-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pt6+4lF/rLm8AW1LpBsUcsjb0CASx+H/VmYSJL23NfP34KrGJ9lx1qVaMUNaSMpm /ScB218w9+UtpJUINl2MSg== 0000916641-96-000802.txt : 19960925 0000916641-96-000802.hdr.sgml : 19960925 ACCESSION NUMBER: 0000916641-96-000802 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960924 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASH RESOURCE TRUST /MA/ CENTRAL INDEX KEY: 0000908920 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-65818 FILM NUMBER: 96633821 BUSINESS ADDRESS: STREET 1: RIVERFRONT PLAZA, WEST TOWER STREET 2: 901 E. BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047823294 MAIL ADDRESS: STREET 1: RIVERFRONT PLAZA, WEST TOWER STREET 2: 901 E BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23219 FORMER COMPANY: FORMER CONFORMED NAME: IMG MONEY MARKET SERIES TRUST DATE OF NAME CHANGE: 19930709 497 1 MENTOR PROSPECTUS 497 Rule 497(e) File No. 811-7862 [MENTOR INVESTMENT GROUP LOGO] CASH RESOURCE TRUST Prospectus September 23, 1996 [EVEREN SECURITIES LOGO] P R O S P E C T U S September 23, 1996 Cash Resource Trust Cash Resource Money Market Fund Cash Resource U.S. Government Money Market Fund Cash Resource Tax-Exempt Money Market Fund Cash Resource Money Market Fund, Cash Resource U.S. Government Money Market Fund, and Cash Resource Tax-Exempt Money Market Fund are designed for investors who seek current income consistent with preservation of capital and maintenance of liquidity. The Funds are diversified investment portfolios of Cash Resource Trust (the "Trust"). An investment in the Trust is neither insured nor guaranteed by the U.S. Government. There can be no assurance that a Fund will be able to maintain a stable net asset value of $1.00 per share. This Prospectus explains concisely what you should know before investing in a Fund. Please read it carefully and keep it for future reference. You can find more detailed information about the Funds in the September 23, 1996 Statement of Additional Information, as amended from time to time. For a free copy of the Statement, call 1-800-382-0016. The Statement has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. EXPENSE SUMMARY Expenses are one of several factors to consider when investing in a Fund. The following table summarizes your maximum transaction costs from an investment in each of the Funds and expenses incurred by each Fund based on its most recent fiscal year. The Examples show the cumulative expenses attributable to a hypothetical $1,000 investment in each Fund over specified periods. The information presented below does not reflect any fees or charges imposed by Financial Institutions through which you may invest in the Funds.
Cash Cash Cash Resource Resource Resource U.S. Government Tax-Exempt Money Market Money Market Money Market Fund Fund Fund Shareholder Transaction Expenses None None None Annual Fund Operating Expenses (as a percentage of average net assets) Management Fees .22% .19% .22% 12b-1 Fees .38% .38% .33% Other Expenses .22% .23%* .16%* Total Fund Operating Expenses .82% .80%* .71%*
*reflecting expense limitation Examples Your investment of $1,000 in a Fund would incur the following expenses, assuming 5% annual return and redemption at the end of each period:
1 year 3 years 5 years 10 years Cash Resource Money Market Fund $8 $26 $46 $101 Cash Resource U.S. Government Money Market Fund $8 $26 $44 $ 99 Cash Resource Tax-Exempt Money Market Fund $7 $23 $40 $ 88
The table is provided to help you understand the expenses of investing in each of the Funds and your share of the operating expenses which each of the Funds incurs. Expenses shown for the U.S. Government Money Market Fund and the Tax-Exempt Money Market Fund reflect an expense limitation. In the absence of this limitation, Other Expenses and Total Fund Operating Expenses would be .36% and .93%, respectively, for the U.S. Government Money Market Fund and .21% and .76%, respectively, for the Tax-Exempt Money Market Fund. The Examples do not represent past or future expense levels. Actual returns and expenses may be greater or less than those shown. Federal regulations require the Examples to assume a 5% annual return, but actual annual return will vary. Because of the 12b-1 fees payable by the Funds, long-term shareholders may pay more in aggregate sales charges than the maximum initial sales charge permitted by the National Association of Securities Dealers, Inc. 2 FINANCIAL HIGHLIGHTS The financial highlights presented below for the Funds have been audited by KPMG Peat Marwick LLP, independent auditors. The report of KPMG Peat Marwick LLP is contained in the Statement of Additional Information, which may be obtained in the manner described on the cover page of this Prospectus. Each of the Funds began operations on December 20, 1993. See "Financial Statements" in the Funds' Statement of Additional Information.
Money Market U.S. Government Tax-Exempt Fund Money Market Fund Money Market Fund Year Ended July 31, 1996 1995 1994* 1996 1995 1994* 1996 1995 1994* Per Share Operating Performance Net asset value, beginning of period $1.00 $1.00 $1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 Income from investment operations Net investment income 0.05 0.05** 0.02 0.05 0.05** 0.02 0.03 0.03** 0.01 Distributions Net investment income (0.05) (0.05)** (0.02) (0.05) (0.05) (0.02) (0.03) (0.03) (0.01) Net asset value, end of period $1.00 $1.00 $1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 Total Return 4.91% 4.97% 1.83%(b) 4.74% 4.82% 1.82%(b) 2.90% 3.05% 1.16%(b) Ratios/Supplemental Data Net assets, end of period (in thousands) $646,500 $422,657 $192,260 $1,402,397 $1,216,690 $907,819 $290,891 $266,895 $195,702 Ratio of expenses to average net assets 0.82% 0.82% 0.89%(a) 0.93% 0.88% 0.80%(a) 0.76% 0.72% 0.65%(a) Ratio of expenses to average net assets excluding waivers 0.82% 0.82% 0.93%(a) 0.93% 0.88% 0.83%(a) 0.76% 0.74% 0.74%(a) Ratio of net investment income to average net assets 4.77% 4.96% 2.96%(a) 4.63% 4.75% 2.91%(a) 2.85% 3.01% 1.87%(a)
* For the period from December 20, 1993 (commencement of operations) to July 31, 1994. ** Includes net realized capital gain (loss) which were under $0.01 per share. (a) Annualized. (b) Total return for periods less than one year are not annualized. 3 INVESTMENT OBJECTIVES AND POLICIES The investment objective of each Fund is to seek as high a rate of current income (or, in the case of Cash Resource Tax-Exempt Money Market Fund, as high a rate of current income exempt from federal income tax) as its investment adviser believes is consistent with preservation of capital and maintenance of liquidity. The Funds seek their objectives through the investment policies described below. Because each of the Funds is a money market fund, it will only invest in the types of investments described below under "Selection of Investments". The investment objective and policies of each Fund may, unless otherwise specifically stated, be changed by the Trustees without a vote of the shareholders. As a matter of policy, the Trustees would not materially change the investment objective of a Fund without shareholder approval. None of the Funds is intended to be a complete investment program, and there is no assurance the Funds will achieve their objectives. Commonwealth Advisors, Inc. ("Commonwealth Advisors") serves as the investment adviser to each of the Funds. Commonwealth Investment Counsel, Inc. ("Commonwealth Investment Counsel"), an affiliate of Commonwealth Advisors, serves as sub-adviser to the Funds, implementing a continuing investment program for each of the Funds. It is expected that in the fall of 1996, Commonwealth Investment Counsel will be reorganized as Mentor Investment Advisors, L.L.C., which will become the investment adviser to the Funds at that time in place of Commonwealth Advisors. References in this prospectus to the "Adviser" are to Commonwealth Investment Counsel during the period prior to the reorganization and to Mentor Investment Advisors for any period thereafter. See "Management" below. Cash Resource Money Market Fund The Money Market Fund invests in a portfolio of high-quality money market instruments consisting exclusively of: o bank certificates of deposit (CD's): negotiable certificates issued against funds deposited in a commercial bank for a definite period of time and earning a specified return. o bankers' acceptances: negotiable drafts or bills of exchange, which have been "accepted" by a bank, meaning, in effect, that the bank has unconditionally agreed to pay the face value of the instrument on maturity. o prime commercial paper: high-grade, short-term obligations issued by banks, corporations, and other issuers. o corporate obligations: high-grade, short-term obligations other than prime commercial paper. o U.S. Government securities: marketable securities issued or guaranteed as to principal or interest by the U.S. Government or by its agencies or instrumentalities. o repurchase agreements: with respect to U.S. Treasury or U.S. Government securities. Cash Resource U.S. Government Money Market Fund The U.S. Government Money Market Fund invests exclusively in U.S. Treasury bills, notes, and bonds, and other obligations issued or guaranteed as to principal or interest by the U.S. Government, its agencies, or instrumentalities, and in repurchase agreements with respect to such obligations. Certain of these obligations, including U.S. Treasury bills, notes, and bonds, mortgage participation certificates issued or guaranteed by the Government National Mortgage Association, and Federal Housing Administration debentures, are supported by the full faith and credit of the United States. Other U.S. Government securities issued by federal agencies or government- 4 sponsored enterprises are not supported by the full faith and credit of the United States. These securities include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Banks, and obligations supported only by the credit of an instrumentality, such as Federal National Mortgage Association bonds. Short-term U.S. Government obligations generally are considered among the safest short-term investments. Because of their added safety, the yields available from U.S. Government obligations are generally lower than the yields available from comparable corporate debt securities. The U.S. Government guarantee of securities owned by the Fund does not guarantee the net asset value of the Fund's shares, which the Fund seeks to maintain at $1.00 per share. Cash Resource Tax-Exempt Money Market Fund The Tax-Exempt Money Market Fund invests, as a fundamental policy, at least 80% of its net assets in Tax-Exempt Securities (as described below). The Fund may invest the remainder of its assets in investments of any kind in which either of the other Funds may invest. The Fund will invest in only the following types of Tax-Exempt Securities: (i) municipal notes; (ii) municipal bonds; (iii) municipal securities backed by the U.S. Government or any of its agencies or instrumentalities; (iv) short-term discount notes (tax-exempt commercial paper); (v) participation interests in any of the foregoing; and (vi) unrated securities or new types of tax-exempt instruments which become available in the future if the Adviser determines they meet the quality standards discussed below (collectively, "Tax-Exempt Securities"). (In the case of any such new types of tax-exempt instruments, this Prospectus would be revised as may be appropriate to describe such instruments.) In connection with the purchase of Tax-Exempt Securities, the Fund may acquire stand-by commitments, which give the Fund the right to resell the security to the dealer at a specified price. Stand-by commitments may provide additional liquidity for the Fund but are subject to the risk that the dealer may fail to meet its obligations. The Fund does not generally expect to pay additional consideration for stand-by commitments or to assign any value to them. Tax-Exempt Securities are debt obligations issued by a state (including the District of Columbia), a U.S. territory or possession, or any of their political subdivisions, the interest from which is, in the opinion of bond counsel, exempt from federal income tax. These securities are issued to obtain funds for various public purposes, such as the construction of public facilities, the payment of general operating expenses, or the refunding of outstanding debts. They may also be issued to finance various private activities, including the lending of funds to public or private institutions for the construction of housing, educational, or medical facilities and may also include certain types of private activity and industrial development bonds issued by public authorities to finance privately owned or operated facilities. Short-term Tax-Exempt Securities are generally issued as interim financing in anticipation of tax collections, revenue receipts, or bond sales to finance various public purposes. The two principal classifications of Tax-Exempt Securities are general obligation and special obligation (or revenue) securities. General obligation securities involve the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues. Their payment may depend on an appropriation by the issuer's legislative body. The characteristics and methods of enforcement of general obligation securities vary according to the law applicable to the particular issuer. Special obligation securities are payable only from the revenues derived from a particular facility or class of facilities, or a specific revenue source, and generally are not payable from the unrestricted revenues of the issuer. Industrial development and private activity bonds are in most cases special obligation securities, the credit quality of which is directly related to the private user of a facility. 5 For purposes of the Fund's policy to invest at least 80% of its net assets in Tax-Exempt Securities, the Fund will not treat obligations as Tax-Exempt Securities for purposes of measuring compliance with such policy if they would give rise to interest income subject to federal alternative minimum tax for individuals. To the extent that the Fund invests in these securities, individual shareholders of the Fund, depending on their own tax status, may be subject to federal alternative minimum tax on the part of the Fund's distributions derived from these securities. In addition, an investment in the Fund may cause corporate shareholders to be subject to (or result in an increased liability under) the alternative minimum tax because tax-exempt income is generally included in the alternative minimum taxable income of corporations. The Fund may invest without limit in high quality taxable money market instruments of any type in which the other Funds may invest at any time when the Adviser believes that market conditions make pursuing the Fund's basic investment strategy inconsistent with the best interests of shareholders. It is impossible to predict when, or for how long, the Fund will use these alternative defensive strategies. Selection of Investments Each Fund will invest only in U.S. dollar-denominated high-quality securities and other U.S. dollar-denominated money market instruments meeting credit criteria which the Trustees believe present minimal credit risk. "High-quality securities" are (i) commercial paper or other short-term obligations rated in one of the two highest short-term rating categories by at least two nationally recognized rating services (or, if only one rating service has rated the security, by that service), (ii) obligations rated at least AA by Standard & Poor's or Aa by Moody's Investors Services, Inc. at the time of investment, and (iii) unrated securities determined by the Adviser to be of comparable quality. Each Fund will maintain a dollar-weighted average maturity of 90 days or less and will not invest in securities with remaining maturities of more than 397 days. A Fund may invest in variable or floating-rate securities which bear interest at rates subject to periodic adjustment or which provide for periodic recovery of principal on demand. Under certain conditions, these securities may be deemed to have remaining maturities equal to the time remaining until the next interest adjustment date or the date on which principal can be recovered on demand. Each of the Funds follows investment and valuation policies designed to maintain a stable net asset value of $1.00 per share, although there is no assurance that these policies will be successful. Considerations of liquidity and preservation of capital mean that a Fund may not necessarily invest in money market instruments paying the highest available yield at a particular time. Consistent with its investment objective, a Fund will attempt to maximize yields by portfolio trading and by buying and selling portfolio investments in anticipation of or in response to changing economic and money market conditions and trends. Each Fund may also invest to take advantage of what the Adviser believes to be temporary disparities in the yields of different segments of the high-quality money market or among particular instruments within the same segment of the market. These policies, as well as the relatively short maturity of obligations purchased by the Funds, may result in frequent changes in the Funds' portfolios. The Funds will not usually pay brokerage commissions in connection with the purchase or sale of portfolio securities. The portfolio of a Fund will be affected by general changes in interest rates resulting in increases or decreases in the values of the obligations held by the Fund. The values of the obligations in a Fund's portfolio can be expected to vary inversely to changes in prevailing interest rates. Although the Funds' investment policies are designed to minimize these changes and to maintain a net asset value of $1.00 per share, there is no assurance that these policies will be successful. Withdrawals by shareholders could require the sale of portfolio investments at a time when such a sale might not otherwise be desirable. 6 Diversification and concentration policies Each Fund is a "diversified" investment company under the Investment Company Act of 1940. This means that each Fund may invest up to 25% of its total assets in the securities of one or more issuers, and is limited with respect to the remaining portion of its assets to investing 5% or less of its total assets in the securities of any one issuer (other than the U.S. government). However, under the current rules governing money market funds, the Funds generally may not invest more than 5% of their assets in any one issuer (other than the U.S. government). The Money Market Fund may invest without limit in obligations of domestic branches of U.S. banks and U.S. branches of foreign banks (if it can be demonstrated that they are subject to the same regulations as U.S. banks). At times when the Fund has concentrated its investments in bank obligations, the values of its portfolio securities may be especially affected by factors pertaining to the issuers of such obligations. The Tax-Exempt Money Market Fund will not invest more than 25% of its total assets in any one industry. Governmental issuers of Tax-Exempt Securities are not considered part of any "industry." However, Tax-Exempt Securities backed only by the assets and revenues of nongovernmental users may for this purpose be deemed to be issued by such nongovernmental users, and the 25% limitation would apply to such obligations. It is nonetheless possible that the Tax-Exempt Money Market Fund may invest more than 25% of its assets in a broader segment of the Tax-Exempt Securities market, such as revenue obligations of hospitals and other health care facilities, housing agency revenue obligations, or airport revenue obligations. This would be the case only if the Adviser determined that the yields available from obligations in a particular segment of the market justified the additional risks associated with such concentration. Although such obligations could be supported by the credit of governmental users or by the credit of nongovernmental users engaged in a number of industries, economic, business, political, and other developments generally affecting the revenues of such users (for example, proposed legislation or pending court decisions affecting the financing of such projects and market factors affecting the demand for their services or products) may have a general adverse effect on all Tax-Exempt Securities in such a market segment.The Fund reserves the right to invest more than 25% of its assets in industrial development bonds and private activity bonds or notes. The Fund also reserves the right to invest more than 25% of its assets in securities relating to any one or more states (including the District of Columbia), U.S. territories or possessions, or any of their political subdivisions. As a result of such an investment, the performance of the Fund may be especially affected by factors pertaining to the economy of the relevant state and other factors specifically affecting the ability of issuers of such securities to meet their obligations. As a result, the value of the Fund's shares may fluctuate more widely than the value of shares of a fund investing in securities relating to a greater number of different states. The ability of governmental issuers to meet their obligations will depend primarily on the availability of tax and other revenues to those governments and on their fiscal conditions generally. The amounts of tax and other revenues available to governmental issuers may be affected from time to time by economic, political, and demographic conditions affecting a particular state. In addition, constitutional or statutory restrictions may limit a government's power to raise revenues or increase taxes. The availability of federal, state, and local aid to issuers of such securities may also affect their ability to meet their obligations. Payments of principal and interest on special obligation securities will depend on the economic condition of the facility or specific revenue source from whose revenues the payments will be made, which in turn could be affected by economic, political, and demographic conditions affecting a particular state. Any reduction in the actual or perceived ability of an issuer of Tax-Exempt Securities in a particular state to meet its obligations (including a reduction in the rating of its outstanding securities) would likely affect adversely the market value and marketability of its obligations and could adversely affect the values of Tax-Exempt Securities issued by others in that state as well. 7 Other Investment Practices A Fund may also engage to a limited extent in the following investment practices, each of which involves certain special risks. The Statement of Additional Information contains more detailed information about these practices. Foreign investments. The Money Market Fund may invest in obligations of foreign issuers and in bank certificates of deposit and bankers' acceptances payable in U.S. dollars and issued by foreign banks (including U.S. branches of foreign banks) or by foreign branches of U.S. banks. These investments subject the Fund to investment risks different from those associated with domestic investments. Such risks include adverse political and economic developments in foreign countries, the imposition of withholding taxes on interest income, seizure or nationalization of foreign deposits, or the adoption of other governmental restrictions which may adversely affect the payment of principal and interest on such obligations. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the U.S. or in other foreign countries. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the Fund's assets held abroad) and expenses not present in the settlement of domestic investments. In addition, foreign securities may be less liquid than U.S. securities, and foreign accounting and disclosure standards may differ from U.S. standards. Special tax considerations apply to foreign investments. Repurchase agreements. Under a repurchase agreement, a Fund purchases a debt instrument for a relatively short period (usually not more than one week), which the seller agrees to repurchase at a fixed time and price, representing the Fund's cost plus interest. A Fund will enter into repurchase agreements only with commercial banks and with registered broker-dealers who are members of a national securities exchange or market makers in government securities, and only if the debt instrument subject to the repurchase agreement is a U.S. Government security. Although the Adviser will monitor repurchase agreement transactions to ensure that they will be fully collateralized at all times, a Fund bears a risk of loss if the other party defaults on its obligation and the Fund is delayed or prevented from exercising its rights to dispose of the collateral. If the other party should become involved in bankruptcy or insolvency proceedings, it is possible that a Fund may be treated as an unsecured creditor and required to return the collateral to the other party's estate. Securities lending. A Fund may lend portfolio securities to broker-dealers. These transactions must be fully collateralized at all times with cash or short-term debt obligations, but involve some risk to a Fund if the other party should default on its obligation and the Fund is delayed or prevented from exercising its right in respect of the collateral. Any investment of collateral by a Fund would be made in accordance with the Fund's investment objective and policies described above. Dividends The Trust determines the net income of each Fund as of the close of regular trading on the New York Stock Exchange (the "Exchange") each day the Exchange is open. Each determination of a Fund's net income includes (i) all accrued interest on the Fund's investments, (ii) plus or minus all realized and unrealized gains and losses on the Fund's investments, (iii) less all accrued expenses of the Fund. Each Fund's investments are valued at amortized cost according to Securities and Exchange Commission Rule 2a-7. A Fund will not normally have unrealized gains or losses so long as it values its investments by the amortized cost method. Daily dividends. Each Fund declares all of its net income as a distribution on each day it is open for business, as a dividend to shareholders of record immediately prior to the close of regular trading on the Exchange. Shareholders whose purchase of shares of a Fund is accepted at or before 12:00 noon on any day will receive the 8 dividend declared by the Fund for that day; shareholders who purchase shares after 12:00 noon will begin earning dividends on the next business day after the Fund accepts their order. A Fund's net income for Saturdays, Sundays, and holidays is declared as a dividend on the preceding business day. Dividends for the immediately preceding calendar month will be paid on the fifteenth day of each calendar month (or, if that day is not a business day, on the next business day), except that a Fund's schedule for payment of dividends during the month of December may be adjusted to assist in tax reporting and distribution requirements. A shareholder who withdraws the entire balance of an account at any time during a month will be paid all dividends declared through the time of the withdrawal. Since the net income of each Fund is declared as a dividend each time it is determined, the net asset value per share of each Fund normally remains at $1 per share immediately after each determination and dividend declaration. You can choose from two distribution options: (1) automatically reinvest all distributions from a Fund in additional shares of that Fund; or (2) receive all distributions in cash. If you wish to change your distribution option, you should contact your Financial Institution (as defined below), who will be responsible for forwarding the necessary instructions to the Trust's transfer agent, Investors Fiduciary Trust Company ("IFTC"). If you do not select an option when you open your account, all distributions will be reinvested. You will receive a statement confirming reinvestment of distributions in additional shares of a Fund promptly following the month in which the reinvestment occurs. Tax information. Each Fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements that are necessary for it to be relieved of federal income taxes on income (and gains, if any) it distributes to shareholders. Each Fund will distribute substantially all of its ordinary income (and net capital gains, if any) on a current basis. Dividends paid by the Tax-Exempt Money Market Fund that are derived from exempt-interest income (known as "exempt-interest dividends") and that are designated as such may be treated by the Fund's shareholders as items of interest excludable from their federal gross income. (Shareholders should consult their own tax adviser with respect to whether exempt-interest dividends would be excludable from gross income if the shareholder were treated as a "substantial user" of facilities financed by an obligation held by the Tax-Exempt Money Market Fund or a "related person" to such a user under the Internal Revenue Code.) If a shareholder receives an exempt-interest dividend with respect to any share held for six months or less, any loss on the sale or exchange of that share will be disallowed to the extent of the amount of the exempt-interest dividend. To the extent dividends paid to shareholders are derived from taxable income (for example, from interest on certificates of deposit) or from gains, such dividends will be subject to federal income tax, whether they are paid in the form of cash or additional shares. If the Tax-Exempt Money Market Fund holds certain "private activity bonds" ("industrial development bonds" under prior law), dividends derived from interest on such obligations will be classified as an item of tax preference which could subject certain shareholders to alternative minimum tax liability. Corporate shareholders must also take all exempt-interest dividends into account in determining "adjusted current earnings" for purposes of calculating their alternative minimum tax liability. Shareholders receiving Social Security benefits or Railroad Retirement Act benefits should note that all exempt-interest dividends will be taken into account in determining the taxability of such benefits. Early in each year your Fund will notify you of the amount and tax status of distributions paid to you by the Fund for the preceding year. 9 The foregoing is a summary of certain federal income tax consequences of investing in the Funds. You should consult your tax adviser to determine the precise effect of an investment in each Fund on your particular tax situation. Buying and Selling Shares of the Funds How to buy shares. The Trust offers shares of the Funds continuously at a price of $1.00 per share. The Trust determines net asset value twice each day, as of 12:00 noon and as of the close of regular trading on the Exchange. The shares of each Fund are sold at net asset value through a number of selected financial institutions, such as investment dealers and banks (each, a "Financial Institution"). Your Financial Institution is responsible for forwarding any necessary documentation to IFTC. There is no sales charge on sales of shares, nor is any minimum investment required for any of the Funds. Because each Fund seeks to be fully invested at all times, investments must be in Same Day Funds to be accepted. Investments which are accepted at or before 12:00 noon will be invested at the net asset value determined at that time; investments accepted after 12:00 noon will receive the net asset value determined at the close of regular trading on the Exchange. "Same Day Funds" are funds credited by the applicable regional Federal Reserve Bank to the account of the Trust at its designated bank. When payment in Same Day Funds is available to the Trust, the Trust will accept the order to purchase shares at the net asset value next determined. If you are considering redeeming shares or transferring shares to another person shortly after purchase, you should pay for those shares with wired Same Day Funds or a certified check to avoid any delay in redemption or transfer. Otherwise, the Trust may delay payment for shares until the purchase price of those shares has been collected which may be up to 15 calendar days after the purchase date. For more information on how to purchase shares of the Funds, contact your Financial Institution or Mentor Distributors, Inc. ("Mentor Distributors"), 901 East Byrd Street, Richmond, Virginia 23219, the principal underwriter of the Trust's shares. Mentor Distributors' telephone number is 1-800-382-0016. How to sell shares. You can redeem your Fund shares through your Financial Institution any day the Exchange is open, or you may redeem your shares by check or by mail. Redemption will be effected at the net asset value per share of the Fund next determined after receipt of the redemption request in good order. The Trust must receive your properly completed purchase documentation before you may sell shares. Selling shares through your Financial Institution. You may redeem your shares through your Financial Institution. Your Financial Institution is responsible for delivering your redemption request and all necessary documentation to the Trust, and may charge you for its services (including, for example, charges relating to the wiring of funds). Your Financial Institution may accept your redemption instructions by telephone. Consult your Financial Institution. Selling shares by check. If you would like the ability to write checks against your investment in a Fund, you should provide the necessary documentation to your Financial Institution and complete the signature card which you may obtain by calling your Financial Institution or your Fund. When a Fund receives your properly completed documentation and card, you will receive checks drawn on your Fund account and payable through the Fund's designated bank. These checks may be made payable to the order of any person. You will continue to earn dividends until the check clears. When a check is presented for payment, a sufficient number of full and fractional shares of the Fund in your account will be redeemed to cover the amount of the check. Your Financial Institution may limit the availability of the check-writing privilege or assess certain fees in connection with the checkwriting privilege. 10 Shareholders using Trust checks are subject to the Trust's designated bank's rules governing checking accounts. There is currently no charge to the shareholder for the use of checks, although one may be imposed in the future. Shareholders would be notified in advance of the imposition of any such charge. (In addition, if you deplete your original check supply, there may be a charge to order additional checks.) You should make sure that there are sufficient shares in your account to cover the amount of the check drawn. If there is an insufficient number of shares in the account, the check will be dishonored and returned, and no shares will be redeemed. Because dividends declared on shares held in your account and prior withdrawals may cause the value of your account to change, it is impossible to determine in advance your account's total value. Accordingly, you should not write a check for the entire value of your account or close your account by writing a check. A shareholder may revoke check-writing authorization by written notice to IFTC. Selling shares by mail. You may also sell shares of a Fund by sending a written withdrawal request to IFTC. You must sign the withdrawal request and include a stock power with signature(s) guaranteed by a bank, broker/dealer, or certain other financial institutions. IFTC may require additional documentation from shareholders which are corporations, partnerships, agents, fiduciaries or surviving joint owners. Corporations, partnerships, agents, trusts, and fiduciary accounts must submit a completed resolution in proper form before selling shares. Resolution forms are available from IFTC and Mentor Distributors. A Fund generally sends you payment for your shares the business day after your request is received in good order. Under unusual circumstances, a Fund may suspend repurchases, or postpone payment for more than seven days, as permitted by federal securities law. How to Exchange Shares You can exchange your shares in any Fund for shares of any other Fund in the Trust at net asset value, except as described below. If you request an exchange through your Financial Institution, your Financial Institution will be responsible for forwarding the necessary documentation to IFTC. Exchange Authorization Forms are available from your Financial Institution or Mentor Distributors. For federal income tax purposes, an exchange is treated as a sale of shares and generally results in a capital gain or loss. The Trust reserves the right to change or suspend the exchange privilege at any time. Shareholders would be notified of any change or suspension. Consult your Financial Institution or Mentor Distributors before requesting an exchange. Financial Institutions Financial Institutions provide varying arrangements for their clients with respect to the purchase and redemption of Trust shares and the confirmation thereof and may arrange with their clients for other investment or administrative services. When you effect transactions with a Fund (including among other things the purchase, redemption, or exchange of Fund shares) through a Financial Institution, the Financial Institution, and not the Fund, will be responsible for taking all steps, and furnishing all necessary documentation, to effect such transactions. Financial Institutions have the responsibility to deliver purchase and redemption requests to a Fund promptly. Some Financial Institutions may establish minimum investment requirements with respect to a Fund. They may also establish and charge fees and other amounts to their client for their services. Certain privileges, such as the check writing privilege or reinvestment options, may not be available through certain Financial Institutions or they may be available only under certain conditions. If your Financial Institution holds your investment in a Fund in its own name, then your Financial Institution will be the shareholder of record in respect of that investment; your ability to take advantage of any investment options or services of the Fund will depend on 11 whether, and to what extent, your Financial Institution is willing to take advantage of them on your behalf. Financial Institutions, including Wheat, First Securities, Inc., a subsidiary of Wheat First Butcher Singer, Inc., and EVEREN Securities, Inc. ("EVEREN"), may charge fees to or impose restrictions on your shareholder account. Consult your Financial Institution for information about any fees or restrictions or for further information concerning its services. Management The Trustees are responsible for generally overseeing the conduct of the Trust's business. Subject to such policies as the Trustees may determine, the Adviser furnishes a continuing investment program for the Funds and makes investment decisions on their behalf. Commonwealth Advisors, Inc. serves as investment adviser to each of the Funds, providing investment advisory services and advising and assisting the officers of the Trust in taking such steps as are necessary or appropriate to carry out the decisions of the Trustees. Commonwealth Investment Counsel, Inc., an affiliate of Commonwealth Advisors, serves as sub-adviser to each of the Funds pursuant to a sub-advisory agreement among Commonwealth Advisors, Commonwealth Investment Counsel, and the Trust. Commonwealth Advisors and Commonwealth Investment Counsel are wholly owned subsidiaries of Mentor Investment Group, Inc., which is in turn a subsidiary of Wheat First Butcher Singer, Inc., a diversified financial services holding company. Commonwealth Advisors serves as investment adviser to four separate investment portfolios (in addition to the Funds) in the Mentor Family of Funds and Commonwealth Investment Counsel serves as investment adviser to six separate investment portfolios in the Mentor Family of Funds. For a copy of the prospectus relating to certain of these other portfolios, call Mentor Distributors at 1-800-382-0016. The address of Commonwealth Advisors and Commonwealth Investment Counsel is 901 East Byrd Street, Richmond, Virginia 23219. It is expected that in the fall of 1996, Commonwealth Investment Counsel will be reorganized as Mentor Investment Advisors, L.L.C., which will become investment adviser to the Funds in place of Commonwealth Advisors. Immediately after the reorganization, Mentor Investment Advisors will be a wholly owned subsidiary of Mentor Investment Group and its corporate affiliates. The address of Mentor Investment Advisors will be 901 East Byrd Street, Richmond, Virginia 23219. In addition, it is expected that promptly after that reorganization, EVEREN Securities, Inc. will acquire 20% of the outstanding shares of Mentor Investment Group. EVEREN may thereafter acquire additional shares in Mentor Investment Group (not to exceed an additional 30% of Mentor Investment Group's outstanding shares) depending principally on the amount of assets in investment companies sponsored by Mentor Investment Group or its affiliates (including the Funds) attributable to shares held by clients of EVEREN. Each Fund pays management fees to Commonwealth Advisors monthly at the following annual rates (based on the assets of the Fund): 0.22% of the first $500 million of the Fund's average net assets; 0.20% of the next $500 million; 0.175% of the next $1 billion; 0.16% of the next $1 billion; and 0.15% of any amounts over $3 billion. Commonwealth Advisors in turn pays fees from its own assets to Commonwealth Investment Counsel monthly at the following annual rates (based on the assets of each Fund taken separately): 0.17% of the first $500 million of a Fund's average net assets; 0.15% of the next $500 million; 0.125% of the next $1 billion; 0.11% of the next $1 billion; and 0.10% of any amounts over $3 billion. When Mentor Investment Advisors becomes investment adviser to the Funds, the Funds will pay management fees to Mentor Investment Advisors at the same rate as currently paid to Commonwealth Advisors. The Funds pay all expenses not assumed by the Adviser, including Trustees' fees, auditing, legal, custodial, investor servicing, and shareholder reporting expenses, and payments under its Distribution Plans. General 12 expenses of the Trust will be charged to the assets of each Fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each Fund or the nature of the services performed and relative applicability to each Fund. Expenses directly charged or attributable to a Fund will be paid from the assets of that Fund. The Adviser places all orders for purchases and sales of the investments of each Fund. In selecting broker-dealers, the Adviser may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, the Adviser may consider sales of shares of the Funds (and, if permitted by law, of the other funds in the Mentor family) as a factor in the selection of broker-dealers. Distribution Services Each Fund has adopted a Distribution Plan (each, a "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to permit each of the Funds to compensate Mentor Distributors for services provided and expenses incurred by it in promoting the sale of shares of the Fund, reducing redemptions, or maintaining or improving services provided to shareholders. The Plans provide for monthly payments by the Funds to Mentor Distributors, subject to the authority of the Trustees to reduce the amount of payments or to suspend the Plans for such periods as they may determine. Any material increase in amounts payable under a Plan would require shareholder approval. In order to compensate Financial Institutions for services provided in connection with sales of Fund shares and the maintenance of shareholder accounts (or, in the case of certain Financial Institutions which are banking institutions, for certain administrative and shareholder services), Mentor Distributors may make periodic payments (from any amounts received by it under the Plans or from its other resources) to any qualifying Financial Institution based on the average net asset value of shares for which the Financial Institution is designated as the financial institution of record. Mentor Distributors makes such payments at the annual rate of between 0.15% and 0.40% in the case of the Money Market Fund and the U.S. Government Money Market Fund, and between 0.15% and 0.33% in the case of the Tax-Exempt Money Market Fund. Mentor Distributors may suspend or modify these payments at any time, and payments are subject to the continuation of each Fund's Plan and of applicable agreements between Mentor Distributors and the applicable Financial Institution. Financial Institutions receiving payments from Mentor Distributors include Wheat, First Securities, Inc., and EVEREN. How a Fund's Performance is Calculated Yield and effective yield data may from time to time be included in advertisements about the Funds. "Yield" is calculated by dividing a Fund's annualized net investment income per share during a recent seven-day period by the net asset value per share on the last day of that period. "Effective yield" compounds that yield for a year and is, for that reason, greater than a Fund's yield. "Tax-equivalent" yield shows the effect on performance of the tax-exempt status of distributions received from the Tax-Exempt Money Market Fund. It reflects the approximate yield that a taxable investment must earn for shareholders at stated income levels to produce an after-tax yield equivalent to the Fund's tax-exempt yield. Quotations of yield for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. A Fund's performance may be compared to various indices. See the Statement of Additional Information. All data is based on a Fund's past investment results and does not predict future performance. Investment performance, which will vary, is based on many factors, including market conditions, the composition of a 13 Fund's portfolio, and a Fund's operating expenses. Investment performance also often reflects the risks associated with a Fund's investment objective and policies. These factors should be considered when comparing a Fund's investment results to those of other mutual funds and other investment vehicles. General Information Cash Resource Trust is a Massachusetts business trust organized on June 14, 1993. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. The Trust is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest. Shares of the Trust may, without shareholder approval, be divided into two or more series of shares representing separate investment portfolios, and are currently divided into three series of shares, one representing each Fund. Under the Agreement and Declaration of Trust, a Fund's shares may be further divided, without shareholder approval, into two or more classes of shares having such preferences or special or relative rights and privileges as the Trustees may determine. Each share has one vote, with fractional shares voting proportionally. Shares of each Fund are freely transferable, are entitled to dividends as declared by the Trustees, and, if a Fund were liquidated, would receive the net assets of the Fund. The Trust may suspend the sale of shares of any Fund at any time and may refuse any order to purchase shares. Although the Trust is not required to hold annual meetings of its shareholders, shareholders have the right to call a meeting to elect or remove Trustees, or to take other actions as provided in the Agreement and Declaration of Trust. Investors Fiduciary Trust Company, located at 127 West 10th Street, Kansas City, Missouri 64105, is the transfer agent and dividend-paying agent for the Trust. IFTC engages at its own expense certain Financial Institutions, including Wheat, First Securities, Inc. and EVEREN, to perform bookkeeping, data processing, and administrative services pertaining to the maintenance of shareholder accounts. If you own fewer shares of a Fund than a minimum amount set by the Trustees (presently 500 shares), the Trust may choose to redeem your shares and pay you for them. You will receive at least 30 days written notice before the Trust redeems your shares, and you may purchase additional shares at any time to avoid a redemption. The Trust may also redeem shares if you own shares of any Fund or of the Trust above any maximum amount set by the Trustees. There is presently no maximum, but the Trustees may establish one at any time, which could apply to both present and future shareholders. The Trust may send a single copy of shareholder reports and communications to an address where there is more than one registered shareholder with the same last name, unless a shareholder at that address requests, by calling or writing his Financial Institution or Mentor Distributors that the Trust do otherwise. 14 Cash Resource Trust 901 East Byrd Street Richmond, VA 23219 Rule 497(e) File No. 811-7862 [MENTOR INVESTMENT GROUP LOGO] CASH RESOURCE TRUST Prospectus September 23, 1996 P R O S P E C T U S September 23, 1996 Cash Resource Trust Cash Resource Money Market Fund Cash Resource U.S. Government Money Market Fund Cash Resource Tax-Exempt Money Market Fund Cash Resource Money Market Fund, Cash Resource U.S. Government Money Market Fund, and Cash Resource Tax-Exempt Money Market Fund are designed for investors who seek current income consistent with preservation of capital and maintenance of liquidity. The Funds are diversified investment portfolios of Cash Resource Trust (the "Trust"). An investment in the Trust is neither insured nor guaranteed by the U.S. Government. There can be no assurance that a Fund will be able to maintain a stable net asset value of $1.00 per share. This Prospectus explains concisely what you should know before investing in a Fund. Please read it carefully and keep it for future reference. You can find more detailed information about the Funds in the September 23, 1996 Statement of Additional Information, as amended from time to time. For a free copy of the Statement, call 1-800-382-0016. The Statement has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. EXPENSE SUMMARY Expenses are one of several factors to consider when investing in a Fund. The following table summarizes your maximum transaction costs from an investment in each of the Funds and expenses incurred by each Fund based on its most recent fiscal year. The Examples show the cumulative expenses attributable to a hypothetical $1,000 investment in each Fund over specified periods. The information presented below does not reflect any fees or charges imposed by Financial Institutions through which you may invest in the Funds.
Cash Cash Cash Resource Resource Resource U.S. Government Tax-Exempt Money Market Money Market Money Market Fund Fund Fund Shareholder Transaction Expenses None None None Annual Fund Operating Expenses (as a percentage of average net assets) Management Fees .22% .19% .22% 12b-1 Fees .38% .38% .33% Other Expenses .22% .23%* .16%* Total Fund Operating Expenses .82% .80%* .71%*
*reflecting expense limitation Examples Your investment of $1,000 in a Fund would incur the following expenses, assuming 5% annual return and redemption at the end of each period:
1 year 3 years 5 years 10 years Cash Resource Money Market Fund $8 $26 $46 $101 Cash Resource U.S. Government Money Market Fund $8 $26 $44 $ 99 Cash Resource Tax-Exempt Money Market Fund $7 $23 $40 $ 88
The table is provided to help you understand the expenses of investing in each of the Funds and your share of the operating expenses which each of the Funds incurs. Expenses shown for the U.S. Government Money Market Fund and the Tax-Exempt Money Market Fund reflect an expense limitation. In the absence of this limitation, Other Expenses and Total Fund Operating Expenses would be .36% and .93%, respectively, for the U.S. Government Money Market Fund and .21% and .76%, respectively, for the Tax-Exempt Money Market Fund. The Examples do not represent past or future expense levels. Actual returns and expenses may be greater or less than those shown. Federal regulations require the Examples to assume a 5% annual return, but actual annual return will vary. Because of the 12b-1 fees payable by the Funds, long-term shareholders may pay more in aggregate sales charges than the maximum initial sales charge permitted by the National Association of Securities Dealers, Inc. 2 FINANCIAL HIGHLIGHTS The financial highlights presented below for the Funds have been audited by KPMG Peat Marwick LLP, independent auditors. The report of KPMG Peat Marwick LLP is contained in the Statement of Additional Information, which may be obtained in the manner described on the cover page of this Prospectus. Each of the Funds began operations on December 20, 1993. See "Financial Statements" in the Funds' Statement of Additional Information.
Money Market U.S. Government Tax-Exempt Fund Money Market Fund Money Market Fund Year Ended July 31, 1996 1995 1994* 1996 1995 1994* 1996 1995 1994* Per Share Operating Performance Net asset value, beginning of period $1.00 $1.00 $1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 Income from investment operations Net investment income 0.05 0.05** 0.02 0.05 0.05** 0.02 0.03 0.03** 0.01 Distributions Net investment income (0.05) (0.05)** (0.02) (0.05) (0.05) (0.02) (0.03) (0.03) (0.01) Net asset value, end of period $1.00 $1.00 $1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 Total Return 4.91% 4.97% 1.83%(b) 4.74% 4.82% 1.82%(b) 2.90% 3.05% 1.16%(b) Ratios/Supplemental Data Net assets, end of period (in thousands) $646,500 $422,657 $192,260 $1,402,397 $1,216,690 $907,819 $290,891 $266,895 $195,702 Ratio of expenses to average net assets 0.82% 0.82% 0.89%(a) 0.93% 0.88% 0.80%(a) 0.76% 0.72% 0.65%(a) Ratio of expenses to average net assets excluding waivers 0.82% 0.82% 0.93%(a) 0.93% 0.88% 0.83%(a) 0.76% 0.74% 0.74%(a) Ratio of net investment income to average net assets 4.77% 4.96% 2.96%(a) 4.63% 4.75% 2.91%(a) 2.85% 3.01% 1.87%(a)
* For the period from December 20, 1993 (commencement of operations) to July 31, 1994. ** Includes net realized capital gain (loss) which were under $0.01 per share. (a) Annualized. (b) Total return for periods less than one year are not annualized. 3 INVESTMENT OBJECTIVES AND POLICIES The investment objective of each Fund is to seek as high a rate of current income (or, in the case of Cash Resource Tax-Exempt Money Market Fund, as high a rate of current income exempt from federal income tax) as its investment adviser believes is consistent with preservation of capital and maintenance of liquidity. The Funds seek their objectives through the investment policies described below. Because each of the Funds is a money market fund, it will only invest in the types of investments described below under "Selection of Investments". The investment objective and policies of each Fund may, unless otherwise specifically stated, be changed by the Trustees without a vote of the shareholders. As a matter of policy, the Trustees would not materially change the investment objective of a Fund without shareholder approval. None of the Funds is intended to be a complete investment program, and there is no assurance the Funds will achieve their objectives. Commonwealth Advisors, Inc. ("Commonwealth Advisors") serves as the investment adviser to each of the Funds. Commonwealth Investment Counsel, Inc. ("Commonwealth Investment Counsel"), an affiliate of Commonwealth Advisors, serves as sub-adviser to the Funds, implementing a continuing investment program for each of the Funds. It is expected that in the fall of 1996, Commonwealth Investment Counsel will be reorganized as Mentor Investment Advisors, L.L.C., which will become the investment adviser to the Funds at that time in place of Commonwealth Advisors. References in this prospectus to the "Adviser" are to Commonwealth Investment Counsel during the period prior to the reorganization and to Mentor Investment Advisors for any period thereafter. See "Management" below. Cash Resource Money Market Fund The Money Market Fund invests in a portfolio of high-quality money market instruments consisting exclusively of: o bank certificates of deposit (CD's): negotiable certificates issued against funds deposited in a commercial bank for a definite period of time and earning a specified return. o bankers' acceptances: negotiable drafts or bills of exchange, which have been "accepted" by a bank, meaning, in effect, that the bank has unconditionally agreed to pay the face value of the instrument on maturity. o prime commercial paper: high-grade, short-term obligations issued by banks, corporations, and other issuers. o corporate obligations: high-grade, short-term obligations other than prime commercial paper. o U.S. Government securities: marketable securities issued or guaranteed as to principal or interest by the U.S. Government or by its agencies or instrumentalities. o repurchase agreements: with respect to U.S. Treasury or U.S. Government securities. Cash Resource U.S. Government Money Market Fund The U.S. Government Money Market Fund invests exclusively in U.S. Treasury bills, notes, and bonds, and other obligations issued or guaranteed as to principal or interest by the U.S. Government, its agencies, or instrumentalities, and in repurchase agreements with respect to such obligations. Certain of these obligations, including U.S. Treasury bills, notes, and bonds, mortgage participation certificates issued or guaranteed by the Government National Mortgage Association, and Federal Housing Administration debentures, are supported by the full faith and credit of the United States. Other U.S. Government securities issued by federal agencies or government- 4 sponsored enterprises are not supported by the full faith and credit of the United States. These securities include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Banks, and obligations supported only by the credit of an instrumentality, such as Federal National Mortgage Association bonds. Short-term U.S. Government obligations generally are considered among the safest short-term investments. Because of their added safety, the yields available from U.S. Government obligations are generally lower than the yields available from comparable corporate debt securities. The U.S. Government guarantee of securities owned by the Fund does not guarantee the net asset value of the Fund's shares, which the Fund seeks to maintain at $1.00 per share. Cash Resource Tax-Exempt Money Market Fund The Tax-Exempt Money Market Fund invests, as a fundamental policy, at least 80% of its net assets in Tax-Exempt Securities (as described below). The Fund may invest the remainder of its assets in investments of any kind in which either of the other Funds may invest. The Fund will invest in only the following types of Tax-Exempt Securities: (i) municipal notes; (ii) municipal bonds; (iii) municipal securities backed by the U.S. Government or any of its agencies or instrumentalities; (iv) short-term discount notes (tax-exempt commercial paper); (v) participation interests in any of the foregoing; and (vi) unrated securities or new types of tax-exempt instruments which become available in the future if the Adviser determines they meet the quality standards discussed below (collectively, "Tax-Exempt Securities"). (In the case of any such new types of tax-exempt instruments, this Prospectus would be revised as may be appropriate to describe such instruments.) In connection with the purchase of Tax-Exempt Securities, the Fund may acquire stand-by commitments, which give the Fund the right to resell the security to the dealer at a specified price. Stand-by commitments may provide additional liquidity for the Fund but are subject to the risk that the dealer may fail to meet its obligations. The Fund does not generally expect to pay additional consideration for stand-by commitments or to assign any value to them. Tax-Exempt Securities are debt obligations issued by a state (including the District of Columbia), a U.S. territory or possession, or any of their political subdivisions, the interest from which is, in the opinion of bond counsel, exempt from federal income tax. These securities are issued to obtain funds for various public purposes, such as the construction of public facilities, the payment of general operating expenses, or the refunding of outstanding debts. They may also be issued to finance various private activities, including the lending of funds to public or private institutions for the construction of housing, educational, or medical facilities and may also include certain types of private activity and industrial development bonds issued by public authorities to finance privately owned or operated facilities. Short-term Tax-Exempt Securities are generally issued as interim financing in anticipation of tax collections, revenue receipts, or bond sales to finance various public purposes. The two principal classifications of Tax-Exempt Securities are general obligation and special obligation (or revenue) securities. General obligation securities involve the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues. Their payment may depend on an appropriation by the issuer's legislative body. The characteristics and methods of enforcement of general obligation securities vary according to the law applicable to the particular issuer. Special obligation securities are payable only from the revenues derived from a particular facility or class of facilities, or a specific revenue source, and generally are not payable from the unrestricted revenues of the issuer. Industrial development and private activity bonds are in most cases special obligation securities, the credit quality of which is directly related to the private user of a facility. 5 For purposes of the Fund's policy to invest at least 80% of its net assets in Tax-Exempt Securities, the Fund will not treat obligations as Tax-Exempt Securities for purposes of measuring compliance with such policy if they would give rise to interest income subject to federal alternative minimum tax for individuals. To the extent that the Fund invests in these securities, individual shareholders of the Fund, depending on their own tax status, may be subject to federal alternative minimum tax on the part of the Fund's distributions derived from these securities. In addition, an investment in the Fund may cause corporate shareholders to be subject to (or result in an increased liability under) the alternative minimum tax because tax-exempt income is generally included in the alternative minimum taxable income of corporations. The Fund may invest without limit in high quality taxable money market instruments of any type in which the other Funds may invest at any time when the Adviser believes that market conditions make pursuing the Fund's basic investment strategy inconsistent with the best interests of shareholders. It is impossible to predict when, or for how long, the Fund will use these alternative defensive strategies. Selection of Investments Each Fund will invest only in U.S. dollar-denominated high-quality securities and other U.S. dollar-denominated money market instruments meeting credit criteria which the Trustees believe present minimal credit risk. "High-quality securities" are (i) commercial paper or other short-term obligations rated in one of the two highest short-term rating categories by at least two nationally recognized rating services (or, if only one rating service has rated the security, by that service), (ii) obligations rated at least AA by Standard & Poor's or Aa by Moody's Investors Services, Inc. at the time of investment, and (iii) unrated securities determined by the Adviser to be of comparable quality. Each Fund will maintain a dollar-weighted average maturity of 90 days or less and will not invest in securities with remaining maturities of more than 397 days. A Fund may invest in variable or floating-rate securities which bear interest at rates subject to periodic adjustment or which provide for periodic recovery of principal on demand. Under certain conditions, these securities may be deemed to have remaining maturities equal to the time remaining until the next interest adjustment date or the date on which principal can be recovered on demand. Each of the Funds follows investment and valuation policies designed to maintain a stable net asset value of $1.00 per share, although there is no assurance that these policies will be successful. Considerations of liquidity and preservation of capital mean that a Fund may not necessarily invest in money market instruments paying the highest available yield at a particular time. Consistent with its investment objective, a Fund will attempt to maximize yields by portfolio trading and by buying and selling portfolio investments in anticipation of or in response to changing economic and money market conditions and trends. Each Fund may also invest to take advantage of what the Adviser believes to be temporary disparities in the yields of different segments of the high-quality money market or among particular instruments within the same segment of the market. These policies, as well as the relatively short maturity of obligations purchased by the Funds, may result in frequent changes in the Funds' portfolios. The Funds will not usually pay brokerage commissions in connection with the purchase or sale of portfolio securities. The portfolio of a Fund will be affected by general changes in interest rates resulting in increases or decreases in the values of the obligations held by the Fund. The values of the obligations in a Fund's portfolio can be expected to vary inversely to changes in prevailing interest rates. Although the Funds' investment policies are designed to minimize these changes and to maintain a net asset value of $1.00 per share, there is no assurance that these policies will be successful. Withdrawals by shareholders could require the sale of portfolio investments at a time when such a sale might not otherwise be desirable. 6 Diversification and concentration policies Each Fund is a "diversified" investment company under the Investment Company Act of 1940. This means that each Fund may invest up to 25% of its total assets in the securities of one or more issuers, and is limited with respect to the remaining portion of its assets to investing 5% or less of its total assets in the securities of any one issuer (other than the U.S. government). However, under the current rules governing money market funds, the Funds generally may not invest more than 5% of their assets in any one issuer (other than the U.S. government). The Money Market Fund may invest without limit in obligations of domestic branches of U.S. banks and U.S. branches of foreign banks (if it can be demonstrated that they are subject to the same regulations as U.S. banks). At times when the Fund has concentrated its investments in bank obligations, the values of its portfolio securities may be especially affected by factors pertaining to the issuers of such obligations. The Tax-Exempt Money Market Fund will not invest more than 25% of its total assets in any one industry. Governmental issuers of Tax-Exempt Securities are not considered part of any "industry." However, Tax-Exempt Securities backed only by the assets and revenues of nongovernmental users may for this purpose be deemed to be issued by such nongovernmental users, and the 25% limitation would apply to such obligations. It is nonetheless possible that the Tax-Exempt Money Market Fund may invest more than 25% of its assets in a broader segment of the Tax-Exempt Securities market, such as revenue obligations of hospitals and other health care facilities, housing agency revenue obligations, or airport revenue obligations. This would be the case only if the Adviser determined that the yields available from obligations in a particular segment of the market justified the additional risks associated with such concentration. Although such obligations could be supported by the credit of governmental users or by the credit of nongovernmental users engaged in a number of industries, economic, business, political, and other developments generally affecting the revenues of such users (for example, proposed legislation or pending court decisions affecting the financing of such projects and market factors affecting the demand for their services or products) may have a general adverse effect on all Tax-Exempt Securities in such a market segment.The Fund reserves the right to invest more than 25% of its assets in industrial development bonds and private activity bonds or notes. The Fund also reserves the right to invest more than 25% of its assets in securities relating to any one or more states (including the District of Columbia), U.S. territories or possessions, or any of their political subdivisions. As a result of such an investment, the performance of the Fund may be especially affected by factors pertaining to the economy of the relevant state and other factors specifically affecting the ability of issuers of such securities to meet their obligations. As a result, the value of the Fund's shares may fluctuate more widely than the value of shares of a fund investing in securities relating to a greater number of different states. The ability of governmental issuers to meet their obligations will depend primarily on the availability of tax and other revenues to those governments and on their fiscal conditions generally. The amounts of tax and other revenues available to governmental issuers may be affected from time to time by economic, political, and demographic conditions affecting a particular state. In addition, constitutional or statutory restrictions may limit a government's power to raise revenues or increase taxes. The availability of federal, state, and local aid to issuers of such securities may also affect their ability to meet their obligations. Payments of principal and interest on special obligation securities will depend on the economic condition of the facility or specific revenue source from whose revenues the payments will be made, which in turn could be affected by economic, political, and demographic conditions affecting a particular state. Any reduction in the actual or perceived ability of an issuer of Tax-Exempt Securities in a particular state to meet its obligations (including a reduction in the rating of its outstanding securities) would likely affect adversely the market value and marketability of its obligations and could adversely affect the values of Tax-Exempt Securities issued by others in that state as well. 7 Other Investment Practices A Fund may also engage to a limited extent in the following investment practices, each of which involves certain special risks. The Statement of Additional Information contains more detailed information about these practices. Foreign investments. The Money Market Fund may invest in obligations of foreign issuers and in bank certificates of deposit and bankers' acceptances payable in U.S. dollars and issued by foreign banks (including U.S. branches of foreign banks) or by foreign branches of U.S. banks. These investments subject the Fund to investment risks different from those associated with domestic investments. Such risks include adverse political and economic developments in foreign countries, the imposition of withholding taxes on interest income, seizure or nationalization of foreign deposits, or the adoption of other governmental restrictions which may adversely affect the payment of principal and interest on such obligations. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the U.S. or in other foreign countries. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the Fund's assets held abroad) and expenses not present in the settlement of domestic investments. In addition, foreign securities may be less liquid than U.S. securities, and foreign accounting and disclosure standards may differ from U.S. standards. Special tax considerations apply to foreign investments. Repurchase agreements. Under a repurchase agreement, a Fund purchases a debt instrument for a relatively short period (usually not more than one week), which the seller agrees to repurchase at a fixed time and price, representing the Fund's cost plus interest. A Fund will enter into repurchase agreements only with commercial banks and with registered broker-dealers who are members of a national securities exchange or market makers in government securities, and only if the debt instrument subject to the repurchase agreement is a U.S. Government security. Although the Adviser will monitor repurchase agreement transactions to ensure that they will be fully collateralized at all times, a Fund bears a risk of loss if the other party defaults on its obligation and the Fund is delayed or prevented from exercising its rights to dispose of the collateral. If the other party should become involved in bankruptcy or insolvency proceedings, it is possible that a Fund may be treated as an unsecured creditor and required to return the collateral to the other party's estate. Securities lending. A Fund may lend portfolio securities to broker-dealers. These transactions must be fully collateralized at all times with cash or short-term debt obligations, but involve some risk to a Fund if the other party should default on its obligation and the Fund is delayed or prevented from exercising its right in respect of the collateral. Any investment of collateral by a Fund would be made in accordance with the Fund's investment objective and policies described above. Dividends The Trust determines the net income of each Fund as of the close of regular trading on the New York Stock Exchange (the "Exchange") each day the Exchange is open. Each determination of a Fund's net income includes (i) all accrued interest on the Fund's investments, (ii) plus or minus all realized and unrealized gains and losses on the Fund's investments, (iii) less all accrued expenses of the Fund. Each Fund's investments are valued at amortized cost according to Securities and Exchange Commission Rule 2a-7. A Fund will not normally have unrealized gains or losses so long as it values its investments by the amortized cost method. Daily dividends. Each Fund declares all of its net income as a distribution on each day it is open for business, as a dividend to shareholders of record immediately prior to the close of regular trading on the Exchange. Shareholders whose purchase of shares of a Fund is accepted at or before 12:00 noon on any day will receive the 8 dividend declared by the Fund for that day; shareholders who purchase shares after 12:00 noon will begin earning dividends on the next business day after the Fund accepts their order. A Fund's net income for Saturdays, Sundays, and holidays is declared as a dividend on the preceding business day. Dividends for the immediately preceding calendar month will be paid on the fifteenth day of each calendar month (or, if that day is not a business day, on the next business day), except that a Fund's schedule for payment of dividends during the month of December may be adjusted to assist in tax reporting and distribution requirements. A shareholder who withdraws the entire balance of an account at any time during a month will be paid all dividends declared through the time of the withdrawal. Since the net income of each Fund is declared as a dividend each time it is determined, the net asset value per share of each Fund normally remains at $1 per share immediately after each determination and dividend declaration. You can choose from two distribution options: (1) automatically reinvest all distributions from a Fund in additional shares of that Fund; or (2) receive all distributions in cash. If you wish to change your distribution option, you should contact your Financial Institution (as defined below), who will be responsible for forwarding the necessary instructions to the Trust's transfer agent, Investors Fiduciary Trust Company ("IFTC"). If you do not select an option when you open your account, all distributions will be reinvested. You will receive a statement confirming reinvestment of distributions in additional shares of a Fund promptly following the month in which the reinvestment occurs. Tax information. Each Fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements that are necessary for it to be relieved of federal income taxes on income (and gains, if any) it distributes to shareholders. Each Fund will distribute substantially all of its ordinary income (and net capital gains, if any) on a current basis. Dividends paid by the Tax-Exempt Money Market Fund that are derived from exempt-interest income (known as "exempt-interest dividends") and that are designated as such may be treated by the Fund's shareholders as items of interest excludable from their federal gross income. (Shareholders should consult their own tax adviser with respect to whether exempt-interest dividends would be excludable from gross income if the shareholder were treated as a "substantial user" of facilities financed by an obligation held by the Tax-Exempt Money Market Fund or a "related person" to such a user under the Internal Revenue Code.) If a shareholder receives an exempt-interest dividend with respect to any share held for six months or less, any loss on the sale or exchange of that share will be disallowed to the extent of the amount of the exempt-interest dividend. To the extent dividends paid to shareholders are derived from taxable income (for example, from interest on certificates of deposit) or from gains, such dividends will be subject to federal income tax, whether they are paid in the form of cash or additional shares. If the Tax-Exempt Money Market Fund holds certain "private activity bonds" ("industrial development bonds" under prior law), dividends derived from interest on such obligations will be classified as an item of tax preference which could subject certain shareholders to alternative minimum tax liability. Corporate shareholders must also take all exempt-interest dividends into account in determining "adjusted current earnings" for purposes of calculating their alternative minimum tax liability. Shareholders receiving Social Security benefits or Railroad Retirement Act benefits should note that all exempt-interest dividends will be taken into account in determining the taxability of such benefits. Early in each year your Fund will notify you of the amount and tax status of distributions paid to you by the Fund for the preceding year. 9 The foregoing is a summary of certain federal income tax consequences of investing in the Funds. You should consult your tax adviser to determine the precise effect of an investment in each Fund on your particular tax situation. Buying and Selling Shares of the Funds How to buy shares. The Trust offers shares of the Funds continuously at a price of $1.00 per share. The Trust determines net asset value twice each day, as of 12:00 noon and as of the close of regular trading on the Exchange. The shares of each Fund are sold at net asset value through a number of selected financial institutions, such as investment dealers and banks (each, a "Financial Institution"). Your Financial Institution is responsible for forwarding any necessary documentation to IFTC. There is no sales charge on sales of shares, nor is any minimum investment required for any of the Funds. Because each Fund seeks to be fully invested at all times, investments must be in Same Day Funds to be accepted. Investments which are accepted at or before 12:00 noon will be invested at the net asset value determined at that time; investments accepted after 12:00 noon will receive the net asset value determined at the close of regular trading on the Exchange. "Same Day Funds" are funds credited by the applicable regional Federal Reserve Bank to the account of the Trust at its designated bank. When payment in Same Day Funds is available to the Trust, the Trust will accept the order to purchase shares at the net asset value next determined. If you are considering redeeming shares or transferring shares to another person shortly after purchase, you should pay for those shares with wired Same Day Funds or a certified check to avoid any delay in redemption or transfer. Otherwise, the Trust may delay payment for shares until the purchase price of those shares has been collected which may be up to 15 calendar days after the purchase date. For more information on how to purchase shares of the Funds, contact your Financial Institution or Mentor Distributors, Inc. ("Mentor Distributors"), 901 East Byrd Street, Richmond, Virginia 23219, the principal underwriter of the Trust's shares. Mentor Distributors' telephone number is 1-800-382-0016. How to sell shares. You can redeem your Fund shares through your Financial Institution any day the Exchange is open, or you may redeem your shares by check or by mail. Redemption will be effected at the net asset value per share of the Fund next determined after receipt of the redemption request in good order. The Trust must receive your properly completed purchase documentation before you may sell shares. Selling shares through your Financial Institution. You may redeem your shares through your Financial Institution. Your Financial Institution is responsible for delivering your redemption request and all necessary documentation to the Trust, and may charge you for its services (including, for example, charges relating to the wiring of funds). Your Financial Institution may accept your redemption instructions by telephone. Consult your Financial Institution. Selling shares by check. If you would like the ability to write checks against your investment in a Fund, you should provide the necessary documentation to your Financial Institution and complete the signature card which you may obtain by calling your Financial Institution or your Fund. When a Fund receives your properly completed documentation and card, you will receive checks drawn on your Fund account and payable through the Fund's designated bank. These checks may be made payable to the order of any person. You will continue to earn dividends until the check clears. When a check is presented for payment, a sufficient number of full and fractional shares of the Fund in your account will be redeemed to cover the amount of the check. Your Financial Institution may limit the availability of the check-writing privilege or assess certain fees in connection with the checkwriting privilege. 10 Shareholders using Trust checks are subject to the Trust's designated bank's rules governing checking accounts. There is currently no charge to the shareholder for the use of checks, although one may be imposed in the future. Shareholders would be notified in advance of the imposition of any such charge. (In addition, if you deplete your original check supply, there may be a charge to order additional checks.) You should make sure that there are sufficient shares in your account to cover the amount of the check drawn. If there is an insufficient number of shares in the account, the check will be dishonored and returned, and no shares will be redeemed. Because dividends declared on shares held in your account and prior withdrawals may cause the value of your account to change, it is impossible to determine in advance your account's total value. Accordingly, you should not write a check for the entire value of your account or close your account by writing a check. A shareholder may revoke check-writing authorization by written notice to IFTC. Selling shares by mail. You may also sell shares of a Fund by sending a written withdrawal request to IFTC. You must sign the withdrawal request and include a stock power with signature(s) guaranteed by a bank, broker/dealer, or certain other financial institutions. IFTC may require additional documentation from shareholders which are corporations, partnerships, agents, fiduciaries or surviving joint owners. Corporations, partnerships, agents, trusts, and fiduciary accounts must submit a completed resolution in proper form before selling shares. Resolution forms are available from IFTC and Mentor Distributors. A Fund generally sends you payment for your shares the business day after your request is received in good order. Under unusual circumstances, a Fund may suspend repurchases, or postpone payment for more than seven days, as permitted by federal securities law. How to Exchange Shares You can exchange your shares in any Fund for shares of any other Fund in the Trust at net asset value, except as described below. If you request an exchange through your Financial Institution, your Financial Institution will be responsible for forwarding the necessary documentation to IFTC. Exchange Authorization Forms are available from your Financial Institution or Mentor Distributors. For federal income tax purposes, an exchange is treated as a sale of shares and generally results in a capital gain or loss. The Trust reserves the right to change or suspend the exchange privilege at any time. Shareholders would be notified of any change or suspension. Consult your Financial Institution or Mentor Distributors before requesting an exchange. Financial Institutions Financial Institutions provide varying arrangements for their clients with respect to the purchase and redemption of Trust shares and the confirmation thereof and may arrange with their clients for other investment or administrative services. When you effect transactions with a Fund (including among other things the purchase, redemption, or exchange of Fund shares) through a Financial Institution, the Financial Institution, and not the Fund, will be responsible for taking all steps, and furnishing all necessary documentation, to effect such transactions. Financial Institutions have the responsibility to deliver purchase and redemption requests to a Fund promptly. Some Financial Institutions may establish minimum investment requirements with respect to a Fund. They may also establish and charge fees and other amounts to their client for their services. Certain privileges, such as the check writing privilege or reinvestment options, may not be available through certain Financial Institutions or they may be available only under certain conditions. If your Financial Institution holds your investment in a Fund in its own name, then your Financial Institution will be the shareholder of record in respect of that investment; your ability to take advantage of any investment options or services of the Fund will depend on 11 whether, and to what extent, your Financial Institution is willing to take advantage of them on your behalf. Financial Institutions, including Wheat, First Securities, Inc., a subsidiary of Wheat First Butcher Singer, Inc., and EVEREN Securities, Inc. ("EVEREN"), may charge fees to or impose restrictions on your shareholder account. Consult your Financial Institution for information about any fees or restrictions or for further information concerning its services. Management The Trustees are responsible for generally overseeing the conduct of the Trust's business. Subject to such policies as the Trustees may determine, the Adviser furnishes a continuing investment program for the Funds and makes investment decisions on their behalf. Commonwealth Advisors, Inc. serves as investment adviser to each of the Funds, providing investment advisory services and advising and assisting the officers of the Trust in taking such steps as are necessary or appropriate to carry out the decisions of the Trustees. Commonwealth Investment Counsel, Inc., an affiliate of Commonwealth Advisors, serves as sub-adviser to each of the Funds pursuant to a sub-advisory agreement among Commonwealth Advisors, Commonwealth Investment Counsel, and the Trust. Commonwealth Advisors and Commonwealth Investment Counsel are wholly owned subsidiaries of Mentor Investment Group, Inc., which is in turn a subsidiary of Wheat First Butcher Singer, Inc., a diversified financial services holding company. Commonwealth Advisors serves as investment adviser to four separate investment portfolios (in addition to the Funds) in the Mentor Family of Funds and Commonwealth Investment Counsel serves as investment adviser to six separate investment portfolios in the Mentor Family of Funds. For a copy of the prospectus relating to certain of these other portfolios, call Mentor Distributors at 1-800-382-0016. The address of Commonwealth Advisors and Commonwealth Investment Counsel is 901 East Byrd Street, Richmond, Virginia 23219. It is expected that in the fall of 1996, Commonwealth Investment Counsel will be reorganized as Mentor Investment Advisors, L.L.C., which will become investment adviser to the Funds in place of Commonwealth Advisors. Immediately after the reorganization, Mentor Investment Advisors will be a wholly owned subsidiary of Mentor Investment Group and its corporate affiliates. The address of Mentor Investment Advisors will be 901 East Byrd Street, Richmond, Virginia 23219. In addition, it is expected that promptly after that reorganization, EVEREN Securities, Inc. will acquire 20% of the outstanding shares of Mentor Investment Group. EVEREN may thereafter acquire additional shares in Mentor Investment Group (not to exceed an additional 30% of Mentor Investment Group's outstanding shares) depending principally on the amount of assets in investment companies sponsored by Mentor Investment Group or its affiliates (including the Funds) attributable to shares held by clients of EVEREN. Each Fund pays management fees to Commonwealth Advisors monthly at the following annual rates (based on the assets of the Fund): 0.22% of the first $500 million of the Fund's average net assets; 0.20% of the next $500 million; 0.175% of the next $1 billion; 0.16% of the next $1 billion; and 0.15% of any amounts over $3 billion. Commonwealth Advisors in turn pays fees from its own assets to Commonwealth Investment Counsel monthly at the following annual rates (based on the assets of each Fund taken separately): 0.17% of the first $500 million of a Fund's average net assets; 0.15% of the next $500 million; 0.125% of the next $1 billion; 0.11% of the next $1 billion; and 0.10% of any amounts over $3 billion. When Mentor Investment Advisors becomes investment adviser to the Funds, the Funds will pay management fees to Mentor Investment Advisors at the same rate as currently paid to Commonwealth Advisors. The Funds pay all expenses not assumed by the Adviser, including Trustees' fees, auditing, legal, custodial, investor servicing, and shareholder reporting expenses, and payments under its Distribution Plans. General 12 expenses of the Trust will be charged to the assets of each Fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each Fund or the nature of the services performed and relative applicability to each Fund. Expenses directly charged or attributable to a Fund will be paid from the assets of that Fund. The Adviser places all orders for purchases and sales of the investments of each Fund. In selecting broker-dealers, the Adviser may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, the Adviser may consider sales of shares of the Funds (and, if permitted by law, of the other funds in the Mentor family) as a factor in the selection of broker-dealers. Distribution Services Each Fund has adopted a Distribution Plan (each, a "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to permit each of the Funds to compensate Mentor Distributors for services provided and expenses incurred by it in promoting the sale of shares of the Fund, reducing redemptions, or maintaining or improving services provided to shareholders. The Plans provide for monthly payments by the Funds to Mentor Distributors, subject to the authority of the Trustees to reduce the amount of payments or to suspend the Plans for such periods as they may determine. Any material increase in amounts payable under a Plan would require shareholder approval. In order to compensate Financial Institutions for services provided in connection with sales of Fund shares and the maintenance of shareholder accounts (or, in the case of certain Financial Institutions which are banking institutions, for certain administrative and shareholder services), Mentor Distributors may make periodic payments (from any amounts received by it under the Plans or from its other resources) to any qualifying Financial Institution based on the average net asset value of shares for which the Financial Institution is designated as the financial institution of record. Mentor Distributors makes such payments at the annual rate of between 0.15% and 0.40% in the case of the Money Market Fund and the U.S. Government Money Market Fund, and between 0.15% and 0.33% in the case of the Tax-Exempt Money Market Fund. Mentor Distributors may suspend or modify these payments at any time, and payments are subject to the continuation of each Fund's Plan and of applicable agreements between Mentor Distributors and the applicable Financial Institution. Financial Institutions receiving payments from Mentor Distributors include Wheat, First Securities, Inc., and EVEREN. How a Fund's Performance is Calculated Yield and effective yield data may from time to time be included in advertisements about the Funds. "Yield" is calculated by dividing a Fund's annualized net investment income per share during a recent seven-day period by the net asset value per share on the last day of that period. "Effective yield" compounds that yield for a year and is, for that reason, greater than a Fund's yield. "Tax-equivalent" yield shows the effect on performance of the tax-exempt status of distributions received from the Tax-Exempt Money Market Fund. It reflects the approximate yield that a taxable investment must earn for shareholders at stated income levels to produce an after-tax yield equivalent to the Fund's tax-exempt yield. Quotations of yield for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. A Fund's performance may be compared to various indices. See the Statement of Additional Information. All data is based on a Fund's past investment results and does not predict future performance. Investment performance, which will vary, is based on many factors, including market conditions, the composition of a 13 Fund's portfolio, and a Fund's operating expenses. Investment performance also often reflects the risks associated with a Fund's investment objective and policies. These factors should be considered when comparing a Fund's investment results to those of other mutual funds and other investment vehicles. General Information Cash Resource Trust is a Massachusetts business trust organized on June 14, 1993. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. The Trust is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest. Shares of the Trust may, without shareholder approval, be divided into two or more series of shares representing separate investment portfolios, and are currently divided into three series of shares, one representing each Fund. Under the Agreement and Declaration of Trust, a Fund's shares may be further divided, without shareholder approval, into two or more classes of shares having such preferences or special or relative rights and privileges as the Trustees may determine. Each share has one vote, with fractional shares voting proportionally. Shares of each Fund are freely transferable, are entitled to dividends as declared by the Trustees, and, if a Fund were liquidated, would receive the net assets of the Fund. The Trust may suspend the sale of shares of any Fund at any time and may refuse any order to purchase shares. Although the Trust is not required to hold annual meetings of its shareholders, shareholders have the right to call a meeting to elect or remove Trustees, or to take other actions as provided in the Agreement and Declaration of Trust. Investors Fiduciary Trust Company, located at 127 West 10th Street, Kansas City, Missouri 64105, is the transfer agent and dividend-paying agent for the Trust. IFTC engages at its own expense certain Financial Institutions, including Wheat, First Securities, Inc. and EVEREN, to perform bookkeeping, data processing, and administrative services pertaining to the maintenance of shareholder accounts. If you own fewer shares of a Fund than a minimum amount set by the Trustees (presently 500 shares), the Trust may choose to redeem your shares and pay you for them. You will receive at least 30 days written notice before the Trust redeems your shares, and you may purchase additional shares at any time to avoid a redemption. The Trust may also redeem shares if you own shares of any Fund or of the Trust above any maximum amount set by the Trustees. There is presently no maximum, but the Trustees may establish one at any time, which could apply to both present and future shareholders. The Trust may send a single copy of shareholder reports and communications to an address where there is more than one registered shareholder with the same last name, unless a shareholder at that address requests, by calling or writing his Financial Institution or Mentor Distributors that the Trust do otherwise. 14 Cash Resource Trust 901 East Byrd Street Richmond, VA 23219 CASH RESOURCE TRUST Annual Report July 31, 1996 [MENTOR INVESTMENT GROUP LOGO] Cash Resource Trust Annual Report July 31, 1996 Message from the Chairman and President It is our privilege to send you the Cash Resource Trust Annual Report for the year ended July 31, 1996. The Cash Resource Trust is part of a diversified family of funds offered by Mentor Investment Group, an investment advisory firm with more than $6 billion under management. Mentor provides investment management in seven different styles to a broad spectrum of investors. As you know, the CRT Money Market Funds are invested to seek as high a rate of current income (or, in the case of the Cash Resource Tax-Exempt Money Market Fund, as high a rate of current income exempt from federal income tax) as the investment advisor believes is consistent with preservation of capital and maintenance of liquidity. The Funds are managed according to a conservative policy that places strong emphasis on credit research. We carefully review each investment and do not sacrifice quality to attain a higher yield. In the pages that follow you will find financial statements for the Cash Resource Money Market Fund, the Cash Resource U.S. Government Money Market Fund, and the Cash Resource Tax-Exempt Money Market Fund, in addition to commentary from members of the management team regarding their investment strategy and outlook. We thank you for your continuing investment in our Funds. We appreciate your confidence in our commitment to providing current income consistent with preservation of capital and maintenance of liquidity. Sincerely, /s/ DANIEL J. LUDEMAN /s/ PAUL F. COSTELLO Daniel J. Ludeman Paul F. Costello Chairman President The Mentor Mission Statement Our mission is to provide professional investment management services through a firm that is second to none in the quality of its investment process, the skill and training of its professionals, and the commitment, shared by all its associates, to deliver the highest level of service and ethical behavior to clients. For more information and a prospectus for the Cash Resource Trust, please call us, (800)382-0016, or contact your financial consultant. The prospectus contains complete information regarding advisory fees, sales charges, and expenses. Please read them carefully before investing or sending money. 1 Cash Resource Trust Annual Report Managers' Overview July 31, 1996 The three funds of the Cash Resource Trust (CRT) are invested in accordance with conservative standards which place primary emphasis on liquidity and safety of principal. * The CRT Money Market Fund is a diversified portfolio of fixed-income securities, including commercial paper, bank obligations, and other short-term investments. * The CRT U.S. Government Money Market Fund is invested entirely in securities backed by the U.S. Government or its agencies, and related repurchase agreements. * The CRT Tax-Exempt Money Market Fund is structured to generate income exempt from federal income tax. The 12-month period ended July 31, 1996 was one of mixed signals for money managers. The period began August 1, 1995 with the Federal Reserve having just lowered the key Fed Funds rate to 5.75%, the first reduction in two years. The next four months witnessed a mixed pattern of economic data, with the economy apparently poised for strong growth but frustrated by a sluggish consumer. During this period the markets tended to vacillate within a relatively narrow trading range based on whether the latest statistics were weak or strong. But the preponderance of evidence indicated a soft economy, with the result that the Fed further reduced rates, to 5.50% in December and 5.25% in January. It now appears, however, that the data for the winter months were distorted, first by the partial government shutdown, then by bad weather, and were not as weak as first reported. The coming of spring brought a more positive growth track for the economy, with the result that sentiment shifted 180 degrees, away from further cuts by the Fed and toward a return to the pattern of higher rates prevailing in the previous fiscal year. The fixed-income markets sold off sharply in response to this change in expectations, with rates rising. The money market area was no exception. The remainder of the year appears more uncertain than usual, with the course of the economy and Fed policy somewhat open to question, particularly with presidential elections taking place. Our pledge to you is to continue our emphasis on safety and liquidity through high credit standards and conservative investment policies. We thank you for your investment. /s/ R. PRESTON NUTTALL R. Preston Nuttall Director of Cash Management /s/ HUBERT R. WHITE Hubert R. White Portfolio Manager /s/ KATHRYN T. ALLEN Kathryn T. Allen Portfolio Manager 2 Cash Resource Trust Money Market Fund Portfolio of Investments July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Bankers Acceptances 5.98% Nationsbank Corporation, 5.39%, 8/07/96 $14,000 $ 13,987 Nationsbank of Texas, 5.31%, 11/15/96 5,000 4,922 Wachovia Bank, 5.42%, 10/29/96 20,000 19,732 Total Bankers Acceptances 38,641 Bank Notes 6.18% Bank of America, 5.54%, 10/15/96 20,000 20,000 First of America, 4.98%, 12/19/96 20,000 19,956 Total Bank Notes 39,956 Certificates of Deposit 3.09% First Alabama Bank, 5.37%, 8/05/96 5,000 5,000 First Alabama Bank, 5.47%, 9/09/96 15,000 15,000 Total Certificates of Deposit 20,000 Commercial Paper 65.96% Apparel & Accessory Stores 3.08% J.C. Penney Funding Corporation, 5.29%, 9/06/96 20,000 19,894 Asset Backed Securities 6.17% CIESCO Limited Partnership, 5.36%, 8/07/96 15,000 14,987 Greenwich Funding Corporation, 5.37%, 8/20/96 (a) 25,000 24,929 Total Asset Backed Securities 39,916 Commercial Banks 17.62% ABN-Amro North America Finance, Inc., 5.32%, 11/08/96 10,000 9,854 ABN-Amro North America Finance, Inc., 5.30%, 11/12/96 10,000 9,848 Abbey National North America, 5.29%, 11/20/96 20,000 19,674 Bank of New York, 5.42%, 9/24/96 20,000 19,837 Mellon Financial Company, 5.36%, 8/15/96 20,000 19,958 Nationsbank Corporation, 5.26%, 8/15/96 10,000 9,980 Svenska Handelsbanken, 5.50%, 10/09/96 25,000 24,736 Total Commercial Banks 113,887
3 Cash Resource Trust Money Market Fund Portfolio of Investments (continued) July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Commercial Paper (continued) Electric Services 4.97% National Rural Utilities, 5.37%, 8/19/96 $20,000 $ 19,946 Rincon Securities, Inc., 5.37%, 8/28/96 1,250 1,245 Rincon Securities, Inc., 5.35%, 9/06/96 5,000 4,973 Rincon Securities, Inc., 5.38%, 9/09/96 6,000 5,965 Total Electric Services 32,129 Insurance Agents, Brokers & Service 3.06% International Nederlanden, 5.42%, 10/21/96 10,000 9,878 International Nederlanden U.S. Insurance Holdings, Inc., 5.41%, 9/17/96 10,000 9,929 Total Insurance Agents, Brokers & Service 19,807 Metal Mining 3.86% North Financial, 5.40%, 8/13/96 25,000 24,955 Oil and Gas Field Exploration Services 1.54% Statoil, 5.30%, 8/28/96 10,000 9,960 Personal Credit Institutions 7.69% American Express, 5.30%, 8/21/96 20,000 19,941 Ford Motor Credit Company, 5.43%, 9/06/96 20,000 19,892 Ford Motor Credit Company, 5.42%, 10/17/96 10,000 9,884 Total Personal Credit Institutions 49,717 Rental & Leasing 3.04% General Electric Capital, 5.24%, 8/30/96 7,000 6,970 General Electric Capital, 5.35%, 1/21/97 13,000 12,666 Total Rental & Leasing 19,636 Security Brokers & Dealers 11.85% Bear Stearns Company, 5.40%, 9/13/96 20,000 19,871 CS First Boston, Inc., 5.33%, 8/27/96 17,000 16,935 CS First Boston, Inc., 5.40%, 9/11/96 10,000 9,939 Merrill Lynch & Company, Inc., 5.45%, 9/06/96 30,000 29,837 Total Security Brokers & Dealers 76,582
4 Cash Resource Trust Money Market Fund Portfolio of Investments (continued) July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Commercial Paper (continued) Tobacco Products 3.08% Philip Morris, 5.38%, 9/09/96 $20,000 $ 19,884 Total Commercial Paper 426,367 Corporate Obligations 2.32% Dupont E I De Nemours, 5.80%, 12/12/96 9,000 9,007 Walker & Associates, 5.54%, 07/01/11 (b) 6,000 6,000 Total Corporate Obligations 15,007 U.S. Government Securities and Agencies 7.75% U.S. Treasury Note, 7.50%, 01/31/97 10,000 10,109 Federal Home Loan Bank, 5.31%-5.67%, 12/23/96-2/14/97 (b) 15,000 15,000 Student Loan Marketing Association, 5.51%-5.54%, 11/24/97-2/22/99 (b) 25,000 24,998 Total U.S. Government Securities and Agencies 50,107 Repurchase Agreement 9.95% Goldman, Sachs & Company Dated 7/31/96, 5.65%, due 8/01/96, collateralized by $66,828 Federal National Mortgage Association, 7.50%, 3/01/26 64,345 64,345 Total Investments (cost $654,423) (d) 101.23% 654,423 Other Assets less Liabilities (1.23%) (7,923) Net Assets 100.00% $646,500
See notes to portfolios of investments. 5 Cash Resource Trust U.S. Government Money Market Fund Portfolio of Investments July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) U.S. Government Securities and Agencies 59.65% Federal Home Loan Bank 5.22%-5.36%, 10/16/96-2/19/97 $ 133,340 $ 130,837 5.31%-5.54%, 2/14/97-2/16/99 (b) 42,000 42,000 Federal Home Loan Mortgage Corporation 5.25%-5.36%, 8/05/96-10/23/96 225,459 224,838 Federal National Mortgage Association 5.17%-5.37%, 8/09/96-10/24/96 234,700 232,912 Student Loan Marketing Association 5.51%-5.55%, 10/14/97-2/08/99 (b) 105,000 104,998 U.S. Treasury Notes 6.50%-7.50%, 11/30/96-1/31/97 100,000 100,962 Total U.S. Government Securities and Agencies 836,547 Repurchase Agreements 40.55% Chase Securities, Inc. Dated 7/31/96, 5.65%, due 8/01/96, collateralized by $61,596 Federal National Mortgage Association, 7.00%-9.00%, 3/01/25-6/01/26 60,000 60,000 First Union Corporation Dated 7/31/96, 5.66%, due 8/01/96, collateralized by $34,444 U.S. Treasury Notes, 11.25%, 2/15/15 50,000 50,000 Goldman, Sachs & Company Dated 7/31/96, 5.65%, due 8/01/96, collateralized by $185,618 Federal National Mortgage Association, 7.50%, 3/01/26 178,721 178,721 Lehman Brothers, Inc. Dated 7/31/96, 5.68%, due 8/01/96, collateralized by $57,716 Federal National Mortgage Association, 9.00%-9.50%, 5/01/22-3/01/25 60,000 60,000 Merrill Lynch, Pierce, Fenner & Smith, Inc. Dated 7/31/96, 5.69%, due 8/01/96, collateralized by $35,748 Federal Home Loan Mortgage Corporation 7.00%, 11/01/25 and $27,504 Federal National Mortgage Association 7.50%, 12/01/25 60,000 60,000
6 Cash Resource Trust U.S. Government Money Market Fund Portfolio of Investments (continued) July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Repurchase Agreements (continued) Paine Webber, Inc. Dated 7/31/96, 5.68%, due 8/01/96, collateralized by $43,420 Federal National Mortgage Association, 7.00%, 6/01/23 and $20,638 Government National Mortgage Association, 7.00%, 7/15/25 $ 60,000 $ 60,000 United Bank of Switzerland Dated 7/31/96, 5.68%, due 8/01/96, collateralized by $61,267 Federal Home Loan Mortgage Corporation, 6.50%-7.00%, 1/01/24-2/01/24 and $45,330 Federal National Mortgage Association-Strips, 6.50%-7.00%, 12/01/10-2/01/26 100,000 100,000 Total Repurchase Agreements 568,721 Total Investments (cost $1,405,268) (d) 100.20% 1,405,268 Other Assets less Liabilities (0.20%) (2,871) Net Assets 100.00% $1,402,397
See notes to portfolios of investments. 7 Cash Resource Trust Tax-Exempt Money Market Fund Portfolio of Investments July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Variable Rate Tax-Exempt Demand Securities (b) 43.53% Alabama 2.20% University of Alabama Board of Trustees, 3.60%, 10/01/13 $ 6,400 $ 6,400 Arizona 6.46% Apache County IDA Tucson Electric Power Company Project, 3.65%, 6/15/20 10,000 10,000 Coconino City Tuscon Gas & Electric Service PCR Series A, 3.70%, 5/01/31 8,800 8,800 18,800 Colorado 2.54% Colorado Housing Finance Authority Series 1985, 3.60%, 5/01/97 7,400 7,400 Illinois 4.51% Chicago O'Hare International Airport American Airlines Series 1983C, 3.70%, 1/01/18 2,000 2,000 Illinois DFA Grayhill, Inc. Project IDR, 3.75%, 2/01/05 3,150 3,150 Illinois DFA Flinn Scientific Project, 3.75%, 10/01/15 4,760 4,760 Illinois HFA West Suburban Hospital, 3.65%, 7/01/05 3,200 3,200 13,110 Maryland 4.44% Anne Arundel County Oakland Hills Project, 3.65%, 5/15/15 2,052 2,052 Howard County Revenue Bond, Harmony Hall, Inc. Project, 3.65%, 10/01/10 2,868 2,868 Maryland State Health & Higher Education, Series B, 3.65%, 4/01/35 8,000 8,000 12,920 Michigan 0.69% Michigan State Strategic Fund, 3.75%, 2/01/09 2,000 2,000
8 Cash Resource Trust Tax-Exempt Money Market Fund Portfolio of Investments (continued) July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Variable Rate Tax-Exempt Demand Securities (b) (continued) North Carolina 5.16% Durham County Water & Sewer, 3.65%, 12/01/15 $ 4,800 $ 4,800 Lincoln County Industrial Facility PCR Series 1994, 3.80%, 8/01/09 6,000 6,000 North Carolina Educational Facilities Bowman Grey School, 3.55%, 9/01/20 4,200 4,200 15,000 New Mexico 0.70% Albuquerque Greater Receipts Tax, 3.65%, 7/01/22 2,050 2,050 Tennessee 0.77% Nashville and Davidson County Health and Education Facility, 3.65%, 5/01/20 2,224 2,224 Texas 2.13% North Texas Higher Education Student Loan Revenue Refund, Series 1991F, 3.65%, 4/01/20 4,000 4,000 Panhandle Plains Student Loan Revenue Series A, 3.65%, 6/01/21 1,300 1,300 Texas Education Authority Series 1985B, 3.60%, 12/01/25 885 885 6,185 Virginia 11.39% Arlington County Ballston Public Parking, 3.60%, 8/01/17 3,650 3,650 Botetourt County IDR Emkay Holdings Project, 3.60%, 10/01/05 2,700 2,700 Capital Regional Airport Series 1995C, 3.70%, 7/01/23 4,000 4,000 Chesterfield County IDR Midlothian Hotel Partnership, 3.65%, 12/01/14 6,344 6,344 Hampton Roads Regional Jail Series 1996B, 3.60%, 7/01/16 4,000 4,000 Hanover County IDR Carter Machinery, 3.65%, 11/01/98 500 500
9 Cash Resource Trust Tax-Exempt Money Market Fund Portfolio of Investments (continued) July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Variable Rate Tax-Exempt Demand Securities (b) (continued) Virginia (continued) Henrico County IDA Hermitage Project, 3.60% -- 3.65%, 5/01/24 $ 3,700 $ 3,700 Lynchburg IDA Mid-Atlantic Series G, 3.55%, 12/01/25 500 500 Richmond IDB Commonwealth Park, 3.70%, 11/01/07 1,364 1,364 Roanoke IDR Quibell Corporate Project, 3.65%, 9/01/15 292 292 Spotsylvania City IDA Residential Care Facilities, 3.65%, 10/01/20 4,684 4,684 Tazewell County IDR, 4.00%, 1/01/03 1,000 1,000 Virginia Beach Revenue Bond, 3.65%, 9/01/09 410 410 33,144 Wisconsin 0.65% Village of Pleasant Prairie Muskie Enterprise Project, Series 1995, 3.75%, 5/01/15 1,900 1,900 Wyoming 1.89% Lincoln County Exxon Series B, 3.65%, 11/01/14 1,500 1,500 Sweetwater County PCR Pacific Corporation Project Series A, 3.50%, 7/01/15 4,000 4,000 5,500 Total Variable Rate Tax-Exempt Demand Securities 126,633 Other Tax-Exempt Securities 56.80% Alabama 0.95% IDB of Fairfield USX Corporation Project, Series 1995, 3.55%, 10/01/96 2,775 2,775 Arizona 0.17% Scottsdale IDA Memorial Hospital Series A, 3.70%, 9/01/96 485 485
10 Cash Resource Trust Tax-Exempt Money Market Fund Portfolio of Investments (continued) July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Other Tax-Exempt Securities (continued) Colorado 1.04% State of Colorado General Fund TRANS Series A, 4.50%, 6/27/97 $ 3,000 $ 3,017 Florida 3.61% City of Jacksonville Series A, 3.40%, 9/10/96 5,000 5,000 Putnam County Development Authority Seminole Electric Series 1984, 3.50%, 12/15/96 3,000 3,000 Sunshine State Government Finance Commission Series 1986 Revenue Bond, 3.60%, 10/17/96 2,500 2,500 10,500 Georgia 1.72% Dekalb County TRANS, 3.75%, 12/31/96 5,000 5,012 Illinois 2.99% Chicago Illinois GO Tender Note, 3.10%, 2/04/97 2,300 2,300 City of Chicago GO Tender Notes Series 1995A, 3.65%, 10/31/96 6,400 6,400 8,700 Kentucky 0.86% Pulaski County Solid Waste Project, Series B, 3.20%, 8/15/96 2,500 2,500 Louisiana 2.23% Plaquemines Port Harbor Series C, 3.70%, 10/22/96 6,500 6,500 Maryland 0.69% Baltimore City Public Improvement, 3.40%, 8/15/96 2,000 2,000 Michigan 2.75% State of Michigan GO Note RANS, 4.00%, 9/30/96 3,000 3,004 Michigan State, Underground Storage Tank Financial Assurance Series I, 3.45%, 8/15/96 5,000 5,000 8,004
11 Cash Resource Trust Tax-Exempt Money Market Fund Portfolio of Investments (continued) July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Other Tax-Exempt Securities (continued) Minnesota 1.43% Rochester Health Care Series C, 3.60%, 8/15/96 $ 3,010 $ 3,010 University of Minnesota Revenue Bond, 3.25%, 8/01/96 1,150 1,150 4,160 Mississippi 0.79% Claiborne County PCR, 3.50%, 9/24/96 2,300 2,300 North Carolina 7.87% North Carolina Power Agency Series B, 3.10%, 8/13/96 10,000 10,000 Wake County Industrial Facility Series 1990A, 3.70%-3.80%, 8/12/96-8/20/96 12,900 12,900 22,900 New York 1.04% New York City TRANS Series A, 4.50%, 2/12/97 3,000 3,012 South Carolina 4.47% York County PCR Series 1984N-3, 3.25%, 9/15/96 8,000 8,000 Beaufort County School District BANS Series 1995, 4.13%, 8/15/96 5,000 5,001 13,001 Texas 13.97% Brazos Harbor Industrial Development Series 1986, 3.65%, 8/22/96 3,700 3,700 Harris City Health Care, 3.40%, 9/09/96 5,000 5,000 Houston TRANS, 4.50%, 6/30/97 5,000 5,032 Houston Water & Sewer Series A, 3.40%, 8/28/96 8,000 8,000 San Antonio Electric & Gas Series A, 3.60%-3.70%, 8/14/96-8/23/96 10,900 10,900 State of Texas TRANS Series A, 4.75%, 8/30/96 8,000 8,004 40,636
12 Cash Resource Trust Tax-Exempt Money Market Fund Portfolio of Investments (continued) July 31, 1996 (In thousands)
Percent of Principal Value Net Assets Amount (Note 2) Other Tax-Exempt Securities (continued) Virginia 4.45% Chesterfield County GO Bond 5.25%, 8/01/96 $ 800 $ 800 Chesterfield County IDR Series 1987B 3.60%, 10/24/96 1,000 1,000 Peninsula Port Authority, 3.55%, 8/13/96 3,135 3,135 York County IDA PCR, 3.55%-3.65% 8/08/96-9/10/96 8,000 8,000 12,935 West Virginia 3.44% West Virginia HDA, 3.55%, 8/15/96 10,000 10,000 Other 2.33% PNC Municash, 3.46%, 8/01/96 6,790 6,790 Total Other Tax-Exempt Securities 165,227 Total Investments (cost $291,860) (d) 100.33% 291,860 Other Assets less Liabilities (0.33%) (969) Net Assets 100.00% $290,891
Investment Abbreviations BANS - Bond Anticipation Notes DFA - Development Finance Authority GO - General Obligation HDA - Housing Development Authority HFA - Housing Finance Authority IDA - Industrial Development Authority IDB - Industrial Development Board IDR - Industrial Development Revenue PCR - Pollution Control Revenue RANS - Revenue Anticipation Notes TRANS - Tax and Revenue Anticipation Notes Notes to Portfolios of Investments (a) These are securities that may be resold to qualified institutional buyers under Rule 144A or securities offered pursuant to section 4 (2) of the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines that have been established by the Board of Trustees. (b) Floating Rate Securities -- The rates shown are the effective rates at July 31, 1996. (c) Interest rates represent annualized yield to date of maturity, except for variable rate securities described in (a). (d) For each security, cost (for financial reporting and federal income tax purposes) and carrying value are the same. See notes to financial statements. 13 Cash Resource Trust Statements of Assets and Liabilities July 31, 1996 (In thousands)
U.S. Money Government Tax-Exempt Market Money Market Money Market Fund Fund Fund Assets Investments, at amortized cost (Note 2) Investment securities $590,078 $ 836,547 $291,860 Repurchase agreements 64,345 568,721 - Total investments 654,423 1,405,268 291,860 Receivables Interest receivable 1,147 1,994 1,797 Shares of the portfolio sold 201 191 26 Investments sold - - 1,003 Deferred expenses (Note 2) 65 301 66 Other 371 - 74 Total assets 656,207 1,407,754 294,826 Liabilities Payables Dividends 1,346 2,766 355 Investments purchased - - 3,012 Shares of the portfolio redeemed 8,181 2,014 514 Accrued distribution fee (Note 3) 45 117 16 Accrued expenses and other liabilities 135 460 38 Total liabilities 9,707 5,357 3,935 Net Assets $646,500 $ 1,402,397 $290,891 Shares outstanding 646,500 1,402,450 290,894 Net asset value per share $ 1.00 $ 1.00 $ 1.00
See notes to financial statements. 14 Cash Resource Trust Statements of Operations Year Ended July 31, 1996 (In thousands)
Money U.S. Government Tax-Exempt Market Money Market Money Market Fund Fund Fund Investment income Interest $30,098 $73,399 $ 10,373 Expenses Distribution fee (Note 3) 2,043 5,016 948 Management fee (Note 3) 1,173 2,660 632 Transfer agent fee (Note 3) 758 2,943 304 Custodian and accounting fees (Note 3) 198 735 140 Shareholder reports 84 344 29 Registration fees 73 274 85 Professional fees 40 137 22 Organizational expenses 10 66 12 Directors' fees 6 22 5 Other 36 122 12 Total expenses 4,421 12,319 2,189 Net investment income 25,677 61,080 8,184 Net increase in net assets resulting from operations $25,677 $61,080 $ 8,184
See notes to financial statements. 15 Cash Resource Trust Statements of Changes in Net Assets (In thousands)
Money U.S. Government Tax-Exempt Market Money Market Money Market Fund Fund Fund Year Ended July 31, 1996 1995 1996 1995 1996 1995 Increase in Net Assets Operations Net investment income $ 25,677 $ 13,949 $ 61,080 $ 47,780 $ 8,184 $ 6,665 Net realized gain (loss) on investments sold - 4 - (53) - (3) Increase in net assets from operations 25,677 13,953 61,080 47,727 8,184 6,662 Distributions to Shareholders Net investment income (25,677) (13,949) (61,080) (47,780) (8,184) (6,665) Net realized gain on investments - (4) - - - - Net decrease from distributions (25,677) (13,953) (61,080) (47,780) (8,184) (6,665) Capital Share Transactions (at $1.00 per share) Net proceeds from sale of shares 3,001,684 1,715,060 5,769,658 4,322,307 1,194,000 1,029,842 Reinvestment of dividends 25,161 13,420 60,634 46,908 8,146 6,528 Cost of shares redeemed (2,803,002) (1,498,083) (5,644,585) (4,060,291) (1,178,150) (965,174) Change in net assets from capital share transactions 223,843 230,397 185,707 308,924 23,996 71,196 Net increase in net assets 223,843 230,397 185,707 308,871 23,996 71,193 Net Assets Beginning of year 422,657 192,260 1,216,690 907,819 266,895 195,702 End of year $ 646,500 $ 422,657 $ 1,402,397 $ 1,216,690 $ 290,891 $ 266,895
See notes to financial statements. 16 Cash Resource Trust Financial Highlights
Money Market Fund Year Year Period Ended Ended Ended 7/31/96 7/31/95 7/31/94* Per Share Operating Performance Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 Income from investment operations Net investment income 0.05 0.05** 0.02 Distributions Net investment income (0.05) (0.05)** (0.02) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 Total Return 4.91% 4.97% 1.83%(b) Ratios / Supplemental Data Net assets, end of period (in thousands) $646,500 $422,657 $192,260 Ratio of expenses to average net assets 0.82% 0.82% 0.89%(a) Ratio of expenses to average net assets excluding waivers 0.82% 0.82% 0.93%(a) Ratio of net investment income to average net assets 4.77% 4.96% 2.96%(a)
(a) Annualized. (b) Total Return for periods less than one year are not annualized. * For the period from December 20, 1993 (commencement of operations) to July 31, 1994. ** Includes net realized capital gains (losses) which were under $0.01 per share. See notes to financial statements. 17 Cash Resource Trust Financial Highlights (continued)
U.S. Government Tax-Exempt Money Market Fund Money Market Fund Year Year Period Year Year Period Ended Ended Ended Ended Ended Ended 7/31/96 7/31/95 7/31/94* 7/31/96 7/31/95 7/31/94* Per Share Operating Performance Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations Net investment income 0.05 0.05** 0.02 0.03 0.03** 0.01 Distributions Net investment income (0.05) (0.05) (0.02) (0.03) (0.03) (0.01) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return 4.74% 4.82% 1.82%(b) 2.90% 3.05% 1.16%(b) Ratios / Supplemental Data Net assets, end of period (in thousands) $1,402,397 $1,216,690 $907,819 $290,891 $266,895 $195,702 Ratio of expenses to average net assets 0.93% 0.88% 0.80%(a) 0.76% 0.72% 0.65%(a) Ratio of expenses to average net assets excluding waivers 0.93% 0.88% 0.83%(a) 0.76% 0.74% 0.74%(a) Ratio of net investment income to average net assets 4.63% 4.75% 2.91%(a) 2.85% 3.01% 1.87%(a)
(a) Annualized. (b) Total Return for periods less than one year are not annualized. * For the period from December 20, 1993 (commencement of operations) to July 31, 1994. ** Includes net realized capital gains (losses) which were under $0.01 per share. See notes to financial statements. 18 Cash Resource Trust Notes to Financial Statements July 31, 1996 Note 1: Organization Cash Resource Trust ("Trust") was organized on June 14, 1993 and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Trust consists of three separate diversified funds (hereinafter each individually referred to as a "Fund" or collectively as the "Funds") at July 31, 1996 as follows: Cash Resource Money Market Fund ("Money Market Fund") Cash Resource U.S. Government Money Market Fund ("U.S. Government Fund") Cash Resource Tax-Exempt Money Market Fund ("Tax-Exempt Fund") The investment objective of each Fund is to seek current income consistent with preservation of capital and maintenance of liquidity. The assets of each Fund of the Trust are segregated and a shareholder's interest is limited to the Fund in which shares are held. Note 2: Significant Accounting Policies The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The policies are in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect amounts reported herein. Although actual results could differ from these estimates, any such differences are expected to be immaterial to the net assets of the Funds. A. Valuation of Securities Investments are stated at amortized cost, which approximates market value. In the event that a deviation of 1/2 of 1% or more exists between a Fund's $1.00 per share net asset value, calculated at amortized cost, and the net asset value calculated by reference to market-based values, or if there is any other deviation that the Board of Trustees believes would result in a material dilution to shareholders or purchasers, the Board of Trustees will promptly consider what action should be initiated. B. Repurchase Agreements It is the policy of the Trust to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book entry system, or to have segregated within the custodian bank's vault all securities held as collateral in support of repurchase agreement investments. Additionally, procedures have been established by the Trust to monitor, on a daily basis, the market value of each repurchase agreement's underlying securities to ensure the existence of a proper level of collateral. 19 Cash Resource Trust Notes to Financial Statements (continued) The Trust will only enter into repurchase agreements with banks and other recognized financial institutions such as broker/dealers which are deemed by the Trust's adviser to be creditworthy pursuant to guidelines established by the Board of Trustees. Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Trust could receive less than the repurchase price on the sale of collateral securities. C. Security Transactions and Interest Income Security transactions for the Funds are accounted for on a trade date basis. Interest income is recorded on the accrual basis and includes amortization of premium and discount on investments. D. Expenses Expenses arising in connection with a Fund are allocated to that Fund. Other Trust expenses are allocated among the Funds in proportion to their relative net assets. E. Fund Share Valuation and Dividends to Shareholders Fund shares are sold and redeemed on a continual basis at net asset value. The net asset value per share (NAV) of each Fund is determined daily as of 4:00 p.m. on each day that the New York Stock Exchange is open for trading. Each Fund determines its NAV by dividing the total value of the Fund's investments and other assets, less liabilities, by the number of Fund shares outstanding. Each Fund declares a daily dividend, equal to its net investment income for that day and payable at month end. Distributions from net realized capital gains, if any, are paid annually. F. Federal Income Taxes No provision for federal income taxes has been made since it is each Fund's policy to comply with the provisions applicable to regulated investment companies under the Internal Revenue Code and to distribute to its shareholders within the allowable time limit substantially all taxable income and realized capital gains. At July 31, 1996, U.S. Government Fund for federal tax purposes, had a capital loss carryforward of approximately $54,000. Pursuant to the Code, such capital loss carryforwards expire as follows: $1,000 in 2002 and $53,000 in 2003. G. Deferred Expenses Costs incurred by the Trust in connection with its initial share registration and organization costs were deferred by the Funds and are being amortized on a straight-line basis over a five year period through December 1998. 20 Cash Resource Trust Notes to Financial Statements (continued) Note 3: Investment Management Agreements and Other Transactions with Affiliates Investment Management Agreement Commonwealth Advisors, Inc. (formerly Cambridge Investment Advisors, Inc.) the Funds' investment adviser ("Investment Adviser")provides investment advisory services to each of the Funds. Commonwealth Investment Counsel, Inc. ("Commonwealth"), an affiliate of the Investment Adviser, serves as sub-adviser to each of the Funds, pursuant to a sub-advisory agreement among the Investment Adviser, Commonwealth and the Trust. Commonwealth furnishes a continuing investment program for each of the Funds and makes investment decisions on their behalf. The Investment Adviser and Commonwealth are wholly-owned subsidiaries of Mentor Investment Group, Inc. ("Mentor") (formerly Investment Management Group, Inc.), which is in turn a wholly-owned subsidiary of Wheat First Butcher Singer, Inc. ("Wheat"). Each Fund pays management fees to the Investment Adviser monthly at the following annual rates, expressed as a percentage of average daily net assets: 0.22% of the first $500 million of each Fund's average net assets; 0.20% of the next $500 million; 0.175% of the next $1 billion; 0.16% of the next $1 billion; and 0.15% of any amounts over $3 billion. The Investment Adviser in turn pays fees from its own assets to Commonwealth monthly at the following annual rates (based on the assets of each Fund taken separately): 0.17% of the first $500 million of a Fund's average net assets; 0.15% of the next $500 million; 0.125% of the next $1 billion; 0.11% of the next $1 billion; and 0.10% of any amounts over $3 billion. The Investment Adviser may from time to time voluntarily waive some or all of its investment advisory fee and may terminate any such voluntary waiver at any time at its sole discretion. For the year ended July 31, 1996, the Investment Adviser and sub-adviser earned the following advisory fees: Adviser Sub-Adviser Fee Fee Earned Earned Money Market Fund $1,172,603 $ 900,553 U.S. Government Fund 2,660,041 1,995,031 Tax-Exempt Fund 632,135 488,468 21 Cash Resource Trust Notes to Financial Statements (continued) In addition, the Funds provide direct reimbursement to Mentor for certain accounting and operations related costs not covered under the Investment Management Agreement. For the year ended July 31, 1996, the Money Market Fund, U.S. Government Fund and Tax-Exempt Fund paid $12,482, $30,947 and $6,767, respectively to Mentor for these direct reimbursements. Distribution Agreement Under a Distribution Agreement, Mentor Distributors, Inc. ("Mentor Distributors") (formerly, Cambridge Distributors, Inc.) a wholly-owned subsidiary of Mentor, was appointed Distributor for each Fund. To compensate Mentor Distributors for the services it provides and for the expenses it incurs under the Distribution Agreement, the Funds have adopted a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940, under which they pay a distribution fee, which is accrued daily and paid monthly at the annual rate of 0.38% of the Fund's average daily net assets for the Money Market Fund and U.S. Government Fund and 0.33% of the Fund's average daily net assets for the Tax-Exempt Fund. In order to compensate selected financial institutions, such as investment dealers and banks through which shares of each Fund are sold ("Financial Institutions") for services provided in connection with sales of shares of each Fund and/or for administrative services and the maintenance of shareholder accounts, Mentor Distributors may make periodic payments to qualifying Financial Institutions based on the average net asset value of shares of a Fund which are attributable to shareholders for whom the Financial Institutions are designated as the Financial Institution of record. Mentor Distributors may make such payments at the annual rate of up to 0.40% of the average net asset value of such shares (0.33% in the case of Cash Resource Tax-Exempt Money Market Fund). Transfer Agent Agreement Under a Transfer Agency Agreement, Investors Fiduciary Trust Company ("IFTC") serves as Transfer Agent and Dividend Disbursing Agent for each Fund. IFTC in turn compensates Wheat (from IFTC's own assets) for related services provided by Wheat directly to its clients. For the year ended July 31, 1996, Wheat earned fees of $757,964, $2,942,606 and $304,012, respectively, from the Money Market Fund, U.S. Government Fund and Tax-Exempt Fund. 22 Independent Auditors' Report The Trustees Cash Resource Trust We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the Money Market Fund, U.S. Government Money Market Fund and Tax-Exempt Money Market Fund, (portfolios of Cash Resource Trust) as of July 31, 1996 and the related statements of operations for the year then ended, and the statements of changes in net assets for each of the years in the two year period then ended, and financial highlights for each of the years in the two year period then ended and for the period from December 20, 1993 (commencement of operations) to July 31, 1994. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of July 31, 1996 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Money Market Fund, U.S. Government Money Market Fund and Tax-Exempt Money Market Fund as of July 31, 1996, the results of their operations for the year then ended and the changes in their net assets for each of the years in the two year period then ended and their financial highlights for the periods indicated in the first paragraph above, in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP Boston, Massachusetts September 6, 1996 23 Shareholder Information Trustees Daniel J. Ludeman, Trustee & Chairman Chairman and Chief Executive Officer Mentor Investment Group, Inc. Arnold H. Dreyfuss, Trustee former Chairman and Chief Executive Officer Hamilton Beach/Proctor-Silex, Inc. Thomas F. Keller, Trustee former Dean, Fuqua School of Business Duke University Louis W. Moelchert, Jr., Trustee Vice President for Business & Finance University of Richmond Stanley F. Pauley, Jr., Trustee Chairman and Chief Executive Officer Carpenter Company Troy A. Peery, Jr., Trustee President Heilig-Meyers Company Peter J. Quinn, Jr., Trustee Managing Director Mentor Investment Group, Inc. Officers Paul F. Costello, President Managing Director Mentor Investment Group, Inc. Terry L. Perkins, Treasurer Senior Vice President Mentor Investment Group, Inc. John M. Ivan, Secretary Managing Director/Assistant General Counsel Wheat First Butcher Singer, Inc. Michael A. Wade, Assistant Treasurer Associate Vice President Mentor Investment Group, Inc. This report is authorized for distribution to prospective investors only when preceded or accompanied by a prospectus, which contains facts concerning the objective, policies, management fees, and expenses of the Trust and further information. Cash Resource Trust 901 East Byrd Street Richmond, VA 23219 -----END PRIVACY-ENHANCED MESSAGE-----