<PAGE>
McM FUNDS
PROSPECTUS
McM Intermediate Fixed Income Fund
Class Z
September 14, 2000
as revised September 21, 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.
Class Z shares are only offered through financial intermediaries that
have selling agreements with the Distributor.
-1-
<PAGE>
McM Funds - Prospectus -
McM INTERMEDIATE FIXED INCOME FUND
Table of Contents
The Fund
Fees and Expenses of the Fund
Management of the Fund
Buying and Selling Fund Shares
Pricing of Fund Shares
Distributions and Taxes
Other Investment Strategies and Risks
Additional Information Back Cover
-2-
<PAGE>
McM Intermediate Fixed Income Fund
Type of Fund: An Intermediate Term Investment Grade Bond Fund
-----------------------------------------------------------------
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 investment grade
fixed-income securities. These securities are investment grade or issued or
guaranteed by the U.S government, its agencies or instrumentalities. The
Fund intends to be fully invested under normal circumstances, but for
temporary and defensive purposes the Fund may invest up to 100% of its
assets in investment grade short-term fixed income securities (including
short-term U.S. government securities and money market instruments,
including negotiable certificates of deposit, non-negotiable fixed time
deposits, bankers' acceptances, commercial paper and floating rate notes)
and repurchase agreements. 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 Intermediate Government/Corporate Index. The adviser
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.
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
-3-
<PAGE>
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. The share price of 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 redeemed prior to
maturity and thus the Fund will not receive the full benefit of the
investment as it originally intended.
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 and less market fluctuation than the McM Fixed Income
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 than a money market fund. The Fund does not attempt
to maintain a $1.00 per share value as money market funds do, and thus 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
-0.43% 14.95% 4.13% 7.91% 7.81% -0.31%
-------------------- ----------------- ----------------- ------------------ ----------------- -----------------
1994 1995 1996 1997 1998 1999
</TABLE>
Year-to-Date Return 2.84% as of June 30, 2000
Best Quarter 5.00% in the second quarter of 1995
Worst Quarter -0.98% in the second quarter of 1999
-4-
<PAGE>
*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)
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since
Inception*
=========================================== ============ ============= ============= =============
<S> <C> <C> <C> <C>
McM Intermediate Fixed Income Fund -0.31% 5.06% 6.78% 6.10%
Lehman Brothers Intermediate 0.39% 5.50% 7.10% 6.47%
Government/Corporate Index
</TABLE>
* 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 invest in unrated debt securities only if the
advisor believes they 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.]
Fees and Expenses of the Fund
The following table shows the fees and expenses you may pay if you buy and hold
Class Z shares of the Fund. The Class Z shares of the Fund do not have any
front-end loads or deferred sales load, but do have a Rule 12b-1 distribution
fee. Shareholders are not charged for exchanging shares into other Class Z
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 0.25%
Other Expenses* 0.17%
-----
Total Annual Operating
Expenses** 0.77%
=====
-5-
<PAGE>
* 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, 2000, if the class had been
operational and the advisor had not waived any fees. The advisor currently
intends to continue to waive certain fees indefinitely, but this voluntary
action by the advisor may be discontinued at any time on 60 days' notice.
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:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
--------------------------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
$79 $246 $428 $954
</TABLE>
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 June 30, 2000, the advisor had approximately
$28 billion of assets under management, including investment company assets of
approximately $690 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.
-6-
<PAGE>
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. Although the Advisor currently intends to continue this
waiver, this voluntary action by the advisor may be discontinued on 60 days'
notice. Any amounts waived by the advisor are 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.
Buying and Selling Fund Shares
Class Z shares of the Fund are continuously offered only through broker/dealers,
financial institutions and financial intermediaries that have selling agreements
with the Trust ("qualified financial intermediaries"). Shares are sold at the
NAV per share next determined after the Trust or the qualified financial
intermediary receives and accepts a proper purchase request. Qualified financial
intermediaries are designated agents of the Fund for certain purposes relating
to the timing of the receipt of purchase and redemption orders. The Trust, the
Fund and the Fund's distributor reserve the right to reject any purchase order
from any party for shares of any Fund.
The Fund will ordinarily make payment for redeemed shares within seven business
days after the Trust or its designated agent receives and accepts a proper
redemption order. A proper redemption order will contain all the necessary
information and signatures required to process the redemption order. The
redemption price will be the NAV per share next determined after the Trust or
its designated agent receives and accepts the shareholder's request in proper
form.
Participants in qualified retirement plans will normally receive various
materials from their Plans which describe the methods by which a participant may
purchase, exchange, transfer or redeem shares.
Financial intermediaries may charge a separate fee for assisting in the
processing of any of these transactions.
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.
-7-
<PAGE>
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.
Exchange Privileges
-------------------
Class Z shares of the Fund may be exchanged for Class Z 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.
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.
Distribution Plan
-----------------
The Fund has adopted a 12b-1 plan that allows it to pay distribution and service
fees for the sale and distribution of its Class Z 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.
Pricing of Fund Shares
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 Fund does 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.
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.
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.
-8-
<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.
<TABLE>
<CAPTION>
Type of Distribution Declared & Paid Federal Tax Status
======================================================= ========================== ==========================
<S> <C> <C>
Dividends from Net Investment Income monthly ordinary income
Short-term Capital Gains annually ordinary income
Long-term Capital Gains annually capital gain
</TABLE>
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. Participants in qualified retirement plans will be advised by
the Plan as to the tax consequences of their holding of, and transactions in
fund shares.
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 800-831-1994.
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.
-9-
<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.
-10-
<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: 800-831-1994
Internet address: www.mcmfunds.com
These reports and other information about the McM Funds are available on the
EDGAR Database on the SEC's Internet site at http://www.sec.gov . You may also
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, D.C. 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
-11-
<PAGE>
McM FUNDS
PROSPECTUS
McM Fixed Income Fund
Class Z
September 14, 2000
as revised September 21, 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.
Class Z shares are only offered through financial intermediaries that
have selling agreements with the Distributor.
-1-
<PAGE>
McM Funds - Prospectus -
McM FIXED INCOME FUND
Table of Contents
The Fund
Fees and Expenses of the Fund
Management of the Fund
Buying and Selling Fund Shares
Pricing of Fund Shares
Distributions and Taxes
Other Investment Strategies and Risks
Additional Information Back Cover
-2-
<PAGE>
McM Fixed Income Fund
Type of Fund: An Investment Grade Bond Fund
-----------------------------------------------------------------
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 investment grade
fixed-income securities. These securities are investment grade or issued or
guaranteed by the U.S government, its agencies or instrumentalities. The
Fund intends to be fully invested under normal circumstances, but for
temporary and defensive purposes, the Fund may invest up to 100% of its
assets in investment grade short-term fixed income securities (including
short-term U.S. government securities and money market instruments,
including negotiable certificates of deposit, non-negotiable fixed time
deposits, bankers' acceptances, commercial paper and floating rate notes)
and repurchase agreements. 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
-3-
<PAGE>
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. The share price of 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 redeemed prior to
maturity and thus the Fund will not receive the full benefit of the
investment as it originally intended.
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 fixed income securities that generally have higher yields and slightly
more interest rate risk. The Fund does not attempt to maintain a $1.00 per
share value as money market funds do, and thus 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
-0.73% 19.29% 3.04% 9.53% 8.52% -2.18%
------------------ ----------------- ----------------- ----------------- ---------------- -----------------
1994 1995 1996 1997 1998 1999
</TABLE>
Year-to-Date Return 3.48% as of June 30, 1999
Best Quarter 6.65% in the second quarter of 1995
Worst Quarter -2.14% in the first quarter of 1996
* 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)
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since
Inception*
====================================== ============== ============== ============== ==============
<S> <C> <C> <C> <C>
McM Fixed Income Fund -2.18% 5.15% 7.40% 6.61%
Lehman Brothers Aggregate Index -0.82% 5.73% 7.73% 7.07%
</TABLE>
* 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
Class Z shares of the Fund. The Class Z shares of the Fund do not have any
front-end loads or deferred sales load, but do have a Rule 12b-1 distribution
fee. Shareholders are not charged for exchanging shares into other Class Z
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 0.25%
Other Expenses* 0.41%
-----
Total Annual Operating
Expenses** 1.01%
=====
* 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, 2000, if the class had been
operational and the advisor had not waived any fees. The advisor currently
intends to continue to waive certain fees indefinitely, but this voluntary
action by the advisor may be discontinued at any time on 60 days' notice.
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.
-5-
<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
--------------------------------------------------------- ------------ ------------ ------------ ------------
$103 $322 $558 $1,236
</TABLE>
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 June 30, 2000, the advisor had approximately
$28 billion of assets under management, including investment company assets of
approximately $690 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 0.09% 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. Although the Advisor currently intends to continue this
waiver, this voluntary action by the advisor may be discontinued on 60 days'
notice. Any amounts waived by the advisor are 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.
-6-
<PAGE>
Buying and Selling Fund Shares
Class Z shares of the Fund are continuously offered only through broker/dealers,
financial institutions and financial intermediaries that have selling agreements
with the Trust ("qualified financial intermediaries"). Shares are sold at the
NAV per share next determined after the Trust or the qualified financial
intermediary receives and accepts a proper purchase request. Qualified financial
intermediaries are designated agents of the Fund for certain purposes relating
to the timing of the receipt of purchase and redemption orders. The Trust, the
Fund and the Fund's distributor reserve the right to reject any purchase order
from any party for shares of any Fund.
The Fund will ordinarily make payment for redeemed shares within seven business
days after the Trust or its designated agent receives and accepts a proper
redemption order. A proper redemption order will contain all the necessary
information and signatures required to process the redemption order. The
redemption price will be the NAV per share next determined after the Trust or
its designated agent receives and accepts the shareholder's request in proper
form.
Participants in qualified retirement plans will normally receive various
materials from their Plans which describe the methods by which a participant may
purchase, exchange, transfer or redeem shares.
Financial intermediaries may charge a separate fee for assisting in the
processing of any of these transactions.
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.
Exchange Privileges
-------------------
Class Z shares of the Fund may be exchanged for Class Z 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.
-7-
<PAGE>
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.
Distribution Plan
-----------------
The Fund has adopted a 12b-1 plan that allows it to pay distribution and service
fees for the sales and distribution of its Class Z 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.
Pricing of Fund Shares
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 Fund does 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.
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.
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.
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.
-8-
<PAGE>
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.
<TABLE>
<CAPTION>
Type of Distribution Declared & Paid Federal Tax Status
======================================================= ========================== ==========================
<S> <C> <C>
Dividends from Net Investment Income monthly ordinary income
Short-term Capital Gains annually ordinary income
Long-term Capital Gains annually capital gain
</TABLE>
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. Participants in qualified retirement plans will be advised by
the Plan as to the tax consequences of their holding of, and transactions on
fund shares.
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 800-831-1994.
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.
-9-
<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: 800-831-1994
Internet address: www.mcmfunds.com
----------------
These reports and other information about the McM Funds are available on the
EDGAR Database on the SEC's Internet site at http://www.sec.gov . You may also
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, D.C. 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
-10-
<PAGE>
McM FUNDS
PROSPECTUS
McM Balanced Fund
Class Z
September 14, 2000
as revised September 21, 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.
Class Z shares are only offered through financial intermediaries that have
selling agreements with the Distributor.
-1-
<PAGE>
McM Funds - Prospectus -
McM BALANCED FUND
Table of Contents
The Fund
Fees and Expenses of the Fund
Management of the Fund
Buying and Selling Fund Shares
Pricing of Fund Shares
Distributions and Taxes
Other Investment Strategies and Risks
Additional Information Back Cover
-2-
<PAGE>
McM Balanced Fund
Type of Fund: A Balanced Fund
------------------------------------------------------------------
Investment Goal
Balance of capital appreciation, income and preservation of capital
Principal Investment Strategies
The Fund's target asset allocation is 60% in equity securities and 40% in
debt securities over the long term. 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.
Equities
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 creates a
portfolio using a "top-down" approach to control risk at the portfolio
level. It uses an investment model to construct the desired portfolio
characteristics with respect to many characteristics, such as liquidity,
risk and yield. Once the desired portfolio characteristics are established,
the advisor uses a "bottom up" approach for selecting equity securities. An
investment return model is used to select those securities which have an
expected return equal to or greater than the market. In addition to seeking
securities having an expected return greater than the market, an emphasis
in selecting an individual security is its contribution to desired
portfolio characteristics.
Debt Securities
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
-3-
<PAGE>
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. The equity
portion of the Fund currently has, but may not always have,
weightings similar to that of the S&P 500 Index (but is not
necessarily invested in the same securities that are in the index).
At the present time, the technology sector represents about 30% of
the S&P 500 Index and the same portion of the equity investments of
the Fund. Technology stock prices tend to be more volatile than those
in other sectors and may increase the volatility of the equity
portion of the Fund and thus, its share price.
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.
<TABLE>
<CAPTION>
0.79% 28.71% 16.26% 23.66% 20.62% 7.05%
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
</TABLE>
-4-
<PAGE>
Year-to-Date Return 1.35% as of June 30, 2000
Best Quarter 11.93% in the fouth quarter of 1998
Worst Quarter -3.13% in the third 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.
Performance Table
(Average annual total returns as of December 31, 1999)
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since
Inception*
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
McM Balanced Fund 7.04% 16.88% 19.02% 17.43%
S&P 500 Index 21.00% 27.73% 27.92% 26.44%
Lehman Brothers Aggregate Index -0.82% 5.73% 7.73% 7.07%
</TABLE>
* 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
Class Z shares of the Fund. The Class Z shares of the Fund do not have any
front-end loads or deferred sales load, but do have a Rule 12b-1 distribution
fee. Shareholders are not charged for exchanging shares into other Class Z
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 0.25%
Other Expenses* 0.19%
-----
Total Annual Operating
Expenses** 0.89%
=====
* 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, 2000, if the class had been
operational and the advisor had not waived any fees. The advisor currently
intends to continue to waive certain fees indefinitely, but this voluntary
action by the advisor may be discontinued at any time on 60 days' notice.
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.
-5-
<PAGE>
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
---------------------------------------------------------------------
$91 $284 $493 $1,096
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 June 30, 2000, the advisor had approximately
$28 billion of assets under management, including investment company assets of
approximately $690 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 0.45% 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.
The fees paid to the advisor reflect a voluntary undertaking to waive a portion
of its advisory fee. Although the Advisor currently intends to continue this
waiver, this voluntary action by the advisor may be discontinued on 60 days'
notice. Any amounts waived by the advisor are 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.
-6-
<PAGE>
Buying and Selling Fund Shares
Class Z shares of the Fund are continuously offered only through broker/dealers,
financial institutions and financial intermediaries that have selling agreements
with the Trust ("qualified financial intermediaries"). Shares are sold at the
NAV per share next determined after the Trust or the qualified financial
intermediary receives and accepts a proper purchase request. Qualified financial
intermediaries are designated agents of the Fund for certain purposes relating
to the timing of the receipt of purchase and redemption orders. The Trust, the
Fund and the Fund's distributor reserve the right to reject any purchase order
from any party for shares of any Fund.
The Fund will ordinarily make payment for redeemed shares within seven business
days after the Trust or its designated agent receives and accepts a proper
redemption order. A proper redemption order will contain all the necessary
information and signatures required to process the redemption order. The
redemption price will be the NAV per share next determined after the Trust or
its designated agent receives and accepts the shareholder's request in proper
form.
Participants in qualified retirement plans will normally receive various
materials from their Plans which describe the methods by which a participant may
purchase, exchange, transfer or redeem shares.
Financial intermediaries may charge a separate fee for assisting in the
processing of any of these transactions.
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.
-7-
<PAGE>
Exchange Privileges
Class Z shares of the Fund may be exchanged for Class Z 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.
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.
Distribution Plan
The Fund has adopted a 12b-1 plan that allows it to pay distribution and service
fees for the sales and distribution of its Class Z 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.
Pricing of Fund Shares
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 Fund does 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.
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.
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.
-8-
<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.
<TABLE>
<CAPTION>
Type of Distribution Declared & Paid Federal Tax Status
========================================================================================================
<S> <C> <C>
Dividends from Net Investment Income monthly ordinary income
Short-term Capital Gains annually ordinary income
Long-term Capital Gains annually capital gain
</TABLE>
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. Participants in qualified retirement plans will be advised by
the Plan as to the tax consequences of their holding of, and transactions in
fund shares.
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 800-831-1994.
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.
-9-
<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: 800-831-1994
Internet address: www.mcmfunds.com
These reports and other information about the McM Funds are available on the
EDGAR Database on the SEC's Internet site at http://www.sec.gov . You may also
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, D.C. 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
-10-
<PAGE>
McM FUNDS
PROSPECTUS
McM Equity Investment Fund
Class Z
September 14, 2000
as revised September 21, 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.
Class Z shares are only offered through financial intermediaries that have
selling agreements with the Distributor.
-1-
<PAGE>
McM Funds - Prospectus -
McM EQUITY INVESTMENT FUND
Table of Contents
The Fund
Fees and Expenses of the Fund
Management of the Fund
Buying and Selling Fund Shares
Pricing of Fund Shares
Distributions and Taxes
Other Investment Strategies and Risks
Additional Information Back Cover
-2-
<PAGE>
McM Equity Investment Fund
Type of Fund: A Diversified Stock Fund
------------------------------------------------------------------
Investment Goal
Above-average total return consistent with reasonable risk.
Principal Investment Strategies
The Fund seeks capital appreciation and will invest in the common stocks of
companies believed to have 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. It uses an investment model to construct the desired portfolio
characteristics with respect to many characteristics, such as liquidity,
risk and yield. Once the desired portfolio characteristics are established,
the advisor uses a "bottom up" approach for selecting equity securities. An
investment return model is used to select those securities which have an
expected return equal to or greater than the market. In addition to seeking
securities having an expected return greater than the market, an emphasis
in selecting an individual security is its contribution to desired
portfolio characteristics.
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 intends to stay fully invested under normal circumstances, but for
temporary and defensive purposes may invest in short-term fixed income
assets including:
o U.S. government securities
o 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. The
Fund currently has, but may not always have, weightings similar to
that of the S&P 500 Index (but is not necessarily invested in the
same securities that are in the index). At the present time, the
technology sector represents about 30% of the S&P 500 Index and the
same portion of the net investments of the Fund. Technology stock
prices tend to be more volatile than those in other sectors and may
increase the volatility of the Fund's share price.
-3-
<PAGE>
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
Suitability
The Fund may be appropriate for investors who desire long-term growth and
are willing to accept the risk of occasional volatile returns similar to
the returns of the S&P 500. 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 S&P 500 Index, an unmanaged securities index. The
figures assume reinvestment of all dividends and distributions.
<TABLE>
<CAPTION>
1.24% 35.94% 26.80% 33.84% 27.76% 11.54%
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
</TABLE>
Year-to-Date Return 0.16% as of June 30, 2000
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)
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since
Inception*
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
McM Equity Investment Fund 11.54% 24.01% 26.86% 24.60%
S&P 500 Index 21.00% 27.73% 27.92% 26.44%
</TABLE>
* 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
Class Z shares of the Fund. The Class Z shares of the Fund do not have any
front-end loads or deferred sales load, but do have a Rule 12b-1 distribution
fee. Shareholders are not charged for exchanging shares into other Class Z
series of the McM Funds or reinvesting dividends.
-4-
<PAGE>
Annual Fund Operating
Expenses:
(expenses that are deducted
from Fund assets)
Management Fees 0.50%
Distribution (12b-1) Fees 0.25%
Other Expenses* 0.17%
Total Annual Operating
Expenses 0.92%
=====
* "Other Expenses" are based on estimated amounts for the current fiscal year.
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
-----------------------------------------------------------------------
$94 $293 $509 $1,131
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.
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<PAGE>
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 June 30, 2000, the advisor had approximately
$28 billion of assets under management, including investment company assets of
approximately $690 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.
The fees paid to the advisor reflect a voluntary undertaking to waive a portion
of its advisory fee. Although the Advisor currently intends to continue this
waiver, this voluntary action by the advisor may be discontinued on 60 days'
notice. Any amounts waived by the advisor are 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.
Buying and Selling Fund Shares
Class Z shares of the Fund are continuously offered only through broker/dealers,
financial institutions and financial intermediaries that have selling agreements
with the Trust ("qualified financial intermediaries"). Shares are sold at the
NAV per share next determined after the Trust or the qualified financial
intermediary receives and accepts a proper purchase request. Qualified financial
intermediaries are designated agents of the Fund for certain purposes relating
to the timing of the receipt of purchase and redemption orders. The Trust, the
Fund and the Fund's distributor reserve the right to reject any purchase order
from any party for shares of any Fund.
The Fund will ordinarily make payment for redeemed shares within seven business
days after the Trust or its designated agent receives and accepts a proper
redemption order. A proper redemption order will contain all the necessary
information and signatures required to process the redemption order. The
redemption price will be the NAV per share next determined after the Trust or
its designated agent receives and accepts the shareholder's request in proper
form.
Participants in qualified retirement plans will normally receive various
materials from their Plans which describe the methods by which a participant may
purchase, exchange, transfer or redeem shares.
Financial intermediaries may charge a separate fee for assisting in the
processing of any of these transactions.
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<PAGE>
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.
Exchange Privileges
Class Z shares of the Fund may be exchanged for Class Z 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.
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.
Distribution Plan
The Fund has adopted a 12b-1 plan that allows it to pay distribution and service
fees for the sales and distribution of its Class Z 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.
Pricing of Fund Shares
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 Fund does 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.
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.
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<PAGE>
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.
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.
<TABLE>
<CAPTION>
Type of Distribution Declared & Paid Federal Tax Status
===========================================================================================================
<S> <C> <C>
Dividends from Net Investment Income monthly ordinary income
Short-term Capital Gains annually ordinary income
Long-term Capital Gains annually capital gain
</TABLE>
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. Participants in qualified retirement plans will be advised by
the Plan as to the tax consequences of their holding of, and transactions in
fund shares.
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 800-831-1994.
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<PAGE>
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.
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<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: 800-831-1994
Internet address: www.mcmfunds.com
These reports and other information about the McM Funds are available on the
EDGAR Database on the SEC's Internet site at http://www.sec.gov . You may also
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, D.C. 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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