly principal and interest payments rather than limiting interest
rate changes. These payment caps may result in negative amortization.
Stripped Mortgage-Backed Securities
Each Fund (except Principal Preservation Fund) may also invest in stripped
mortgage-backed securities, which are derivative multi-class mortgage
securities. The stripped mortgage-backed securities in which a Fund may invest
will only be issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Stripped mortgage-backed securities have greater market
volatility than other types of mortgage securities in which a Fund may invest.
Stripped mortgage-backed securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage-backed security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 4
<PAGE>
maturity on an IO class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the yield to maturity
of any such IOs held by the Fund. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the Fund may fail to recoup
fully its initial investment in these IO securities even if the securities are
rated in the highest rating categories, AAA or Aaa, by Standard & Poor's Ratings
Group ("S&P") or Moody's Investor Services, Inc.("Moody's"), respectively.
Stripped mortgage-backed securities are purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers.
The U.S. Securities and Exchange Commission has indicated that it views such
securities as illiquid. A Fund?s investment in stripped mortgage securities will
be treated as illiquid and will, together with any other illiquid investments,
not exceed 15% of a Fund's net assets.
Risks of Mortgage-Backed Securities
The mortgage-backed securities in which a Fund invests differ from conventional
bonds in that principal is paid back over the life of the mortgage security
rather than at maturity. As a result, the holder of the mortgage-backed
securities (i.e., the Fund) receives monthly scheduled payments of principal and
interest, and may receive unscheduled principal payments representing
prepayments on the underlying mortgages. When the holder reinvests the payments
and any unscheduled prepayments of principal it receives, it may receive a rate
of interest that is lower than the rate on the existing mortgage securities. For
this reason, mortgage-backed securities may be less effective than other types
of U.S. Government securities as a means of "locking in" long-term interest
rates.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages and expose a Fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by a
Fund, the prepayment right of mortgagors may decrease or limit the increase in
net asset value of the Fund because the value of the mortgage-backed securities
held by the Fund may decline more than or may not appreciate as much as the
price of noncallable debt securities. To the extent market interest rates
increase beyond the applicable cap or maximum rate on a mortgage security, the
market value of the mortgage-backed security would likely decline to the same
extent as a conventional fixed rate security.
In addition, to the extent mortgage-backed securities are purchased at a
premium, mortgage foreclosures and unscheduled principal prepayments may result
in some loss of the holder's principal investment to the extent of the premium
paid. On the other hand, if mortgage-backed securities are purchased at a
discount, both a scheduled payment of principal and an unscheduled prepayment of
principal will increase current and total returns and will accelerate the
recognition of income which, when distributed to shareholders, will be taxable
as ordinary income.
A Fund may also invest in pass-through certificates issued by non-governmental
issuers. Pools of conventional residential mortgage loans created by such
issuers generally offer a higher rate of interest than government and
government-related pools because there are no direct or indirect government
guarantees of payment. Timely payment of interest and principal of these pools
is, however, generally supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance. The insurance and
guarantees are issued by government entities, private insurance and the mortgage
poolers. Such insurance and guarantees and the creditworthiness of the issuers
thereof will be considered in determining whether a mortgage-related security
meets the Fund's quality standards. The Fund may buy mortgage-related securities
without insurance or guarantees, if through an examination of the loan
experience and practices of the poolers, the investment manager determines that
the securities meet the Fund's quality standards.
With respect to pass-through mortgage pools issued by non-governmental issuers,
there can be no assurance that the private insurers associated with such
securities can meet their obligations under the policies. Although the market
for such non-governmental issued or guaranteed mortgage securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable. The purchase of such securities is subject to each Fund's
limit with respect to investment in illiquid securities.
Other Mortgage-Backed Securities
The Advisor expects that governmental, government-related or private entities
may create mortgage loan pools and other mortgage-related securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. The mortgages underlying these securities may include
alternative mortgage instruments, that is, mortgage instruments the principal or
interest payments of which may vary or the terms to maturity of which may differ
from customary long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Advisor will, consistent
with a Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities. A Fund will
not invest in any new types of mortgage-related securities without prior
disclosure to the shareholders of the respective Fund.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 5
<PAGE>
Asset-Backed Securities
Asset-backed securities are securities backed by installment contracts, credit
card and other receivables, or other assets of a financial character.
Asset-backed securities represent interests in "pools" of assets in which
payments of both interest and principal on the securities are made monthly, thus
in effect "passing through" monthly payments made by the individual borrowers on
the assets that underlie the securities, net of any fees paid to the issuer or
guarantor of the securities. The average life of asset-backed securities varies
with the maturities of the underlying instruments. An asset-backed security's
stated maturity may be shortened, and the security's total return may be
difficult to predict precisely.
Futures Contracts and Related Options
Each Fund (except Principal Preservation Fund) may invest in futures contracts
and options on futures contracts for hedging purposes or to maintain liquidity.
However, a Fund may not purchase or sell a futures contract unless immediately
after any such transaction the sum of the aggregate amount of margin deposits on
its existing futures positions and the amount of premiums paid for related
options is 20% or less of its total assets.
At maturity, a futures contract obligates a Fund to take or make delivery of
certain securities or the cash value of a securities index. A Fund may sell a
futures contract in order to offset a decrease in the market value of its
portfolio securities that might otherwise result from a market decline. A Fund
may do so either to hedge the value of its portfolio of securities as a whole or
to protect against declines, occurring prior to sales of securities, in the
value of the securities to be sold. Conversely, a Fund may purchase a futures
contract in anticipation of purchases of securities. In addition, a Fund may
utilize futures contracts in anticipation of changes in the composition of its
portfolio holdings.
A Fund may purchase and sell call and put options on futures contracts traded on
an exchange or board of trade. In connection with a Fund's position in a futures
contract or option thereon, a Fund will create a segregated account of liquid
assets, such as cash, U.S. Government securities or other liquid high-grade debt
obligations, or will otherwise cover its position in accordance with applicable
requirements of the U.S. Securities and Exchange Commission.
Risk Factors of Options, Futures and Forward Contracts
The primary risks associated with the use of futures contracts and options are:
(i) imperfect correlation between the change in market value of the securities
held by a Fund and the price of futures contracts and options; (ii) possible
lack of a liquid secondary market for a futures contract and the resulting
inability to close a futures contract when desired; (iii) losses, which are
potentially unlimited, due to unanticipated market movements; and (iv) McMorgan
& Company?s (the ?Advisor?) ability to predict correctly the direction of
security prices, interest rates and other economic factors.
Options
Each Fund (except Principal Preservation Fund) may purchase put and call options
listed on a national securities exchange and issued by the Options Clearing
Corporation to the extent that premiums paid on all outstanding call options do
not exceed 20% of a Fund's total assets. Purchasing options is a specialized
investment technique that entails a substantial risk of a complete loss of the
amounts paid as premiums to the writer of the option. Each Fund (except
Principal Preservation Fund) may write covered call and secured put options.
Such options may relate to particular securities, stock indices, or financial
instruments and may or may not be listed on a national securities exchange and
issued by the Options Clearing Corporation. Options trading is a highly
specialized activity that entails greater than ordinary investment risk. Options
on particular securities may be more volatile than the underlying securities,
and therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than a direct investment in the underlying securities. A
Fund may lose potential market appreciation if the Advisor's judgment is
incorrect with respect to interest rates, security prices or the movement of
indices.
A Fund may use options traded on U.S. exchanges and, to the extent permitted by
law, options traded over-the-counter. A Fund will invest in such options only to
the extent consistent with its 10% limit on investments in illiquid securities.
A Fund will write call and put options only if they are "covered." In the case
of a call option on a security, the option is "covered" if a Fund owns the
security underlying the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or, if additional cash
consideration is required, liquid assets, such as cash, U.S. Government
securities or other liquid high-grade debt obligations, in such amount as are
held in a segregated account by its custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the option is
covered if a Fund maintains with its custodian a diversified stock portfolio or
liquid assets equal to the contract value. A call option is also covered if a
Fund holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written; or (ii) greater than the exercise price of the call written
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 6
<PAGE>
provided the difference is maintained by the Fund in liquid assets such as cash,
U.S. Government securities and other high-grade debt obligations in a segregated
account with its custodian. A Fund will write put options only if they are
"secured" by liquid assets maintained in a segregated account by McM Funds'
custodian in an amount not less than the exercise price of the option at all
times during the option period.
A Fund's obligation to sell a security subject to a covered call option written
by it, or to purchase a security subject to a secured put option written by it,
may be terminated prior to the expiration date of the option by the Fund's
execution of a closing purchase transaction, which is effected by purchasing on
an exchange an option of the same series as the previously written option. Such
a purchase does not result in the ownership of an option. A closing purchase
transaction will ordinarily be effected to realize a profit on an outstanding
option, to prevent an underlying security from being called, to permit the sale
of the underlying security or to permit the writing of a new option containing
different terms on such underlying security. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Fund will have incurred a loss in the
transaction. There is no assurance that a liquid secondary market will exist for
any particular option. An option writer, unable to effect a closing purchase
transaction, will not be able to sell the underlying security (in the case of a
covered call option) or liquidate the segregated account (in the case of a
secured put option) until the option expires or the optioned security is
delivered upon exercise with the result that the writer in such circumstances
will be subject to the risk of market decline or appreciation in the security
during such period.
Purchasing Call Options
Each Fund (except Principal Preservation Fund) may purchase call options to the
extent that premiums paid by a Fund do not aggregate more than 20% of that
Fund's total assets. When a Fund purchases a call option, in return for a
premium paid by the Fund to the writer of the option, the Fund obtains the right
to buy the security underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option, who receives
the premium upon writing the option, has the obligation, upon exercise of the
option, to deliver the underlying security against payment of the exercise
price. The advantage of purchasing call options is that a Fund may alter
portfolio characteristics and modify portfolio maturities without incurring the
cost associated with transactions.
A Fund may, following the purchase of a call option, liquidate its position by
effecting a closing sale transaction. This is accomplished by selling an option
of the same series as the option previously purchased. The Fund will realize a
profit from a closing sale transaction if the price received on the transaction
is more than the premium paid to purchase the original call option; the Fund
will realize a loss from a closing sale transaction if the price received on the
transaction is less than the premium paid to purchase the original call option.
Although a Fund will generally purchase only those call options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option, or at any
particular time, and for some options no secondary market on an exchange may
exist. In such event, it may not be possible to effect closing transactions in
particular options, with the result that a Fund would have to exercise its
options in order to realize any profit and would incur brokerage commissions
upon the exercise of such options and upon the subsequent disposition of the
underlying securities acquired through the exercise of such options. Further,
unless the price of the underlying security changes sufficiently, a call option
purchased by a Fund may expire without any value to the Fund, in which event the
Fund would realize a capital loss that would be characterized as short-term
unless the option was held for more than one year.
Covered Call Writing
Each Fund (except Principal Preservation Fund) may write covered call options
from time to time on such portions of their portfolios, without limit, as the
Advisor determines is appropriate in seeking to obtain a Fund's investment
objective. The advantage to a Fund of writing covered calls is that the Fund
receives a premium that is additional income. However, if the security rises in
value, the Fund may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
or upon entering a closing purchase transaction. A closing purchase transaction,
in which a Fund, as writer of an option, terminates its obligation by purchasing
an option of the same series as the option previously written, cannot be
effected with respect to an option once the option writer has received an
exercise notice for such option.
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McM Funds - Statement of Additional Information Page 7
<PAGE>
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable a Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. A Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term capital
gain in the amount of the premium on the option less the commission paid. Such a
gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option is exercised, a
Fund will realize a gain or loss from the sale of the underlying security equal
to the difference between the cost of the underlying security and the proceeds
of the sale of the security plus the amount of the premium on the option less
the commission paid.
A Fund will write call options only on a covered basis, which means that a Fund
will own the underlying security subject to a call option at all times during
the option period. Unless a closing purchase transaction is effected, a Fund
would be required to continue to hold a security which it might otherwise wish
to sell or deliver a security it would want to hold. The exercise price of a
call option may be below, equal to or above the current market value of the
underlying security at the time the option is written.
Purchasing Put Options
Each Fund (except Principal Preservation Fund) may invest up to 20% of its total
assets in the purchase of put options. A Fund will, at all times during which it
holds a put option, own the security covered by such option. The purchase of the
put on substantially identical securities held will constitute a short sale for
tax purposes, the effect of which is to create short-term capital gain on the
sale of the security and to suspend running of its holding period (and treat it
as commencing on the date of the closing of the short sale) or that of a
security acquired to cover the same if, at the time the put was acquired, the
security had not been held for more than one year.
A put option purchased by a Fund gives it the right to sell one of its
securities for an agreed-upon price up to an agreed date. A Fund may purchase
put options in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option ("protective puts"). The ability to purchase put options will allow a
Fund to protect unrealized gains in an appreciated security in its portfolio
without actually selling the security. If the security does not drop in value, a
Fund will lose the value of the premium paid. A Fund may sell a put option which
it has previously purchased prior to the sale of the securities underlying such
option. Such sale will result in a net gain or loss depending upon whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold.
A Fund may sell a put option purchased on individual portfolio securities.
Additionally, a Fund may enter into closing sale transactions. A closing sale
transaction is one in which a Fund, when it is the holder of an outstanding
option, liquidates its position by selling an option of the same series as the
option previously purchased.
Writing Put Options
Each Fund (except Principal Preservation Fund) may also write put options on a
secured basis, which means that a Fund will maintain, in a segregated account
with its custodian, cash or U.S. Government securities in an amount not less
than the exercise price of the option at all times during the option period. The
amount of cash or U.S. Government securities held in the segregated account will
be adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Fund. Secured put options
will generally be written in circumstances where the Advisor wishes to purchase
the underlying security for a Fund's portfolio at a price lower than the current
market price of the security. In such event, that Fund would write a secured put
option at an exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay. With regard to the
writing of put options, each Fund will limit the aggregate value of the
obligations underlying such put options to 50% of its total net assets.
Following the writing of a put option, a Fund may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 8
<PAGE>
Swaps
To help enhance the value of its portfolio or manage its exposure to different
types of investments, the Balanced Fund, Intermediate Fixed Income Fund and
Fixed Income Fund may enter into interest rate, currency and mortgage swap
agreements and may purchase and sell interest rate "caps", "floors" and
"collars". The potential loss from investing in swap agreements is much greater
than the amount initially invested. This would protect a Fund from a decline in
the value of the underlying security due to rising rates, but would also limit
its ability to benefit from falling interest rates. A Fund will enter into
interest rate swaps only on a net basis (i.e. the two payment streams will be
netted out, with the Fund receiving or paying as the case may be, only the net
amount of the two payments). The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap will
be accrued on a daily basis and an amount of cash or liquid high-grade debt
securities having an aggregate value at least equal to the accrued excess will
be maintained in a segregated account by McM Funds' custodian bank. Interest
rate swaps do not involve the delivery of securities or other underlying assets
or principal. Thus, if the other party to an interest rate swap defaults, a
Fund's risk of loss consists of the net amount of interest payments that the
Fund is contractually entitled to receive.
In a cap or floor, one party agrees, usually in return for a fee, to make
payments under particular circumstances. For example, the purchaser of an
interest rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed-upon level; the purchaser of an interest rate
floor has the right to receive payments to the extent a specified interest rate
falls below an agreed level. A collar entitles the purchaser to receive payments
to the extent a specified interest rate falls outside an agreed-upon range.
Swap agreements may involve leverage and may be highly volatile; depending on
how they are used, they may have a considerable impact on a Fund's performance.
Swap agreements involve risks relating to the other party's creditworthiness and
ability to perform, as well as the Fund's ability to terminate its swap
agreements or reduce its exposure through offsetting transactions.
Forward Commitments, When-Issued Securities and Delayed Delivery Transactions
Each Fund may purchase or sell securities on a when-issued or delayed delivery
basis and make contracts to purchase or sell securities for a fixed price at a
future date beyond customary settlement time. Debt securities are often issued
on this basis. No income will accrue on securities purchased on a when-issued or
delayed delivery basis until the securities are delivered. Each Fund will
establish a segregated account in which it will maintain cash and U.S.
Government securities or other high-grade debt obligations at least equal in
value to commitments for when-issued securities. Securities purchased or sold on
a when-issued, delayed delivery or forward commitment basis involve a risk of
loss if the value of the security to be purchased declines prior to the
settlement date. Although a Fund would generally purchase securities on a
when-issued, delayed delivery or a forward commitment basis with the intention
of acquiring the securities, a Fund may dispose of such securities prior to
settlement if the Advisor deems it appropriate to do so.
A Fund may dispose of or negotiate a when-issued or forward commitment. A Fund
will normally realize a capital gain or loss in connection with these
transactions. For purposes of determining a Fund's average dollar-weighted
maturity, the maturity of when-issued or forward commitment securities will be
calculated from the commitment date.
When a Fund purchases securities on a when-issued, delayed delivery or forward
commitment basis, the Fund's custodian will maintain in a segregated account
cash, U.S. Government securities or other high-grade liquid debt obligations
having a value (determined daily) at least equal to the amount of the Fund's
purchase commitments. In the case of a forward commitment to sell portfolio
securities, the custodian will hold the portfolio securities in a segregated
account while the commitment is outstanding. These procedures are designed to
ensure that the Fund will maintain sufficient assets at all times to cover its
obligations under when-issued purchases, forward commitments and delayed
delivery transactions.
Variable and Floating Rate Instruments
With respect to the variable and floating rate instruments that may be acquired
by Intermediate Fixed Income Fund and Fixed Income Fund, the Advisor will
consider the earning power, cash flows and other liquidity ratios of the issuers
and guarantors of such instruments and, if the instruments are subject to demand
features, will monitor their financial status to meet payment on demand. Where
necessary to ensure that a variable or floating rate instrument meets a Fund?s
quality requirements, the issuer's obligation to pay the principal of the
instrument will be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend.
Repurchase Agreements
Each Fund may enter into repurchase agreements to earn income. McM Funds may
only enter into repurchase agreements with financial institutions that are
deemed to be creditworthy by the Advisor pursuant to guidelines established by
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McM Funds - Statement of Additional Information Page 9
<PAGE>
McM Funds' Board of Trustees. During the term of any repurchase agreement, the
Advisor will continue to monitor the creditworthiness of the seller. Repurchase
agreements will be fully collateralized by securities in which the Fund may
invest directly. Such collateral will be marked-to-market daily. If the seller
of the underlying security under the repurchase agreement should default on its
obligation to repurchase the underlying security, a Fund may experience delay or
difficulty in exercising its right to realize upon the security and, in
addition, may incur a loss if the value of the security should decline, as well
as disposition costs in liquidating the security. No more than 10% of a Fund?s
net assets will be invested in illiquid securities, including repurchase
agreements that have a maturity of longer than seven days.
The repurchase price under the repurchase agreements generally equals the price
paid by a Fund plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement). Repurchase agreements are considered to be collateralized
loans by a Fund under the Investment Company Act of 1940, as amended (the "1940
Act").
Each Fund will only enter into a repurchase agreement where the market value of
the underlying security, including interest accrued, will at all times be equal
to or exceed the value of the repurchase agreement. The securities held subject
to a repurchase agreement by Principal Preservation Fund may have stated
maturities exceeding 13 months, provided the repurchase agreement itself matures
in less than 13 months.
Reverse Repurchase Agreements
Each Fund may obtain funds for temporary defensive purposes by entering into
reverse repurchase agreements with banks and broker-dealers. Reverse repurchase
agreements involve sales by a Fund of portfolio assets concurrently with an
agreement by that Fund to repurchase the same assets at a later date at a fixed
price. During the reverse repurchase agreement period, the Fund continues to
receive principal and interest payments on these securities. During the time a
reverse repurchase agreement is outstanding, the Fund will maintain a segregated
custodial account consisting of cash, U.S. Government securities or other
high-grade liquid debt obligations having a value at least equal to the
repurchase price, plus accrued interest, subject to the agreement. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the price of the securities the Fund is
obligated to repurchase. Reverse repurchase agreements are considered borrowings
by the Fund, and as such are subject to the investment limitations discussed in
the section entitled "Borrowing."
Borrowing
Each Fund (except Principal Preservation Fund) has a fundamental policy that it
may not borrow money, except that it may (1) borrow money from banks for
temporary or emergency purposes and not for leveraging or investment and (2)
enter into reverse repurchase agreements for any purpose, so long as the
aggregate amount of borrowings and reverse repurchase agreements does not exceed
one-third of the Fund's total assets less liabilities (other than borrowings).
No Fund will purchase securities while borrowings in excess of 5% of its total
assets are outstanding.
Securities Lending
To increase return on portfolio securities, each Fund (except Principal
Preservation Fund) may lend its portfolio securities on a short-term basis to
banks, broker-dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. Collateral
will consist of U.S. Government securities, cash equivalents or irrevocable
letters of credit. A Fund will not lend portfolio securities in excess of
one-third of the value of its respective total assets. There may be risks of
delay in receiving additional collateral or in recovering the securities loaned
or even a loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
Advisor to be of good standing and when, in its judgment, the income to be
earned from the loan justifies the attendant risks.
Securities of Other Investment Companies
Each Fund may invest in securities issued by other investment companies that
invest in securities in which the Fund is permitted to invest. In addition, each
Fund may invest in securities of other investment companies within the limits
prescribed by the 1940 Act, which include limits to its investments in
securities issued by other investment companies, so that, as determined
immediately after a purchase of such securities is made: (i) not more than 5% of
the value of the Fund's total assets will be invested in the securities of any
one investment company; (ii) not more than 10% of its total assets will be
invested in the aggregate in securities of investment companies as a group; and
(iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund or Funds as a whole. As a shareholder of
another investment company, each Fund would bear along with other shareholders
its pro rata portion of the investment company's expenses, including advisory
fees. In accordance with applicable state regulatory provisions, the Advisor has
agreed to waive its management fee with respect to the portion of any Fund's
assets invested in shares of other open-end investment companies. In the case of
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McM Funds - Statement of Additional Information Page 10
<PAGE>
closed-end investment companies, these expenses would be in addition to the
advisory and other expenses that a Fund bears directly in connection with its
own operations.
Foreign Securities
Each Fund (except Principal Preservation Fund) may only invest indirectly in
foreign securities through American Depository Receipts and European Depository
Receipts ("ADR's" and "EDR's"). For many foreign securities, there are U.S.
dollar denominated ADR's, which are bought and sold in the United States and are
issued by domestic banks. ADR's represent the right to receive securities of
foreign issuers deposited in the domestic bank or a correspondent bank. In
general, there is a large, liquid market in the United States for most ADR's.
Each Fund may also invest in EDR's which are receipts evidencing an arrangement
with a European bank similar to that for ADR's and are designed for use in the
European securities markets. EDR's are not necessarily denominated in the
currency of the underlying security. McM Funds will not invest in unsponsored
ADR's and EDR's.
Investments made in foreign securities, whether made directly or indirectly,
involve certain inherent risks, such as those related to changes in foreign
currency exchange rates, future political and economic developments, the
possible imposition of foreign withholding tax on the interest or dividend
income payable on such instruments, the possible establishment of foreign
controls, the possible seizure or nationalization of foreign deposits or assets,
or the adoption of other foreign government restrictions that might adversely
affect the foreign securities held by a Fund.
Restricted Securities
Each Fund will limit investments in securities of issuers which the Fund is
restricted from selling to the public without registration under the Securities
Act of 1933, as amended (the "Securities Act"), to no more than 10% of the
Fund's total assets, excluding restricted securities eligible for resale
pursuant to Rule 144A that have been determined to be liquid by McM Funds? Board
of Trustees.
Rule 144A Securities
Each Fund may purchase securities which are not registered under the Securities
Act but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the Securities Act. In some cases, such securities are
classified as "illiquid securities", however, any such security will not be
considered illiquid so long as it is determined by the Advisor, under guidelines
approved by McM Funds? Board of Trustees, that an adequate trading market exists
for that security. This investment practice could have the effect of increasing
the level of illiquidity in a Fund during any period that qualified
institutional buyers become uninterested in purchasing these restricted
securities.
Illiquid Securities
Each Fund will not invest more than 10% of the value of its net assets in
securities that are illiquid because of restrictions on transferability or other
reasons. Repurchase agreements with deemed maturities in excess of seven days
and securities that are not registered under the Securities Act but that may be
purchased by institutional buyers pursuant to Rule 144A under the Securities Act
are subject to these percentage limits (unless such securities are variable
amount master demand notes with maturities of nine months or less or unless the
Board determines that a liquid trading market exists).
Convertible Securities
Common stock occupies the most junior position in a company's capital structure.
Convertible securities entitle the holder to exchange those securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors, and are senior to the claims
of preferred and common shareholders. In the case of preferred stock and
convertible preferred stock, the holder's claims on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareholders.
Money Market Instruments
Money market instruments in which a Fund may invest include, but are not limited
to, the following: short-term corporate obligations, letters of credit backed by
commercial paper, time deposits, trading securities, variable and floating rate
notes, master demand notes and bank obligations.
Bank obligations include bankers' acceptances and negotiable certificates of
deposit issued by a U.S. bank, savings bank or savings association that is a
member of the Federal Reserve System or insured by the Federal Deposit Insurance
Corporation. Investments in bank obligations are limited to the obligations of
financial institutions having $1 billion or more in total assets at the time of
purchase.
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McM Funds - Statement of Additional Information Page 11
<PAGE>
Investments by McM Funds in commercial paper will consist of issues that are
rated "A-1" or better by S&P or "Prime-1" by Moody's, and regarding up to 5% of
the Principal Preservation Fund, commercial paper rated "A-2" by S&P or
"Prime-2" by Moody's. In addition, McM Funds may acquire unrated commercial
paper that is determined by the Advisor at the time of purchase to be of
comparable quality to rated instruments that may be acquired by McM Funds.
Commercial paper may include variable and floating rate instruments. While there
may be no active secondary market with respect to a particular variable or
floating rate instrument purchased by McM Funds, McM Funds may, from time to
time as specified in the instrument, demand payment of the principal or may
resell the instrument to a third party. The absence of an active secondary
market, however, could make it difficult for a Fund to dispose of an instrument
if the issuer defaulted on its payment obligation or during periods that a Fund
is not entitled to exercise its demand rights, and a Fund could, for these or
other reasons, suffer a loss. Substantial holdings of variable and floating rate
instruments could reduce portfolio liquidity.
Time Deposits carry some credit risk, which Treasuries do not; also, investors
regard time deposits as being sufficiently less liquid than Treasuries; hence,
investors demand some extra yield for buying time deposits rather than
Treasuries.
Because Variable and Floating Rate Notes are direct lending arrangements between
the lender and the borrower, it is not contemplated that such instruments will
generally be traded, and there is generally no established secondary market for
these obligations, although they are redeemable at face value. Accordingly, if
these obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand.
Temporary Defensive Measures For temporary and defensive purposes, each Fund
(except Principal Preservation Fund) may invest up to 100% of its total assets
in investment grade short-term fixed income securities (including short-term
U.S. government securities, money market instruments, including negotiable
certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances, commercial paper and floating rate notes) and repurchase
agreements. Each Fund may also hold significant amounts of its assets in cash,
subject to the applicable percentage limitations for short-term securities.
Other Investments The Board of Trustees may, in the future, authorize a Fund to
invest in securities other than those listed here and in the Prospectus,
provided that such investment would be consistent with that Fund's investment
objective and that it would not violate any fundamental investment policies or
restrictions applicable to that Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies and may not
be changed as to a Fund without the approval of a majority of the outstanding
voting shares (as defined in the 1940 Act) of the Fund. Unless otherwise
indicated, all percentage limitations listed below apply to each Fund and apply
only at the time of the transaction. Accordingly, if a percentage restriction is
adhered to at the time of investment, a later increase or decrease in the
percentage that results from a relative change in values or from a change in a
Fund's total assets will not be considered a violation.
Except as set forth under "Investment Objectives" and "Investment Strategies" in
the Prospectus, each Fund may not:
(1) As to 75% of its total assets, purchase the securities of any one
issuer (other than securities issued by the U.S. Government or its
agencies or instrumentalities), if immediately after such purchase
more than 5% of the value of the Fund's total assets would be
invested in securities of such issuer;
(2) Purchase or sell real estate (but this restriction shall not prevent
a Fund from investing directly or indirectly in portfolio instruments
secured by real estate or interests therein or acquiring securities
of real estate investment trusts or other issuers that deal in real
estate), interests in oil, gas and/or mineral exploration or
development programs or leases;
(3) Purchase or sell commodities or commodity contracts, except that a
Fund may enter into futures contracts and options thereon in
accordance with such Fund's investment objectives and policies;
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McM Funds - Statement of Additional Information Page 12
<PAGE>
(4) Make investments in securities for the purpose of exercising control;
(5) Purchase the securities of any one issuer if, immediately after such
purchase, a Fund would own more than 10% of the outstanding voting
securities of such issuer;
(6) Sell securities short or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of
transactions. For this purpose, the deposit or payment by a Fund for
initial or maintenance margin in connection with futures contracts is
not considered to be the purchase or sale of a security on margin;
(7) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of debt instruments in accordance with a Fund's
investment objectives and policies, (b) the lending of portfolio
securities or (c) entry into repurchase agreements with banks or
broker-dealers;
(8) Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets, except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the total assets of the Fund at the
time of its borrowing. All borrowings will be done from a bank and
asset coverage of at least 300% is required. A Fund will not purchase
securities when borrowings exceed 5% of that Fund's total assets;
(9) Purchase the securities of issuers conducting their principal
business activities in the same industry (other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if immediately after such purchase the value of a
Fund's investments in such industry would exceed 25% of the value of
the total assets of the Fund;
(10) Act as an underwriter of securities, except that, in connection with
the disposition of a security, a Fund may be deemed to be an
"underwriter" as that term is defined in the Securities Act;
(11) Invest in puts, calls, straddles or combinations thereof except to
the extent otherwise disclosed in the Prospectus; and
(12) Invest more than 5% of its total assets in securities of companies
less than three years old. Such three-year period shall include the
operation of any predecessor company or companies.
TRUSTEES AND OFFICERS
McM Funds has a Board of Trustees that establishes each Fund's policies and
supervises and reviews the management of each Fund. The officers of McM Funds
and the Advisor administer the day-to-day operations of the Funds pursuant to
the terms of the Investment Advisory Agreement with each Fund.
Information pertaining to the Trustees and executive officers of McM Funds is
set forth below.
<TABLE>
<CAPTION>
Aggregate
Principal Compensation From Total Compensation
Position(s) Occupation(s) Trust To Date for From Trust and Fund
Name, Address Held with During Past Fiscal Year Ended Complex Paid
and Date of Birth Registrant Five Years June 30, 1999 to Trustees
----------------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Terry A. O'Toole, CPA* 7-9-47 Chairman President and CEO, N/A N/A
McMorgan & Company and McMorgan &
One Bush Street, Suite 800 President Company
San Francisco, CA 94104
Kenneth I. Rosenblum 4-27-41 Trustee Independent $6,750 $6,750
1299 Ocean Avenue Consultant
Suite 333
Santa Monica, CA 90401
</TABLE>
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McM Funds - Statement of Additional Information Page 13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Walter B. Rose 5-8-46 Trustee President, Venture $6,750 $6,750
Venture Consulting Corp. Consulting Corp.
355 South Grand Avenue (1998-Present);
Suite 4295 prior thereto,
Los Angeles, CA 90071 President, McBain,
Rose Partners
S.D. Sicotte 2-22-31 Trustee Retired; prior $6,750 $6,750
2047 Byron Street thereto Chairman
Palo Alto, CA 94301 and Chief
Executive Officer,
Hemming Morse, Inc.
Robert R. Barron * 10-17-44 Trustee, Executive Vice N/A N/A
McMorgan & Company Vice President, McMorgan
3500 W. Olive Avenue President & Company.
Suite 690 &
Burbank, CA 91505 Treasurer
Mark R. Taylor * 12-22-58 Trustee Vice President, N/A N/A
McMorgan & Company McMorgan &
One Bush Street, Suite 800 Company
San Francisco, CA 94104
Gregory L. Watson, CFA * 9-1-45 Trustee Executive Vice N/A N/A
McMorgan & Company President, McMorgan
8955 E. Pinnacle Peak Rd & Company
Suite 101
Scottsdale, AZ 85255
Deane A. Nelson, CFA* 8-1-46 Vice Vice President, N/A N/A
McMorgan & Company President McMorgan &
One Bush Street, Suite 800 and Company
San Francisco, CA 94104 Secretary
Robert M. Hirsch * 12-11-53 Compliance General Counsel, N/A N/A
McMorgan & Company Officer McMorgan &
One Bush Street, Suite 800 Company; prior
San Francisco, CA 94104 thereto Partner, Van
Bourg, Weinberg,
Roger & Rosenfeld.
</TABLE>
* These Trustees and officers are considered "interested persons" of McM Funds
as defined under the 1940 Act.
The non-interested Trustees of McM Funds each receive a fee of $6,500 per year,
plus $500 per meeting and expenses for each meeting of the Board of Trustees
they attend. No officer or employee of McMorgan & Company receives any
compensation from McM Funds for acting as a Trustee of McM Funds. The officers
of the Trust receive no compensation directly from McM Funds for performing the
duties of their offices.
Code of Ethics
Th Trust and the advisor have adopted separate Codes of ethics under rule 17j-1
of the 1940 Act. Each Code of Ethics permits personnel subject to the Codes to
invest in securities, including securities that may be purchased or held by the
Fund. Without prior approval from the designated compliance officer, the
officers, directors or trustees and advisory personnel of the Trust and advisor
with substantial responsibility or with knowledge of the investments made by the
advisor on behalf of its clients, including the McM Funds, are prohibited from
purchasing or selling any security which he or she knows:
(i) is being considered for purchase or sale by the advisor for a client;
(ii) is being purchased or sold by the advisor for a client; or
(iii) is the subject of non-public material information relating to the
security and known to that person.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 14
<PAGE>
Moreover, portfolio managers and trading personnel of the advisor are prohibited
from engaging in any transaction for their own account that involves a limited
opportunity from which a client could otherwise benefit. All access persons must
obtain prior approval of any personal securities transaction involving an
initial public offering or limited offering (private placement). All Access
Persons who are registered representatives must obtain prior approval of any
personal securities transactions.
Independent Trustees of the McM Funds are not subject to the pre-clearance
provisions of the Trust's Code if they have no knowledge of a Fund's intended
investments.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 3, 2000, the Trustees and officers of the Trust, individually and
as a group, owned beneficially less than 1% of the outstanding shares of the McM
Funds shares of the McM Principal Preservation Fund, McM Intermediate Fixed
Income Fund, McM Fixed Income Fund and McM Balanced Fund and 1% of the McM
Equity Investment Fund and of the Trust.
As of February 3, 2000, no person owned beneficially or of record 5% or more of
the Trust. As of February 3, 2000, the Broker Shares Class B shares had not
commenced operations. As of February 3, 2000, the following persons owned
beneficially more than 5% of the outstanding voting shares of the McM Funds
class of the following series:
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 15
<PAGE>
McM PRINCIPAL PRESERVATION FUND
Name & Address of Beneficial Owners Percentage
----------------------------------- ----------
Operating Engineers Participating EMP PRE 9.80%
APP APP & Journeyman Action Training Fund
Oakland, CA
Union Bank of California 6.60%
Trustee Producer Supl Plan McMorgan
San Diego, CA
Cement Masons Vacation Holiday Trust Fund 5.27%
Suisun, CA
McM INTERMEDIATE FIXED INCOME FUND
Name & Address of Beneficial Owners Percentage
----------------------------------- ----------
Cement Masons Health & Welfare Trust Fund 9.84%
Suisun, CA
Stationary Engineers Local 39 6.62%
New York, NY
Northern California Carpenters Regional Council 5.44%
Oakland, CA
McM FIXED INCOME FUND
Name & Address of Beneficial Owners Percentage
----------------------------------- ----------
Industrial Carpenters & Precast Industry 32.44%
Pension Fund*
Oakland, CA
Wendel & Company 21.76%
New York, NY
USW Education and Scholarship Fund 8.26%
Cleveland, OH
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 16
<PAGE>
McM BALANCED FUND
Name & Address of Beneficial Owners Percentage
----------------------------------- ----------
UA Local 290 Plumber Steamfitter & Shipfitter 10.55%
Retiree Health Trust
Portland, OR
UA Local 38 Pipe Trades Defined 7.80%
Contribution Plan
San Francisco, CA
Wendel & Company 7.24%
New York, NY
Plumbers & Pipefitters 5.63%
Local Union No. 286
Goodlettsville, TN
Sheet Metal Workers Local 104 5.60%
Supplemental Unemployment & Healthcare Fund
San Ramon, CA
Electrical Industry Adv Fund 5.32%
Portland, OR
McM Equity Investment Fund
Name & Address of Beneficial Owners Percentage
----------------------------------- ----------
Wendel & Company 9.96%
New York, NY
BAC Local 3 Pension Trust 5.88%
Los Angeles, CA
* Pursuant to the definitions set forth in the 1940 Act, as of February 3,
2000, these persons are deemed "control persons" by nature of their
significant holdings in the respective Fund. This does not mean, however,
that these persons manage the affairs of McM Funds. The Advisor maintains
sole responsibility over the affairs of McM Funds pursuant to its
Investment Advisory Agreement with McM Funds.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 17
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement. Each Fund has entered into an investment advisory
agreement with McMorgan & Company (the "Advisor"), One Bush Street, Suite 800,
San Francisco, CA 94104. For providing investment advisory services, each Fund
pays McMorgan & Company a monthly fee at the following annual rates based on
each Fund's average daily net assets before any fee waiver as follows: Principal
Preservation Fund - 0.25%, Intermediate Fixed Income Fund - 0.35%, Fixed Income
Fund - 0.35%, Balanced Fund - 0.45%, and Equity Investment Fund - 0.50%. The
Advisor has voluntarily undertaken to reduce some or all of its management fee
to keep total annual operating expenses at or below the following percentages of
each McM Funds class Fund's average net assets: Principal Preservation Fund
(0.30%), Intermediate Fixed Income Fund (0.50%), Fixed Income Fund (0.50%),
Balanced Fund (0.60%), and Equity Investment Fund (0.75%). While the Advisor has
not undertaken to limit the total annual operating expenses of the Broker Shares
Class B shares, the advisory fee waiver would also apply to these shares. Such
fee waivers and expense reimbursements may be terminated at any time at the
discretion of the Advisor. Any fee reductions or expense reimbursements made by
the Advisor are subject to reimbursement by the appropriate Fund within the
following three years provided the Fund is able to effect such reimbursement and
remain in compliance with applicable expense limitations.
Thomas A. Morton, Chairman of the Board of McMorgan & Company, is deemed a
control person by reason of his ownership interest in the Advisor.
Under an advisory agreement on behalf of each Fund (the "Advisory Agreements"),
the Advisor is not liable for any error of judgment or mistake of law or for any
loss suffered by McM Funds or a Fund in connection with the performance of the
Advisory Agreements, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard of its duties and obligations thereunder.
The Advisory Agreements are terminable with respect to a Fund by vote of the
Board of Trustees or by the holders of a majority of the outstanding voting
securities of the Fund, at any time without penalty, on 60 days' written notice
to the Advisor. The Advisor may also terminate its advisory relationship with
respect to a Fund on 60 days' written notice to McM Funds. The Advisory
Agreements terminate automatically in the event of their assignment.
For the fiscal years ended June 30, 1999, 1998 and 1997, the Advisor was paid
advisory fees and expense recoveries after expense reimbursements and fee
waivers as follows:
<TABLE>
<CAPTION>
Series Year Ended Year Ended Year Ended
June 30, 1999 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
$ 0.00 $ 0.00 $ 0.00
Principal Preservation Fund
Intermediate Fixed Income $452,932 $323,908 $223,365
Fund
$ 0.00 $ 0.00 $ 0.00
Fixed Income Fund
$481,329 $202,084 $ 9,677
Balanced Fund
Equity Investment Fund $977,550 $480,813 $146,113
</TABLE>
General expenses of McM Funds (such as costs of maintaining corporate existence,
legal fees, insurance, etc.) will be allocated among the Funds in proportion to
their relative net assets. Expenses that relate exclusively to a particular
Fund, such as certain registration fees, brokerage commissions and other
portfolio expenses, will be borne directly by that Fund. Expenses that relate
exclusively to a particular class of shares will be borne directly by that
class.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 18
<PAGE>
For the fiscal years ended June 30, 1999, 1998 and 1997, the Advisor reimbursed
the Funds for certain recoverable expenses as follows:
<TABLE>
<CAPTION>
Series Year Ended Year Ended Year Ended
June 30, 1999 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
McM Principal
Preservation Fund $156,860 $140,922 $119,537
McM Intermediate Fixed
Income Fund $ 27,773 $ 58,688 $ 83,302
McM Fixed Income Fund $108,967 $101,633 $ 93,006
McM Balanced Fund $ 50,527 $ 90,791 $101,913
McM Equity Investment Fund $ 0.00 $ 0.00 $ 52,492
</TABLE>
Transfer Agent. PFPC, Inc. ("PFPC"), a wholly-owned subsidiary of PNC Bank
Corporation, which has its principal business address at 400 Bellevue Parkway,
Wilmington, DE 19809, provides transfer agency and dividend disbursing agent
services for the Funds. As part of these services, PFPC maintains records
pertaining to the sale and redemption of Fund shares and will distribute each
Fund's cash dividends to shareholders.
Administrative Services Agent. PFPC also serves as the administrator for the
Funds. The services include the day-to-day administration of matters necessary
to the Funds' operations, maintenance of records and books, preparation of
reports, and compliance monitoring. For providing administrative services to the
Funds, PFPC receives from each Fund a basic fee, computed daily and paid
monthly, at the annual rate of 0.15% of the first $50 million of average daily
net assets of each Fund, 0.10% of the next $50 million of average daily net
assets, and 0.05% of average daily net assets over $100 million (with a minimum
annual fee of $55,000).
McM Funds paid the following administration fees for the fiscal years ended June
30, 1999, 1998 and 1997 :
<TABLE>
<CAPTION>
Series Fiscal Year End 1999 Fiscal Year End 1998 Fiscal Year End 1997
<S> <C> <C> <C>
McM Principal
Preservation Fund $53,963 $39,466 $25,844
McM Intermediate Fixed
Income Fund $53,391 $39,144 $25,348
McM Fixed Income Fund $53,871 $38,314 $24,948
McM Balanced Fund $54,540 $39,088 $25,728
McM Principal
Preservation Fund $55,958 $40,160 $26,161
</TABLE>
Accounting Services Agent. PFPC also serves as the accounting agent for the
Funds and maintains the accounting books and records of the Funds, calculates
each Fund's net asset value in accordance with the provisions of that Fund's
current Prospectus and prepares for Fund approval and use various government
reports, tax returns, and proxy materials. For providing accounting services to
the Funds, PFPC receives from each Fund an annual fee, computed daily and paid
monthly, based on a minimum of $24,000 for the first $10 million of average
daily net assets per portfolio, 0.0002 of combined assets to $500 million,
0.0001 over $500 million. In addition, the Funds pay $12,000 per additional
class per portfolio.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 19
<PAGE>
Custodian and Custody Administrator. The Bank of New York, 48 Wall Street, New
York, New York 10286, is custodian of the Funds' assets pursuant to a custodian
agreement. Under the custodian agreement, The Bank of New York (i) maintains a
separate account or accounts in the name of the Funds (ii) holds and transfers
portfolio securities on account of the Funds, (iii) accepts receipts and make
disbursements of money on behalf of the Funds, (iv) collects and receives all
income and other payments and distributions on account of the Funds' securities
and (v) makes periodic reports to the Trustees concerning the Funds' operations.
PFPC will act as custody administrator and has agreed to pay the fees and
expenses of the custodian. For those services, PFPC receives an annual fee of
.00015 on the first $500 million of average net assets; .0001on the next $1.5
billion of average net assets; .00009 over $2 billion of average net assets and
a minimum of $3,600 per portfolio per year. Certain transaction fees and
out-of-pocket expenses may also be charged.
Underwriter
Provident Distributors, Inc. ("PDI"), Four Falls Corporate Center, 6th Floor,
West Conshohocken, PA 19428, serves as underwriter pursuant to an underwriting
agreement for the limited purpose of acting as underwriter to facilitate the
registration of shares of each Fund under state securities laws and to assist in
the sale of shares. The Underwriting Agreement may be terminated by either party
upon 60 days' prior written notice to the other party.
PDI has agreed at its own expense to qualify as a broker-dealer under all
applicable federal or state laws in those states which the Trust shall from time
to time identify to PDI as states in which it wishes to offer its shares for
sale, in order that state registrations may be maintained for the Trust.
PDI is a broker-dealer registered with the U.S. Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.
Distribution Plan. The Trust has adopted a distribution plan on behalf of the
Broker Shares Class B shares of the McM Intermediate Fixed Income Fund, McM
Fixed Income Fund, McM Balanced Fund and McM Equity Investment Fund (the "Plan")
in accordance with Rule 12b-1 under the 1940 Act. The Plan permits each Fund to
pay certain expenses associated with the distribution of its shares. The Plan
provides that the applicable Fund will reimburse PDI for actual distribution
and shareholder servicing expenses incurred by PDI not exceeding, on an annual
basis, 0.45% of each Fund's average daily net assets.
In adopting the Plan, the Board of Trustees considered the likelihood that the
Plan is designed to benefit each Fund and its shareholders by strengthening the
system for distributing the Fund's shares and thereby increasing sales and
reducing redemptions. The Trustees adopted the Plan because of its anticipated
benefits to the Funds. These anticipated benefits include: increased promotion
and distribution of the Funds' shares, an enhancement in each Fund's ability to
maintain accounts and improve asset retention, increased stability of net assets
for the Funds, increased stability in each Fund's positions, and greater
flexibility in achieving investment objectives. The costs of any joint
distribution activities among the Funds will be allocated among the Funds in
proportion to their net assets. The Board of Trustees concluded that there was a
reasonable liklihood that each of the applicable Funds and their shareholders
would benefit from the adoption of the Plan.
The Plan is subject to annual approval by the Trustees and is terminable at any
time by vote of the Trustees or by vote of a majority of the shares of the
applicable class or Fund. Pursuant to the Plan, a new Trustee who is not an
interested person (as defined in the 1940 Act) must be nominated by existing
Trustees who are not interested persons.
If the Plan is terminated (or not renewed) with respect to any one or more
classes or Funds, the Plan may continue in effect with respect to a class or
fund as to which it has not been terminated (or has been renewed). Although
there is no obligation for the Trust to pay expenses incurred by the Distributor
in excess of those paid to the Distributor under a Plan, if the Plan is
terminated, the Board will consider how to treat such expenses. Any expenses
incurred by the Distributor but not yet recovered through distribution fees
could be recovered through future distribution fees.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 20
<PAGE>
Because amounts paid pursuant to the Plan are paid to the Distributor, the
Distributor and its officers, directors and employees may be deemed to have a
financial interest in the operation of the Plan. None of the Trustees has a
financial interest in the operation of the Plan. The Plan was not in effect
during the fiscal year ended June 30, 1999.
All payments made pursuant to the Plan will be made for the purpose of selling
shares issued by the applicable Funds.
Independent Accountants
The accounting firm of Tait, Weller & Baker, Eight Penn Center Plaza, Suite 800,
Philadelphia, PA 19103, has been designated as independent accountant for each
Fund. Tait, Weller & Baker performs annual audits of each Fund and is
periodically called upon to provide accounting and tax advice.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Advisor is responsible for decisions to buy and sell securities for each
Fund and for the placement of its portfolio business and the negotiation of
commissions, if any, paid on such transactions. Fixed income securities in which
a Fund invests are traded in the over-the-counter market. These securities are
generally traded on a net basis with dealers acting as principal for their own
accounts without a stated commission. In over-the-counter transactions, orders
are placed directly with a principal market-maker unless a better price and
execution can be obtained by using a broker. Brokerage commissions are paid on
transactions in listed securities, futures contracts and options thereon. The
Advisor is responsible for effecting portfolio transactions and will do so in a
manner deemed fair and reasonable to each Fund. The primary consideration in all
portfolio transactions will be prompt execution of orders in an efficient manner
at the most favorable price. In selecting and monitoring broker-dealers and
negotiating commissions, the Advisor considers the firm's reliability, the
quality of its execution services on a continuing basis and its financial
condition.
The Advisor effects portfolio transactions for other investment companies and
advisory accounts. Research services furnished by dealers through whom McM Funds
effect securities transactions may be used by the Advisor in servicing all of
its accounts; not all such services may be used in connection with McM Funds. In
the opinion of the Advisor, it is not possible to measure separately the
benefits from research services to each of the accounts (including each Fund).
The Advisor will attempt to allocate equitably portfolio transactions among each
Fund and others whenever concurrent decisions are made to purchase or sell
securities by a Fund and other accounts. In making such allocations between McM
Funds and others, the main factors to be considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and the opinions of the persons
responsible for recommending investments to McM Funds and the others. In some
cases, this procedure could have an adverse effect on McM Funds. In the opinion
of the Advisor, however, the results of such procedures will, on the whole, be
in the best interests of each of the clients.
McM Funds paid the following aggregate brokerage commissions for the fiscal
years ended June 30, 1999, 1998 and 1997:
Series Fiscal Year End Fiscal Year End Fiscal Year End
1999 1998 1997
McM Balanced Fund $29,250 $22,585 $13,819
McM Equity Investment
Fund $58,757 $47,700 $25,691
The McM Principal Preservation Fund, McM Intermediate Fixed Income Fund and
the McM Fixed Income Fund paid no brokerage commissions during the three
preceding fiscal years.
SHARES OF BENEFICAL INTEREST
Each share of a Fund represents an equal proportionate interest in the assets
belonging to that Fund. When issued, shares are fully paid and non-assessable.
In the event of liquidation of a Fund, shareholders are entitled to share pro
rata in the net assets of the Fund available for distribution to such
shareholders. Shares of a Fund are freely transferable and have no preemptive,
subscription or conversion rights.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 21
<PAGE>
In accordance with the provisions of the Trust Instrument, the Trustees have
initially determined that shares entitle their holders to one vote per share on
any matter on which such shares are entitled to vote. The Trustees may determine
in the future, without the vote or consent of shareholders, that each dollar of
net asset value (number of shares owned times net asset value per share) will be
entitled to one vote on any matter on which such shares are entitled to vote.
Unless otherwise required by the 1940 Act or the Trust Instrument, the Funds
have no intention of holding annual meetings of shareholders. Shareholders may
remove a Trustee by the affirmative vote of at least two-thirds of the Trust's
outstanding shares. At any time that less than a majority of the Trustees
holding office were elected by the shareholders, the Trustees will call a
special meeting of shareholders for the purpose of electing Trustees.
Under Delaware law, shareholders of a Delaware business trust are protected from
liability for acts or obligations of the Trust to the same extent as
shareholders of a private, for-profit Delaware corporation. In addition, the
Trust Instrument expressly provides that the Trust has been organized under
Delaware law and that the Trust Instrument will be governed by Delaware law. It
is possible that the Trust might become a party to an action in another state
whose courts refused to apply Delaware law, in which case the Trust's
shareholders could be subject to personal liability. The Trust Instrument
provides for the indemnification of any shareholders held personally liable for
any obligations of the Trust or a Fund.
PURCHASES, REDEMPTONS AND PRICING OF SHARES
Purchase of Shares
Shares of McM Principal Preservation Fund are offered in one class only, McM
Fund shares, with no sales charge or Rule 12b-1 fees. McM Intermediate Fixed
Income Fund, McM Intermediate Fixed Income Fund, McM Balanced Fund and McM
Equity Investment Fund offer both McM Fund shares and Broker Shares Class B
shares. The McM Funds shares have no sales charge or Rule 12b-1 fees. Broker
Shares Class B shares have no sales charge, but are subject to a 0.45% Rule
12b-1 distribution fee.
Net Asset Value
The net asset value per share of each Fund is computed as of the close of
regular trading on the NYSE; provided that, for the Principal Preservation Fund,
it is also not a national bank holiday. The NYSE is currently closed on New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.
The net asset value per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities (expenses and fees
are accrued daily) and dividing by the number of shares outstanding. The equity
securities of each Fund listed or traded on a stock exchange are valued at the
last sale price on its principal exchange. If no sale price is reported, the
mean of the last bid and asked prices is used. Securities traded
over-the-counter are priced at the mean of the last bid and asked prices. When
market quotations are not readily available, securities and other assets are
valued at fair value as determined in good faith by the Board of Trustees.
Fixed income securities are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices provided
by investment dealers in accordance with procedures established by the Board of
Trustees. Options, futures and options on futures are valued at the price as
determined by the appropriate clearing corporation.
All securities held in the portfolio of the Principal Preservation Fund, and
debt securities with maturities of 60 days or less held by the other Funds, are
valued at amortized cost. When a security is valued at amortized cost, it is
valued at its cost when purchased, and thereafter by 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.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 22
<PAGE>
Transfer of Securities:
At the discretion of McM Funds, investors may be permitted to purchase a Fund's
shares by transferring securities to the Fund that meet the Fund's investment
objectives and policies. Securities transferred to a Fund will be valued in
accordance with the same procedures used to determine the Fund's net asset value
at the time of the next determination of net asset value after such acceptance.
Shares issued by a Fund in exchange for securities will be issued at the net
asset value determined as of the same time. All dividends, interest,
subscription, or other rights pertaining to such securities shall become the
property of the Fund and must be delivered to the Fund by the investor upon
receipt from the issuer. Investors who are permitted to transfer such securities
will be required to recognize a gain or loss on such transfer and pay tax
thereon, if applicable, measured by the difference between the fair market value
of the securities and the investor's basis therein. Securities will not be
accepted in exchange for shares of a Fund unless: (1) such securities are, at
the time of the exchange, eligible to be included in the Fund's portfolio and
current market quotations are readily available for such securities; (2) the
investor represents and warrants that all securities offered to be exchanged are
not subject to any restrictions upon their sale by the Fund under the Securities
Act; and (3) the value of any such security, (except U.S. Government
securities), being exchanged, together with other securities of the same issuer
owned by the Fund, will not exceed 5% of the Fund's net assets immediately after
the transaction.
Redemptions
Pursuant to McM Funds' Trust Instrument, payment for shares redeemed may be made
either in cash or in kind, or partly in cash and partly in-kind. However, McM
Funds has elected, pursuant to Rule 18f-1 under the 1940 Act to redeem its
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of the Fund, during any 90-day period for any one shareholder. Payments in
excess of this limit will also be made wholly in cash unless the Board of
Trustees believes that economic conditions exist which would make such a
practice detrimental to the best interests of each Fund. Any portfolio
securities paid or distributed in-kind would be valued as described under "Net
Asset Value." In the event that an in-kind distribution is made, a shareholder
may incur additional expenses, such as the payment of brokerage commissions, on
the sale or other disposition of the securities received from a Fund. In-kind
payments need not constitute a cross-section of the Fund's portfolio. If a
shareholder has requested redemption of all or a part of the shareholder's
investment, and the Fund completes such redemption in-kind, the Fund will not
recognize gain or loss for federal tax purposes, on the securities used to
complete the redemption but the shareholder will recognize gain or loss equal to
the difference between the fair market value of the securities received and the
shareholder's basis in the Fund shares redeemed.
McM Funds may suspend the right of redemption or postpone the date of payment
for more than seven days during any period when (1) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the U.S. Securities and Exchange Commission has by order permitted
such suspension; (3) an emergency, as defined by rules of the U.S. Securities
and Exchange Commission, exists making disposal of portfolio investments or
determination of the value of the net assets of a Fund not reasonably
practicable.
<PAGE>
TAXES
Each Fund has elected, and intends to continue, to qualify to be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code").
In order to so qualify for any taxable year, a fund must, among other things,
(i) derive at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, gains from the sale of securities or
foreign currencies or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (ii) distribute at least 90%
of its dividend, interest and certain other taxable income each year; and (iii)
at the end of each fiscal quarter maintain at least 50% of the value of its
total assets in cash, government securities, securities of other regulated
investment companies, and other securities of issuers which represent, with
respect to each issuer, no more than 5% of the value of a fund's total assets
and 10% of the outstanding voting securities of such issuer, and have no more
than 25% of its assets invested in the securities (other than those of the
government or other regulated investment companies) of any one issuer or of two
or more issuers which the fund controls and which are engaged in the same,
similar or related trades and businesses. To the extent McM Funds continues to
qualify for treatment as a regulated investment company, it will not be subject
to federal income tax on income paid to shareholders in the form of dividends or
capital gains distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of a
Fund's "required distributions" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of a fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. Each Fund intends to make distributions sufficient to avoid imposition of
the excise tax. For a distribution to qualify as such with respect to a calendar
year under the foregoing rules, it must be declared by each Fund during October,
November or December to shareholders of record during such month and paid by
January 31 of the following year. Such distributions will be taxable in the year
they are declared, rather than the year in which they are received.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 23
<PAGE>
When a Fund writes a call, or purchases a put option, an amount equal to the
premium received or paid by it is included in the Fund's accounts as an asset
and as an equivalent liability. In writing a call, the amount of the liability
is subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the last sale
price on the principal exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and asked prices. If an option
which a Fund has written expires on its stipulated expiration date, the Fund
recognizes a short-term capital gain. If a Fund enters into a closing purchase
transaction with respect to an option which the Fund has written, the Fund
realizes a short-term gain (or loss if the cost of the closing transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a call option which a Fund has written is
exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received.
The premium paid by a Fund for the purchase of a put option is recorded in the
Fund's assets and liabilities as an investment and subsequently adjusted daily
to the current market value of the option. For example, if the current market
value of the option exceeds the premium paid, the excess would be unrealized
appreciation and, conversely, if the premium exceeds the current market value,
such excess would be unrealized depreciation. The current market value of a
purchased option is the last sale price on the principal exchange on which such
option is traded or, in the absence of a sale, the mean between the last bid and
asked prices. If an option which a Fund has purchased expires on the stipulated
expiration date, the Fund realizes a short-term or long-term capital loss for
federal income tax purposes in the amount of the cost of the option. If a Fund
exercises a put option, it realizes a capital gain or loss (long-term or
short-term, depending on the holding period of the underlying security) from the
sale which will be decreased by the premium originally paid.
Accounting for options on certain stock indices will be in accordance with
generally accepted accounting principles. The amount of any realized gain or
loss on closing out such a position will result in a realized gain or loss for
tax purposes. Such options held by a Fund at the end of each fiscal year on a
broad-based stock index will be required to be "marked-to-market" for federal
income tax purposes. Sixty percent of any net gain or loss recognized on such
deemed sales or on any actual sales will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss
("60/40 gain or loss"). Futures contracts and options on futures contracts
utilized by McM Funds are also "Section 1256 contracts." Any gains or losses on
Section 1256 contracts held by a Fund at the end of each taxable year (and on
October 31 of each year for purposes of the 4% excise tax) are
"marked-to-market" with the result that unrealized gains or losses are treated
as though they were realized and the resulting gain or loss is treated as a
60/40 gain or loss.
Shareholders will be subject to federal income taxes on distributions made by a
Fund whether received in cash or additional shares of a Fund. Distributions of
net investment income and net short-term capital gains, if any, will be taxable
to shareholders as ordinary income. Distributions of net long-term capital
gains, if any, will be taxable to shareholders as long-term capital gains,
without regard to how long a shareholder has held shares of a Fund. A loss on
the sale of shares held for six months or less will be treated as a long-term
capital loss to the extent of any long-term capital gain dividend paid to the
shareholder with respect to such shares. Dividends paid by a Fund may qualify in
part for the 70% dividends received deduction for corporations, provided,
however, that those shares have been held for at least 45 days.
Each Fund will notify shareholders each year of the amount of dividends and
distributions, including the amount of any distribution of long-term capital
gains, and the portion of its dividends which qualify for the 70% deduction.
The above discussion and the related discussion in the Prospectus are not
intended to be complete discussions of all applicable federal tax consequences
of an investment in McM Funds. The law firm of Paul, Hastings, Janofsky and
Walker, LLP has expressed no opinion in respect thereof. Dividends and
distributions also may be subject to state and local taxes. Shareholders are
urged to consult their tax advisors regarding specific questions as to federal,
state and local taxes.
The foregoing discussion relates solely to U.S. federal income tax law. Non-U.S.
investors should consult their tax advisors concerning the tax consequences of
ownership of shares of McM Funds, including the possibility that distributions
may be subject to a 30% U.S. withholding tax (or a reduced rate of withholding
provided by treaty).
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 24
<PAGE>
PERFORMANCE INFORMATION
General
From time to time, McM Funds may include general comparative information, such
as statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. McM Funds may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of any Fund.
From time to time, the yield and total return of a Fund may be quoted in
advertisements, shareholder reports or other communications to shareholders.
Total Return Calculations
Each Fund that computes its average annual total returns does so by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
Average Annual Total Return = [ (ERV)1/n - 1 ]
---
P
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms
of years.
Each Fund that computes its aggregate total returns does so by determining the
aggregate compounded rate of return during specified period that likewise equate
the initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
Aggregate Total Return = [ (ERV) - 1 ]
---
P
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Based upon the foregoing calculations, the average annual total return for the
Principal Preservation Fund for the one year period ended June 30, 1999 and the
period July 13, 1994 (commencement of operations) through June 30, 1999 was
4.97% and 5.26%, respectively. The average annual total returns for the one year
period ended June 30, 1999 and for the period July 14, 1994 (commencement of
operations) through June 30, 1999 were as follows: Intermediate Fixed Income
Fund - 3.25% and 6.60%; Fixed Income Fund - 2.34% and 7.29%; Balanced Fund -
14.60% and 18.94%; and Equity Investment Fund - 21.70% and 26.99%, respectively.
Since performance will fluctuate, performance data for a Fund should not be used
to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 25
<PAGE>
Yield of Principal Preservation Fund
The yield of the Principal Preservation Fund for a seven-day period (the "base
period") will be computed by determining the net change in value (calculated as
set forth below) of a hypothetical account having a balance of one share at the
beginning of the period, dividing the net change in account value by the value
of the account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by 365/7 with the resulting yield
figure carried to the nearest hundredth of one percent. Net changes in value of
a hypothetical account will include the value of additional shares purchased
with dividends from the original share and dividends declared on both the
original share and any such additional shares, but will not include realized
gains or losses or unrealized appreciation or depreciation on portfolio
investments. Yield may also be calculated on a compound basis (the "effective
yield"), which assumes that net income is reinvested in shares of the Fund at
the same rate as net income is earned for the base period.
The yield and effective yield of Principal Preservation Fund will vary in
response to fluctuations in interest rates and in the expenses of the Fund. For
comparative purposes the current and effective yields should be compared to
current and effective yields offered by competing financial institutions for the
same base period and calculated by the methods described above. For the
seven-day period ended June 30, 1999, the Principal Preservation Fund had a
yield of 4.57% and an effective yield of 4.67%.
Yields of Intermediate Fixed Income Fund, Fixed Income Fund, Balanced Fund and
Equity Investment Fund The yield of each of these Funds is calculated by
dividing the net investment income per share (as described below) earned by the
Fund during a 30-day (or one-month) period by the maximum offering price per
share on the last day of the period and annualizing the result on a semi-annual
basis by adding one to the quotient, raising the sum to the power of six,
subtracting one from the result and then doubling the difference. A Fund's net
investment income per share earned during the period is based on the average
daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:
YIELD = 2 [ ( a - b + 1)6 - 1 ]
-----
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = maximum offering price per share on the last day of the period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on any debt obligations held by a Fund is calculated by computing the
yield to maturity of each obligation held by that Fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by that Fund. For purposes of this
calculation, it is assumed that each month contains 30 days, and that the
maturity date is the date on which the obligation reasonably may be expected to
be called or, if none, the stated maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount premium. The amortization schedule will be adjusted
monthly to reflect changes in the market values of such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by a Fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
The interest earned on tax-exempt obligations that are issued without original
issue discount and have a current market discount is calculated by using the
coupon rate of interest instead of the yield to maturity. In the case of
tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original discount (market discount), the yield to maturity is the
imputed rate based on the original issue discount calculation. On the other
hand, in the case of tax-exempt obligations that are issued with original issue
discount but which have discounts based on current market value that are less
than the then-remaining portion of the original discount (market premium), the
yield to maturity is based on the market value.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 26
<PAGE>
With respect to mortgage or other receivables-backed obligations which are
expected to be subject to monthly payments of principal and interest
("pay-downs") (i) gain or loss attributable to actual monthly paydowns are
accounted for as an increase or decrease to interest income during the period
and (ii) each Fund may elect either (a) to amortize the discount and premium on
the remaining security, based on the cost of the security, to the weighted
average maturity date, if such information is available, or to the remaining
term of the security, if any, if the weighted average date is not available or
(b) not to amortize discount or premium on the remaining security.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information do not contain all
the information included in the Registration Statement filed with the U.S.
Securities and Exchange Commission under the Securities Act with respect to the
securities offered by the Prospectus. Certain portions of the Registration
Statement have been omitted from the Prospectus and this Statement of Additional
Information pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission. The Registration Statement including the exhibits filed
therewith may be examined at the office of the U.S. Securities and Exchange
Commission in Washington, D.C.
Statements contained in the Prospectus or this Statement of Additional
Information as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this Statement of Additional Information
forms a part. Each such statement is qualified in all respects by such
reference.
Reports to Shareholders. Shareholders will receive unaudited semi-annual reports
describing McM Funds' investment operations and annual financial statements
audited by independent certified public accountants. Inquiries regarding McM
Funds may be directed to the Advisor at (800) 788-9485.
Audited Financial Statements. McM Funds' financial statements, including the
notes thereto, dated as of June 30, 1999, which have been audited by Tait,
Weller & Baker, are incorporated by reference from the Funds' 1999 Annual Report
to Shareholders.
- --------------------------------------------------------------------------------
McM Funds - Statement of Additional Information Page 27
<PAGE>
EXPLANATION OF RATING CATEGORIES
The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk of lower quality securities.
Credit rating agencies may fail to change credit ratings to reflect subsequent
events on a timely basis. Although McMorgan & Company considers security ratings
when making investment decisions, it also performs its own investment analysis
and does not rely solely on the ratings assigned by credit agencies.
STANDARD & POOR'S RATINGS SERVICES
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------- -----------------------------------------------------
Bond Rating Explanation
- ------------------------------------------------------- -----------------------------------------------------
Investment Grade
- ------------------------------------------------------- -----------------------------------------------------
AAA Highest rating; extremely strong capacity to pay
principal and interest
- ------------------------------------------------------- -----------------------------------------------------
AA High quality; very strong capacity to pay principal
and interest
- ------------------------------------------------------- -----------------------------------------------------
A Strong capacity to pay principal and interest;
somewhat more susceptible to the adverse effects
of changing circumstances and economic conditions.
- ------------------------------------------------------- -----------------------------------------------------
BBB Adequate capacity to pay principal and interest;
normally exhibit adequate protection parameters,
but adverse economic conditions or changing
circumstances more likely to lead to a
weakened capacity to pay principal and interest
than for higher rated bonds.
- ------------------------------------------------------- -----------------------------------------------------
Non-Investment Grade
- ------------------------------------------------------- -----------------------------------------------------
BB, B, CCC, CC, C Predominantly speculative with respect to the
issuer's capacity to meet required interest and
principal payments.
BB - lowest degree of speculation; C - the highest
degree of speculation. Quality and protective
characteristics outweighed by large uncertainties
or major risk exposure to adverse conditions.
- ------------------------------------------------------- -----------------------------------------------------
D In default.
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOODY'S INVESTORS SERVICE, INC.
<S> <C>
- ------------------------------------------------------- -----------------------------------------------------
Bond Rating Explanation
- ------------------------------------------------------- -----------------------------------------------------
Investment Grade
- ------------------------------------------------------- -----------------------------------------------------
Aaa Highest quality, smallest degree of investment risk.
- ------------------------------------------------------- -----------------------------------------------------
Aa High quality; together with Aaa bonds, they
compose the high-grade bond group.
- ------------------------------------------------------- -----------------------------------------------------
A Upper-medium grade obligations; many
favorable investment attributes.
- ------------------------------------------------------- -----------------------------------------------------
Baa Medium-grade obligations; neither highly protected
nor poorly secured. Interest and principal appear
adequate for the present but certain protective
elements may be lacking or may be unreliable
over any great length of time.
- ------------------------------------------------------- -----------------------------------------------------
Non-Investment Grade
- ------------------------------------------------------- -----------------------------------------------------
Ba More uncertain, with speculative elements.
Protection of interest and principal payments
not well safeguarded during good and bad times.
- ------------------------------------------------------- -----------------------------------------------------
B Lack characteristics of desirable investment;
potentially low assurance of timely interest and
principal payments or maintenance of other contract
terms over time.
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
McM Funds - Statement of Additional Information Page 28
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Caa Poor standing, may be in default; elements of
danger with respect to principal or interest
payments.
- ------------------------------------------------------- -----------------------------------------------------
Ca Speculative in a high degree; could be in
default or have other marked shortcomings.
- ------------------------------------------------------- -----------------------------------------------------
C Lowest-rated; extremely poor prospects of ever
attaining investment standing.
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
Unrated securities will be treated as noninvestment grade securities unless a
portfolio manager determines that such securities are the equivalent of
investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
McM Funds - Statement of Additional Information Page 29
<PAGE>
MCM FUNDS
FORM N-1A
PART C OTHER INFORMATION
Part C. Other Information
Item 23. Exhibits.
- ------------------------
(a) Copies of Charter -- Amended Trust Instrument dated May
9, 1994 is incorporated by reference to Exhibit No. (1)
of Post-Effective No. 3.
(b) Copies of existing By-Laws --By-laws are incorporated by
reference to Exhibit No. (2) of Post-Effective No. 3.
(c) Copies of all instruments defining the rights of holders
of the securities -- Not Applicable. Registrant proposes
to maintain investments as non-certificated book entry
shares.
(d) Copies of all investment advisory contracts --
Investment Advisory contracts are incorporated by
reference to Exhibit No. (5) of Post-Effective No. 3.
(e) Copies of each underwriting or distribution contract --
Underwriting Agreement between Registrant and Provident
Distributors, Inc. dated November 22, 1999 -- filed
herewith electronically.
(f) Copies of all bonus, profit sharing, pension or other
similar contracts -- Not Applicable.
(g) Copies of all custodian agreements --
(1) Custodian Agreement is incorporated by reference to
Exhibit No. (8)(b) of Post-Effective No. 3.
(h) Copies of all other material contracts not made in the
ordinary course of business which are to be performed.
(1) Services Agreement between the Registrant and First
Data Investor Services Group, Inc. dated November
22, 1999 -- filed herewith electronically.
(i) Opinion and Consent of Counsel as to the legality
of the securities to be issued -- filed herewith
electronically.
(j) Copies of any other opinions, appraisals or rulings
-- Consent of Independent Auditors - filed herewith
electronically.
(k) All financial statements omitted from Item 23.
-- Not Applicable.
(l) Copies of any agreements or understandings made in
consideration for providing the initial capital between
or among the Registrant is incorporated by reference to
Exhibit No. (13) of Post-Effective No. 3.
(m) Copies of any plan entered into by Registrant pursuant
to Rule 12b-1 -- filed herewith electronically.
- --------------------------------------------------------------------------------
Page 1
<PAGE>
. (n) Financial Data Schedules on behalf of McM Principal
Preservation Fund, McM Intermediate Fixed Income Fund,
McM Fixed Income Fund, McM Balanced Fund and McM Equity
Investment Fund -- not applicable.
(o) Rule 18f-3 Plan -- filed herewith electronically.
(P) Power of Attorney--filed herewith electronically.
Item 24. Persons Controlled by or under Common Control with Registrant.
- -----------------------------------------------------------------------------
None.
Item 25. Indemnification.
- -------------------------------
Registrant has obtained from a major insurance carrier a trustees'
and officers' liability policy covering certain types of errors and
omissions. In addition, Section 10.2 of the Registrant's Trust
Instrument provides as follows:
10.2 Indemnification. The Trust shall indemnify each of
its Trustees against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal,
in which he may be involved or with which he may be
threatened, while as a Trustee or thereafter, by reason of his
being or having been such a Trustee except with respect to any
matter as to which he shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties, provided that as to any
matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the
Trustees to the effect that if either the matter of willful
misfeasance, gross negligence or reckless disregard of duty,
or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of
such person. The rights accruing to any person under these
provisions shall not exclude any other right to which he may
be lawfully entitled, provided that no person may satisfy any
right of indemnity or reimbursement hereunder except out of
the property of the Trust. The Trustees may make advance
payments in connection with the indemnification under this
Section 10.2, provided that the indemnified person shall have
given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to
such indemnification.
The Trust shall indemnify officers, and shall have the
power to indemnify representatives and employees of the Trust,
to the same extent that Trustees are entitled to
indemnification pursuant to this Section 10.2.
In so far as indemnification for liability arising under
the Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in that Act and is,
therefore, enforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a
trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
that Act and will be governed by the final adjudication of
such issue.
- --------------------------------------------------------------------------------
Page 2
<PAGE>
Section 10.3 of the Registrant's Trust Instrument, filed
herein as Exhibit 1, also provides for the indemnification of
shareholders of the Registrant. Section 10.3 states as follows:
10.3 Shareholders. In case any Shareholder or former
Shareholder of any Series shall be held to be personally
liable solely by reason of his being or having been a
shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators or other
legal representatives or, in the case of a corporation or
other entity, its corporate or other general successor) shall
be entitled out of the assets belonging to the applicable
Series to be held harmless from and indemnified against all
loss and expense arising from such liability. The Trust, on
behalf of the affected Series, shall, upon request by the
Shareholder, assume the defense of any claim made against the
Shareholder for any act or obligation of the Trust and satisfy
any judgment thereon from the assets of the Series.
Item 26. Business and Other Connections of Advisor.
- ---------------------------------------------------------
McMorgan & Company provides investment advisory services consisting
of portfolio management for retirement plans and health and welfare
funds, and as of June 30, 1999 had approximately $28 billion in
assets under management primarily for employee benefit plans such as
retirement plans and health and welfare funds.
For information as to any other business, vocation or employment of
a substantial nature in which each Trustee or officer of the
Registrant's investment advisor has been engaged for his own account
or in the capacity of Trustee, officer, employee, partner or
trustee, reference is made to the Form ADV (File #801-10448) filed
by it under the Investment Advisers Act of 1940.
Item 27. Principal Underwriter.
- -------------------------------------
(a) Provident Distributors, Inc., the principal underwriter
for the Registrant's securities, acts as principal
underwriter for the following investment companies as of
12/1/99:
International Dollar Reserve Fund I, Ltd.
Provident Institutional Funds Trust
Pacific Innovatins Trust
Columbia Common Stock Fund, Inc.
Columbia Growth Fund, Inc.
Columbia International Stock Fund, Inc.
Columbia Special Fund, Inc.
Columbia Small Cap Fund, Inc.
Columbia Real Estate Equity Fund, Inc.
Columbia Balanced Fund, Inc.
Columbia Daily Income Company
Columbia U.S. Government Securities Fund, Inc.
Columbia Fixed Income Securities Fund, Inc.
Columbia Municipal Bond Fund, Inc.
Columbia High Yield Fund, Inc.
Columbia National Municipal Bond Fund, Inc.
GAMNA Series Funds, Inc.
WT Investment Trust
Kalmar Pooled Investment Trust
The RBB Fund, Inc.
Robertson Stephens Investment Trust
HT Insight Funds, Inc.
Harris Insight Funds Trust
Hilliard-Lyons Government Fund, Inc.
Hilliard-Lyons Growth Fund, Inc.
Hilliard-Lyons Research Trust
Senbanc Fund
ABN AMRO Funds
Alleghany Funds
BT Insurance Funds Trust
First Choice Funds Trust
Forward Funds, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
IBJ Funds Trust
Light Index Funds, Inc.
LKCM Funds
Matthews International Funds
-3-
<PAGE>
McM Funds
Metropolitan West Funds
New Covenant Funds, Inc.
Panorama Trust
Smith Breeden Series Funds
Smith Breeden Trust
Stratton Growth Fund, Inc.
Stratton Monthly Dividend REIT Shares, Inc.
The Stratton Funds, Inc.
The Galaxy Fund
The Galaxy VIP Fund
Galaxy Fund II
The Govett Funds, Inc.
Trainer, Wortham First Mutual Funds
Undiscovered Managers Funds
Wilshire Target Funds, Inc.
Weiss, Peck & Greer Funds Trust
Weiss, Peck & Greer International Fund
WPG Growth and Income Fund
WPG Growth Fund
WPG Tudor Fund
RWB/WPG U.S. Large Stock Fund
Tomorrow Funds Retirement Trust
The BlackRock Funds, Inc. (Distributed by
BlackRock Distributors, Inc. a wholly owned
subsidiary of Provident Distributors, Inc.)
Northern Funds Trust (Distributed by Northern
Funds Distributors, LLC. a wholly owned subsidiary
of Provident Distributors, Inc.)
The Offit Investment Fund, Inc. (Distributed by
Offit Funds Distributor, Inc. a wholly owned
subsidiary of Provident Distributors, Inc.)
The Offit Variable Insurance Fund, Inc.
(Distributed by Offit Funds Distributor, Inc. a
wholly owned subsidiary of Provident Distributors,
Inc.)
Provident Disributors, Inc. is registered with the
Securities and Exchange Commission as a broker-dealer and is a
member of the National Association of Securities Dealers.
Provident Distributors, Inc. is located at Four Falls
Corporate Center, Suite 600, West Conshohocken, Pennsylvania
19428-2961
-4-
<PAGE>
(b) The table below sets forth certain information as to the
Underwriter's Trustees, Officers and Control Persons:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Position Position
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
------------------ ------------------ ---------------
Philip H. Rinnander President & Treasurer None
Jane Haegele Director & Secretary None
Jason A. Greim Vice President None
Barbara A. Rice Vice President None
Jennifer K. Rinnander Vice President None
Lisa M. Buono Vice President &
Compliance Officer None
</TABLE>
(c) Not Applicable.
Item 28. Location of Accounts and Records.
- ------------------------------------------------
All records described in Section 31(a) of the Act and the Rules 17
CFR 270.31a-1 to 31a-31 promulgated thereunder, are maintained by
the Fund's Investment Advisor, McMorgan & Company, One Bush Street,
Suite 800, San Francisco, CA 94104, except for those maintained by
the Fund's Custodian, The Bank of New York and McM Funds'
Administrator, Transfer Agent and Fund Accounting Services Agent,
PFPC, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
Pennsylvania 19406-0903.
-5-
<PAGE>
Item 29. Management Services.
- -----------------------------------
There are no management-related service contracts not
discussed in Part A or Part B.
Item 30. Undertakings.
- ----------------------------
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report for the fiscal year
ended June 30, 1999, upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon
the question of removal of any director or directors
when requested in writing to do so by the record holders
of not less than 10 percent of the Registrant's
outstanding shares and to assist its shareholders in
accordance with the requirements of Section 16(c) of the
Investment Company Act of 1940, as amended relating to
shareholder communications.
-6-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "Securities
Act") and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all the requirements for effectiveness of this
registration statement under rule 485(b) under the Securities Act and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, and State
of California on the 29th day of February 2000.
McM Funds
----------
Registrant
By /s/ Terry A. O'Toole*
------------------------
Terry A. O'Toole,
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement of McM Funds has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ Terry A. O'Toole* Chairman of the Board of Trustees 2/29/00
- ------------------------- and President and Principal
Terry O'Toole Executive Officer
/s/ Kenneth I. Rosenblum* Trustee 2/29/00
- -------------------------
Kenneth I. Rosenblum
/s/ Walter B. Rose* Trustee 2/29/00
- -------------------------
Walter B. Rose
/s/ Robert R. Barron* Treasurer, Vice President 2/29/00
- ------------------------- Principal Accounting & Financial
Robert R. Barron Officer & Trustee
/s/ Gregory L. Watson* Trustee 2/29/00
- -------------------------
Gregory L. Watson
/s/ Mark R. Taylor* Trustee 2/29/00
- -------------------------
Mark R. Taylor
/s/ S.D. Sicotte* Trustee 2/29/00
- -------------------------
S.D. Sicotte
</TABLE>
*By:/s/ Carolyn F. Mead, as Attorney-in-Fact
and Agent pursuant to Power of Attorney
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<PAGE>
McM FUNDS
99.B Index to Exhibits to Form N-1A
Exhibit Description of
Number Exhibit
99.B.23(e) Underwriting Agreement between Registrant and Provident
Distributors, Inc.
99.B.23(h) Services Agreement between the Registrant and First Data
Investor Services Group, Inc.
99.B.23(i) Opinion and Consent of Counsel
99.B.23(j) Consent of Independent Auditor
99.B.23(m) Rule 12b-1 Plan
99.B.23(o) Rule 18f-3 Plan
99.B.23(p) Power of Attorney
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<PAGE>
Exhibit 99.B.23.(e)
UNDERWRITING AGREEMENT
This Agreement, dated as of November 22, 1999, is made by and between
McM Funds, a Delaware business trust (the "Fund") operating as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), and Provident Distributors, Inc. ("PDI"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund is authorized to issue separate series of shares
representing interests in separate investment portfolios (the "Series"), which
Series are identified on Schedule "A" attached hereto, and which Schedule "A"
may be amended from time to time by mutual agreement among the Parties; and
WHEREAS, PDI is a broker-dealer registered with the U.S. Securities and
Exchange Commission (the "SEC") and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASDR"); and
WHEREAS, the Parties are desirous of entering into an agreement
providing for the distribution by PDI of the shares of the Fund (the "Shares").
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
1. Appointment
The Fund hereby appoints PDI as its principal agent for the distribution of
the Shares, and PDI hereby accepts such appointment under the terms of this
Agreement. The Fund agrees that it will not sell any Shares to any person
except to fill orders for the Shares received through PDI, provided, however,
that the foregoing exclusive right shall not apply to: (a) Shares issued or
sold in connection with the merger or consolidation of any other investment
company with the Fund or the acquisition by purchase of otherwise of all or
substantially all of the assets of any investment company or substantially
all of the outstanding shares of any such company by the Fund; (b) Shares
which may be offered by the Fund to its stockholders for reinvestment of cash
distributed from capital gains or net investment income of the Fund; or (c)
Shares which may be issued to shareholders of other funds who exercise any
exchange privilege set forth in the Fund's Prospectus. Notwithstanding any
other provision hereof, the Fund may terminate, suspend, or withdraw the
-1-
<PAGE>
offering of the Shares whenever, in its sole discretion, it deems such action
to be desirable.
2. Sale and Repurchase of Shares
(a) PDI is hereby granted the right, as agent for the Fund, to sell Shares to
the public against orders received at the public offering price as
defined in the Fund's Prospectus and Statement of Additional Information.
(b) PDI will also have the right to take, as agent for the Fund, all actions
which, in PDI's judgment, and subject to the Fund's reasonable approval,
are necessary to carry into effect the distribution of the Shares.
(c) PDI will act as agent for the Fund in connection with the repurchase of
Shares by the Fund upon the terms set forth in the Fund's Prospectus and
Statement of Additional Information.
(d) The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information relating to the Shares, and when determined shall be
applicable to all transactions as provided in the Prospectus. The net
asset value of the Shares shall be calculated by the Fund or by another
entity on behalf of the Fund. PDI shall have no duty to inquire into, or
liability for, the accuracy of the net asset value per Share as
calculated.
(e) On every sale, PDI shall promptly pay to the Fund the applicable net
asset value of the Shares.
(f) Upon receipt of purchase instructions, PDI will transmit such
instructions to the Fund or its transfer agent for registration of the
Shares purchased.
(g) Nothing in this Agreement shall prevent PDI or any affiliated person (as
defined in the Act) of PDI from acting as underwriter for any other
person, firm or corporation (including other investment companies), or in
any way limit or restrict PDI or such affiliated person from buying,
selling or trading any securities for its or their own account or for the
account of others for whom it or they may be acting, provided, however,
that PDI expressly agrees that it will not for its own account purchase
any Shares of the Fund except for investment purposes, and that it will
not for its own account dispose of any such Shares except by redemption
of such Shares with the Fund, and that it will not undertake in any
activities which, in its judgment, will adversely affect the performance
of its obligations to the Fund under this Agreement.
-2-
<PAGE>
3. Rules of Sale of Shares
PDI does not agree to sell any specific number of Shares and serves only in
the capacity of Statutory Underwriter. The Fund reserves the right to
terminate, suspend or withdraw the sale of its Shares for any reason deemed
adequate by it, and the Fund reserves the right to refuse at any time or
times to sell any of its Shares to any person for any reason deemed adequate
by it.
4. Rules of NASDR, etc.
(a) PDI will conform to the Conduct Rules of the NASDR and the securities
laws of any jurisdiction in which it directly or indirectly sells any
Shares.
(b) PDI will require each dealer with whom PDI has a selling agreement to
conform to the applicable provisions of the Prospectus, with respect to
the public offering price of the Shares, and PDI shall not cause the Fund
to withhold the placing of purchase orders so as to make a profit
thereby.
(c) The Fund agrees to furnish PDI sufficient copies of any and all:
agreements, plans, communications with the public or other materials
which the Fund intends to use in connection with any sales of Shares, in
adequate time for PDI to file and clear such materials with the proper
authorities before they are put in use. PDI and the Fund may agree that
any such material does not need to be filed subsequent to distribution.
In addition, the Fund agrees not to use any such materials until so filed
and cleared for use, if required, by appropriate authorities as well as
by PDI.
(d) PDI, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in order
that the Shares may be sold in such states as may be mutually agreed upon
by the Parties.
(e) PDI shall remain registered with the SEC and a member of the NASDR for
the term of this Agreement.
(f) PDI shall not, in connection with any sale or solicitation of a sale of
the Shares, make or authorize any representative, service organization,
broker or dealer to make any representations concerning the Shares,
except those contained in the Prospectus offering the Shares and in
communications with the public or sales materials approved by PDI as
information supplemental to such Prospectus. Copies of the Prospectus
will be supplied by the Fund to PDI in reasonable quantities upon
request.
(g) PDI shall only be authorized to make representations in respect of the
Fund consistent with the then current Prospectus, Statement of Additional
Information, and other written information provided by the Fund or its
agents to be used explicitly with respect to the sale of Shares.
-3-
<PAGE>
5. Records to be Supplied by the Fund
The Fund shall furnish to PDI copies of all information, financial statements
and other papers which PDI may reasonably request for use in connection with
the underwriting of the Shares including, but not limited to, one certified
copy of all financial statements prepared for the Fund by its independent
public accountants.
6. Expenses
(a) The Fund will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient copies of
the Prospectus and Statement of Additional Information for
distribution to shareholders, and the cost of distribution of same
to the shareholders;
(ii) preparation, printing and distribution of reports and other
communications to shareholders;
(iii) registration of the Shares under the federal securities laws;
(iv) qualification of the Shares for sale in the jurisdictions as
directed by the Fund;
(v) maintaining facilities for the issue and transfer of the Shares;
(vi) supplying information, prices and other data to be furnished by the
Fund under this Agreement; and
(vii) any original issue taxes or transfer taxes applicable to the sale
or delivery of the Shares or certificates therefor.
(b) PDI agrees to pay all of its own expenses in performing its obligations
hereunder.
7. Term
(a) The term of this Agreement shall commence immediately upon the
consummation of the acquisition of First Data Investor Services Group,
Inc. by a subsidiary of PNC Bank Corp., which the parties anticipate to
occur on or about December 1, 1999 (the "Effective Date").
(b) This Agreement shall remain in effect for one (1) year from the Effective
Date. This Agreement shall continue thereafter for periods not exceeding
-4-
<PAGE>
one (1) year, if approved at least annually (i) by a vote of a majority
of the outstanding voting securities of each Series, or (ii) by a vote of
a majority of the Board Members of the Fund who are not parties to this
Agreement (other than as Board Members of the Fund) or interested persons
of any such party, cast in person at a meeting called for the purpose of
voting on such approval.
(c) This Agreement (i) may be terminated at any time without the payment of
any penalty, either by a vote of the Trustees of the Fund or by a vote of
a majority of the outstanding voting securities of each Series with
respect to such Series, on sixty (60) days' written notice to PDI; and
(ii) may be terminated by PDI on sixty (60) days' written notice to the
Fund with respect to any Series.
(d) This Agreement shall automatically terminate in the event of its
assignment, as defined in the Act.
8. Liability of PDI
(a) PDI, its directors, officers, employees, shareholders and agents shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of PDI's obligations
pursuant to Section 4 of this Agreement (Rules of NASDR), a breach of
fiduciary duty with respect to the receipt of compensation for services
or a loss resulting from willful misfeasance, bad faith or negligence on
the part of PDI in the performance of its obligations and duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement. PDI agrees to indemnify and hold harmless the Fund and each
person who has been, is, or may hereafter be a Trustee, officer, or
employee of the Fund against expenses reasonably incurred by any of them
in connection with any claim or in connection with any action, suit, or
proceeding to which any of them may be a party, which arises out of or is
alleged to arise out of any misrepresentation or omission to state a
material fact, on the part of PDI or any agent of employee of PDI or any
of the persons for whose acts PDI is responsible or is alleged to be
responsible unless such misrepresentation or omission was made in
reliance upon written information furnished to PDI by the Fund. PDI also
agrees to indemnify and hold harmless the Fund and each such person in
connection with any claim or in connection with any action, suit, or
proceeding which arises out of or is alleged to arise out of PDI's
failure to exercise reasonable care and diligence with respect to its
services rendered in connection with the purchase and sale of Shares. The
foregoing rights of indemnification shall be in addition to any other
rights to which the Fund or any such person shall be entitled to as a
matter of law.
-5-
<PAGE>
(b) The Fund agrees to indemnify and hold harmless PDI against any and all
liability, loss, damages, costs of expenses (including reasonable counsel
fees) which PDI may incur or be required to pay hereafter, in connection
with any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which PDI may
be involved as a party or otherwise or with which PDI may be threatened,
by reason of the offer or sale of the Fund's Shares by persons other than
PDI or its representatives, (except for actions of FPS Broker Services,
Inc. or its representatives) to the Fund's indemnification of PDI for
actions prior to the execution of this Agreement. If a claim is made
against PDI as to which PDI may seek indemnity under the Section, PDI
shall notify the Fund promptly after any written assertion of such claim
threatening to institute an action or proceeding with respect thereto and
shall notify the Fund promptly of any action commenced against PDI within
10 days time after PDI shall have been served with a summons or other
legal process, giving information as to the nature and basis of the
claim. Failure to notify the Fund shall not, however, relieve the Fund
from any liability which it may have on account of the indemnity under
this Section 8(b) if the Fund has not been prejudiced in any material
respect by such failure. The Fund shall have the sole right to control
the settlement of any such action, suit or proceeding subject to PDI
approval, which shall not be unreasonably withheld. PDI shall have the
right to participate in the defense of an action or proceeding and to
retain its own counsel, and the reasonable fees and expenses of such
counsel shall be borne by the Fund (which shall pay such fees, costs and
expenses at least quarterly) if:
(i) PDI has received an opinion of counsel stating that the use of
counsel chosen by the Fund to represent PDI would present such
counsel with a conflict of interest:
(ii) the defendants in, or targets of, any such action or proceeding
include both PDI and the Fund, and legal counsel to PDI shall have
reasonably concluded that there are legal defenses available to it
which are different from or additional to those available to the
trust or which may be adverse to or inconsistent with defenses
available to the Fund (in which case the Fund shall not have the
right to direct the defense of such action on behalf of PDI); or
(iii) the Fund shall authorize PDI to employ separate counsel at the
expense of the Fund.
(c) Any person, even though also a director, officer, employee, shareholder
or agent of PDI who may be or become an officer, director, trustee,
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<PAGE>
employee or agent of the Fund, shall be deemed, when rendering services
to the Fund or acting on any business of the Fund (other than services or
business in connection with PDI's duties hereunder), to be rendering such
services to or acting solely for the Fund and not as a director, officer,
employee, shareholder or agent, or one under the control or direction of
PDI even though receiving a salary from PDI.
(d) The Fund agrees to indemnify and hold harmless PDI, and each person who
controls PDI within the meaning of Section 15 of the Securities Act of
1933, as amended (the "Securities Act"), or Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any and
all losses, claims, damages and liabilities, joint or several (including
any reasonable investigative, legal and other expenses incurred in
connection therewith) to which they, or any of them, may become subject
under the Act, the Securities Act, the Exchange Act or other federal or
state law or regulations, at common law or otherwise insofar as such
losses, claims, damages or liabilities (or actions, suits or proceedings
in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in a Prospectus,
Statement of Additional Information, supplement thereto, sales literature
(or other written information) prepared by the Fund and furnished by the
Fund to PDI for PDI's use hereunder, disseminated by the trust or which
arise out of or are based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading.
Such indemnity shall not, however, inure to the benefit of PDI (or any
person controlling PDI) on account of any losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof) arising
from the sale of the Shares of the Fund to any person by PDI (i) if such
untrue statement or omission or alleged untrue statement or omission was
made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity
with information furnished in writing to the Fund by PDI specifically for
use therein or (ii) if such losses, claims, damages or liabilities arise
out of or are based upon an untrue statement or omission or alleged
untrue statement or omission found in any Prospectus, Statement of
Additional Information, supplement, sales or other literature,
subsequently corrected, but negligently distributed by PDI and a copy of
the corrected Prospectus was not delivered to such person at or before
the confirmation of the sale to such person
(e) PDI shall not be responsible for any damages, consequential or otherwise,
which the Company or the Fund may experience, due to the disruption of
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<PAGE>
the distribution of Shares caused by any action or inaction of any
registered representative or affiliate of PDI or of PDI itself.
(f) Notwithstanding anything in this Agreement to the contrary, in no event
shall any party to this Agreement, its affiliates or any of its or their
directors, trustees, officers, employees, agents or subcontractors be
liable for lost profits, exemplary, punitive, special, incidental,
indirect or consequential damages.
9. Amendments
No provision of this Agreement may be amended or modified in any manner
whatsoever, except by a written agreement properly authorized and executed
by the Parties.
10. Section Headings
Section and paragraph headings are for convenience only and shall not be
construed as part of this Agreement.
11. Reports
PDI shall prepare reports for the Board of the Fund, on a quarterly basis,
showing such information as, from time to time, shall be reasonably
requested by the Board.
12. Severability
If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not affected, and the
rights and obligations of the Parties shall be construed and enforced as if
the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic agreement is not thereby
substantially impaired.
13. Governing Law
This Agreement shall be governed by the laws of the State of California and
the exclusive venue of any action arising under this Agreement shall be the
City of San Francisco, State of California.
14. Authority to Execute
The Parties represent and warrant to each other that the execution and
delivery of this Agreement by the undersigned officer of each Party has been
duly and validly authorized; and, when duly executed, this Agreement will
constitute a valid and legally binding and enforceable obligation of each
Party.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be signed
by their duly authorized officer, of the day and year first above written.
PROVIDENT DISTRIBUTORS, INC.
/s/ Philip H. Rinnander
- --------------------------
By: Philip H. Rinnander
Title: President
MCM FUNDS
/s/ Deane A. Nelson
- --------------------------
By: Deane A. Nelson
Title:Vice President
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<PAGE>
SCHEDULE A
IDENTIFICATION OF SERIES
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
Equity Investment Fund
Balanced Fund
Intermediate Fixed Income Fund
Fixed Income Fund
Principal Preservation Fund
S&P 500 Index Fund
This Schedule "A" may be amended from time to time by agreement of the Parties.
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<PAGE>
Exhibit 99.23.B(h)
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 22nd day of November 1999 (the "Effective
Date") between MCM FUNDS (the "Fund"), a Delaware business trust having its
principal place of business at One Bush Street, Suite 800, San Francisco,
California 94104 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor
Services Group"), a Massachusetts corporation with principal offices at 4400
Computer Drive, Westboro, Massachusetts 01581.
WITNESSETH
----------
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its administrator, fund accounting agent, transfer
agent, dividend disbursing agent and agent in connection with certain other
activities and Investor Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
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<PAGE>
(d) "Board of Directors" shall mean the Board of Directors or Board
of Trustees of the Fund, as the case may be.
(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Fund pursuant to
this Agreement.
(f) "Commission" shall mean the Securities and Exchange Commission.
(g) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement. (a) "Investor
Services Group Secure Net Gateway" shall mean the system of computer
hardware and software and network established by Investor Services
Group to provide access between Investor Services Group recordkeeping
system and the Internet.
(h) "Fund Home Page" shall mean the Fund's proprietary web site on
the Internet used by the Fund to provide information to its
shareholders and potential shareholders.
(i) "Investor Services Group Web Transaction Engine" shall mean the
system of computer hardware and software created and established by
Investor Services Group in order to enable Shareholders of the Fund to
perform the transactions contemplated hereunder.
(j) "Internet" shall mean the communications network comprised of
multiple communications networks linking education, government,
industrial and private computer networks.
(k) "1934 Act" shall mean the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, all as amended from
time to time.
(l) "1940 Act" shall mean the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder, all as amended from
time to time.
(m) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by Investor Services Group from a
person reasonably believed by Investor Services Group to be an
Authorized Person;
(n) "Portfolio" shall mean each separate series of shares offered
by the Fund representing interests in a separate portfolio of
securities and other assets;
(o) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements
thereto if any, which has become effective under the Securities Act of
1933 and the 1940 Act.
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<PAGE>
(p) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(q) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(r) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 Appointment of Investor Services Group.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent and dividend
disbursing agent for Shares of each respective Portfolio of the Fund and as
administrator, fund accounting agent, shareholder servicing agent for the Fund
and Investor Services Group hereby accepts such appointments and agrees to
perform the duties hereinafter set forth. This Agreement shall be effective as
of the Effective Date.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and in accordance with the terms of
the Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time between
Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant to
Rule 17Ad-10(e) of the 1934 Act a record of the total number of Shares
of each Portfolio which are authorized, based upon data provided to it
by the Fund, and issued and outstanding. Investor Services Group shall
provide the Fund on a regular basis with the total number of Shares of
each Portfolio which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which functions shall be
the sole responsibility of the Fund.
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<PAGE>
(c) Investor Services Group shall be responsible for the following:
performing the customary services of an administrator, including
corporate secretarial, treasury and blue sky services, and fund
accounting agent for the Fund, as more fully described in the written
schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and subject to the supervision and
direction of the Board of Directors of the Fund.
(d) In addition to providing the foregoing services, the Fund
hereby engages Investor Services Group as its exclusive service
provider with respect to the Print/Mail Services as set forth in
Schedule C for the fees also identified in Schedule C. Investor
Services Group agrees to perform the services and its obligations
subject to the terms and conditions of this Agreement.
(e) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any dividend by the Board of Directors, or the
legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the
Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group
in writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of Investor Services Group for the
Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
3.3 IMPRESSNet Services. Investor Services Group agrees to provide the
following services:
(a) in accordance with the written procedures established between
the Fund and Investor Services Group, enable the Fund and its
Shareholders to utilize the Internet in order to access Fund
information maintained by Investor Services Group through the use of
the Investor Services Group Web Transaction Engine and Secure Net
Gateway;
(b) allow the Shareholders to perform account inquiries and
transactions; and
(c) maintenance of the Investor Services Group Secure Net Gateway
and the Investor Services Group Web Transaction Engine.
In connection with the services provided by Investor Services Group
hereunder, the Fund shall be responsible for the following:
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(a) establishment and maintenance of the Fund Home Page on the
Internet;
(b) services and relationships between the Fund and any third party
on-line service providers to enable the Shareholders to access the Fund
Home Page; and
(c) provide Investor Services Group with access to and information
regarding the Fund Home Page in order to enable Investor Services Group
to provide the services contemplated hereunder.
3.4 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.5 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Fund of such request and secure Written Instructions as to the handling of
such request. Investor Services Group reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to comply with such request.
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Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees and other charges set forth in the written Fee Schedule
annexed hereto as Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by Investor Services Group in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios hereby authorizes
Investor Services Group to collect its fees, other charges and related
out-of-pocket expenses by debiting the Fund's or Portfolio's custody account for
invoices which are rendered for the services performed for the applicable
function. Invoices for the services performed will be sent to the Fund after
such debiting with an indication that payment has been made.
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6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.
6.5 The Fund acknowledges that the fees and charges that Investor
Services Group charges the Fund under this Agreement reflect the allocation of
risk between the parties, including the disclaimer of warranties in Section 9.3
and the limitations on liability and exclusion of remedies in Section 11.2 and
Article 12. Modifying the allocation of risk from what is stated here would
affect the fees that Investor Services Group charges, and in consideration of
those fees, the Fund agrees to the stated allocation of risk.
6.6 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or persons
shall be paid by Investor Services Group and no obligation shall be incurred on
behalf of the Fund in such respect.
6.7 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.7
which may be properly payable by the Fund. Investor Services Group shall not be
required to pay any Blue Sky registration or filing fees unless and until it has
received the amount of such fees from the Fund.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 Investor Services Group System.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
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8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency as
a transfer agent and such registration will remain in effect for the
duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under the
laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
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(d) a registration statement under the Securities Act of 1933, as
amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable; and
(f) as of the date hereof, each Portfolio is duly registered and
lawfully eligible for sale in each jurisdiction indicated for such
Portfolio on the list furnished to Investor Services Group pursuant to
Article 7 of this Agreement and that it will notify Investor Services
Group immediately of any changes to the aforementioned list.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR SERVICES
GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent
act or omission to act or bad faith by Investor Services Group in the
performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or reasonable
use of information, data, records and documents (including but not
limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or
any authorized third party acting on behalf of the Fund, including but
not limited to the prior transfer agent for the Fund, in the
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performance of Investor Services Group's duties and obligations
hereunder;
(c) the reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any requirement
under the securities laws or regulations of any state that such shares
be registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale
of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund
made herein.
10.2 The Fund agrees and acknowledges that Investor Services Group has
not prior to the date hereof assumed, and will not assume, any obligations or
liabilities arising out of the conduct by the Company prior to the date hereof
of those duties which Investor Services Group has agreed to perform pursuant to
this Agreement. The Fund further agrees to indemnify Investor Services Group
against any losses, claims, damages or liabilities to which Investor Services
Group may become subject in connection with the conduct by the Fund or its agent
of such duties prior to the date hereof.
10.3 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and shall
keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel chosen
by the Fund and satisfactory to Investor Services Group, and thereupon the Fund
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further legal or other expenses in respect of such Claim. Investor
Services Group will not confess any Claim or make any compromise in any case in
which the Fund will be asked to provide indemnification, except with the Fund's
prior written consent. The obligations of the parties hereto under this Article
10 shall survive the termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Investor Services Group becomes aware of the
event for which indemnification is claimed; or
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(b) one year after the earlier of the termination of this Agreement
or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.3 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES.
As used in the preceding paragraph "incidental, indirect or
consequential damages" means damages which do not flow directly from the act of
the party or which arise from the intervention of special circumstances not
ordinarily predictable, and does not include direct damages which arise
naturally or ordinarily from a breach of contract.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue until June 30, 2000 (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive one year periods ending on June 30 ("Renewal
Terms") each, unless the Fund or Investor Services Group provides written notice
to the other of its intent not to renew. Such notice must be received not more
than ninety (90) days following the expiration of the Initial Term or the then
current Renewal Term.
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13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, should the Fund desire to move any of the services provided by
Investor Services Group hereunder to a successor service provider prior to the
expiration of the then current Initial or Renewal Term, or should the Fund or
any of its affiliates take any action which would result in Investor Services
Group ceasing to provide transfer agency, administration or fund accounting
services to the Fund prior to the expiration of the Initial or any Renewal Term,
Investor Services Group shall make a good faith effort to facilitate the
conversion on such prior date, however, there can be no guarantee that Investor
Services Group will be able to facilitate a conversion of services on such prior
date. In connection with the foregoing, should services be converted to a
successor service provider or should the Fund or any of its affiliates take any
action which would result in Investor Services Group ceasing to provide transfer
agency, administration or fund accounting services to the Fund prior to the
expiration of the Initial or any Renewal Term, the payment of fees to Investor
Services Group as set forth herein shall be accelerated to a date prior to the
conversion or termination of services and calculated as if the services had
remained with Investor Services Group until the expiration of the then current
Initial or Renewal Term and calculated at the asset and/or Shareholder account
levels, as the case may be, on the date notice of termination was given to
Investor Services Group.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Schedule A shall be amended to include such additional Portfolios.
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Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and Investor Services Group shall exercise at least the same degree of care, but
not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and Investor Services
Group shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party. The Fund and Investor Services Group may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and Investor Services Group may also disclose
the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
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15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free of
any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not
limited to, giving the other party as much advance notice of the
possibility of such disclosure as practical so the other party may
attempt to stop such disclosure or obtain a protective order concerning
such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 Force Majeure; Excused Non-Performance.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In addition, no party shall be liable for
any default or delay in the performance of its obligations under this Agreement
if and to the extent that such default or delay is caused, directly or
indirectly, by the actions or inactions of the other party. In any such event,
the non-performing party shall be excused from any further performance and
observance of the obligations so affected only for as long as such circumstances
prevail and such party continues to use commercially reasonable efforts to
recommence performance or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
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which consent shall not be unreasonably withheld. Investor Services Group may,
in its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services Group.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
McM Funds
One Bush Street, Suite 800
San Francisco, CA 94104
Attention: __________________
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
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Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
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Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
Article 26 Miscellaneous.
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of Incorporation.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
MCM FUNDS
By: Deane A. Nelson
------------------------------------
Title: Vice President
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: Kenneth J. Kempf
------------------------------------
Title: Senior Vice President
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SCHEDULE A
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LIST OF PORTFOLIOS
McM Principal Preservation Fund
McM Intermediate Fixed Income Fund
McM Fixed Income Fund
McM Balanced Fund
McM Equity Investment Fund
McM S&P 500 Index Fund
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SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
I. TRANSFER AGENCY SERVICES
(a) Shareholder Information. Investor Services Group shall maintain a record
of the number of Shares held by each Shareholder of record which shall include
name, address, taxpayer identification and which shall indicate whether such
Shares are held in certificates or uncertificated form.
(b) Shareholder Services. Investor Services Group shall respond as
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between Investor Services Group and the Fund.
(c) Share Certificates.
o At the expense of the Fund, the Fund shall supply Investor Services Group
with an adequate supply of blank share certificates to meet Investor
Services Group requirements therefor. Such Share certificates shall be
properly signed by facsimile. The Fund agrees that, notwithstanding the
death, resignation, or removal of any officer of the Fund whose signature
appears on such certificates, Investor Services Group or its agent may
continue to countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
o Investor Services Group shall issue replacement Share certificates in lieu
of certificates which have been lost, stolen or destroyed, upon receipt by
Investor Services Group of properly executed affidavits and lost
certificate bonds, in form satisfactory to Investor Services Group, with
the Fund and Investor Services Group as obligees under the bond.
o Investor Services Group shall also maintain a record of each certificate
issued, the number of Shares represented thereby and the Shareholder of
record. With respect to Shares held in open accounts or uncertificated form
(i.e., no certificate being issued with respect thereto) Investor Services
Group shall maintain comparable records of the Shareholders thereof,
including their names, addresses and taxpayer identification. Investor
Services Group shall further maintain a stop transfer record on lost and/or
replaced certificates.
(d) Mailing Communications to Shareholders; Proxy Materials. Investor
Services Group will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In connection with meetings of Shareholders,
Investor Services Group will prepare Shareholder lists, mail and certify as to
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<PAGE>
the mailing of proxy materials, process and tabulate returned proxy cards,
report on proxies voted prior to meetings, act as inspector of election at
meetings and certify Shares voted at meetings.
(e) Sales of Shares.
o Investor Services Group shall not be required to issue any Shares of the Fund
where it has received a Written Instruction from the Fund or official notice
from any appropriate authority that the sale of the Shares of the Fund has
been suspended or discontinued. The existence of such Written Instructions or
such official notice shall be conclusive evidence of the right of Investor
Services Group to rely on such Written Instructions or official notice.
o In the event that any check or other order for the payment of money is
returned unpaid for any reason, Investor Services Group will endeavor to: (i)
give prompt notice of such return to the Fund or its designee; (ii) place a
stop transfer order against all Shares issued as a result of such check or
order; and (iii) take such actions as Investor Services Group may from time
to time deem appropriate.
(f) Transfer and Repurchase.
o Investor Services Group shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in
the Fund's Prospectus.
o Investor Services Group will transfer or repurchase Shares upon receipt of
Oral or Written Instructions or otherwise pursuant to the Prospectus and
Share certificates, if any, properly endorsed for transfer or redemption,
accompanied by such documents as Investor Services Group reasonably may deem
necessary.
o Investor Services Group reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. Investor Services Group also reserves the
right to refuse to transfer or repurchase Shares until it is satisfied that
the requested transfer or repurchase is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make transfers or
repurchases which Investor Services Group, in its good judgement, deems
improper or unauthorized, or until it is reasonably satisfied that there is
no basis to any claims adverse to such transfer or repurchase.
o When Shares are redeemed, Investor Services Group shall, upon receipt of the
instructions and documents in proper form, deliver to the Custodian and the
Fund or its designee a notification setting forth the number of Shares to be
repurchased. Such repurchased shares shall be reflected on appropriate
accounts maintained by Investor Services Group reflecting outstanding Shares
of the Fund and Shares attributed to individual accounts.
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<PAGE>
o Investor Services Group shall upon receipt of the monies provided to it by
the Custodian for the repurchase of Shares, pay such monies as are received
from the Custodian, all in accordance with the procedures described in the
written instruction received by Investor Services Group from the Fund.
o Investor Services Group shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by Investor Services Group or its
agent of notification of the suspension of the determination of the net asset
value of the Fund.
(g) Dividends.
o Upon the declaration of each dividend and each capital gains distribution by
the Board of Directors of the Fund with respect to Shares of the Fund, the
Fund shall furnish or cause to be furnished to Investor Services Group
Written Instructions setting forth the date of the declaration of such
dividend or distribution, the ex-dividend date, the date of payment thereof,
the record date as of which Shareholders entitled to payment shall be
determined, the amount payable per Share to the Shareholders of record as of
that date, the total amount payable on the payment date and whether such
dividend or distribution is to be paid in Shares at net asset value.
o On or before the payment date specified in such resolution of the Board of
Directors, the Fund will provide Investor Services Group with sufficient cash
to make payment to the Shareholders of record as of such payment date.
o If Investor Services Group does not receive sufficient cash from the Fund to
make total dividend and/or distribution payments to all Shareholders of the
Fund as of the record date, Investor Services Group will, upon notifying the
Fund, withhold payment to all Shareholders of record as of the record date
until sufficient cash is provided to Investor Services Group.
(h) Retirement Plans. In connection with the individual retirement account,
simplified employee pension plan, rollover individual retirement plan,
educational IRA and ROTH individual retirement account (each hereinafter
referred to as an "IRA" and, collectively, the "IRAs") within the meaning of
Section 408 of the Internal Revenue Code of 1986, as amended (the "Code")
offered by the Fund for which contributions of the Funds' shareholders (the
"Participants") in the IRA's are invested in shares of the Fund, Investor
Services Group shall provide the following administrative services in addition
to those services described herein:
o Establish a record of types and reasons for distributions (i.e., attainment
of age 59-1/2, disability, death, return of excess contributions, etc.);
o Record method of distribution requested and/or made;
o Receive and process designation of the beneficiary forms;
o Examine and process requests for direct transfers between
custodians/trustees, transfer and pay over to the successor assets in the
account and records pertaining thereto as requested;
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<PAGE>
o Prepare any annual reports or returns required to be prepared and/or filed
by a custodian of an IRA, including, but not limited to, an annual fair
market value report, Forms 1099R and 5498 and file with the IRS and provide
to Participant/Beneficiary; and
o Perform applicable federal withholding and send Participants/Beneficiaries
an annual TEFRA notice regarding required federal tax withholding.
(i) Cash Management Services.
(a) Investor Services Group shall establish demand deposit accounts (DDA's)
with a cash management provider to facilitate the receipt of purchase payments
and the processing of other Shareholder-related transactions. Investor Services
Group shall retain any excess balance credits earned with respect to the amounts
in such DDA's ("Balance Credits") after such Balance Credits are first used to
offset any banking service fees charged in connection with banking services
provided on behalf of the Fund. Balance Credits will be calculated and applied
toward the Fund's banking service charges regardless of the withdrawal of DDA
balances described in Section (b) below.
(b) DDA balances which cannot be forwarded on the day of receipt may be
withdrawn on a daily basis and invested in U.S. Treasury and Federal Agency
obligations, money market mutual funds, repurchase agreements, money market
preferred securities (rated A or better), commercial paper (rated A1 or P1),
corporate notes/bonds (rated A or better) and/or Eurodollar time deposits
(issued by banks rated A or better). Investor Services Group bears the risk of
loss on any such investment and shall retain any earnings generated thereby.
Other similarly rated investment vehicles may be used, provided however,
Investor Services Group shall first notify the Fund of any such change.
(c) Investor Services Group may facilitate the payment of distributions from
the Fund which are made by check ("Distributions") through the "IPS Official
Check" program. "IPS Official Check" is a product and service provided by
Investor Services Group's affiliate, Integrated Payment Systems ("IPS"). IPS is
licensed and regulated as an "issuer of payment instruments". In the event the
IPS Official Check program is utilized, funds used to cover such Distributions
shall be forwarded to and held by IPS. IPS may invest such funds while awaiting
presentment of items for payment. In return the services provided by IPS, IPS
imposes a per item charge which is identified in the Schedule of Out-of-Pocket
Expenses attached hereto and shall retain, and share with Investor Services
Group, the benefit of the revenue generated from its investment practices.
(j) Lost Shareholders. Investor Services Group shall perform such services as
are required in order to comply with Rules 17a-24 and 17Ad-17 of the 34 Act (the
Lost Shareholder Rules"), including, but not limited to those set forth below.
Investor Services Group may, in its sole discretion, use the services of a third
party to perform the some or all such services.
o documentation of electronic search policies and procedures;
o execution of required searches;
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o creation and mailing of confirmation letters;
o taking receipt of returned verification forms;
o providing confirmed address corrections in batch via electronic media;
o tracking results and maintaining data sufficient to comply with the Lost
Shareholder Rules; and
o preparation and submission of data required under the Lost Shareholder
Rules.
II. ADMINISTRATION SERVICES
(a) Maintaining office facilities (which may be in the offices of Investor
Services Group or a corporate affiliate) and furnishing corporate officers for
the Fund;
(b) Furnishing data processing services, clerical services, and executive
and administrative services and standard stationery and office supplies;
(c) Performing all functions ordinarily performed by the office of a
corporate treasurer, and furnishing the services and facilities ordinarily
incident thereto, as follows:
o Expense Accrual Monitoring
o Determination of Dividends
o Preparation materials for review by the Board, e.g., Rules 2a-7,10f-3,
17a-7, 17e-1 and 144A
o Tax and Financial Counsel
o Creation of expense pro formas for new Portfolios/classes
o Reporting to investment company reporting agencies (i.e., Lipper)
o Compliance Testing including Section 817(h) (daily, weekly or monthly)
(d) Preparing reports to the Fund's Shareholders and the SEC including, but
not necessarily limited to, Annual Reports and Semi-Annual Reports on Form
N-SAR;
(e) Preparing and filing the Fund's tax returns and providing shareholder
tax information to the Fund's transfer agent;
(f) Assisting the Adviser, at the Adviser's request, in monitoring and
developing compliance procedures for the Fund which will include, among other
matters, procedures to assist the Adviser in monitoring compliance with each
Portfolio's investment objective, policies, restrictions, tax matters and
applicable laws and regulations;
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<PAGE>
(g) Performing "Blue Sky" compliance functions, as follows:
o Effecting and maintaining, as the case may be, the registration of Shares of
the Fund for sale under the securities laws of the jurisdictions listed in
the Written Instructions of the Fund, which instructions will include the
amount of Shares to be registered as well as the warning threshold to be
maintained. Any Written Instructions not received at least 45 days prior to
the date the Fund intends to offer or sell its Shares cannot be guaranteed a
timely notification to the states. In addition, Investor Services Group
shall not be responsible for providing to any other service provider of the
Fund a list of the states in which the Fund may offer and sell its Shares.
o Filing with each appropriate jurisdiction the appropriate materials relating
to the Fund. The Fund shall be responsible for providing such materials to
Investor Services Group, and Investor Services Group shall make such filings
promptly after receiving such materials.
o Providing to the Fund quarterly reports of sales activity in each
jurisdiction in accordance with the Written Instructions of the Fund. Sales
will be reported by shareholder residence. NSCC trades and order clearance
will be reported by the state provided by the dealer at the point of sale.
Trades by omnibus accounts will be reported by trustee state of residence in
accordance with the Written Instructions of the Fund outlining the entities
which are permitted to maintain omnibus positions with the Fund.
o In the event sales of Shares in a particular jurisdiction reach or exceed
the warning levels provided in the Written Instructions of the Fund,
Investor Services Group will promptly notify the Fund with a recommendation
of the amount of Shares to be registered in such jurisdiction and the fee
for such registration. Investor Services Group will not register additional
Shares in such jurisdiction unless and until Investor Services Group shall
have received written instructions from the Fund to do so.
o If Investor Services Group is instructed by the Fund not to register Shares
in a particular jurisdiction, Investor Services Group will use its best
efforts to cause any sales in such jurisdictions to be blocked, and such
sales will not be reported to Investor Services Group as sales of Shares of
the Fund.
(h) Performing corporate secretarial services including the following:
o Assist in maintaining corporate records and good standing status of Fund in
its state of organization
o Develop and maintain calendar of annual and quarterly board approvals and
regulatory filings
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<PAGE>
o Prepare notice, agenda, memoranda, resolutions and background materials for
legal approvals at quarterly board meetings and committee meetings; attend
meetings; make presentations where appropriate; prepare minutes; follow up
on issues
o Provide support for one special in person board meeting per year and written
consent votes where needed
(i) Performing the following legal services:
o Prepare and file annual Post-Effective Amendment
o Prepare and file Rule 24f-2 Notice
o Review and file Form N-SAR
o Review, Edgarize and file Annual and Semi-Annual Financial Reports
o Communicate significant regulatory or legislative developments to Fund
management and directors and provide related planning assistance where
needed
o Consult with Fund management regarding portfolio compliance and Fund
corporate and regulatory issues as needed
o Maintain effective communication with outside counsel and review legal bills
of outside counsel
o Coordinate the printing and mailing process with outside printers for all
shareholder publications
o Arrange D&O/E&O insurance and fidelity bond coverage for Fund
o Assist in monitoring Fund Code of Ethics reporting and provide such reports
to the person designated under the Fund's Code
(j) Performing, in accordance with the Written Instructions of the Fund,
the following Special Legal Services in accordance with the pricing structure
listed on the Fee Schedule attached to this Agreement as Schedule C:
o Assist in managing SEC audit of the Fund at the Adviser's principal place of
business
o Review sales material and advertising for Fund Prospectus compliance
o Assist in new Portfolio start-up (to the extent requested)
Coordinate time and responsibility schedules
Prepare Fund corporate documents (MTA/by-laws)
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<PAGE>
Draft/file registration statement (including investment
objectives/policies and prospectuses)
Respond to and negotiate SEC comments
Draft notice, agenda and resolutions for organizational
meeting; attend board meeting; make presentations where
appropriate; prepare minutes and follow up on issues
o Assist in developing compliance guidelines and procedures to improve
overall compliance by Fund and service providers
o Prepare notice, agenda, memoranda and background materials for special
board meetings, make presentations where appropriate, prepare minutes and
follow up on issues
o Prepare proxy material for special meetings (including fund merger
documents)
o Prepare Post-Effective Amendments for special purposes (e.g., new funds or
classes, changes in advisory ---- relationships, mergers, restructurings)
o Prepare special Prospectus supplements where needed
o Assist in extraordinary non-recurring projects, including providing
consultative legal services, e.g.,
Arrange CDSC financial programs
Prospectus simplification
Profile prospectuses
Exemptive order applications
III. FUND ACCOUNTING SERVICES
Performing fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Fund as may be required
by Section 31(a) of the 1940 Act) as follows:
o Daily, Weekly, and Monthly Reporting
o Portfolio and General Ledger Accounting
o Daily Valuation of all Portfolio Securities
o Daily Valuation and NAV Calculation
o Comparison of NAV to market movement
o Review research of price tolerance/fluctuation report to market movements
and events
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<PAGE>
o Research of items appearing on the price exception report
o Weekly cost monitoring along with market-to-market valuations in accordance
with Rule 2a-7
o Security trade processing
o Daily cash and position reconciliation with the custodian bank
o Daily updating of price and distribution rate information to the Transfer
Agent/Insurance Agent
o Daily support and report delivery to Portfolio Management
o Daily calculation of Portfolio adviser fees and waivers
o Daily calculation of distribution rates
o Daily investable cash call
o Monitor and research aged receivables
o Collect aged income items and perform reclaims
o Update NASDAQ reporting
o Daily maintenance of each Portfolio's general ledger including expense
accruals
o Daily NAV per share notification to other vendors as required
o Calculation of 30-day SEC yields and total returns
o Preparation of month-end reconciliation package
o Monthly reconciliation of Portfolio expense records
o Application of monthly pay down gain/loss
o Preparation of all annual and semi-annual audit work papers
IV. CUSTODY ADMINISTRATION
Performing custody administration services as follows:
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<PAGE>
o Assign a custody administrator to accept, control and process the Fund's
daily portfolio transactions through direct computer link with the Custodian
o Match and review DTC eligible ID's and trade information with the Fund's
instructions for accuracy and coordinating with the Custodian and the Fund's
accounting agent for recording and affirmation processing with the
depository
o Systematically settle all depository eligible issues
o Assist the Fund in placing cash management trades through the Custodian,
such as commercial paper, CD's and repurchase agreements
o Provide the Fund with daily custodian statements reflecting all prior day
cash activity on behalf of each Portfolio by 8:30 a.m. Eastern time.
Complete description of any posting, inclusive of Sedol/CUSIP numbers,
interest/dividend payment date, capital stock details, expense
authorizations, beginning/ending cash balances, etc., will be provided by
the Custodian's reports or systems.
o Provide monthly activity statements combining both cash changes and security
trades, and a full portfolio listing.
o Communicate to the Fund on any corporate actions, capital changes and
interest rate changes supported by appropriate supplemental reports received
from the Custodian. Follow-up will be made with the Custodian to ensure all
necessary actions and/or paperwork is complete.
o Coordinate and resolve unsettled dividends, interest, paydowns and capital
changes. Assist in resolution of failed transactions and any settlement
problems.
o Provide broker interface ensuring trade settlement with failed trade
follow-up.
o Provide the Fund's auditor with trade documentation to help expedite the
Fund's audit.
o Investor Services Group shall be entitled to retain any excess balance
credits or fee reductions or other concessions or benefits earned or
generated by or associated with the Fund's custodial accounts or made
available by the institution at which such accounts are maintained after
such benefits are first applied towards banking service fees charged to the
Fund by such institution.
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<PAGE>
SCHEDULE C
FEE SCHEDULE
1. Standard Fees
Transfer Agency Fees:
Annual Fees:
$18.00 Per Account Per Year
$12.00 Maintenance Fee Per Year- IRA's, 403B's, DC/
Benefit Plans
$24,000.00 Annual Minimum Per Portfolio
$15,000.00 Per Additional Class Per Portfolio
NSCC Fees: $8,000.00 Set Up Fee Per Management Company for FundServ and
Networking plus: $0.15 a Transaction, $0.10/ Same Day Trade
Fund Administration Fees:
Annual Fees:
.0008 On First $100 Million of Average
Net Assets .0005 On The Next $500 Million
of Average Net Assets .0003 Over $600
Million of Average Net assets Annual
Minimum Fee of $50,000 For Initial series
Issued by the trust
And $12,000 for each additional separate series.
There is also an additional fee of $12,000 for each
additional class per portfolio.
Fund Accounting Fees:
Annual Fees:
$24,000.00 On the First $10 Million of Average Net Assets Per
Portfolio, then
.0002 Of Combined Assets to $500 Million, and
.0001 Over $500 Million
$12,000 Per Additional Class Per Portfolio
Custody Administration Fees:
Annual Fees:
.00015 On First $500 Million of Average Net Assets
.0001 On Next $1.5 Billion of Average Net Assets
.00009 Over $2.0 Billion of Average Net Assets
Minimum $3,600.00 Per Portfolio Per Year
Custody Domestic Securities Transactions Charge:
$12.00 Book Entry DTC, Federal Book Entry, PTC
*For the McM S&P 500 Index Fund
First 100 transactions per month $12.00 Over
100 transactions per month $10.00
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<PAGE>
$20.00 Physical/Options/Futures
$7.00 Mortgage Backed Securities-Principal Pay Down Per Pool
$24.00 RICs, GICs
$4.00 Wire Transfer in/out not related to Securities Transaction
Note: A transaction includes, Buys, Sells, Maturities or
Free Security Movement
When Issued, Securities Lending, Index Futures:
Should any of these investment vehicles require a
separate segregated custody Account, a fee of $250.00
per account per month will apply.
2. Lost Shareholder Search/Reporting: $2.75 per account search*
* The per account search fee shall be waived until June 2000
so long as the Fund retains Keane Tracers, Inc. ("KTI") to
provide the Fund with KTI's "In-Depth Research Program"
services.
3. Print/Mail Fees.
Implementation Fee:
-------------------
$ 5000.00
$150.00/hr. Multi-check and non-standard
Testing Application or Data Requirements: $3.00/fax
-----------------------------------------
Work Order: $15.00 per workorder
-----------
Daily Work (Confirms):
----------------------
Hand: $71/K with $20.00 minimum (includes 1 insert)
$0.07/each additional insert
Machine: $42/K with $15.00 minimum (includes 1 insert)
$0.01/each additional insert
Daily Checks*:
--------------
Hand: $91/K with $30.00 minimum daily (includes 1 insert)
$0.08/each additional insert
Machine: $52/K with $20.00 minimum (includes 1 insert)
$0.01/each additional insert
* There is a $3.00 charge for each 3606 Form sent.
Statements:
-----------
Hand: $78/K with $20.00 minimum (includes 1 insert)
$0.08/each additional insert
$125/K for intelligent inserting
Machine: $52/K with $20.00 minimum (includes 1 insert)
$0.01 each additional insert
$58/K for intelligent inserting
Periodic Checks:
----------------
Hand: $91/K with $30.00 minimum (includes 1 insert)
$0.08/each additional insert
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<PAGE>
Machine: $52/K with $30.00 minimum (includes 1 insert)
$0.01/each additional insert
12B1/Dealer Commission Checks/Statements: $0.78/each envelope with
----------------------------------------- $30.00 minimum
Spac Reports/Group Statements: $78/K with $20.00 minimum
------------------------------
Listbills: $0.78 per envelope with $20.00 minimum
----------
Printing Charges: (price ranges dependent on volumes)
-----------------
$0.08/per confirm/statement/page
$0.115/per check
Folding (Machine): $18/K
------------------
Folding (Hand): $.12 each
---------------
Presort Charge: postage rate
--------------- $0.035 per piece
Courier Charge: $25.00 for each on call courier trip/or actual cost
--------------- for on demand
Overnight Charge: $3.50 per package service charge plus Federal
----------------- Express/Airborne charge
Inventory Storage: $20.00 for each inventory location as of the 15th of
------------------ the month
Inventory Receipt: $20.00 for each SKU / Shipment
------------------
Hourly work; special projects, opening envelopes, etc...: $24.00 per hour
---------------------------------------------------------
Special Pulls: $2.50 per account pull
--------------
Boxes/Envelopes: Shipping boxes $0.85 each
---------------- Oversized Envelopes $0.45 each
Forms Development/Programming Fee: $100/hr
----------------------------------
Systems Testing: $110/hr
----------------
Cutting Charges: $10.00/K
----------------
4. IMPRESSNet Fees
One-Time Set-Up $15,000
Annual Maintenance Fee $10,500
Usage: Inquiry Fee $0.10 per inquiry
Inquiry/Monthly Minimum* $1,200
Usage: Transaction Fee $0.50 per transaction
Transaction/Monthly Minimum $120
PIN Registration Fee $2.50 per PIN
Billable Fee for any Fund
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<PAGE>
Specific Customization $150/hr
* Inquiry Volume Discount Fee
>100,000 $0.10
100-000 - 200,000 $0.08
200-000 - 300,000 $0.05
<300,000 $0.03
5. Investor Services Group shall be entitled to the following fee for the
performance of any Special Legal Services as described in Schedule B in
accordance with the Written Instructions of the Fund: $185 per hour subject to
certain project caps as may be agreed to by Investor Services Group and the
Fund. Services and charges may vary based on volume.
6. Miscellaneous Charges. The Fund shall be charged for the following products
and services as applicable:
o Ad hoc reports
o Ad hoc SQL time
o COLD Storage
o Digital Recording
o Banking Services, including incoming and outgoing wire charges
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Manual Pricing
o Materials for Rule 15c-3 Presentations
o Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
7. Fee Adjustments. After the one year anniversary of the effective date of this
Agreement, Investor Services Group may adjust the fees described in the above
sections once per calendar year, upon thirty (30) days prior written notice in
an amount not to exceed the cumulative percentage increase in the Consumer Price
Index for All Urban Consumers (CPI-U) U.S. City Average, All items (unadjusted)
- - (1982-84=100), published by the U.S. Department of Labor since the last such
adjustment in the Client's monthly fees (or the Effective Date absent a prior
such adjustment).
8. Programming Costs. The following programming rates are subject to an annual
5% increase after the one year anniversary of the effective date of this
Agreement.
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $150.00 per/hr per programmer
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<PAGE>
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
o Postage - direct pass through to the Fund
o Telephone and telecommunication costs, including all lease, maintenance
and line costs
o Proxy solicitations, mailings and tabulations
o Shipping, Certified and Overnight mail and insurance
o Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
o Duplicating services
o Distribution and Redemption Check Issuance - $.07 per item
o Courier services
o Overtime, as approved by the Fund
o Temporary staff, as approved by the Fund
o Travel and entertainment, as approved by the Fund
o Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
o Third party audit reviews (SAS 70)
o Insurance
o Pricing services (or services used to determine Fund NAV)
o Vendor set-up charges for Blue Sky and other services
o Blue Sky filing or registration fees o EDGAR filing fees o Vendor pricing
comparison
o Such other expenses as are agreed to by Investor Services Group and the
Fund
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with Investor Services Group. In addition, the
Fund will promptly reimburse Investor Services Group for any other unscheduled
expenses incurred by Investor Services Group whenever the Fund and Investor
Services Group mutually agree that such expenses are not otherwise properly
borne by Investor Services Group as part of its duties and obligations under the
Agreement.
-5-
<PAGE>
SCHEDULE E
FUND DOCUMENTS
o Certified copy of the Articles of Incorporation of the Fund, as amended
o Certified copy of the By-laws of the Fund, as amended
o Copy of the resolution of the Board of Directors authorizing the execution
and delivery of this Agreement
o Copies of all agreements between the Fund and its service providers
o Specimens of the certificates for Shares of the Fund, if applicable, in the
form approved by the Board of Directors of the Fund, with a certificate of
the Secretary of the Fund as to such approval
o All account application forms and other documents relating to Shareholder
accounts or to any plan, program or service offered by the Fund
o Certified list of Shareholders of the Fund with the name, address and
taxpayer identification number of each Shareholder, and the number of Shares
of the Fund held by each, certificate numbers and denominations (if any
certificates have been issued), lists of any accounts against which stop
transfer orders have been placed, together with the reasons therefore, and
the number of Shares redeemed by the Fund
o All notices issued by the Fund with respect to the Shares in accordance with
and pursuant to the Articles of Incorporation or By-laws of the Fund or as
required by law and shall perform such other specific duties as are set forth
in the Articles of Incorporation including the giving of notice of any
special or annual meetings of shareholders and any other notices required
thereby.
o A listing of all jurisdictions in which each Portfolio is registered and
lawfully available for sale as of the date of this Agreement and all
information relative to the monitoring of sales and registrations of Fund
shares in such jurisdictions
o Each Fund's most recent post-effective amendment to its Registration
Statement
o Each Fund's most recent prospectus and statement of additional information,
if applicable, and all amendments and supplements thereto
-6-
<PAGE>
Exhibit 99.B.23.(i)
PAUL, HASTINGS, JANOFSKY & WALKER LLP
345 California Street, Suite 2900
San Francisco, California 94104
(415) 835-1600
(415) 217-5333 fax
www.phjw.com
February 23, 2000
McM Funds
One Bush Street, Suite 800
San Francisco, CA 94104
Re: McM Funds
Ladies and Gentlemen:
We have acted as legal counsel to the McM Funds, a Delaware business
trust (the "Trust"), in connection with Post-Effective Amendment No. 14 under
the Investment Company Act of 1940, as amended, and the Trust's Registration
Statement on Form N-1A filed with the Securities and Exchange Commission (the
"Registration Statement") and relating to the issuance by the Trust of an
indefinite number of $.001 par value shares of beneficial interest (the
"Shares") of four series of the Trust, the McM Fixed Income Fund; McM
Intermediate Fixed Income Fund; McM Balanced Fund and McM Equity Investment Fund
(each a "Fund" and collectively the "Funds").
In connection with this opinion, we have assumed the authenticity of
all records, documents and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of all natural persons, and
the conformity to the originals of all records, documents, and instruments
submitted to us as copies. We have based our opinion on the following:
(a) the Trust's Agreement and Declaration of Trust dated February 3,
1994 (the "Declaration of Trust"), and the Trust's Certificate of
Trust as originally filed with the Secretary of State of Delaware,
as amended May 9, 1994, certified to us by an officer of the Trust
as being true and complete and in effect on the date hereof;
(b) the By-laws of the Trust certified to us by an officer of the
Trust as being true and complete and in effect on the date hereof;
(c) the resolution of the Trustees of the Trust adopted on May 9, 1994
authorizing (i) the establishment of the McM Fixed Income Fund and
the issuance of the Shares of the McM Fixed Income Fund; (ii) the
establishment of the McM Intermediate Fixed Income Fund and the
issuance of the Shares of the McM Intermediate Fixed Income Fund;
(iii) the establishment of the McM Balanced Fund and the issuance
of the Shares of the McM Balanced Fund; and (iv) the
<PAGE>
McM Funds
February 23, 2000
Page 2
establishment of the McM Equity Investment Fund and the issuance
of the Shares of the McM Equity Investment Fund;
(d) the Post-Effective Amendment; and
(e) a certificate of an officer of the Trust as to certain factual
matters relevant to this opinion.
Our opinion below is limited to the federal law of the United States of
America and the business trust law of the State of Delaware. We are not licensed
to practice law in the State of Delaware, and we have based our opinion below
solely on our review of Chapter 38 of Title 12 of the Delaware Code and the case
law interpreting such Chapter as reported in Delaware Code Annotated. We have
not undertaken a review of other Delaware law or of any administrative or court
decisions in connection with rendering this opinion. We disclaim any opinion as
to any law other than that of the United States of America and the business
trust law of the State of Delaware as described above, and we disclaim any
opinion as to any statute, rule, regulation, ordinance, order or other
promulgation of any regional or local governmental authority.
Based on the foregoing and our examination of such questions of law as
we have deemed necessary and appropriate for the purpose of this opinion, and
assuming that (i) all of the Shares will be issued and sold for cash at the
per-share public offering price on the date of their issuance in accordance with
statements in the Funds' Prospectus included in the Post-Effective Amendment and
in accordance with the Declaration of Trust, (ii) all consideration for the
Shares will be actually received by a Fund, and (iii) all applicable securities
laws will be complied with, it is our opinion that, when issued and sold by a
Fund, the Shares will be legally issued, fully paid and nonassessable.
This opinion is rendered to you in connection with the filing of the
registration statement on Form N-1A with respect to the above Funds of the Trust
and is solely for your benefit. This opinion may not be relied upon by you for
any other purpose or relied upon by any other person, firm, corporation or other
entity for any purpose, without our prior written consent. We disclaim any
obligation to advise you of any developments in areas covered by this opinion
that occur after the date of this opinion.
<PAGE>
McM Funds
February 23, 2000
Page 3
We hereby consent to (i) the reference to our firm as Legal Counsel in
the Prospectus included in the Registration Statement on Form N-1A; and (ii) the
filing of this opinion as an exhibit to the Registration Statement on Form N-1A.
Sincerely yours,
/s/ PAUL, HASTINGS, JANOFSKY & WALKER LLP
<PAGE>
Exhibit 99.B.23.(j)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment to
the Registration Statement on Form N-1A of the McM Funds and to the use of our
report dated July 22, 1999 on the financial statements and financial highlights
of McM Principal Preservation Fund, McM Intermediate Fixed Income Fund, McM
Fixed Income Fund, McM Balanced Fund, and McM Equity Investment Fund, each a
series of shares of beneficial interest of McM Funds. Such financial statements
and financial highlights appear in the 1999 Annual Report to Shareholders which
is incorporated by reference in the Registration Statement.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 23, 2000
<PAGE>
Exhibit 99.B.23(m)
McM FUNDS
on behalf of
McM Intermediate Fixed Income Fund
McM Fixed Income Fund
McM Balanced Fund
McM Equity Investment Fund
(each, a "Fund" and collectively the "Funds")
Rule 12b-1 Distribution Plan for
Broker Shares Class B Shares
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by McM Funds
(the "Trust") for the Broker Shares Class B shares of the McM Intermediate Fixed
Income Fund, McM Fixed Income Fund, McM Balanced Fund and McM Equity Investment
Fund series of the Trust and any separate series of the Trust hereinafter
organized. The Plan has been approved by a majority of the Trust's Board of
Trustees, including a majority of the Trustees who are not interested persons of
the Trust and who have no direct or indirect financial interest in the operation
of the Plan (the "Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that the
adoption of the Plan would be prudent and in the best interests of the Trust and
its shareholders. Such approval included a determination that in the exercise of
their reasonable business judgment and in light of their fiduciary duties, there
is a reasonable likelihood that the Plan will benefit the Trust and its
shareholders. The Plan has also been approved by a vote of the sole initial
shareholder of the Broker Shares Class B shares of the Trust.
The provisions of the Plan are:
1. (a) Broker Shares Class B shares of the Trust shall reimburse
McMorgan & Company (the "Advisor"), the Distributor or others for all expenses
incurred by such parties in the promotion and distribution of the Broker Shares
Class B shares of the Trust, including but not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparation of
sales literature and related expenses, advertisements, and other
distribution-related expenses, as well as any distribution fees paid to
securities dealers or others who have executed a selling agreement with the
Trust on behalf of Broker Shares Class B shares or the Distributor. The maximum
aggregate amount which may be reimbursed by Broker Shares Class B shares of the
Trust to such parties pursuant to this paragraph herein shall be 0.45% per annum
of the average daily net assets of the Broker Shares Class B shares. Said
reimbursement shall be paid monthly by the Funds' Broker Shares Class B shares
to such parties.
<PAGE>
2. The amount set forth in paragraph 1 of the Plan shall be paid for
the Distributor's services and expenses as the principal distributor of the
Broker Shares Class B shares and shall be used by the Distributor to furnish, or
cause or encourage others to furnish, services and incentives in connection with
the promotion, offering and sale of Broker Shares Class B shares, and where
suitable and appropriate, the retention of Broker Shares Class B shares by
shareholders, and in connection therewith may be spent on, among other things,
compensation to and expenses (including overhead and telephone expenses) of
account executives or other employees of the Advisor, the Distributor or other
broker-dealers who engage in or support the distribution of the Broker Shares
Class B shares; pension administration firms that provide distribution and
shareholder related services, financial planners, certified public accountants,
recordkeeping firms and other financial intermediaries that provide distribution
and shareholder related services; printing of prospectuses and reports for other
than existing shareholders; advertising; preparation, printing and distribution
of sales literature; and allowances to other broker-dealers and other financial
intermediaries.
3. The Plan shall not take effect until it has been approved by (a) a
vote of at least "a majority of the outstanding voting securities" (as defined
in the Act) of each Fund, and (b) a majority vote of both (i) the Board, and
(ii) the Independent Trustees, cast in person at a meeting called for the
purpose of voting on the Plan.
4. The Plan and any related agreements shall continue in effect for so
long as such continuance is specifically approved at least annually by a
majority of both (a) the Board, and (b) the Independent Trustees, cast in person
at a meeting called for the purpose of voting thereon.
5. In each year that the Plan remains in effect, any person authorized
to direct the disposition of monies paid or payable by the Fund pursuant to the
Plan or their designated agent shall prepare and furnish to the Board, and the
Board shall review, at least quarterly, written reports, complying with the
requirements of Rule 12b-1 under the Act, of the amounts expended under the Plan
and the purposes for which such expenditures were made. All distribution
expenses in excess of the fee rate provided for in paragraph 1 of this Plan may
be carried forward for three years and included in the reports submitted in a
subsequent fiscal year.
6. The Plan may be terminated at any time, without penalty, by a
majority vote of the Independent Trustees or by a "vote of a majority of the
outstanding voting securities" (as defined in the Act) of each Fund, and any
agreement related to the Plan must likewise be terminable on not more than sixty
(60) days' written notice. Once terminated, no further payments shall be made
under the Plan notwithstanding the existence of any unreimbursed current or
carried forward distribution expenses. Any agreement related to the Plan will
terminate automatically in the event of an assignment as that term is defined in
the Act. Agreements entered into between the Distributor and service providers
or brokers or other persons enumerated under paragraph 2 are not considered
"agreements relating to the Plan" so that ownership changes in the parties to
these agreements will not result in an assignment as that term is defined in the
Act.
-2-
<PAGE>
7. The Plan may not be amended in order to increase materially the
amount of distribution expenses provided for in paragraph 1 above unless such
amendment is approved by the shareholders in the manner provided in subparagraph
3(a) above, and no material amendment to the Plan shall be made unless approved
by the Board and the Independent Trustees in the manner provided in subparagraph
3(b) above.
8. While the Plan shall be in effect, the selection and nomination of
Trustees of the Trust who are not "interested persons" (as defined in the Act)
of the Trust shall be committed to the discretion of the Trustees then in office
who are not "interested persons" of the Trust.
9. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 5 hereof, for a period of
not less than six years from the date of this Plan, or the agreements or such
reports, as the case may be, the first two years in an easily accessible place.
Adopted: August 18, 1999
as amended February 17, 2000
-3-
<PAGE>
Exhibit 99.23.B.(o)
McM Funds
on behalf of
McM Intermediate Fixed Income Fund
McM Fixed Income Fund
McM Balanced Fund
McM Equity Investment Fund
Multiple Class Plan Pursuant to Rule 18f-3
McM Intermediate Fixed Income Fund, McM Fixed Income Fund, McM Balanced
Fund and McM Equity Investment Fund (the "Funds") hereby adopt this Multiple
Class Plan (the "Plan") pursuant to Rule 18f-3 under the Investment Company Act
of 1940, as amended (the "1940 Act"), which sets forth the separate distribution
arrangements and expense allocations of each class of the Funds. This Plan has
been adopted by a majority of the Board of Trustees, including a majority of the
Trustees who are not interested persons of the Trust as defined in the 1940 Act
(the "Independent Trustees"), of McM Funds (the "Trust"). The Trustees have
determined that the Plan is in the best interests of each class and the Funds as
a whole.
CLASS CHARACTERISTICS
Each class of shares will represent interest in the same portfolio of
investments and be identical in all respects to each other class, except as set
forth below.
McM Funds Class: McM Funds shares are offered for sale at net asset
value per share without a sales charge. McM Funds
shares are sold subject to a minimum initial
investment of $5,000 and subsequent investments of
$250 or more. McM Funds shares are not subject to
Rule 12b-1 distribution charges. These investment
criteria may be changed from time to time.
Broker Shares Class B:
Broker Shares Class B shares are offered for sale at
net asset value per share without a sales charge.
Broker Shares Class B shares are sold subject to a
minimum initial investment of $5,000 and subsequent
investments of $250 or more. Broker Shares Class B
shares are subject to Rule 12b-1 distribution charges
with a fee of 0.45% per annum of the average daily
net assets attributable to the Broker Shares Class B
shares. These investment criteria may be changed from
time to time.
The Rule 12b-1 charges associated with the Broker Shares Class B shares shall be
reimbursed to McMorgan & Company (the "Advisor"), the "Distributor", a
registered broker-dealer and distributor, or others for distribution services
provided and expenses assumed in connection with distribution assistance,
including payments to the Distributor pursuant to the Underwriting Agreement
among the Trust, the Advisor and the Distributor. The Distributor may reallow a
portion or all of the 12b-1 fees received to broker-dealers or others who have
executed a selling agreement with the Distributor on behalf of the Broker Shares
Class B shares of the Trust.
<PAGE>
INCOME AND EXPENSE ALLOCATION
Expenses of the Trust will be allocated among the Funds on the basis of
the relative net assets of the Funds. Certain expenses attributable to a Fund,
and not to a particular class will be borne by each class on the basis of the
relative aggregate net assets of the class. Notwithstanding the foregoing, the
Advisor or other service provider may waive or reimburse the expenses of a
specific class or classes to the extent permitted under Rule 18f-3 under the
1940 Act.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by each class of shares, to the
extent that any dividends are paid, will be calculated in the same manner, at
the same time, and on the same day, except that any distribution fees, service
fees and class expenses allocated to a class will be borne exclusively by that
class.
EXCHANGES AND CONVERSIONS
There shall be no exchange or conversion features available between the
McM Funds shares and Broker Shares Class B shares.
GENERAL
The Rule 12b-1 Plan relating to the Broker Shares Class B shares for
each Fund shall operate in accordance with the Conduct Rules of the National
Association of Securities Dealers, Inc., Article III, Section 26.
Each class shall vote separately and exclusively with respect to any
matter related to the Rule 12b-1 Plan. Each class of shares shall vote
separately with respect to any matter that relates solely to that class of
shares.
On an ongoing basis, the Trustees, pursuant to their fiduciary
responsibilities under the 1940 Act, and otherwise, will monitor the Trust for
the existence of any material conflicts between the interests of the classes of
shares. The Trustees, including a majority of the Independent Trustees, shall
take such action as is reasonably necessary to eliminate any such conflict that
may develop. The Advisor and the Distributor shall be responsible for alerting
the Trustees to any material conflicts that may arise.
Any material amendment to this Plan must be approved by a majority of
the Trustees of the Funds, including a majority of the Independent Trustees.
Date: August 18, 1999
as amended February 17, 2000
<PAGE>
Exhibit 99.B.23(p)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Gerald J. Holland, Carolyn F. Mead, Esq., Thomas N. Calabria, Esq.
and David A. Peters, Esq. and each of them, with full power to act without the
other, as a true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute and file with
the U.S. Securities Exchange Commission, any amendment to the registration
statement of McM Funds (the "Trust"), file any request for exemptive relief from
state and federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of February, 1999.
/s/ Kenneth I. Rosenblum
---------------------------
Kenneth I. Rosenblum
Trustee
ACKNOWLEDGMENT
--------------
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 11th day of February,
1999, by Kenneth I. Rosenblum, Trustee of McM Funds.
/s/ Mary Schroeder
- ------------------
Notary Public
<PAGE>
Exhibit 99.B.23(p)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Gerald J. Holland, Carolyn F. Mead, Esq., Thomas N. Calabria, Esq.
and David A. Peters, Esq. and each of them, with full power to act without the
other, as a true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute and file with
the U.S. Securities Exchange Commission, any amendment to the registration
statement of McM Funds (the "Trust"), file any request for exemptive relief from
state and federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of February, 1999.
/s/ Gregory L. Watson
--------------------------
Gregory L. Watson
Trustee
ACKNOWLEDGMENT
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 11th day of February,
1999, by Gregory L. Watson, Trustee of McM Funds.
/s/ Mary Schroeder
- ------------------
Notary Public
<PAGE>
Exhibit 99.B.23(p)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Gerald J. Holland, Carolyn F. Mead, Esq., Thomas N. Calabria, Esq.
and David A. Peters, Esq. and each of them, with full power to act without the
other, as a true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute and file with
the U.S. Securities Exchange Commission, any amendment to the registration
statement of McM Funds (the "Trust"), file any request for exemptive relief from
state and federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of February, 1999.
/s/ Walter B. Rose
-------------------------
Walter B. Rose
Trustee
ACKNOWLEDGMENT
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 11th day of February,
1999, by Walter B. Rose, Trustee of McM Funds.
/s/ Mary Schroeder
- ------------------
Notary Public
<PAGE>
Exhibit 99.B.23(p)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Gerald J. Holland, Carolyn F. Mead, Esq., Thomas N. Calabria, Esq.
and David A. Peters, Esq. and each of them, with full power to act without the
other, as a true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute and file with
the U.S. Securities Exchange Commission, any amendment to the registration
statement of McM Funds (the "Trust"), file any request for exemptive relief from
state and federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of February, 1999
/s/ Robert R. Barron
------------------------
Robert R. Barron
Trustee
ACKNOWLEDGMENT
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 11th day of February,
1999, by Robert R. Barron, Trustee of McM Funds.
/s/ Mary Schroeder
- ------------------
Notary Public
<PAGE>
Exhibit 99.B.23(p)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Gerald J. Holland, Carolyn F. Mead, Esq., Thomas N. Calabria, Esq.
and David A. Peters, Esq. and each of them, with full power to act without the
other, as a true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute and file with
the U.S. Securities Exchange Commission, any amendment to the registration
statement of McM Funds (the "Trust"), file any request for exemptive relief from
state and federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of February, 1999.
/s/ Terry A. O'Toole
--------------------------
Terry A. O'Toole
President and Chief
Executive Officer
ACKNOWLEDGMENT
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 11th day of February,
1999, by Terry A. O'Toole, President and Chief Executive Officer of McM Funds.
/s/ Mary Schroeder
- ------------------
Notary Public
<PAGE>
Exhibit 99.B.23(p)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Gerald J. Holland, Carolyn F. Mead, Esq., Thomas N. Calabria, Esq.
and David A. Peters, Esq. and each of them, with full power to act without the
other, as a true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute and file with
the U.S. Securities Exchange Commission, any amendment to the registration
statement of McM Funds (the "Trust"), file any request for exemptive relief from
state and federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of February, 1999.
/s/ Mark R. Taylor
---------------------------
Mark R. Taylor
Trustee
ACKNOWLEDGMENT
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 11th day of February,
1999, by Mark R. Taylor, Trustee of McM Funds.
Mary Schroeder
- --------------
Notary Public
<PAGE>
Exhibit 99.B.23(p)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Gerald J. Holland, Carolyn F. Mead, Esq., Thomas N. Calabria, Esq.
and David A. Peters, Esq. and each of them, with full power to act without the
other, as a true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute and file with
the U.S. Securities Exchange Commission, any amendment to the registration
statement of McM Funds (the "Trust"), file any request for exemptive relief from
state and federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of February, 1999.
/s/ S.D. Sicotte
-------------------------
S.D. Sicotte
Trustee
ACKNOWLEDGMENT
State of California )
) ss:
County of San Francisco )
The foregoing instrument was acknowledged before me this 11th day of February,
1999, by S.D. Sicotte, Trustee of McM Funds.
/s/ Mary Schroeder
- ------------------
Notary Public
