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Securities Act File No.
Investment Company Act File No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. |_|
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. |_|
(Check appropriate box or boxes)
______________
National Investors Cash Management Fund, Inc.
(Exact name of Registrant as specified in charter)
55 Water Street
New York, New York 10041
(Address of Principal Executive Offices)
Applied For
Registrant's Telephone Number, including Area Code
John E. Pelletier, President
National Investors Cash Management Fund, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copies to:
Counsel for the Fund:
Margery K. Neale, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
The Registrant declares that an indefinite amount of common stock, par value
$0.0001 per share, is being registered by this Registration Statement pursuant
to Section 24(f) under the Investment Company Act of 1940, as amended, and Rule
24f-2 thereunder.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a),may determine.
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REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No. Location in Prospectus
- - - ------------- ----------------------
Part A
- - - ------
Item 1. Cover Page ............................... Cover Page
Item 2. Synopsis.................................. Summary of Expenses
Item 3. Condensed Financial Information........... Inapplicable
Item 4. General Description of Registrant......... The Portfolios -- Matching
Your Investment Needs to
the Portfolios; --
Investment Policies and
Restrictions; Other
Information
Item 5. Management of the Fund.................... Management and Related
Expenses
Item 5A. Management's Discussion of Fund
Performance............................. Inapplicable
Item 6. Capital Stock and Other Securities........ Other Information
Item 7. Purchase of Securities Being Offered...... Purchases and Redemptions--
How to Purchase Shares
Item 8. Redemption or Repurchase.................. Purchases and Redemptions
Item 9. Pending Legal Proceedings................. Inapplicable
Part B
- - - ------
Item 10. Cover Page................................ Cover Page
Item 11. Table of Contents......................... Cover Page
Item 12. General Information and History........... Not Applicable
Item 13. Investment Objectives and Policies........ Investment Policies and
Restrictions
Item 14. Management of the Fund.................... Directors and Executive
Officers; The Investment
Manager
Item 15. Control Persons and Principal Holders
of Securities........................... Not Applicable
Item 16. Investment Advisory and Other Services.... Investment Management,
Distribution and Other
Services
Item 17. Brokerage Allocation ..................... Portfolio Transactions
Item 18. Capital Stock and Other Securities........ Shareholders Rights
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered................ Share Price Calculation;
Additional Purchase and
Redemption Information
Item 20. Tax Status................................ Dividends and Taxes
Item 21. Underwriters.............................. Investment Manager,
Distribution and Other
Services
Item 22. Calculations of Performance Data.......... Performance
Item 23. Financial Statements...................... To Be Filed by Amendment
Part C
- - - ------
Information required to be included is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
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NATIONAL INVESTORS
CASH MANAGEMENT FUND, INC
TABLE OF CONTENTS
SUMMARY OF EXPENSES.....................................................
THE PORTFOLIOS.......................................................... 2
PURCHASES AND REDEMPTIONS............................................... 8
OPERATING EXPENSES AND FEES............................................. 10
OTHER INFORMATION....................................................... 12
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the Fund's
official sales literature in connection with the offer of the Fund's shares,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund. This Prospectus does not
constitute an offer in any State in which, or to any person to whom, such
offering may not lawfully be made.
NATIONAL INVESTORS CASH
MANAGEMENT FUND, INC
55 Water Street o New York, New York 10041
National
Investors Cash
Management
Fund, Inc.
______________________________________________
National Investors Class
Three portfolios to choose from:
Money Market Portfolio
U.S. Government Portfolio
Municipal Portfolio
______________________________________________
_____, 1996
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996
NATIONAL INVESTORS
CASH MANAGEMENT FUND, INC.
(National Investors Class)
______, 1996
National Investors Cash Management Fund, Inc. (the "Fund") is an open-end,
diversified management investment company known as a money market mutual fund.
The Fund currently consists of three money market portfolios designed for
investors who seek current income consistent with the preservation of capital,
liquidity and a stable price of $1.00 per share. The three Portfolios are the
Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio (each a "Portfolio" and collectively, the "Portfolios").
This Prospectus relates only to the "National Investors Class" of each
Portfolio's shares. Shares of this class are available only through selected
financial service firms. See "Purchase and Redemptions - How to Purchase
Shares."
This Prospectus contains information about the Fund which a prospective investor
should know before investing and should be retained for future reference. A
Statement of Additional Information relating to the Fund dated, ______, 1996
("SAI"), has been filed with the Securities and Exchange Commission ("SEC") and
is incorporated herein by reference. The SAI is available upon request and
without charge by writing the Fund at 55 Water Street, New York, New York 10041
or by contacting the firm from which this prospectus was received.
An investment in a Portfolio of the Fund is neither insured nor guaranteed by
the U.S. government, the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency, and is not a deposit or obligation of, or
guaranteed or endorsed by, any bank. There can be no assurance that any
Portfolio will be able to maintain a stable net asset value of $1.00 per share.
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.
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SUMMARY OF EXPENSES
(National Investors Class)
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Money Market U.S. Government Municipal
Portfolio Portfolio Portfolio
--------- --------- ---------
Shareholder Transaction Expenses None None None
Annual Operating Expenses (as
a percentage of average daily
net assets)
Management Fees(1) .35%(1) .35%(1) .35%(1)
12b-1 Fees(2) .35%(2) .35%(2) .35%(2)
Other Expenses (3) .30%(3) .30%(3) .30%(3)
---- ---- ----
Total Portfolio Operating Expenses 1.00% 1.00% 1.00%
(1) The annual investment management fee for each Portfolio is payable to the
Investment Manager (defined below) on a graduated basis of .35 of 1% of the
first billion of average daily net assets of each Portfolio, .34 of 1% of
the next $1 billion, and .33 of 1% of average daily net assets over $2
billion. The Investment Manager may elect, in its sole discretion, to
voluntarily waive or reduce its fees. For the first year of the Fund's
operations, the Investment Manager or its affiliates intend to waive a
portion of their annual fees payable by each Portfolio so that the actual
expenses paid during such period will not exceed 1% of average daily net
assets of such Portfolio. The investment management fee is payable monthly
by each Portfolio. See "Operating Expenses and Fees-Management and Related
Expenses" and the SAI.
(2) As a result of the accrual of 12b-1 fees, long term shareholders may pay
more than the economic equivalent of maximum front-end sales charges
permitted by the National Association of Securities Dealers, Inc.
(3) Other Expenses include, among other items, a transfer agent fee (.20 of 1%
of average daily net assets) which is paid to an affiliate of the Fund's
investment manager (the "Transfer Agent") and administration fees (.10 of
1% of average daily net assets), which are paid to the Investment Manager.
See footnote 1 for discussion of certain waiver arrangements. All expenses
included in this category are based upon estimated amounts for the 1997
fiscal year. See "Operating Expenses and Fees-Management and Related
Expenses" and "-Transfer Agent and Custodian." See also the SAI.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) a
5% annual return and (2) redemption at the end of each time period:
Portfolio (National Investors Class) 1 Year 3 Years
--------- ------ -------
Money Market $10 $32
U.S. Government $10 $32
Municipal $10 $32
The purpose of the preceding table is to assist you in understanding the
various costs and expenses that an investor in a Portfolio will bear
directly or indirectly. Investment dealers and other firms may
independently charge shareholders additional fees. The example should not
be considered to be a representation of past or future expenses. Actual
expenses may be greater or less than those shown. The example assumes a 5%
annual rate of return pursuant to the
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requirements of the SEC. This hypothetical rate of return is not intended
to be representative of past or future performance of any Portfolio. See
"Operating Expenses and Fees."
THE PORTFOLIOS
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Matching Your Investment Needs to the Portfolios.
The Money Market Portfolio, the U.S. Government Portfolio, and the Municipal
Portfolio each seeks current income consistent with the preservation of capital,
liquidity and a stable price of $1.00 per share. Each Portfolio invests in money
market securities of different types. The Money Market Portfolio has the
flexibility to invest broadly in U.S. dollar-denominated securities of domestic
and foreign issuers. The U.S. Government Portfolio offers an added measure of
safety and invests exclusively in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The Municipal Portfolio offers
investors federally tax-exempt income by investing primarily in municipal
securities.
Although the Portfolios are managed to avoid fluctuations of principal and
maintain a stable share of $1.00 per share, there is no guarantee that a
Portfolio will achieve its investment objective or maintain a price of $1.00 per
share. The rates of income will vary from day to day and generally reflect
current short-term interest rates.
It is important to note that none of the Portfolios, including the U.S.
Government Portfolio, is guaranteed by the U.S. government. In addition, the
Municipal Portfolio would not be an appropriate investment for retirement plans
such as IRA or Keogh accounts, as income earned by such plans is tax-deferred
until withdrawal, and amounts withdrawn are taxable as ordinary income.
Therefore, such plans would receive no incremental tax benefit by investing in
the Municipal Portfolio.
Investment Policies and Restrictions.
The following is an abbreviated discussion of the investment policies and
restrictions of each Portfolio. A more detailed listing of each Portfolio's
policies and restrictions and more detailed information about a Portfolio's
investments are contained in the appendix to this Prospectus (the "Appendix")
and in the SAI.
Money Market Portfolio. The Money Market Portfolio pursues its objective by
investing in high quality U.S. dollar-denominated money market instruments with
remaining maturities of 13 months or less, consisting of the securities
described below and in the section of this Prospectus entitled "All Portfolios":
1. Certificates of deposit and time deposits of domestic banks (including
their foreign branches), domestic savings and loan associations, United
States branches and foreign branches of foreign banks, and bankers'
acceptances of each of such entities other than domestic savings and loan
associations.
2. Commercial paper rated in one of the two highest rating categories by a
nationally recognized statistical rating organization ("NRSRO"), or
commercial paper or notes of issuers with a debt issue (which is comparable
in priority and security with the commercial paper or notes) rated in one
of the two highest rating categories for short-term
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debt obligations by an NRSRO, or unrated commercial paper or notes of
comparable quality as determined by the Investment Manager, or commercial
paper secured by a letter of credit issued by a domestic or foreign bank
rated in the highest rating category by an NRSRO. For a description of
ratings issued by Moody's Investors Services, Inc. ("Moody's") and Standard
& Poor's Ratings Group ("S&P"), two NRSROs, see "Annex Ratings of
Investments" in the SAI.
3. Obligations of, or guaranteed by, the United States or Canadian
governments, their agencies or instrumentalities.
4. Repurchase agreements involving obligations that are suitable for
investment under the categories set forth above. Repurchase agreements are
discussed in the Appendix and in the SAI.
In addition, the Money Market Portfolio limits its investments to securities
that meet the quality and diversification requirements of Rule 2a-7 ("Rule
2a-7") under the Investment Company Act of 1940, as amended (the "Investment
Company Act"). The diversification and quality requirements described under "All
Portfolios" below prohibit the Money Market Portfolio from investing more than
5% of its total assets in the securities of any one issuer, except in limited
circumstances permitted by such Rule.
To the extent the Money Market Portfolio purchases Eurodollar certificates of
deposit issued by foreign branches of U.S. banks or by foreign banks, commercial
paper issued by foreign branches of U.S. banks or by foreign banks, or
commercial paper issued by foreign entities, consideration will be given to
their marketability and possible restrictions on international currency
transactions and to regulations imposed by the domicile country of the foreign
issuer. Eurodollar certificates of deposit may not be subject to the same
regulatory requirements as certificates of deposit issued by U.S. banks and
associated income may be subject to the imposition of foreign taxes which would
reduce the yield on such investments to the Portfolio.
The Money Market Portfolio may invest in commercial paper issued by major
corporations under the Securities Act of 1933 in reliance on the exemption from
registration afforded by Section 3(a)(3) thereof. Such commercial paper may be
issued only to finance current transactions and must mature in nine months or
less. Trading of such commercial paper is conducted primarily by institutional
investors through investment dealers and individual investor participation in
the commercial paper market is very limited. The Portfolio also may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration which is afforded by Section 4(2) of the Securities
Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws. In addition, the Money Market
Portfolio may invest in other securities that are not registered under the
Securities Act of 1933 but that may be resold to "qualified institutional
buyers" under Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities"). See "All Portfolios" for additional information about Rule 144A
Securities. For more information about Section 4(2) paper and Rule 144A
Securities, see the Appendix.
U.S. Government Portfolio. The U.S. Government Portfolio pursues its objective
by investing exclusively in U.S. Treasury bills, notes, bonds and other
obligations issued or guaranteed by the
4
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U.S. government, its agencies or instrumentalities, and repurchase agreements
with respect to such obligations ("Government Securities"). A U.S. government
guarantee of the securities owned by the U.S. Government Portfolio, however,
does not guarantee the net asset value of the Portfolio's shares. See "Purchases
and Redemptions - Pricing Your Shares." All securities purchased must have a
remaining maturity of 13 months or less. The portfolio limits its investments to
securities that meet the quality requirements of Rule 2a-7, which are described
below under "All Portfolios." For more information about Government Securities
and investments made by the U.S. Government Portfolio, see "All Portfolios" and
the Appendix.
Some securities issued by U.S. government agencies or instrumentalities are
supported only by the credit of the agency or instrumentality, such as those
issued by the Federal Home Loan Banks, and others have an additional line of
credit with the U.S. Treasury, such as those issued by the Federal National
Mortgage Association, Farm Credit System and Student Loan Marketing Association.
With respect to securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. government will provide support to such agencies
or instrumentalities and such securities may involve risk of loss of principal
and interest.
Municipal Portfolio. The Municipal Portfolio seeks maximum current income that
is exempt from federal income taxes to the extent consistent with preservation
of capital and liquidity. The Portfolio pursues its objective primarily by
investing in a diversified portfolio of short-term, high quality, tax-exempt
municipal obligations. It is a fundamental policy of the Municipal Portfolio
that normally no less than 80% of its total assets will be invested in
obligations issued or guaranteed by states, territories and possessions of the
United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities ("Municipal Securities"), the income from which
is exempt from federal income tax, but may subject shareholders to federal
alternative minimum tax liability.
Dividends representing net interest income received by the Municipal Portfolio
on Municipal Securities will be exempt from federal income tax when distributed
to the Portfolio's shareholders, except to the extent that they are subject to
federal alternative minimum tax. Such dividend income may be subject to state
and local taxes. See "Other Information - Taxes-Municipal Portfolio." The
Portfolio's assets will consist of Municipal Securities, temporary investments
as described below, and cash.
The Municipal Portfolio will invest only in Municipal Securities which at the
time of purchase: (a) are rated within the two highest ratings by an NRSRO for
Municipal Securities, short-term Municipal Securities, or municipal commercial
paper; (b) are guaranteed or insured by the U.S. government as to the payment of
principal and interest; (c) are fully collateralized by an escrow of Government
Securities acceptable to the Investment Manager; (d) are unrated if determined
by the Investment Manager to be at least equal in quality to one or more of the
above ratings in accordance with the requirements of Rule 2a-7. In addition, the
Portfolio limits its investments to securities that meet the applicable quality
and diversification requirements of Rule 2a-7 which are described below under
"All Portfolios." For a description of the ratings issued by Moody's and S&P,
see "Annex-Ratings of Investments" in the SAI.
5
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Municipal Securities are generally classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. For more information about Municipal Securities, see
the Appendix and the SAI.
The Municipal Portfolio may purchase high quality Certificates of Participation
in trusts that hold Municipal Securities. A Certificate of Participation gives
the Portfolio an undivided pro rata interest in each Municipal Security equal to
the Portfolio's percentage ownership interest in the Certificate of
Participation. For more information about Certificates of Participation, see the
Appendix.
The Municipal Portfolio may purchase Municipal Securities which provide for the
right to resell them to an issuer, bank or dealer at an agreed-upon price or
yield within a specified period prior to the maturity date of such securities
subject to the requirements of Rule 2a-7. Such a right to resell is referred to
as a "Standby Commitment." For more information about Standby Commitments, see
the Appendix.
In seeking to achieve its investment objective, the Municipal Portfolio may
invest all or any part of its assets in Municipal Securities that are Industrial
Development Bonds. Moreover, although the Portfolio does not currently intend to
do so on a regular basis it may invest more than 25% of its assets in Municipal
Securities that are repayable out of revenue streams generated from economically
related projects or facilities, if such investment is deemed necessary or
appropriate by the Investment Manager. To the extent that the Portfolio's assets
are concentrated in Municipal Securities payable from revenues on economically
related projects and facilities, the Portfolio will be subject to the risks
presented by such projects to a greater extent than it would be if the
Portfolio's assets were not so concentrated. For a description of Industrial
Development Bonds, see the Appendix.
The Municipal Portfolio may invest in Municipal Lease Obligations and
participation interests therein. The Portfolio may also purchase Tender Option
Bonds. To the extent such securities may be considered "conduit securities," as
defined in Rule 2a-7 such securities will also be subject to the limitations of
Rule 2a-7 applied to conduit securities, as discussed more fully below. For a
description of each of these types of investments, see the Appendix.
The Municipal Portfolio may deviate from its investment policies and may adopt
temporary defensive measures when significant adverse market, economic,
political or other circumstances require immediate action in order to avoid
losses. During such periods, the portfolio may temporarily invest its assets
without limitation in taxable temporary investments which include the types of
money market instruments listed under "Money Market Portfolio" above. Interest
income from temporary investments is taxable to shareholders as ordinary income.
Although the Portfolio is permitted to invest in taxable securities, it is the
Portfolio's primary intention to generate income dividends that are not subject
to federal income taxes. See "Other Information-Taxes."
6
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All Portfolios. Each Portfolio must comply with the requirements of Rule 2a-7.
Under the applicable quality requirements of Rule 2a-7, the Portfolios may only
purchase U.S. dollar-denominated instruments that are determined to present
minimal credit risks and that are at the time of acquisition "Eligible
Securities" as defined in Rule 2a-7. Generally, "Eligible Securities" include
only securities that are rated in the top two rating categories by the required
number of NRSROs (two or, if only one such NRSRO has rated the security, that
one organization) or if unrated, are deemed to be of comparable quality. For a
description of the ratings for Eligible Securities issued by Moody's and S&P,
see "Annex-Ratings of Investments" in the SAI.
Each Portfolio will maintain a dollar-weighted average maturity of 90 days or
less and will limit its investments to securities that have remaining maturities
of 13 months or less or other features that shorten maturities in a manner
consistent with the requirements of Rule 2a-7, such as interest rate reset and
demand features.
It is a fundamental policy of all Portfolios that, with respect to 75% of its
assets, a Portfolio may not invest in the securities of any one issuer, other
than Government Securities, if as a result, more than 5% of its total assets
would be invested in securities of that issuer or the Portfolio would hold more
than 10% of the outstanding voting securities of that issuer. Rule 2a-7 imposes
additional diversification requirements on the Portfolios. As a matter of
operating policy, as to 100% of their assets, none of the Money Market
Portfolio, the U.S. Government Portfolio or the Municipal Portfolio will invest
more than 5% of its total assets in the securities of any one issuer, other than
Government Securities and certain demand features permitted by Rule 2a-7. In
addition, the Money Market Portfolio may not invest more than 5% of its total
assets in securities which have not been rated (or deemed comparable to
securities rated) in the highest rating category by an NRSRO, with investment in
such "second tier securities" of any one issuer being limited to the greater of
1% of the Portfolio's total assets or $1 million. The diversification
requirements of Rule 2a-7 limit the ability of the Municipal Portfolio to invest
in certain conduit securities, which are "second tier securities." Generally,
conduit securities are securities issued to finance nongovernmental private
projects, such as retirement homes, private hospitals, local housing projects,
and industrial development projects, with respect to which the ultimate obligor
is not a government entity. The Municipal Portfolio's investment in "second
tier" conduit securities, which may include certain Industrial Development Bonds
is limited to 5% of the Portfolio's total assets and, with respect to second
tier conduit securities issued by a single issuer, the greater of $1 million or
1% of the Portfolio's total assets.
A Portfolio may borrow from banks and engage in reverse repurchase agreements.
However, as a matter of fundamental policy, a Portfolio may not borrow money
except as a temporary measure for defensive or emergency purposes, and then
(together with any reverse repurchase agreements) only in an amount up to
33 1/3% of the value of its total assets less liabilities (other than
borrowings), in order to meet redemption requests without immediately selling
any portfolio securities. No Portfolio will borrow from banks for leverage
purposes. As a matter of fundamental policy, a Portfolio will not purchase any
security, other than a security with a maturity of one day, while reverse
repurchase agreements or borrowings representing more than 5% of its total
assets are outstanding. In addition, as a matter of fundamental policy, no
Portfolio will lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be loaned to other parties but this limit
does not apply to purchases of debt securities or to
7
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repurchase agreements. For more information on reverse repurchase agreements and
loans of portfolio securities, see the Appendix and the SAI.
A Portfolio will not purchase or hold illiquid securities, including time
deposits and repurchase agreements not entitling the holder to payment of
principal and interest within seven days if, as a result thereof, more than 10%
of such Portfolio's net assets would be invested in such securities. If
otherwise consistent with its investment objective and policies, each Portfolio
may purchase securities that are not registered under the Securities Act of 1933
but which can be sold to qualified institutional buyers in accordance with Rule
144A thereunder. Rule 144A Securities and Section 4(2) paper will not be
considered to be illiquid so long as the Investment Manager, acting under
guidelines adopted by the Board of Directors, determines that an adequate
trading market exists for the security. For more information on illiquid
securities, see the SAI.
Each Portfolio may purchase securities issued by other investment companies,
consistent with the Portfolio's investment objectives and policies. It is
currently anticipated that such investments will be made solely in other no-load
money market funds. For more information, see the Appendix and the SAI.
Each Portfolio may invest in instruments having rates of interest that are
adjusted periodically ("Variable Rate Obligations") or which "float"
continuously ("Floating Rate Obligations") according to formulae intended to
minimize fluctuation in values of the instruments. For information on Variable
and Floating Rate Obligations, see the Appendix and the SAI.
Each Portfolio may purchase and sell securities on a when-issued or delayed
delivery basis. A when-issued or delayed delivery transaction arises when
securities are bought or sold for future payment and delivery to secure what is
considered to be an advantageous price and yield to the Portfolio at the time it
enters into the transaction. For more information about when-issued or delayed
delivery securities, see the Appendix.
Each Portfolio, other than the Municipal Portfolio, may purchase certain
Stripped Government Securities. For a discussion of Stripped Government
Securities, see the Appendix.
Each Portfolio may also invest in Zero Coupon Bonds, a description of which
appears in the Appendix.
Each Portfolio (other than the Municipal Portfolio) may trade in certain
Asset-Backed Securities which include pools of mortgages, loans, receivables or
other assets. Payment of principal and interest may be largely dependent upon
the cash flows generated by the assets backing the securities. The U.S.
Government Portfolio will not invest in any Asset-Backed Securities which are
not Government Securities. For a discussion of Asset-Backed Securities, see the
Appendix.
Each portfolio may invest in securities subject to letters of credit or other
credit enhancement features. Such letters of credit or other credit enhancements
are not subject to federal deposit insurance and changes in the credit quality
of the issuers of such letters of credit or other credit enhancements could
cause losses to a Portfolio and affect its share price.
8
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Fundamental Investment Objectives, Policies and Restrictions. The investment
objective of each Portfolio is fundamental. The Fund has also adopted for each
Portfolio certain fundamental investment restrictions and policies which are
identified above and others which are set forth in the SAI. Such fundamental
investment objectives, restrictions and policies cannot be changed without
approval by holders of a "majority of the outstanding voting securities" of such
Portfolio, as defined in the SAI.
PURCHASES AND REDEMPTIONS
================================================================================
Pricing Your Shares.
The price of each Portfolio's shares on any given day is their net asset value
("NAV"). The Fund normally calculates the NAV of each Portfolio as of 12:00 noon
and 4:00 p.m. Eastern time each day that the New York Stock Exchange ("NYSE")
and the bank which serves as the custodian of each Portfolio's assets (the
"Custodian") are open. The NAV per share for a Portfolio is calculated by
subtracting the Portfolio's liabilities from its total assets and then dividing
the remainder by the total number of its shares outstanding. The Fund's shares
are sold at the NAV next determined after an order and payment are received in
the manner described under "How to Purchase Shares". Each Portfolio seeks to
maintain its NAV at $1.00 per share.
Like most money market funds, the Fund values the securities owned by each
Portfolio at amortized cost, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or discount) rather
than at current market value. This method of valuation minimizes the effect of
changes in a security market value and helps each Portfolio to maintain a stable
$1.00 share price. The Fund's Board of Directors has adopted procedures pursuant
to which the NAV of each Portfolio, as determined under the amortized cost
method, is monitored in relation to the market value of the Portfolios.
Additional information regarding such procedures is contained in the SAI.
How to Purchase Shares.
Shares of each Portfolio are sold at NAV only through selected financial
services firms, such as broker-dealers and banks ("service firms"). To purchase
shares, a prospective investor should contact his or her service firm. Service
firms provide varying arrangements for their clients with respect to the
purchase and redemption of Fund shares and the confirmation thereof. See
"Arrangements with Service Firms" below. Service firms are responsible for the
prompt transmission of orders to the Fund or the Transfer Agent.
The Fund requires payment for all shares by wire transfer in the form of Federal
Funds. Purchases will be effected at the next determined net asset value after
receipt by the Fund of instructions from the service firm and payment of the
purchase price.
The Fund has not established a minimum initial or subsequent investment amount,
but reserves the right to do so. The service firms offering Fund shares may
establish minimums for accounts they service and may change such minimums at
their discretion.
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The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus or to reject purchase orders. All orders to purchase shares are
subject to acceptance by the Fund and are not binding until confirmed or
accepted in writing.
How to Sell Shares.
To sell shares of a Portfolio, shareholders should contact their service firm
for redemption instructions. Upon the Fund's or the Transfer Agent's receipt of
a redemption request from a service firm in acceptable form, shares will be
redeemed by the Fund at the next determined net asset value. Proceeds will
ordinarily be remitted to the service firm, or as directed by the service firm,
the same business day, but not later than seven calendar days after an order to
sell shares is received by the Fund or the Transfer Agent.
Fund shares may be subject to automatic redemption should the brokerage account
in which they are held be closed or if a service firm imposes certain
requirements with respect to its brokerage accounts, including requirements
relating to minimum account balances. Service firms may automatically sell
shares of the Fund to satisfy a debit balance in a shareholder's brokerage
account at that firm. Shares may also be sold automatically by a service firm to
settle securities transactions or to provide the cash collateral necessary to
meet a shareholder's margin obligations to its service firm.
Arrangements with Service Firms.
Shareholders should direct any inquiries relating to the Fund to their service
firm.
Certain service firms may offer special purchase and redemption features, such
as automatic "sweeps" (pursuant to which uninvested funds in a brokerage account
are invested or "swept" automatically each business day into the selected
Portfolio), checkwriting, and charge or debit cards. Service firms have
different charges for these services. Shareholders should obtain information
from their service firm with respect to any special features, applicable
charges, minimum balance requirements and special rules of any cash management
program being offered.
Service firms may independently establish and charge additional amounts to their
clients for their services relating to the purchase or redemption of Fund
shares, no part of which is received by the Fund. Such charges would reduce the
clients' yield or return on an investment in the Fund. In addition, service
firms may charge a service fee when a check for the purchase of shares is
returned because of insufficient or uncollected funds or a stop payment order.
This prospectus should be read in connection with such service firm's materials
regarding its fees and services.
Service firms may hold Fund shares in nominee or street name as agent for and on
behalf of their clients. Shareholders should obtain access to their accounts and
information about their accounts from their service firm. Certain service firms
may receive compensation from the Fund's Transfer Agent for record keeping and
other expenses relating to these nominee accounts.
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OPERATING EXPENSES AND FEES
================================================================================
Management and Related Expenses.
Responsibility for overall management of the Fund rests with its Board of
Directors in accordance with Maryland law. Professional investment supervision
is provided by the Investment Manager, Waterhouse Asset Management, Inc., 50
Main Street, White Plains, New York 10606. The Investment Manager is an indirect
subsidiary of The Toronto-Dominion Bank ("TD Bank"). TD Bank, a Canadian
chartered bank is subject to the provisions of the Bank Act of Canada. The
Investment Manager currently serves as the investment manager to another money
market mutual fund and to an affiliated institution. As of August 31, 1996 the
Investment Manager had assets under management in excess of $2.4 billion.
The Investment Management Agreement provides that the Investment Manager will
act as the investment manager for each Portfolio and will manage its
investments. For the investment management services furnished to each Portfolio,
such Portfolio pays the Investment Manager an annual investment management fee,
accrued daily and payable monthly, on a graduated basis equal to .35 of 1% of
the first $1 billion of average daily net assets of each Portfolio, .34 of 1% of
the next $1 billion, and .33 of 1% of average daily net assets of each Portfolio
over $2 billion.
In order to increase the yield to investors, the Investment Manager and other
service providers to the Fund may voluntarily, from time to time, waive or
reduce its (or their) fees on assets held by each of the Portfolios, which would
have the effect of lowering that Portfolio's overall expense ratio and
increasing yield to investors during the time such fees are waived or reduced,
as the case may be. For the first year of the Fund's operations, the Investment
Manager or its affiliates intend to waive a portion of their annual fees payable
by each Portfolio so that the actual expenses paid during such period will not
exceed 1% of average daily net assets. Fee waivers or reductions, other than
those set forth in the Investment Management Agreement, may be rescinded at any
time without further notice to investors.
The Fund and the Investment Manager have also entered into an Administration
Agreement pursuant to which the Investment Manager, as Administrator, provides
administrative services to each of the Portfolios. For its services as
Administrator, the Investment Manager receives from each Portfolio an annual
fee, payable monthly, of .10 of 1% of average daily net assets of such
Portfolio. The fee is accrued daily as an expense of each Portfolio.
The Investment Manager has entered into a Subadministration Agreement with Funds
Distributor, Inc. ("FDI"), 60 State Street, Suite 1300, Boston Massachusetts
02109, pursuant to which FDI will perform certain of the foregoing
administrative services for the Fund. Under this Agreement, the Investment
Manager pays FDI's fees for providing such services. In addition, the Investment
Manager may enter into subadministration agreements with other persons to
perform such services from time to time.
Distributor.
FDI serves as distributor of the shares of each Portfolio of the Fund (the
"Distributor"), pursuant to a distribution agreement with the Fund (the
"Distribution Agreement"). Pursuant to the Distribution Agreement, the
Distributor may enter into agreements with various service firms ("Selling and
Servicing Agreements"). Under such agreements such service firms may agree,
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<PAGE>
among other things, to offer Fund shares to their clients and to use the Fund to
provide cash management services to their clients or customers and to provide
shareholder support services with respect to such clients.
Under a separate distribution plan adopted by the Fund on behalf of each
Portfolio with respect to its National Investors Class of shares (collectively,
the "Distribution Plans") pursuant to Rule 12b-1 under the Investment Company
Act and the Distribution Agreement, the Distributor incurs certain expenses of
distributing the Fund's shares. These expenses may include commissions and/or
account servicing fees paid to or on account of service firms, payment to the
Transfer Agent in respect of particular service firms that receive a discount in
their clearing fees or other services from the Transfer Agent as clearing
broker, advertising expenses, the cost of printing and mailing prospectuses and
reports to potential investors, and sales promotion expenses. Under the
Distribution Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.
Under the Distribution Plans relating to the National Investors Class of shares
of each of the Portfolios, the Fund may pay the Distributor for
distribution-related activities at an annual rate of up to 0.35 of 1% of the
average daily net assets of each Portfolio. Each Distribution Plan provides that
a portion of the total fee payable by each Portfolio, may be used as a service
fee to pay for personal service and/or the maintenance of shareholder accounts.
In addition to distribution and service fees paid by the Fund under the
Distribution Plans, the Investment Manager (or one of its affiliates) may make
payments out of its own resources to dealers and other persons which distribute
shares of the Fund. Such payments may be calculated by reference to the net
asset value of shares sold by such persons or otherwise.
Each Distribution Plan provides that it shall continue in effect from year to
year provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of the Distribution Plan or any agreement related to the
Distribution Plan (the "12b-1 Directors"), vote annually to continue the
Distribution Plan. Each Distribution Plan may be terminated at any time by vote
of a majority of the Rule 12b-1 Directors or of a majority of the outstanding
voting shares of the applicable Portfolio. The Fund will not be obligated to pay
expenses incurred under any Distribution Plan if it is terminated or not
continued.
Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion of
the Fund, based upon the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services to
investment companies as contemplated under the Selling and Servicing Agreements
with such entities. The Fund's Directors will consider appropriate modifications
to the operations of the Fund, including discontinuance of payments under the
Distribution Plans to banks and other depository institutions, in the event such
institutions can no longer provide the services called for under the Selling and
Servicing Agreements. Banks and other financial
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<PAGE>
services firms may be subject to various state laws regarding the services
described in the Selling Agreements, and may be required to register as dealers
pursuant to state law.
Transfer Agent and Custodian.
National Investor Services Corp. ("NISC" or the "Transfer Agent"), 55 Water
Street, New York, New York 10041, an affiliate of the Investment Manager, serves
as transfer agent for each Portfolio. For services rendered under the Transfer
Agency and Dividend Disbursing Agency Agreement, the Transfer Agent receives
from each Portfolio an annual fee, payable monthly, of .20 of 1% of average
daily net assets of such Portfolio. The fee is accrued as a daily expense to
such Portfolio. The Transfer Agent may enter into sub-transfer agency and
dividend disbursing agency agreements with other persons to perform such
services from time to time.
The Bank of New York serves as the custodian of the assets of each of the
Portfolios (the "Custodian").
Other Expenses.
The Fund also pays other expenses that are not assumed by third parties, such as
expenses relating to preparing, printing and mailing prospectuses, proxy
materials and other information to existing shareholders, blue sky servicing
fees, pricing services, legal, audit and custodian fees.
The Fund's expenses generally are allocated among the Portfolios on the basis of
relative net assets at the time of allocation, except that expenses directly
attributable to a particular Portfolio are charged to that Portfolio.
OTHER INFORMATION
================================================================================
Dividends.
On each day that the NAV of a Portfolio is determined, such Portfolio's net
investment income will be declared at 4:00 p.m. (Eastern time) as a daily
dividend to shareholders of record as of such day's last calculation of NAV. All
expenses are accrued daily and are deducted before declaration of dividends to
investors. Shares purchased by 4:00 p.m. (Eastern time) will begin earning
dividends that business day. Shares redeemed prior to 4:00 p.m. (Eastern time),
will not earn dividends on the date of redemption. Shareholders who redeem all
their shares of a Portfolio will receive the NAV of such shares and all declared
but unpaid dividends on such shares. Each Portfolio's earnings for Saturdays,
Sundays and holidays are declared as dividends on the previous business day.
Dividends and distributions from a Portfolio will be reinvested in additional
full and fractional shares of the same Portfolio at the NAV next determined
after their payable date. Dividends are reinvested monthly. A shareholder may
elect to receive any monthly dividend in cash by contacting his/her service firm
to make appropriate arrangements.
Taxes.
Money Market and U.S. Government Portfolio. The Money Market Portfolio and the
U.S. Government Portfolio each intends to qualify under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") as a
regulated investment company and, if so qualified, will not be subject to
federal income taxes to the extent its earnings are distributed in accordance
with applicable provisions of the Internal Revenue Code. Dividends derived from
interest and short-term capital gains are taxable to a shareholder as ordinary
income even if they
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<PAGE>
are reinvested in additional Fund shares. Dividends paid to foreign investors
generally will be subject to a 30% (or lower treaty rate) withholding tax.
Dividends from these Portfolios do not qualify for the dividends received
deduction allowable to certain U.S. corporate shareholders. All or some of the
dividends received from the U.S. Government Portfolio may be exempt from
individual state and/or local income taxes. You should consult with your tax
adviser in this regard.
Municipal Portfolio. The Municipal Portfolio intends to qualify under the
Internal Revenue Code as a regulated investment company and, if so qualified,
will not be liable for federal income taxes to the extent its earnings are
distributed in accordance with applicable provisions of the Internal Revenue
Code. Shareholders of the Municipal Portfolio will not be required to include
the "exempt-interest" portion of dividends paid by the Portfolio in their gross
income for federal income tax purposes. However, shareholders will be required
to report the receipt of exempt interest dividends and other tax-exempt interest
on their federal income tax returns. Moreover, as described below and in the
SAI, exempt-interest dividends may be subject to state income taxes, may give
rise to a federal alternative minimum tax liability, may affect the amount of
social security benefits subject to federal income tax, may affect the
deductibility of interest on certain indebtedness of the shareholder and may
have other collateral federal income tax consequences. The Municipal Portfolio
may purchase without limitation Municipal Securities, the interest on which
constitutes an item of tax preference and which may therefore give rise to a
federal alternative minimum tax liability for individual shareholders.
Dividends representing taxable net investment income (such as net interest
income from temporary investments in obligations of the U.S. government) and net
short-term capital gains, if any, are taxable to shareholders as ordinary
income. Market discount recognized on taxable and tax-exempt securities also is
taxable as ordinary income, and is not treated as excludable income. Dividends
representing taxable net investment income which are paid to foreign investors
generally will be subject to a 30% (or lower treaty rate) withholding tax.
To the extent that exempt-interest dividends are derived from certain "private
activity bonds" (some of which were formerly referred to as "industrial
development bonds") issued on or after August 8, 1986, they will be treated as
an item of tax preference and may, therefore, be subject to both the individual
and corporate alternative minimum tax. All exempt-interest dividends will be
included in determining a corporate shareholder's "adjusted current earnings."
Seventy-five percent of the excess, if any, of "adjusted current earnings" over
the corporate shareholder's alternative minimum taxable income, with certain
adjustments, will be an upward adjustment for purposes of the corporate
alternative minimum tax. The percentage of dividends which constitutes
exempt-interest dividends, and the percentage thereof (if any) which constitutes
an item of tax preference, will be determined annually and will be applied
uniformly to all dividends of the Municipal Portfolio declared during that year.
These percentages may differ from the actual percentages for any particular day.
Shareholders are advised to consult their tax advisers with respect to
alternative minimum tax consequences of an investment in the Municipal
Portfolio. For additional information concerning the alternative minimum tax and
certain collateral tax consequences of the receipt of exempt-interest dividends,
see the SAI.
Individuals whose modified income exceeds a base amount will be subject to
federal income tax on up to one-half (85% if modified income exceeds a modified
base amount) of their Social
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<PAGE>
Security benefits. Modified income includes tax-exempt interest, including
exempt-interest dividends from the Municipal Portfolio.
The tax exemption of dividends from the Municipal Portfolio for federal income
tax purposes does not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority. The laws of the several states
and local taxing authorities vary with respect to the taxation of such income
and you are advised to consult your own tax adviser as to the status of your
dividends under state and local tax laws.
All Portfolios. Dividends declared in December to shareholders of record as of a
date in December and paid during the following January are treated as paid on
December 31 for federal income and excise tax purposes. The Fund may adjust its
schedule for dividend reinvestment for the month of December to assist in
complying with reporting and minimum distribution requirements contained in the
Internal Revenue Code.
Each Portfolio will be subject to a non-deductible 4% excise tax if it does not
distribute sufficient amounts of taxable investment income and capital gains
annually. Each Portfolio intends to distribute sufficient income to avoid the
application of this excise tax.
It is not anticipated that the Portfolios will realize long-term capital gains
and therefore the Fund does not contemplate making distributions taxable to
shareholders as long-term capital gain.
Each Portfolio is required by law to withhold 31% ("back-up withholding") of
certain dividends, distributions of capital gains and redemption proceeds paid
to certain shareholders who do not furnish a correct taxpayer identification
number (in the case of individuals, a social security number and in the case of
entities, an employer identification number) and in certain other circumstances.
Any tax withheld as a result of back-up withholding does not constitute an
additional tax imposed on the shareholder of the account, and may be claimed as
a credit on such shareholder's federal income tax return. You should consult
your own tax adviser regarding the withholding requirement.
Investors should consult your tax adviser regarding specific questions as to
federal, state and local taxes.
Performance.
From time to time, the Fund may advertise several types of performance
information for a Portfolio. These are "yield," "effective yield" and, for the
Municipal Portfolio only, "tax equivalent yield" and "tax equivalent effective
yield." Each of these figures will be based upon historical earnings and is not
representative of the future performance of a Portfolio. The yield of a
Portfolio refers to the net investment income generated by a hypothetical
investment in the Portfolio over a specific seven-day period (which period will
be stated in any such advertisement). Net investment income is then annualized,
which means that the net investment income generated during the seven-day period
is assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The effective yield is calculated similarly, but
the net investment income earned by the investment is assumed to be reinvested
weekly when annualized. The effective yield will be slightly higher than the
yield due to the compounding effect of this assumed reinvestment. Tax equivalent
yield is the yield that a
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taxable investment must generate in order to equal the Municipal Portfolio's
yield for an investor in a stated federal income tax bracket (normally assumed
to be the maximum tax rate). Tax equivalent yield is based upon, and will be
higher than, the yield on the portion of the Municipal Portfolio that is
tax-exempt. Tax equivalent effective yield is computed in the same manner as tax
equivalent yield, except that effective yield is substituted for yield in the
calculation.
The performance of the Portfolios may be compared to that of other money market
mutual funds tracked by Lipper Analytical Services, Inc., a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets. A Portfolio's performance also may be compared
to other money market funds rated by IBC/Donoghue's Money Fund Report(R), a
reporting service on money market funds. Investors may want to compare a
Portfolio's performance to that of various bank products as reported by BANK
RATE MONITOR(TM), a financial reporting service that publishes each week average
rates of bank and thrift institution money market deposit accounts and interest
bearing checking accounts. Certain of these alternative investments may offer
fixed rates of return and guaranteed principal and may be insured. The
performance of a Portfolio also may be compared to that of United States
Treasury Bills and Notes, the consumer price index, the S&P's 500 Index(TM), and
various other investment indices.
Each Portfolio's yield will fluctuate. Shares of the Portfolio are not insured
against reduction in NAV. Additional information concerning the calculation of a
Portfolio's performance appears in the SAI.
Capital Structure.
The Fund is an open-end, diversified management investment company. The Fund was
organized as a Maryland corporation on August 19, 1996. The shares of the Fund
are divided into three Portfolios, each of which represents shares of common
stock, par value of $.0001. There are no preemptive or conversion rights
applicable to any of the Fund's shares. The Fund's shares when issued, will be
fully paid, non-assessable and transferable. Currently the Board of Directors
has authorized only one class of shares of each Portfolio, the National
Investors Class. The Board of Directors may increase the number of authorized
shares or create additional series or classes of the Fund shares without
shareholder approval. Other classes of shares of the Fund's Portfolios may be
offered from time to time in the future through other prospectuses. Such other
class or classes may have different maximum distribution or shareholder
servicing plan payments and may have other different expenses which may affect
performance. Investors may call the service firm from which they received this
prospectus or the Distributor at (617)-557-0700 to obtain more information
concerning other classes of the Fund's Portfolios.
Shares of the Fund have equal rights with respect to voting, except that the
holders of shares of a particular Portfolio or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such
Portfolio or class. For example, holders of a particular Portfolio will have the
exclusive right to vote on any investment restriction that relates only to such
Portfolio. Likewise, holders of a particular class will have the exclusive right
to vote on a material change to the distribution plan covering such class.
The holders of each Portfolio have distinctive rights with respect to dividends
and redemptions which are more fully described in this prospectus and the SAI.
In the event of dissolution or
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<PAGE>
liquidation, holders of each Portfolio will receive pro rata, subject to the
rights of creditors, (a) the proceeds of the sale of the assets held in the
respective Portfolio to which the shares of the Fund relate, less (b) the
liabilities of the Fund attributable to the respective portfolio or allocated
between the portfolios based on the respective liquidation value of each
Portfolio. There will not normally be annual shareholders' meetings.
Shareholders may remove directors from office by a majority of votes entitled to
be cast at a meeting of shareholders. Shareholders holding 10% or more of the
Fund's outstanding stock may call a special meeting of shareholders. Prior to
the offering of each Portfolio's shares, FDI Distribution Services, Inc. will be
each Portfolio's sole shareholder and deemed a controlling person of such
Portfolio.
APPENDIX
================================================================================
The following describes in greater detail the types of investments discussed
elsewhere in the Prospectus:
Asset-Backed Securities. Each Portfolio, other than the Municipal Portfolio, may
invest in securities backed by pools of mortgages, loans, receivables or
other assets. Payment of principal and interest may be largely dependent upon
the cash flows generated by the assets backing the securities, and, in certain
cases, supported by letters of credit, surety bonds, or other credit
enhancements. The value of asset-backed securities may also be affected by the
creditworthiness of the servicing agent for the pool, the originator of the
loans or receivables, or the financial institution(s) providing the credit
support. The U.S. Government Portfolio will invest in asset-backed securities
only to the extent that such securities are considered "Government Securities."
Certificates of Participation. The Municipal Portfolio may invest in
Certificates of Participation. Certificates of Participation may be variable
rate or fixed rate with remaining maturities of one year or less. A Certificate
of Participation may be backed by an irrevocable letter of credit or guarantee
of a financial institution that satisfies rating agencies as to the credit
quality of the Municipal Security supporting the payment of principal and
interest on the Certificate of Participation. Payments of principal and interest
would be dependent upon the underlying Municipal Security and may be guaranteed
under a letter of credit to the extent of such credit. The quality rating by a
rating service of an issuer of Certificates of Participation is based primarily
upon the rating of the Municipal Security held by the trust and the credit
rating of the issue of any letter of credit and of any other guarantor providing
credit support to the issue. The Investment Manager considers these factors as
well as others, such as any quality ratings issued by the rating services
identified above, in reviewing the credit risk present by a Certificate of
Participation and in determining whether the Certificate of Participation is
appropriate for investment by the Portfolio. It is anticipated by the Investment
Manager that for most publicly offered Certificates of Participation, there will
be a liquid secondary market or there may be demand features enabling the
Portfolio to readily sell its Certificates of Participation prior to maturity to
the issuer or third party. As to those instruments with demand features, the
Portfolio intends to exercise its right to demand payment from the issuer of the
demand feature only upon a default under the terms of the Municipal Security, as
needed to provide liquidity to meet redemptions, or to maintain a high quality
investment portfolio.
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<PAGE>
Government Securities. Each Portfolio may invest in Government Securities.
Government Securities consist of marketable securities and instruments issued or
guaranteed by the U.S. government or by its agencies and instrumentalities, and
repurchase agreements with respect to such obligations. Direct obligations are
issued by the U.S. Treasury and include bills, certificates of indebtedness,
notes and bonds. Obligations of U.S. government agencies and instrumentalities
("Agencies") are issued by government-sponsored agencies and enterprises acting
under authority of Congress. Although obligations of federal agencies and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
including, but not limited to, obligations of the Federal Housing
Administration, the Export-Import Bank of the United States, the Small Business
Administration, the Government National Mortgage Association, the General
Services Administration and the Maritime Administration. In other cases, payment
of interest and principal is not guaranteed, e.g., obligations of the Student
Loan Marketing Association, Federal National Mortgage Association, Federal Home
Loan Mortgage Corporation, Tennessee Valley Authority, Federal Home Loan Bank,
and the Federal Farm Credit Bank.
Industrial Development Bonds. Industrial Development Bonds are a type of
Municipal Security that may be held by the Municipal Portfolio. These are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer.
Investments in Other Investment Companies. A Portfolio may invest in securities
issued by other investment companies to the extent that such investments are
consistent with the Portfolio's investment objectives and policies and are
permissible under the Investment Company Act. Under the Investment Company Act,
the Portfolios may not acquire collectively more than 3% of the outstanding
securities of any one investment company. In addition, each Portfolio will limit
its investments in other investment companies in accordance with the
diversification and quality requirements of such Portfolio. As a shareholder of
another investment company, a Portfolio would bear, along with other
shareholders, its pro rata portion of the other investment Company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Portfolio bears directly in connection with its own
operations. It is currently anticipated that such investments will be made
solely in other no-load money market funds.
Loans of Portfolio Securities. Each Portfolio may lend portfolio securities in
amounts up to 33 1/3% of its respective total assets to brokers, dealers and
other financial institutions, provided such loans are callable at any time by
the Portfolio and are at all times secured by cash or by equivalent collateral.
By lending its portfolio securities, a Portfolio will receive income while
retaining the securities' potential for capital appreciation. As with any
extensions of credit, there are risks of delay in recovery and, in some cases,
even loss of rights in the collateral should the borrower of the securities fail
financially. However, such loans of securities will only be made to service
firms deemed to be creditworthy by the Investment Manager.
Municipal Lease Obligations. The Municipal Portfolio may invest a portion of its
assets in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the Portfolio will not hold such obligations directly as a lessor of
the property, but will
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<PAGE>
purchase a participation interest in a municipal obligation from a bank or other
third party. A participation interest gives the Portfolio a specified, undivided
interest in the obligation in proportion to its purchased interest in the total
amount of the obligation. Municipal leases frequently have risks distinct from
those associated with general obligation or revenue bonds. State constitutions
and statutes set forth requirements that states or municipalities must meet to
incur debt. These may include voter referenda, interest rate limits, or public
sale requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to acquire
property and equipment without meeting their constitution and statutory
requirements for the issuance of debt. Many leases and contracts include
"non-appropriation clauses" providing that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purposes by the appropriate legislative body on a yearly
or other periodic basis. Non-appropriation clauses free the issuer from debt
issuance limitations. The Portfolio's ability to recover under such a lease in
the event of non-appropriation or default will be limited solely to the
repossession of the leased property in the event foreclosure proves difficult.
In addition to the "non-appropriation" risk, these securities represent a
relatively new type of financing that has not yet developed the depth of
marketability associated with more conventional bonds.
Municipal Securities. The Municipal Portfolio will invest in Municipal
Securities. Municipal Securities are issued to raise money for a variety of
public purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities may
be issued in anticipation of future revenues and may be backed by the full
taxing power of a municipality, the revenues from a specific project, or the
credit of a private organization. A security credit may be enhanced by a bank,
insurance company, or other financial institution. The securities may carry
fixed, variable, or floating interest rates. A Portfolio may own a Municipal
Security directly or through a participation interest. Municipal Securities
include Industrial Development Bonds, as well as tax-exempt commercial paper and
short-term municipal notes such as tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax payments, the proceeds of bond placements, or
other revenues.
Put Features. Put features entitle the holder to sell a security (including a
repurchase agreement) back to the issuer or a third party at any time or at
specific intervals. They are subject to the risk that the put provider is unable
to honor the put feature (purchase of the security). Put providers often support
their ability to buy securities on demand by obtaining letters of credit or
other guarantees from domestic or foreign banks. The Investment Manager may rely
on its evaluation of a bank's credit in determining whether to purchase a
security supported by a letter of credit. In evaluating a foreign bank's credit,
the Investment Manager will consider whether adequate public information about
the bank is available and whether the bank may be subject to unfavorable
political or economic developments, currency controls, or other government
restrictions that might affect the bank's ability to honor its credit
commitment. Demand features, standby commitments, and tender options are types
of put features.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements,
which are instruments under which a Portfolio acquires ownership of a security
from a broker-dealer or
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bank that agrees to repurchase the security at a mutually agreed upon time and
price (which price is higher than the purchase price), thereby determining the
yield during the Portfolio's holding period. Repurchase agreements are, in
effect, loans collateralized by the underlying securities. Maturity of the
securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, a Portfolio
might have expenses in enforcing its rights, and could experience losses
including a decline in the value of the underlying security and loss of income.
Reverse Repurchase Agreements. Each Portfolio may enter into reverse repurchase
agreements, which are instruments under which a Portfolio sells a portfolio
instrument to another party, such as a bank or broker-dealer, in return for cash
and agrees to repurchase the instrument at a particular price and time. While a
reverse repurchase agreement is outstanding, a Portfolio will maintain
appropriate liquid assets in a segregated custodial account to cover its
obligation under the Agreement. Each Portfolio will enter into reverse
repurchase agreements only with parties whose creditworthiness has been found
satisfactory by the Investment Manager. Such transactions may increase
fluctuations in the market value of a Portfolio's assets and may be viewed as a
form of leverage.
Rule 144A Securities. If otherwise consistent with its investment objectives and
policies, each Portfolio, other than the Government Portfolio, may invest in
Rule 144A Securities. Rule 144A Securities are securities which are not
registered under the Securities Act of 1933 but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the Securities Act of
1933. Any such security will not be considered illiquid so long as it is
determined by the Fund's Board of Directors or the Investment Manager, acting
under guidelines approved and monitored by the Fund's Board, that an adequate
trading market exists for that security. This investment practice could have the
effect of increasing the level of illiquidity in a Portfolio during any period
that qualified institutional buyers become uninterested in purchasing these
restricted securities.
Section 4(2) paper. The Money Market Portfolio may invest in Section 4(2) paper.
Section 4(2) paper is restricted as to disposition under the federal securities
laws, and generally is sold to institutional investors such as the Money Market
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors like the Portfolio through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. The Portfolio's Investment Manager considers the legally restricted
but readily salable Section 4(2) paper to be liquid. However, pursuant to
procedures adopted by the Fund's Board of Directors, if an investment in Section
4(2) paper is not determined by the Investment Manager to be liquid, the
investment will be included within the 10% limitation on illiquid securities
discussed under "All Portfolios" in this Prospectus. The Fund's Investment
Manager will monitor the liquidity of the Portfolio's investments in Section
4(2) paper on a continuous basis.
Standby Commitments. The Municipal Portfolio may acquire Standby Commitments.
Standby Commitments are put options that entitle holders to same day settlement
at an exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Municipal Portfolio may
acquire Standby Commitments to enhance the liquidity of
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<PAGE>
portfolio securities, but only when the issuers of the commitments present
minimal risk of default. Ordinarily, the Municipal Portfolio may not transfer a
Standby Commitment to a third party, although it could sell the underlying
municipal security to a third party at any time. The Portfolio may purchase
Standby Commitments separate from or in conjunction with the purchase of
securities subject to such commitments. In the latter case, the Portfolio would
pay a higher price for the securities acquired, thus reducing their yield to
maturity. Standby Commitments will not affect the dollar-weighted average
maturity of the Portfolio, or the valuation of the securities underlying the
commitments. Issuers or financial intermediaries may obtain letters of credit or
other guarantees to support their ability to buy securities on demand. The
Investment Manager may rely upon its evaluation of a bank's credit in
determining whether to support an instrument supported by a letter of credit.
Standby Commitments are subject to certain risks, including the ability of
issuers of Standby Commitments to pay for securities at the time the commitments
are exercised; the fact that Standby Commitments are not marketable by the
Portfolios; and the possibility that the maturities of the underlying securities
may be different from those of the commitments.
Stripped Government Securities. Each of the Portfolios, except the Municipal
Portfolio, may purchase U.S. Treasury STRIPS (Separate Trading of Registered
Interest and Principal of Securities), that are created when the coupon payments
and the principal payment are stripped from an outstanding Treasury bond by the
Federal Reserve Bank. These instruments are issued at a discount to their "face
value" and may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors. Bonds issued by the Resolution Funding Corporation (REFCOR) can also
be stripped in this fashion. REFCORP Strips are eligible investments for the
Money Market Portfolio and the U.S. Government Portfolio. The Money Market
Portfolio can purchase privately stripped government securities, which are
created when a dealer deposits a Treasury security, or federal agency security
with a custodian for safekeeping and then sells the coupon payments and
principal payment that will be generated by this security. Proprietary receipts,
such as Certificates of Accrual on Treasury Securities (CATS), Treasury
Investment Growth Receipts (TIGRS), and generic Treasury Receipts (Trs), are
stripped U.S. Treasury securities that are separated into their component parts
through trusts created by their broker sponsors. Bonds issued by the Financing
Corporation (FICO) can also be stripped in this fashion. Because of the view of
the SEC on privately stripped government securities, the Money Market Portfolio
must evaluate them as it would non-government securities pursuant to regulatory
guidelines applicable to all money market funds.
Tender Option Bonds. The Municipal Portfolio may purchase Tender Option Bonds.
Tender Option Bonds are created by coupling an intermediate-or long term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial arrangement)
with a tender agreement that gives the holder the option to tender the bond at
its face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate and
the rate (determined by a remarketing or similar agent) that would cause the
bond, coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, the Portfolio effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. Subject to applicable regulatory requirements, the Municipal
Portfolio may buy Tender Option Bonds if the agreement gives the Portfolio the
right to tender the bond to its sponsor no
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less frequently than once every 13 months. In selecting Tender Option Bonds for
the Portfolio, the Investment Manager will consider the creditworthiness of the
issuer of the underlying bond, the custodian, and the third party provider of
the tender option. In certain instances, a sponsor may terminate a tender option
if, for example, the issuer of the underlying bond defaults on an interest
payment.
Variable or Floating Rate Obligations. Each Portfolio may invest in Variable
Rate or Floating Rate Obligations. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while variable
rate instruments provide for a specified periodic adjustment in the interest
rate. The interest rate of Variable Rate Obligations ordinarily is determined by
reference to or is a percentage of an objective standard such as a bank's prime
rate, the 90-day U.S. Treasury Bill rate, or the rate of return on commercial
paper or bank certificates of deposit. Generally, the changes in the interest
rate on Variable Rate Obligations reduce the fluctuation in the market value of
such securities. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than for fixed-rate
obligations. Some Variable Rate Obligations ("Variable Rate Demand Securities")
have a demand feature entitling the purchaser to resell the securities at an
amount approximately equal to amortized cost or the principal amount thereof
plus accrued interest. As is the case for other Variable Rate Obligations, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. Each Portfolio determines the maturity of Variable Rate
Obligations and Floating Rate Obligations in accordance with Rule 2a-7 under
the Investment Company Act which allows the Portfolio to consider certain of
such instruments as having maturities shorter than the maturity date on the
face of the instrument.
When-Issued and Delayed Delivery Basis Securities. Each Portfolio may invest in
when-issued and delayed delivery basis securities. A security purchased on a
when-issued basis is subject to changes in market value based upon changes in
the level of interest rates and investors' perceptions of the creditworthiness
of the issuer. Generally such securities will appreciate in value when interest
rates decline and decrease in value when interest rates rise. In determining the
maturity of portfolio securities purchased on a when-issued or delayed delivery
basis, the Portfolio will consider them to have been purchased on the date when
it committed itself to the purchase. The Portfolio's Custodian will maintain, in
a segregated account of the Portfolio, cash, U.S. government securities or other
liquid high-grade debt obligations having a value equal to or greater than the
Portfolio's purchase commitments; the Custodian will likewise segregate
securities sold on a delayed delivery basis. The securities so purchased are
subject to market fluctuation and no interest accrues to the purchaser during
the period between purchase and settlement. At the time of delivery of the
securities, the value may be more or less than the purchase price and an
increase in the percentage of the Portfolio's assets committed to the purchase
of securities on a when-issued or delayed delivery basis may increase the
volatility of the Portfolio's net asset value. A Portfolio will only make
commitments to purchase securities on a when-issued or delayed delivery basis
with the intention of actually acquiring or disposing of the securities, but the
Portfolio reserves the right to sell these securities before the settlement date
if deemed advisable. The sale of such securities by the Municipal Portfolio may
result in the realization of gains that are not exempt from federal income tax.
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Zero Coupon Bonds. Each Portfolio may invest in Zero Coupon Bonds. Zero Coupon
Bonds do not make regular interest payments. Instead, they are sold at a
discount from their face value and are redeemed at face value when they mature.
Because Zero Coupon Bonds do not pay current income, their prices can be very
volatile when interest rates change. In calculating its daily dividend, a
Portfolio takes into account as income a portion of the difference between a
Zero Coupon Bond's purchase price and its face value.
________________________
Future Developments. Each Portfolio may invest in securities and in other
instruments which do not presently exist but may be developed in the future,
provided that each such investment is consistent with such Portfolio's
investment objectives, policies and restrictions and is otherwise legally
permissible under federal and state laws. The Prospectus will be amended or
supplemented as appropriate to discuss any such new investments.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
Money Market Portfolio
U.S. Government Portfolio
Municipal Portfolio
(NATIONAL INVESTORS CLASS)
55 Water Street, New York, New York 10041
National Investors Cash Management Fund, Inc.
1-800-[________ ]
STATEMENT OF ADDITIONAL INFORMATION
________ __, 1996
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus dated ____________ __, 1996 (the
"Prospectus") for the National Investors Class of the National Investors Cash
Management Money Market Portfolio, U.S. Government Portfolio and Municipal
Portfolio. To obtain a copy of the Prospectus please contact the service firm
from which you purchased your shares or call (617) 557-0700.
TABLE OF CONTENTS
Page
----
INVESTMENT POLICIES AND RESTRICTIONS.......................................
PORTFOLIO TRANSACTIONS.....................................................
DIRECTORS AND EXECUTIVE OFFICERS...........................................
THE INVESTMENT MANAGER.....................................................
INVESTMENT MANAGEMENT, DISTRIBUTION AND OTHER SERVICES.....................
DIVIDENDS AND TAXES........................................................
SHARE PRICE CALCULATION....................................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................
PERFORMANCE................................................................
SHAREHOLDER RIGHTS.........................................................
ANNEX -- RATINGS OF INVESTMENTS............................................
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NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
Money Market Portfolio
U.S. Government Portfolio
Municipal Portfolio
(National Investors Class)
INVESTMENT POLICIES AND RESTRICTIONS
National Investors Cash Management Fund, Inc. (the "Fund") has adopted for each
of its three investment portfolios (the Money Market Portfolio, the U.S.
Government Portfolio and Municipal Portfolio (the "Portfolios") certain
fundamental investment limitations which cannot be changed for a Portfolio
without approval by holders of a majority of the outstanding voting securities
of that Portfolio. However, except for each Portfolio's investment objectives
and the fundamental investment limitations set forth below, the investment
policies and restrictions described in the Prospectus and this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval. As defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and as used herein and in the
Prospectus, the term "majority of the outstanding voting securities" of the
Fund, or of a particular Portfolio means, respectively, the vote of the holders
of the lesser of (i) 67% of the shares of the Fund or such Portfolio present or
represented by proxy at a meeting where more than 50% of the outstanding shares
of the Fund or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Fund or such Portfolio.
The following policies and restrictions supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or limitation
states a maximum percentage of a Portfolio's assets that may be invested in any
security or other assets, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the Portfolio's acquisition of such security or other asset.
Accordingly, any subsequent change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with the
Portfolio's investment policies and restrictions.
Investment Restrictions. The following are the fundamental investment
restrictions of each Portfolio of the Fund. Each Portfolio may not (unless noted
otherwise):
(1) with respect to 75% of its total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. government, or
any of its agencies or instrumentalities) if, as a result thereof, (a) more than
5% of the Portfolio's total assets would be invested in the securities of that
issuer, or (b) the Portfolio would hold more than 10% of the outstanding voting
securities of that issuer;
(2) with respect to the Municipal Portfolio, normally invest less than 80%
of its total assets in obligations issued or guaranteed by states, territories
and possessions of the United States
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and the District of Columbia and their political subdivisions, agencies and
instrumentalities ("Municipal Securities"), the income from which is exempt from
federal income tax, but may be subject to federal alternative minimum tax
liability;
(3) issue senior securities, except as permitted under the Investment
Company Act;
(4) make short sales of securities or purchase securities on margin (but a
Portfolio may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities);
(5) borrow money, except that each Portfolio may: (i) borrow money for
temporary defensive or emergency purposes (not for leveraging or investment),
(ii) engage in reverse repurchase agreements for any purpose, and (iii) pledge
its assets in connection with such borrowing to the extent necessary; provided
that (i) and (ii) in combination do not exceed 331/3% of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
Any borrowings that exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation. A Portfolio will not purchase any security, other than a
security with a maturity of one day, while reverse repurchase agreements or
borrowings representing more than 5% of its total assets are outstanding;
(6) act as an underwriter (except as it may be deemed such in a sale of
restricted securities);
(7) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities;
or, in the case of the Municipal Portfolio, tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local government, or
a political subdivision, agency or instrumentality of any of the foregoing) if,
as a result, more than 25% of the Portfolio's total assets would be invested in
the securities of companies whose principal business activities are in the same
industry, except that the Money Market Portfolio may invest more than 25% of its
total assets in the financial services industry and the Municipal Portfolio may
invest more than 25% of its total assets in industrial development bonds related
to a single industry. The Money Market Portfolio specifically reserves the right
to invest up to 100% of its assets in certificates of deposit or bankers'
acceptances issued by U.S. banks including their foreign branches, and U.S.
branches of foreign banks, in accordance with its investment objectives and
policies;
(8) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent a Portfolio from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);
(9) buy or sell commodities or commodity (futures) contracts, except for
financial futures and options thereon. This limitation does not apply to options
attached to, or acquired or traded
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together with, their underlying securities, and does not apply to securities
that incorporate features similar to options or futures contracts;
(10) lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be loaned to other parties, but this limit
does not apply to purchases of debt securities or to repurchase agreements; or
(11) purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of assets
or to the extent otherwise permitted by the Investment Company Act; however, a
Portfolio may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies, and restrictions as the Portfolio.
The following investment restrictions are not fundamental, and may be changed
without shareholder approval. Each Portfolio does not currently intend:
(i) to purchase a security (other than a security issued or guaranteed by
the U.S. government or any of its agencies or instrumentalities, or a security
subject to an "unconditional demand feature issued by a non-controlled person,"
as defined in Rule 2a-7 under the Investment Company Act ("Rule 2a-7") if, as a
result, more than 5% of its total assets would be invested in the securities of
a single issuer, provided that a Portfolio may invest up to 25% of its total
assets in the first tier securities of a single issuer for up to three business
days;
(ii) to purchase the securities of any issuer (other than securities issued
or guaranteed by domestic or foreign governments or political subdivisions
thereof) if, as a result, more than 5% of its total assets would be invested in
the securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operations;
(iii) to purchase or hold any security if, as a result, more than 10% of
its net assets would be invested in securities that are deemed to be illiquid
because they are subject to legal or contractual restrictions on resale or
because they cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued, including repurchase
agreements not entitling the holder to payment of principal and interest within
seven days and securities restricted as to disposition under federal securities
laws, except for commercial paper issued in reliance on the "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 ("Section 4(2) paper") and securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933 ("144A securities"), which are determined
to be liquid pursuant to procedures adopted by the Fund's Board of Directors;
(iv) to purchase the securities of any issuer if those officers and
directors of the Fund and of the Investment Manager who individually own more
than 1/2 of 1% of the securities of such issuer together own more than 5% of
such issuer's securities;
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(v) to invest in oil, gas, or other mineral exploration or development
programs;
(vi) to invest in companies for the purpose of exercising control or
management; or
(vii) to invest in financial futures and options thereon.
For the Fund's policies on quality and maturity, see the subsection entitled
"Quality and Maturity" below.
Each Portfolio's investments must be consistent with its investment objective
and policies. Accordingly, not all of the security types and investment
techniques discussed below are eligible investments for each of the Portfolios.
Investment Policies of all Portfolios:
Quality and Maturity. Pursuant to procedures adopted by the Board of Directors,
a Portfolio may purchase only high quality securities that the Investment
Manager believes present minimal credit risks. To be considered high quality, a
security must be rated in accordance with applicable rules in one of the two
highest categories for short-term securities by at least two nationally
recognized statistical rating organizations (or by one, if only one such rating
organization has rated the security); or, if unrated, judged to be of equivalent
quality by the Investment Manager.
High quality securities are divided into "first tier" and "second tier"
securities. First tier securities are generally those deemed to be in the
highest rating category (e.g., Standard & Poor's Ratings Group's ("S&P's") A-1)
and Government Securities and securities issued by other money market funds.
Second tier securities are generally those deemed to be in the second highest
rating category (e.g., S&P's A-2). See "Annex -- Ratings of Investments."
The Money Market Portfolio may not invest more than 5% of its total assets in
second tier securities. In addition, the Money Market Portfolio may not invest
more than 1% of its total assets or $1 million (whichever is greater) in the
second tier securities of a single issuer. The Municipal Portfolio may not
invest more than 5% of its total assets in second tier securities that are
"conduit securities," as that term is defined in Rule 2a-7. In addition, the
Municipal Portfolio may not invest more than 1% of its assets or $1 million
(whichever is greater) in second tier conduit securities of a single issuer.
Each Portfolio will limit its investments to securities with remaining
maturities of 13 months or less, and maintain a dollar-weighted average maturity
of 90 days or less. When determining the maturity of a security, a Portfolio may
rely upon an interest rate reset or demand feature.
When-Issued and Delayed Delivery Transactions. Each Portfolio may buy and sell
securities on a when-issued or delayed delivery basis. These transactions
involve a commitment by a Portfolio to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery
B-4
<PAGE>
taking place after the customary settlement period for that type of security
(and more than seven days in the future). Typically, no interest accrues to the
purchaser until the security is delivered.
When purchasing securities on a when-issued or delayed delivery basis, a
Portfolio assumes the rights and risks of ownership, including the risk of price
and yield fluctuations. Because a Portfolio is not required to pay for
securities until the delivery date, these risks are in addition to the risks
associated with each Portfolio's other investments. If a Portfolio remains
substantially fully invested at a time when when-issued or delayed delivery
purchases are outstanding, the purchases may result in a form of leverage. When
when-issued or delayed delivery purchases are outstanding, a Portfolio will set
aside appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a Portfolio has sold a security on a delayed delivery
basis, the Portfolio does not participate in further gains or losses with
respect to the security. If the other party to a delayed delivery transaction
fails to deliver or pay for the securities, a Portfolio could miss a favorable
price or yield opportunity, or could suffer a loss.
Each Portfolio may renegotiate when-issued or delayed delivery transactions
after they are entered into, and may sell underlying securities before they are
delivered, which may result in capital gains or losses.
Variable or Floating Rate Obligations. Variable or Floating Rate Obligations
bear variable or floating interest rates and carry rights that permit holders to
demand payment of the unpaid principal balance plus accrued interest from the
issuers or certain financial intermediaries. Floating rate instruments have
interest rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value for
the instrument that approximates its amortized cost. A demand instrument with a
conditional demand feature must have received both a short-term and a long-term
high quality rating or, if unrated, have been determined to be of comparable
quality pursuant to procedures adopted by the Board of Directors. In addition,
the Board must make certain findings to insure, pursuant to Rule 2a-7, the
appropriateness of the conditional demand feature for money fund investment. A
demand instrument with an unconditional demand feature may be acquired solely in
reliance upon a short-term high quality rating or, if unrated, upon a finding of
comparable short-term quality pursuant to procedures adopted by the Board of
Directors.
Repurchase Agreements. In a repurchase agreement, a Portfolio purchases a
security and simultaneously commits to sell that security back to the original
seller at an agreed-upon price. The resale price reflects the purchase price
plus an agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. It is each Portfolio's current policy to
engage in repurchase agreement transactions with parties whose creditworthiness
has been reviewed and found satisfactory by the Investment Manager pursuant to
procedures approved by the Board of Directors; it does not presently appear
possible, however, to eliminate all risks from these transactions (particularly
the possibility that the value of the underlying security will be less than the
resale price, as well as delays and costs to a Portfolio in connection with a
seller's bankruptcy proceedings).
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Reverse Repurchase Agreements. In a reverse repurchase agreement, a Portfolio
sells a portfolio instrument to another party, such as a bank or broker-dealer,
in return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, a Portfolio will
maintain appropriate liquid assets in a segregated custodial account to cover
its obligation under the agreement. Each Portfolio will enter into reverse
repurchase agreements only with parties whose creditworthiness has been found
satisfactory by the Investment Manager.
Illiquid Investments. Illiquid investments are investments that cannot be sold
or disposed of in the ordinary course of business within seven days at
approximately the prices at which they are valued. Under the supervision of the
Board of Directors, the Investment Manager determines the liquidity of a
Portfolio's investments and, through reports from the Investment Manager, the
Board monitors investments in illiquid instruments. In determining the liquidity
of a Portfolio's investments, the Investment Manager may consider various
factors, including (i) the frequency of trades and quotations, (ii) the number
of dealers and prospective purchasers in the marketplace, (iii) dealer
undertakings to make a market, (iv) the nature of the security (including any
demand or tender features), and (v) the nature of the marketplace for trades
(including the ability to assign or offset the Portfolio's rights and
obligations relating to the investment).
Investments currently considered by the Portfolios to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days. Also, with regard to the Money Market Portfolio, the
Investment Manager may determine some time deposits to be illiquid. In the
absence of market quotations, illiquid investments are valued for purposes of
monitoring amortized cost valuation at fair value as determined in good faith by
or under the direction of the Board of Directors. If through a change in values,
net assets, or other circumstances, a Portfolio were in a position where more
than 10% of its net assets was invested in illiquid securities, it would seek to
take appropriate steps to protect liquidity.
For purposes of the 10% limit on illiquid securities, 144A securities will not
be considered to be illiquid so long as the Investment Manager determines, in
accordance with procedures adopted by the Board of Directors, that such
securities have a readily available market. The Investment Manager will monitor
the liquidity of such securities subject to the supervision of the Board of
Directors.
Municipal lease obligations will not be considered illiquid for purposes of the
Municipal Portfolio's 10% limitation on illiquid securities, provided the
Investment Manager determines that there is a readily available market for such
securities. With respect to municipal lease obligations, the Investment Manager
will consider, pursuant to procedures adopted by the Board of Directors, the
following: (1) the willingness of the municipality to continue, annually or
biannually, to appropriate funds for payment of the lease; (2) the general
credit quality of the municipality and the essentiality to the municipality of
the property covered by the lease; (3) in the case of unrated municipal lease
obligations, an analysis of factors similar to that performed by nationally
recognized statistical rating organizations in evaluating the credit quality of
a municipal lease obligation, including (i) whether the lease can be cancelled;
(ii) if applicable, what assurance there is that the assets represented by
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<PAGE>
the lease can be sold; (iii) the strength of the lessee's general credit (e.g.,
its debt, administrative, economic and financial characteristics); (iv) the
likelihood that the municipality will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to the
operations of the municipality (e.g., the potential for an event of
nonappropriation); (v) the legal recourse in the event of failure to
appropriate; and (4) any other factors unique to municipal lease obligations as
determined by the Investment Manager.
Investment Policies of Money Market Portfolio Only:
Domestic and Foreign Issuers. Investments may be made in U.S. dollar-denominated
time deposits, certificates of deposit, and bankers' acceptances of U.S. banks
and their branches located outside of the United States, U.S. savings and loan
institutions, U.S. branches of foreign banks, and foreign branches of foreign
banks. The Fund may also invest in U.S. dollar-denominated securities issued or
guaranteed by other U.S. or foreign issuers, including U.S. and foreign
corporations or other business organizations, foreign governments, foreign
government agencies or instrumentalities, and U.S. and foreign financial
institutions, including savings and loan institutions, insurance companies,
mortgage bankers, and real estate investment trusts, as well as banks.
The obligations of foreign branches of U.S. banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by governmental regulation. Payment of
interest and principal on these obligations may also be affected by governmental
action in the country of domicile of the branch (generally referred to as
sovereign risk). In addition, evidence of ownership of portfolio securities may
be held outside of the United States and the Fund may be subject to the risks
associated with the holding of such property overseas. Various provisions of
federal law governing the establishment and operation of U.S.
branches do not apply to foreign branches of U.S. banks.
Obligations of U.S. branches and agencies of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office.
Obligations of foreign issuers involve certain additional risks. These risks may
include future unfavorable political and economic developments, withholding
taxes, seizures of foreign deposits, currency controls, interest limitations, or
other governmental restrictions that might affect payment of principal or
interest. Additionally, there may be less public information available about
foreign banks and their branches. Foreign issuers may be subject to less
governmental regulation and supervision than U.S. issuers. Foreign issuers also
generally are not bound by uniform accounting, auditing, and financial reporting
requirements comparable to those applicable to U.S. issuers.
Credit Enhancement Features. Each Portfolio may invest in securities subject to
letters of credit or other credit enhancement features. Such letters of credit
or other credit enhancements are not
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<PAGE>
subject to federal deposit insurance, and changes in the credit quality of the
issuers of such letters of credit or other credit enhancements could cause
losses to a Portfolio and affect its share price.
Put Features. Put features entitle the holder to sell a security (including a
repurchase agreement) back to the issuer or a third party at any time or at
specified intervals. They are subject to the risk that the put provider is
unable to honor the put feature (purchase the security). Put providers often
support their ability to buy securities on demand by obtaining letters of credit
or other guarantees from domestic or foreign banks. The Investment Manager may
rely on its evaluation of a bank's credit in determining whether to purchase a
security supported by a letter of credit. In evaluating a foreign bank's credit,
the Investment Manager will consider whether adequate public information about
the bank is available and whether the bank may be subject to unfavorable
political or economic developments, currency controls, or other government
restrictions that might affect the bank's ability to honor its credit
commitment. Demand features, standby commitments, and tender options are types
of put features.
Investment Policies of the Municipal Portfolio Only:
Municipal Securities. Municipal Securities which the Municipal Portfolio may
purchase include, without limitation, debt obligations issued to obtain funds
for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, public utilities, schools, streets, and water and sewer works.
Other public purposes for which Municipal Securities may be issued include
refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to loan to other public institutions and
facilities.
Municipal Securities, such as private activity bonds ("industrial development
bonds" under prior law), are issued by or on behalf of public authorities to
obtain funds for purposes including privately operated airports, housing,
conventions, trade shows, ports, sports, parking or pollution control facilities
or for facilities for water, gas, electricity, or sewage and solid waste
disposal. Such obligations, which may include lease arrangements, are included
within the term Municipal Securities if the interest paid thereon qualifies as
exempt from federal income tax. Other types of industrial development bonds, the
proceeds of which are used for the construction, equipment, repair or
improvement of privately operated industrial or commercial facilities, may
constitute Municipal Securities, although current federal tax laws place
substantial limitations on the size of such issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
notes are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Industrial development bonds which are Municipal
Securities are in most cases revenue bonds and generally do not constitute the
pledge of the credit of the issuer of such bonds.
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<PAGE>
Examples of Municipal Securities that are issued with original maturities of 13
months or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds and tax-free commercial paper. Tax anticipation notes typically are sold
to finance working capital needs of municipalities in anticipation of receiving
property taxes on a future date. Bond anticipation notes are sold on an interim
basis in anticipation of a municipality issuing a longer term bond in the
future. Revenue anticipation notes are issued in expectation of receipt of other
types of revenue such as those available under the Federal Revenue Sharing
Program. Construction loan notes are instruments insured by the Federal Housing
Administration with permanent financing by "Fannie Mae" (the Federal National
Mortgage Association) or "Ginnie Mae" (the Government National Mortgage
Association) at the end of the project construction period. Pre-refunded
municipal bonds are bonds which are not yet refundable, but for which securities
have been placed in escrow to refund an original municipal bond issue when it
becomes refundable. Tax-free commercial paper is an unsecured promissory
obligation issued or guaranteed by a municipal issuer. The Municipal Portfolio
may purchase other Municipal Securities similar to the foregoing, which are or
may become available, including securities issued to pre-refund other
outstanding obligations of municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under the state constitutions of present
systems of financing public education has been initiated or adjudicated in a
number of states, and legislation has been introduced to effect changes in
public school finances in some states. In other instances there has been
litigation challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which ultimately could
affect the validity of those Municipal Securities or the tax-free nature of the
interest thereon.
Federally Taxable Obligations. From time to time, the Municipal Portfolio may
invest a portion of its assets on a temporary basis in fixed-income obligations
whose interest is subject to federal income tax. For example, the Portfolio may
invest in obligations whose interest is federally taxable pending the investment
or reinvestment in Municipal Securities of proceeds from the sale of its shares
or sales of portfolio securities. Should the Portfolio invest in federally
taxable obligations, it would purchase securities that in the Investment
Manager's judgment are of high quality. These would include obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities;
obligations of domestic banks; and repurchase agreements. In addition, the
Municipal Portfolio may deviate from its investment policies and may adopt
temporary defensive measures when significant adverse market, economic,
political or other circumstances require immediate action in order to avoid
losses. During such periods, the Portfolio may temporarily invest its assets,
without limitation, in taxable temporary investments. The Municipal Portfolio
will purchase taxable obligations only if they meet its quality requirements.
B-9
<PAGE>
Proposals to restrict or eliminate the federal income tax exemption for interest
on municipal obligations are introduced before Congress from time to time.
Proposals also may be introduced before state legislatures that would affect the
state tax treatment of the Portfolio's distributions. If such proposals were
enacted, the availability of municipal obligations and the value of the
Portfolio's holdings would be affected and the directors would reevaluate the
Portfolio's investment objective and policies.
The Municipal Portfolio anticipates being as fully invested as practicable in
Municipal Securities; however, there may be occasions when, as a result of
maturities of portfolio securities, sales of Portfolio shares, or in order to
meet redemption requests, the Portfolio may hold cash that is not earning
income. In addition, there may be occasions when, in order to raise cash to meet
redemptions, the Portfolio may be required to sell securities at a loss.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the objective of
each Portfolio in relation to movements in the general level of interest rates,
to invest money obtained from the sale of Fund shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund shares. This may
increase or decrease the yield of a Portfolio depending upon the Investment
Manager's ability to correctly time and execute such transactions. Each
Portfolio normally intends to hold its portfolio securities to maturity. The
Portfolios do not intend to trade portfolio securities although they may do so
to take advantage of short-term market movements.
In effecting purchases and sales of portfolio securities for the account of each
Portfolio, the Investment Manager will implement the Fund's policy of seeking
the best execution of orders, which includes best net prices. Consistent with
this policy, orders for portfolio transactions are placed with broker-dealer
firms giving consideration to the quality, quantity and nature of the firms'
professional services which include execution, clearance procedures, reliability
and other factors. In selecting among the firms believed to meet the criteria
for handling a particular transaction, the Investment Manager may give
consideration to those firms which provide market, statistical and other
research information to the Fund and the Investment Manager, although the
Investment Manager is not authorized to pay higher prices to firms that provide
such services. Any research benefits derived are available for all clients.
Because statistical and other research information is only supplementary to the
Investment Manager's research efforts and still must be analyzed and reviewed by
its staff, the receipt of research information is not expected to significantly
reduce its expenses. The Fund expects that purchases and sales of portfolio
securities usually will be principal transactions. Portfolio securities will
normally be purchased directly from the issuer or from an underwriter or market
maker for the securities. Purchases from underwriters may include a commission
or concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers will include the spread between the bid and asked
prices.
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<PAGE>
The investment decisions for each Portfolio will be reached independently from
those for each other and for other accounts, if any, managed by the Investment
Manager. On occasions when the Investment Manager deems the purchase or sale of
securities to be in the best interest of one or more Portfolios as well as other
clients of the Investment Manager, the Investment Manager, to the extent
permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be so sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Investment
Manager in accordance with its policy for aggregation of orders, as in effect
from time to time. In some cases this procedure may affect the size or price of
the position obtainable for a Portfolio.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Fund, their principal occupations
over the past five years and their affiliations, if any, with the Investment
Manager and Funds Distributor, Inc. ("FDI"), the Fund's distributor, are as
follows:
[to be filed by amendment]
* Each of these directors is an "interested person" of the Fund.
Officers and directors who are interested persons of the Investment Manager or
FDI will receive no compensation from the Fund. The Fund expects to pay or
accrue total directors' fees of approximately $[_________] per year to those
directors who are not designated above as "interested persons." Directors who
are interested persons of the Fund may be compensated by the Investment Manager
for their services to the Fund. On [January __, 1997,] the officers and
directors of the Fund, as a group, owned less than 1% of the then outstanding
shares of each Portfolio and FDI Distribution Services, Inc., an affiliate of
FDI, owned of record 100% of the outstanding shares of each of the Portfolios as
the initial shareholder. Because the initial shareholder's ownership interest
will be diluted upon the sale of shares to the public, such control will not
affect the rights of shareholders of the Fund.
The Fund pays its directors an annual retainer and a per meeting fee and
reimburses them for their expenses. The amounts of compensation that the Fund
estimates it will pay to each director for the fiscal year ending October 31,
1997, are as follows:
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<PAGE>
<TABLE>
<CAPTION>
Pension or Retirement Total Compensation
Aggregate Benefits Accrued as Estimated Annual from
Name of Board Compensation from Part of Fund's Benefits Upon Portfolio Complex
Member Fund Expenses Retirement Paid to Board Members )
------ ---- -------- ---------- -----------------------
<S> <C> <C> <C> <C>
$ (1) $ 0 (2) $ 0 (2) $ (1)
$ (1) $ 0 (2) $ 0 (2) $ (1)
$ $ 0 (2) $ 0 (2) $ 0
$ (1) $ 0 (2) $ 0 (2) $ (1)
</TABLE>
- - - ----------
(1) Amounts do not include reimbursed expenses for attending Board meetings.
(2) It is not anticipated that any pension or retirement benefits will be
granted to directors of the Fund.
(3) Interested director of the Fund.
THE INVESTMENT MANAGER
Waterhouse Asset Management, Inc., a Delaware corporation, is the Investment
Manager of the Fund. The Investment Manager is a wholly owned subsidiary of
Waterhouse National Bank ("the Bank"), which is a wholly-owned subsidiary of
Waterhouse Investor Services, Inc. ("Waterhouse"), which is in turn a wholly
owned subsidiary of The Toronto-Dominion Bank ("TD Bank"). The Bank offers
various banking products and services primarily to the customers of Waterhouse
Securities, the principal subsidiary of Waterhouse. TD Bank, a Canadian
chartered bank subject to the provisions of the Bank Act of Canada, acquired
Waterhouse in a merger effective on October 15, 1996. In addition to the Fund,
the Investment Manager also currently serves as Investment Manager to the Bank
and to one other money market mutual fund. As of August 31, 1996, the Investment
Manager had total assets under management in excess of $2.4 billion.
Personnel of the Investment Manager may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees' fiduciary
responsibilities regarding the Fund, establishes procedures for personal
investing and restricts certain transactions. In addition, restrictions on the
timing of personal investing relative to trades by the Fund have been adopted.
The following persons are senior officers and directors of the Investment
Manager, each of whom will have substantial responsibilities in connection with
the management of the Portfolios:
DENNIS C. BORECKI, Director, President and Chief Operating Officer of Waterhouse
Asset Management, Inc. Mr. Borecki has been serving as a Director, President and
Chief Operating Officer of Waterhouse Asset Management, Inc. since July 1995.
Mr. Borecki has been serving as Senior Vice President and Senior Trust Officer
of the Bank since February 1996. From 1990 to July 1995, Mr. Borecki served as
Executive Vice President in charge of operations, systems, administration and
customer service of Reich & Tang. In 1984, Mr. Borecki, together with Mr.
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<PAGE>
Ebbitt, formed Cortland Financial Group ("CFG"), the manager of the Cortland
Trust Mutual Funds. At CFG, Mr. Borecki was directly responsible for operations,
systems, administration and customer service until its merger with Reich & Tang
in 1990. He is 49 years old.
KENNETH C. EBBITT, Chairman and Chief Executive Officer of Waterhouse Asset
Management, Inc. Mr. Ebbitt has been serving as Chairman and Chief Executive
Officer of Waterhouse Asset Management, Inc. since July 1995. Mr. Ebbitt has
been serving as Senior Vice President and Senior Trust Officer of the Bank since
February 1996. From 1990 to July 1995, Mr. Ebbitt served as Executive Vice
President of Reich & Tang and Chairman of Reich & Tang's Cortland Funds. In
1984, Mr. Ebbitt, together with Mr. Borecki, formed Cortland Financial Group
("CFG"), the manager of the Cortland Trust Mutual Funds. Mr. Ebbitt served as
Chairman and Chief Executive Officer of both Cortland entities, with direct
responsibility for compliance, marketing, sales and administration until its
merger with Reich & Tang in 1990. He is 54 years old.
DAVID HARTMAN, Senior Vice President and Chief Investment Officer of Waterhouse
Asset Management, Inc. Mr. Hartman has been serving as Senior Vice President and
Chief Investment Officer of Waterhouse Asset Management, Inc. since October
1995. From February 1995 through August 1995, Mr. Hartman served as Senior Vice
President and Senior Portfolio Manager in charge of Fixed Income Separate
Accounts at Mitchell Hutchins - Paine Webber. From 1983 to 1995, Mr. Hartman was
a Senior Vice President of Kidder Peabody & Co. In this capacity, Mr. Hartman
served as the Chief Investment Officer for Fixed Income accounts and both
taxable and municipal money market funds. From 1976 to 1983, Mr. Hartman served
as Vice President of Federated Investors Inc. and was responsible for managing
$5 billion in mutual funds. From 1967 to 1976, Mr. Hartman was a Senior Auditor
at Arthur Andersen & Co. where he was a small business consultant. Mr. Hartman
is 49 years old.
MICHELE R. TEICHNER, Senior Vice President of Waterhouse Asset Management, Inc.
since August 1996. From August 1994 to July 1996, Ms. Teichner served as
President of Mutual Fund Training & Consulting, Inc. From July 1993 to July
1994, Ms. Teichner served as Assistant Vice President of Concord Financial
Group, Inc. From 1987 to 1992, Ms. Teichner served as Assistant Vice President
of Dillon, Read Capital Inc. and was responsible for the administration,
operations and compliance for mutual funds and the investment adviser. Ms.
Teichner is 37 years old.
INVESTMENT MANAGEMENT, DISTRIBUTION AND OTHER SERVICES
Investment Management
Pursuant to the Investment Management Agreement with the Fund on behalf of each
Portfolio, the Investment Manager manages each Portfolio's investments in
accordance with its stated policies and restrictions, subject to oversight by
the Fund's Board of Directors. Each Portfolio pays the expenses of its
operations, including the costs of shareholder and board meetings, the fees and
expenses of blue sky and pricing services, independent auditors, counsel, the
Custodian and the Transfer Agent, reports and notices to shareholders, the costs
of calculating net asset value, brokerage commissions
B-13
<PAGE>
or transaction costs, taxes, interest, insurance premiums, Investment Company
Institute dues and the fees and expenses of qualifying the Portfolio and its
shares for distribution under federal and state securities laws. In addition,
each Portfolio pays for typesetting, printing and mailing proxy material,
prospectuses, statements of additional information, notices and reports to
existing shareholders, and the fees of the directors who are not "interested
persons" of the Fund within the meaning of such term as defined under the
Investment Company Act ("Disinterested Directors"). Each Portfolio is also
liable for such nonrecurring expenses as may arise, including costs of any
litigation to which the Fund may be a party, and any obligation it may have to
indemnify the Fund's officers and directors with respect to any litigation. The
Fund's expenses generally are allocated among the Portfolios on the basis of
relative net assets at the time of allocation, except that expenses directly
attributable to a particular Portfolio are charged to that Portfolio.
The Investment Management Agreement continues in effect for each Portfolio from
the date of its execution for two years and thereafter from year to year so long
as its continuation is approved at least annually by (i) a majority vote of the
directors who are not parties to such agreement or interested persons of any
such party except in their capacity as directors of the Fund, cast in person at
a meeting called for such purpose, and (ii) by the vote of a majority (as
defined in the Investment Company Act) of the outstanding voting securities of
each Portfolio, or by the Fund's Board of Directors. The agreement may be
terminated as to any Portfolio at any time upon 60 days prior written notice,
without penalty, by either party, or by a majority vote of the outstanding
shares of a Portfolio with respect to that Portfolio, and will terminate
automatically upon assignment. The Investment Management Agreement was approved
by the Board of Directors of the Fund, including a majority of the Disinterested
Directors who have no direct or indirect financial interest in the Agreement,
and by the initial shareholder of each Portfolio.
The Investment Management Agreement provides that the Investment Manager will
not be liable for any error of judgment or of law, or for any loss suffered by a
Portfolio in connection with the matters to which such agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
Investment Manager's part in the performance of its obligations and duties, or
by reason of its reckless disregard of its obligations and duties under such
agreement. The services of the Investment Manager to the Portfolios under the
Investment Management Agreement are not exclusive and it is free to render
similar services to others.
B-14
<PAGE>
For the investment management services furnished to each Portfolio, such
Portfolio pays the Investment Manager an annual investment management fee,
accrued daily and payable monthly, on a graduated basis equal to .35 of 1% of
the first $1 billion of average daily net assets of each such Portfolio, .34 of
1% of the next $1 billion, and .33 of 1% of average daily net assets of each
Portfolio over $2 billion.
The Investment Manager and its affiliates may, from time to time, voluntarily
waive or reimburse all or a part of each Portfolio's operating expenses. For the
first year of the Fund's operations, the Investment Manager or its affiliates
intend to waive a portion of their annual fees payable by each Portfolio so that
the actual expenses paid during such period will not exceed 1% of average net
assets. Fee waivers or reductions other than those set forth in the Investment
Management Agreement, may be reduced or rescinded at the Investment Manager's
discretion. Expense reimbursements by the Investment Manager or its affiliates
will increase each Portfolio's total returns and yield.
Distribution
FDI, (or the "Distributor") 60 State Street, Suite 1300, Boston, Massachusetts
02109, acts as the distributor of the shares of each Portfolio. The Fund has
entered into a Distribution Agreement with FDI in connection with offering
shares of the National Investors Class of the Fund (the "Distribution
Agreement"). The Distribution Agreement grants FDI the exclusive right to
distribute shares of the Fund. Pursuant to the Distribution Agreement, the
Distributor may enter into agreements with various service firms ("Selling and
Servicing Agreements"). Under such agreements the service firms may agree, among
other things, to offer Fund shares to their clients, to use the Fund to provide
cash management services to their clients or customers and to provide
shareholder support services with respect to such clients. FDI also acts as a
subadministrator for the Fund.
Under a separate distribution plan adopted by the Fund on behalf of each
Portfolio with respect to its National Investors Class of shares (collectively,
the "Distribution Plans") pursuant to Rule 12b-1 under the Investment Company
Act and the Distribution Agreement, the Distributor incurs certain expenses of
distributing the Fund's shares. These expenses may include commissions and/or
account servicing fees paid to or on account of service firms, payment to the
Transfer Agent in respect of particular service firms that receive a discount in
their clearing fees or other services from the Transfer Agent as clearing
broker, advertising expenses, the cost of printing and mailing prospectuses and
reports to potential investors and sales promotion expenses. Under the
Distribution Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.
Under the Distribution Plans relating to the National Investors Class of shares
of each of the Portfolios, the Fund may pay the Distributor for
distribution-related activities at an annual rate of up
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<PAGE>
to 0.35 of 1% of the average daily net assets of each Portfolio. Each
Distribution Plan provides that a portion of the total fee payable by each
Portfolio, may be used as a service fee to pay for personal service and/or the
maintenance of shareholder accounts.
In addition to distribution and service fees paid by the Fund under the
Distribution Plans, the Investment Manager (or one of its affiliates) may make
payments out of its own resources to dealers and other persons that distribute
shares of the Fund. Such payments may be calculated by reference to the net
asset value of shares sold by such persons or otherwise.
Each Distribution Plan provides that it shall continue in effect from year to
year provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of the Distribution Plan or any agreement related to the
Distribution Plan (the "12b-1 Directors"), vote annually to continue the
Distribution Plan. Among other things, the Distribution Plan provides that the
Distributor shall provide and the Directors shall review quarterly reports of
the disbursement of the distribution fees paid to the Distributor. In their
consideration of the Distribution Plan, the Board of Directors must consider all
factors they deem relevant, including information as to the benefits of the
Distribution Plan to the Fund and its shareholders. In approving the
Distribution Plan in accordance with Rule 12b-1, the Independent Directors
concluded that there is reasonable likelihood that the Distribution Plan will
benefit the Fund and its National Investors Class shareholders. The Distribution
Plan can be terminated at any time, without penalty, by the vote of a majority
of the Independent Directors or by the vote of the holders of a majority of the
outstanding voting securities of the Fund. The Distribution Plan cannot be
amended to increase materially the amount to be spent by the Fund without
shareholder approval, and all material amendments are required to be approved by
the vote of Directors, including a majority of the Independent Directors who
have no direct or indirect financial interest in the Distribution Plan, cast in
person at a meeting called for that purpose.
Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion of
the Fund, based upon the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services to
investment companies as contemplated under the Selling and Servicing Agreements
with such entities. The Fund's Directors will consider appropriate modifications
to the operations of the Fund, including discontinuance of payments under the
Distribution Plans to banks and other depository institutions, in the event such
institutions can no longer provide the services called for under the
Selling and Servicing Agreements. Banks and other financial services firms may
be subject to various state laws regarding the services described in the Selling
Agreements, and may be required to register as dealers pursuant to state law.
Conflict of interest restrictions may apply to the receipt by service firms of
compensation from the Fund in connection with the investment of fiduciary assets
in Fund shares. Service firms, including banks regulated by the Comptroller of
the Currency, the Federal Reserve Board or the Federal
B-16
<PAGE>
Deposit Insurance Corporation, and investment advisers and other money managers
are urged to consult their legal advisers before investing such assets in Fund
shares.
Administration
The Fund and the Investment Manager have also entered into an Administration
Agreement pursuant to which the Investment Manager, as Administrator, provides
administrative services to the Fund and each of the Portfolios. Administrative
services furnished by the Investment Manager include, among others, maintaining
and preserving the records of the Fund, including financial and corporate
records, computing net asset value, dividends, performance data and financial
information regarding the Fund, preparing reports, overseeing the preparation
and filing with the Securities and Exchange Commission ("SEC") and state
securities regulators of registration statements, notices, reports and other
material required to be filed under applicable laws, developing and implementing
procedures for monitoring compliance with regulatory requirements, providing
routine accounting services, providing office facilities and clerical support as
well as providing general oversight of other service providers. For its services
as administrator, the Investment Manager receives from each Portfolio an annual
fee, payable monthly, of .10 of 1% of average daily net assets of such
Portfolio. The fee is accrued daily as an expense of each Portfolio.
The Investment Manager has entered into a Subadministration Agreement with FDI
pursuant to which FDI will perform certain of the foregoing administrative
services for the Fund. Under this Agreement, the Investment Manager will pay
FDI's fees for providing such services. In addition, the Investment Manager may
enter into subadministration agreements with other persons to perform such
services from time to time.
The Administration Agreement has an initial term of two years from the date of
execution, and is renewable thereafter for periods of one year, so long as such
continuance is approved at least annually by a vote of the Board of Directors of
the Fund, including a majority of Disinterested Directors of the Fund who have
no direct or indirect financial interest in the Agreement. The Agreement was
approved by the Board of Directors of the Fund, including a majority of the
Disinterested Directors of the Fund who have no direct or indirect financial
interest in the Agreement. Each Portfolio or the Investment Manager may
terminate the Administration Agreement on 60 days' prior written notice without
penalty. Termination by a Portfolio may be by vote of the Fund's Board of
Directors, or a majority of the Disinterested Directors of the Fund who have no
direct or indirect financial interest in the Agreement, or by a "majority of the
outstanding voting securities" of such Portfolio as defined under the Investment
Company Act. The Agreement terminates automatically in the event of its
"assignment" as defined in the Investment Company Act.
The Administration Agreement provides that the Investment Manager will not be
liable for any error of judgment or of law, or for any loss suffered by a
Portfolio in connection with the matters to which such agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
Investment Manager's part in the performance of its obligations and duties, or
by reason of its reckless disregard of its obligations and duties under such
agreement.
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<PAGE>
The Glass-Steagall Act and other applicable laws generally prohibit federally
chartered or supervised banks from engaging in the business of underwriting,
selling or distributing securities. While the matter is not free from doubt, the
Investment Manager believes that such laws should not preclude the Investment
Manager from acting as administrator and investment manager to the Fund.
Accordingly, the Investment Manager under the Administration Agreement and the
Investment Management Agreement will only perform administrative and investment
management servicing functions. However, judicial and administrative decisions
or interpretations of such laws as well as changes in either state statutes or
regulations relating to the permissible activities of banks or their
subsidiaries or affiliates could prevent the Investment Manager from continuing
to perform all or a part of its administration or investment management
activities. If the Investment Manager were prohibited from so acting,
alternative means of continuing such services would be sought by the Board of
Directors of the Fund.
Transfer Agent and Custodian
The National Investor Services Corp. (also referred to as the "Transfer Agent"),
an affiliate of the Investment Manager, serves as transfer and dividend
disbursing agent for each Portfolio. For the services provided under the
Transfer Agency and Dividend Disbursing Agency Agreement, which include
furnishing periodic and year-end shareholder statements and confirmations of
purchases and sales, reporting share ownership, aggregating, processing and
recording purchases and redemptions of shares, processing dividend and
distribution payments, forwarding shareholder communications such as proxies,
shareholder reports, dividend notices and prospectuses to beneficial owners,
receiving, tabulating and transmitting proxies executed by beneficial owners and
sending year-end tax reporting to shareholders and the Internal Revenue Service,
the Transfer Agent is entitled to an annual fee, payable monthly, of .20 of 1%
of each Portfolio's average daily net assets.
The Transfer Agent may enter into sub-transfer agency and dividend disbursing
agency agreements with other persons to perform such services for compensation
from time to time.
Custodian. Pursuant to a Custodian Agreement, The Bank of New York acts as the
custodian of each of the Portfolio's assets.
DIVIDENDS AND TAXES
Dividends. On each day that the net asset value ("NAV") of a Portfolio is
determined, such Portfolio's net investment income will be declared at 4:00 p.m.
(Eastern time) as a daily dividend to shareholders of record as of such day's
calculation of NAV.
Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of a Portfolio consists of
accrued interest income plus or minus amortized discount or premium minus
accrued expenses. Expenses of each Portfolio are accrued each day.
B-18
<PAGE>
Because each Portfolio's income is entirely derived from interest or gains from
the sale of debt instruments, dividends from a Portfolio will not qualify for
the dividends received deduction available to corporate shareholders.
Distributions of income realized with respect to market discount will be made,
at least annually, as determined by the Board of Directors, to maintain each
Portfolio's net asset value at $1.00 per share.
Capital Gains Distribution. If a Portfolio realizes any net capital gains, such
gains will be distributed at least once during the year as determined by the
Board of Directors, to maintain its net asset value at $1.00 per share.
Short-term capital gains distributed by a Portfolio are taxable to shareholders
as ordinary income, not as capital gains. Any realized short-term capital losses
to the extent not offset by realized capital gains will be carried forward. It
is not anticipated that a Portfolio will realize any long-term capital gains,
but if it does so, these gains will be distributed annually.
Tax Status of the Fund. Each Portfolio intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its investment company taxable income and net realized gains,
if applicable, to shareholders. Therefore, it is not anticipated that any of the
Portfolios will be subject to the 4% excise tax applicable to regulated
investment companies that fail to satisfy certain distribution requirements.
Each Portfolio is treated as a separate entity from the other Portfolios for tax
purposes.
State and Local Tax Issues. Shareholders are urged to consult with their tax
advisers as to whether any of the dividends paid by the U.S. Government
Portfolio are exempt from state and local taxation. The exemption from state and
local income taxation does not preclude states from assessing other taxes on the
ownership of U.S. government securities whether such securities are held
directly or through the Fund.
Federal Tax Issues - Municipal Portfolio. Distributions from the Municipal
Portfolio will constitute exempt-interest dividends to the extent of the
Portfolio's tax-exempt interest income (net of expenses and amortized bond
premium). Exempt-interest dividends distributed to shareholders of the Municipal
Portfolio are excluded from gross income for federal income tax purposes.
However, shareholders required to file a federal income tax return will be
required to report the receipt of exempt-interest dividends on their returns.
Moreover, while exempt-interest dividends are excluded from gross income for
federal income tax purposes, they may be subject to alternative minimum tax
("AMT") in certain circumstances and may have other collateral tax consequences
as discussed below. Distributions by the Municipal Portfolio of any investment
company taxable income or of any short-term capital gains or market discount
will be taxable to shareholders.
Dividend distributions resulting from a recharacterization of gain from the sale
of bonds purchased with market discount are not considered income for purposes
of the Municipal Portfolio's policy of investing so that at least 80% of its
income is free from Federal income tax.
B-19
<PAGE>
AMT is imposed in addition to, but only to the extent it exceeds, the regular
tax and is computed at a maximum marginal rate of 28% for noncorporate taxpayers
and 20% for corporate taxpayers on the excess of the taxpayer's alternative
minimum taxable income ("AMTI") over an exemption amount. Exempt-interest
dividends derived from certain "private activity" municipal obligations issued
after August 7, 1986 will generally constitute an item of tax preference
includable in AMTI for both corporate and noncorporate taxpayers. Corporate
investors should note that 75% of the amount by which adjusted current earnings
(which includes all tax-exempt interest) exceeds the AMTI of the corporation
constitutes an upward adjustment for purposes of the corporate AMT.
Exempt-interest dividends must be taken into account in computing the portion,
if any, of social security or railroad retirement benefits that must be included
in an individual shareholder's gross income and subject to federal income tax.
Receipt of exempt-interest dividends may result in other collateral federal
income tax consequences to certain taxpayers. Prospective investors should
consult their own tax advisers as to such consequences.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for federal income tax purposes. Further, the Municipal
Portfolio may not be an appropriate investment for (i) persons who are
"substantial users" of facilities financed by industrial development bonds held
by the Municipal Portfolio or are "related persons" to such users; or (ii)
persons who are investing through a tax-exempt retirement plan, IRA or Keogh
Account.
The "Superfund Amendments and Reauthorization Act of 1986" ("SARA") imposes a
separate tax on corporations at a rate of 0.12 percent of the excess of such
corporation's "modified" AMTI over $2,000,000. A portion of tax-exempt interest,
including exempt-interest dividends from the Municipal Portfolio, may be
includable in modified AMTI. Corporate shareholders are advised to consult with
their tax advisers with respect to the consequences of SARA.
The Municipal Portfolio purchases municipal obligations based on opinions of
bond counsel regarding the federal income tax status of the obligations. These
opinions generally will be based on covenants by the issuers regarding
continuing compliance with federal tax requirements. If the issuer of an
obligation fails to comply with its covenant at any time, interest on the
obligation could become federally taxable, either prospectively or retroactively
to the date the obligation was issued.
Each of the Portfolios may invest in obligations such as zero coupon bonds,
issued with original issue discount ("OID") for federal income tax purposes.
Accrued OID constitutes income subject to the distribution requirements
applicable to regulated investment companies, although such income may not be
represented by any cash payment. Accordingly, it may be necessary for a
Portfolio to dispose of other assets in order to satisfy such distribution
requirements.
Other Tax Information. The information above, together with the information set
forth in the Prospectus, is only a summary of some of the federal tax
consequences generally affecting each Portfolio and its shareholders, and no
attempt has been made to present a detailed explanation of the
B-20
<PAGE>
tax treatment of each Portfolio or to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and local
taxes on Fund distributions, and shares may be subject to state and local
personal property taxes. Investors should consult their tax advisers to
determine whether a Portfolio is suitable to their particular tax situation.
Foreign shareholders should consult their tax advisers regarding foreign tax
consequences applicable to their purchase of Fund shares.
Independent Auditors and Reports to Shareholders. The Fund's independent
auditors, [______], whose address is [_______], audit and report on the Fund's
annual financial statements, review certain regulatory reports and the Fund's
federal income tax returns, and perform other professional accounting, auditing,
tax and advisory services when engaged to do so by the Fund.
SHARE PRICE CALCULATION
Each Portfolio values its portfolio instruments at amortized cost, which means
that they are valued at their acquisition cost, as adjusted for amortization of
premium or accretion of discount, rather than at current market value. The
amortized cost value of an instrument may be higher or lower than the price each
Portfolio would receive if it sold the instrument.
Valuing a Portfolio's instruments on the basis of amortized cost and use of the
term "money market fund" are permitted by Rule 2a-7. Each Portfolio must adhere
to certain conditions under Rule 2a-7.
The Board of Directors of the Fund oversees the Investment Manager's adherence
to SEC rules concerning money market funds, and has established procedures
designed to stabilize each Portfolio's NAV per share at $1.00. At such intervals
as they deem appropriate, the Board of Directors considers the extent to which
NAV calculated by using market valuations would deviate from $1.00 per share.
Market valuations are obtained by using actual quotations provided by market
makers, estimates of current market value, or values obtained from yield data
relating to classes of money market instruments published by reputable sources
at the mean between the bid and asked prices of the instruments. If a deviation
were to occur between the net asset value per share calculated by reference to
market values and a Portfolio's $1.00 per share net asset value, which the Board
of Directors of the Fund believed may result in material dilution or other
unfair results to shareholders, the directors have agreed promptly to consider
what corrective action they deem appropriate to eliminate or reduce, to the
extent reasonably practicable, the dilution or unfair results. Such corrective
action could include selling portfolio securities prior to maturity; withholding
dividends; redeeming shares in kind; establishing NAV by using available market
quotations; and such other measures as the directors may deem appropriate.
During periods of declining interest rates, each Portfolio's yield based on
amortized cost may be higher than the yield based on market valuations. Under
these circumstances, a shareholder of any Portfolio would be able to retain a
somewhat higher yield than would result if each Portfolio utilized
B-21
<PAGE>
market valuations to determine its NAV. The converse would apply in a period of
rising interest rates.
Net asset value is calculated by the Fund as to each Portfolio on each day that
the NYSE and the Custodian are open. Currently the NYSE is closed on weekends
and New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. In addition to these
holidays, the Custodian generally is closed on Martin Luther King, Jr. Day,
Veteran's Day and Columbus Day.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each Portfolio are sold at NAV only through selected financial
services firms, such as broker-dealers and banks ("service firms"). To purchase
shares, a prospective investor should contact his or her service firm. Service
firms provide varying arrangements for their clients with respect to the
purchase and redemption of Fund shares and the confirmation thereof. Such
service firms are responsible for the prompt transmission of orders to the Fund.
The Fund normally calculates the net asset value of each Portfolio as of 12:00
noon and 4:00 p.m. (Eastern time) each day that the NYSE and the bank which
serves as the Custodian are open. To the extent that portfolio securities are
traded in other markets on days when the NYSE or the Custodian are closed, a
Portfolio's net asset value may be affected on days when investors do not have
access to their service firms to purchase or redeem shares. In addition, trading
in some of a Portfolio's portfolio securities may not occur on days when the
Fund is open for business.
To sell shares of a Portfolio, shareholders should contact their service firm
for redemption instructions. Upon the Fund's or the Transfer Agent's receipt of
a redemption request from a service firm in acceptable form, shares will be
redeemed by the Fund at the next determined net asset value. Proceeds will
ordinarily be remitted to the service firm, or as directed by the service firm,
the same business day, but not later than seven calendar days after an order to
sell shares is received by the Fund or the Transfer Agent.
The Fund may suspend redemption rights and postpone payments at times when
trading on the NYSE is restricted, the NYSE is closed for any reason other than
its customary weekend or holiday closings, emergency circumstances as determined
by the SEC exist, or for such other circumstances as the SEC may permit.
PERFORMANCE
As reflected in the Prospectus, the historical performance calculation for a
Portfolio may be shown in the form of "yield," "effective yield" and, for the
Municipal Portfolio only, "tax equivalent yield" and "tax equivalent effective
yield." These various measures of performance are described below.
B-22
<PAGE>
Each Portfolio's yield is computed in accordance with a standardized method
prescribed by rules of the SEC. Under that method, the yield quotation is based
on a seven-day period and is computed for each Portfolio as follows: the first
calculation is net investment income per share for the period, which is accrued
interest on portfolio securities, plus or minus amortized discount or premium
(excluding market discount for the Municipal Portfolio), less accrued expenses.
This number is then divided by the price per share (expected to remain constant
at $1.00) at the beginning of the period ("base period return"). The result is
then divided by 7 and multiplied by 365 and the resulting yield figure is
carried to the nearest one-hundredth of one percent. Realized capital gains or
losses and unrealized appreciation or depreciation of investments are not
included in the calculation.
Each Portfolio's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for effective yield is:
[(base period return + 1)365/7] - 1.
The tax equivalent yield of the shares of the Municipal Portfolio is computed by
dividing that portion of the yield of the Portfolio (computed as described
above) that is tax-exempt by an amount equal to one minus the stated federal
income tax rate (normally assumed to be the maximum applicable marginal tax
bracket rate) and adding the result to that portion, if any, of the yield of the
Portfolio that is not tax-exempt.
Tax equivalent effective yield is computed in the same manner as tax equivalent
yield, except that effective yield is substituted for yield in the calculation.
Each Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in that Portfolio
will actually yield for any given future period. Actual yields will depend not
only on changes in interest rates on money market instruments during the period
in which the investment in the Portfolio is held, but also on such matters as
expenses of that Portfolio.
As indicated in the Prospectus (see "Performance"), the performance of the
Fund's Portfolios may be compared to that of other money market mutual funds
tracked by Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm that ranks mutual funds by overall performance,
investment objectives and assets. Lipper performance calculations include the
reinvestment of all capital gain and income dividends for the periods covered by
the calculations. A Portfolio's performance also may be compared to other money
market funds as reported by IBC/Donoghue's Money Fund Report(R), a reporting
service on money market funds. As reported by Money Portfolio Report, all
investment results represent total return (annualized results for the period net
of management fees and expenses) and one year investment results are effective
annual yields assuming reinvestment of dividends.
B-23
<PAGE>
BANK RATE MONITOR(TM), N. Palm Beach, Florida 33408, a financial reporting
service which each week publishes average rates of bank and thrift institution
money market deposit accounts and interest bearing checking accounts, reports
results for the BANK RATE MONITOR National Index. The rates published by the
BANK RATE MONITOR National Index are averages of the personal account rates
offered on the Wednesday prior to the date of publication by 100 of the leading
bank and thrift institutions in the ten largest Consolidated Metropolitan
Statistical Areas. Account minimums range upward from $2,000 in each institution
and compounding methods vary. Interest bearing checking accounts generally offer
unlimited checking while money market deposit accounts generally restrict the
number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Bank products
represent a taxable alternative income producing product. Bank and thrift
institution account deposits may be insured. Shareholder accounts in the Fund
are not insured. Bank savings accounts compete with money market mutual fund
products with respect to certain liquidity features but may not offer all of the
features available from a money market mutual fund, such as checkwriting. Bank
checking accounts normally do not pay interest but compete with money market
mutual fund products with respect to certain liquidity features (e.g., the
ability to write checks against the account). Bank certificates of deposit may
offer fixed or variable rates for a set term. (Normally, a variety of terms are
available.) Withdrawal of these deposits prior to maturity will normally be
subject to a penalty. In contrast, shares of a Portfolio are redeemable at the
net asset value next determined (normally, $1.00 per share) after a request is
received without charge.
Investors may also want to compare a Portfolio's performance to that of United
States Treasury Bills or Notes because such instruments represent alternative
income producing products. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the United States Treasury. The market value of such instruments will generally
fluctuate inversely with interest rates prior to maturity and will equal par
value at maturity. Generally, the values of obligations with shorter maturities
will fluctuate less than those with longer maturities. A Portfolio's yield will
fluctuate.
Tax-Exempt versus Taxable Yield. Investors may want to determine which
investment -- tax exempt or taxable -- will provide a higher after-tax return.
To determine the tax equivalent yield, simply divide the yield from the
tax-exempt investment by an amount equal to 1 minus the investor's marginal
federal income tax rate. The table below is provided for investors' convenience
in making this calculation for selected tax-exempt yields and taxable income
levels. These yields are presented for purposes of illustration only and are not
representative of any yield that the Municipal Portfolio may generate. This
table is based upon current law as to the 1996 tax rate schedules.
B-24
<PAGE>
================================================================================
Single Taxpayer Married Filing Investor's
Joint Return Marginal
Federal A Tax-Exempt
Tax Rate Yield of:
2% 3% 4% 5% 6% 7%
Taxable Income Taxable Income
Is Equivalent to a Taxable
Yield of:
================================================================================
$24,001 - $58,150 $40,101 - $96,900 28.0% 2.8 4.2 5.6 6.9 8.3 9.7
$58,151 - $121,300 $96,901 - $147,700 31.0% 2.9 4.3 5.8 7.2 8.7 10.1
$121,301 - $263,750 $147,701 - $263,750 36.0% 3.1 4.7 6.3 7.8 9.4 10.9
$263,751 or greater $263,751 or greater 39.6% 3.3 5.0 6.6 8.3 9.9 11.6
================================================================================
SHAREHOLDER RIGHTS
The Fund is an open-end, diversified management investment company. The Fund was
organized as a Maryland corporation on August 19, 1996.
The shares of the Fund are divided into three Portfolios (or series)
constituting separate portfolios of investments, with various investment
objectives and policies. The Fund has currently authorized one class of shares
to be issued by each Portfolio (the "National Investors Class").
The Board of Directors may authorize the issuance of additional series or
classes of shares. The Board of Directors anticipates that it will from time to
time, classify or reclassify issued or any unissued shares to create one or more
new series or classes of shares in addition to the existing series or class
setting or changing in any one or more respects the designations, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption, of such
classes; provided, however, that any such classification or reclassification
shall not substantially adversely affect the rights of holders of issued shares.
Any such classification or reclassification will comply with the provisions of
the Investment Company Act.
Shares of the Fund have equal rights with respect to voting, except that the
holders of shares of a particular Portfolio or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such
Portfolio or class. For example, holders of a particular Portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such Portfolio. Shareholders of the Portfolios
do not have cumulative voting rights, and therefore the holders of more than 50%
of the outstanding shares of the Fund voting together for the election of
directors may elect all of the members of the Board of Directors. In such event,
the remaining holders cannot elect any members of the Board of Directors.
B-25
<PAGE>
The Articles of Incorporation permit the directors to issue the following number
of full and fractional shares, par value $.0001, of the Portfolios: 60 billion
shares of the National Investors Cash Management Fund Money Market Portfolio; 20
billion shares of the National Investors Cash Management Fund U.S. Government
Portfolio; and 20 billion shares of the National Investors Cash Management Fund
Municipal Portfolio. Each Portfolio share is entitled to participate pro rata in
the dividends and distributions from that Portfolio.
As described in each Prospectus, the Fund will not normally hold annual
shareholders' meetings. Under Maryland law and the Fund's By-Laws, an annual
meeting is not required to be held in any year in which the election of
directors is not required to be acted upon under the Investment Company Act. The
Fund's By-Laws provide that special meetings of shareholders, unless otherwise
provided by law or by the Articles of Incorporation, may be called for any
purpose or purposes by a majority of the Board of Directors, the Chairman of the
Board, the President, or the written request of the holders of at least 10% of
the outstanding shares of capital stock of the corporation entitled to be voted
at such meeting to the extent permitted by Maryland law.
Each director serves until the next election of directors and until the election
and qualification of his successor or until such director sooner dies, resigns,
retires or is removed by the affirmative vote of a majority of the outstanding
voting securities of the Fund. In accordance with the Investment Company Act (i)
the Fund will hold a shareholder meeting for the election of directors at such
time as less than a majority of the directors have been elected by shareholders,
and (ii) if, as a result of a vacancy in the Board of Directors, less than
two-thirds of the directors have been elected by the shareholders, that vacancy
will be filled only by a vote of the shareholders.
B-26
<PAGE>
ANNEX -- RATINGS OF INVESTMENTS
STANDARD AND POOR'S RATINGS GROUP AND
MOODY'S INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATINGS
Commercial paper rated by Standard & Poor's Ratings Group has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of a public interest questions and preparations to meet such obligations.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated Prime-1, 2 or 3.
MIG-1 AND MIG-2 MUNICIPAL NOTES
Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade ("MIG"). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S RATINGS GROUP BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Ratings Group to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
B-A1
<PAGE>
AA. Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
B-A2
<PAGE>
Financial Statements
B-A3
<PAGE>
PART C
OTHER INFORMATION
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) Contained in Part A, the Prospectus
None
(2) Contained in Part B, the Statement of Additional Information Statement
of Assets and Liabilities as of [January __,] 1997*
(b) Exhibits
(1)--Articles of Incorporation of Registrant, as amended to date.
(2)--By-Laws of Registrant, as amended to date.
(3)--Inapplicable
(4)--Instrument defining rights of Shareholders (Incorporated by Reference
to Exhibits 1 and 2 above).
(5)--Investment Management Agreement*
(6) (a)--Distribution Agreement*
(b)--Selling and Servicing Agreement*
(7)--Inapplicable
(8)--Form of Custody Agreement*
(9) (a)--Transfer Agency and Dividend Disbursing Agency Agreement*
(b)--Administration Agreement*
(c)--Subadministration Agreement*
(10)--Opinion and Consent of Shereff, Friedman, Hoffman and Goodman, LLP as
to legality of the securities being registered*
C-1
<PAGE>
(11)--Consent of Independent Auditors*
(12)--Inapplicable
(13)--Subscription Agreement between Registrant and FDI Distribution
Services, Inc.*
(14)--Model Plan to Establish Retirement Plans*
(15)--12b-1 Distribution Plan*
(16)--Inapplicable
(17)--Inapplicable
(18)--Inapplicable
- - - ----------
* To be filed by amendment.
Item 25. Persons Controlled by or under Common Control with Registrant.
None
Item 26. Number of Holders of Securities.
As of ________________, 1996, the number of record holders of each class of
securities of the Registrant were as follows:
Title of Series Number of Record Holders
- - - ---------------------------------- -------------------------------------
Money Market Portfolio 1
U.S. Government Portfolio 1
Municipal Portfolio 1
C-2
<PAGE>
Item 27. Indemnification.
Section 2-418 of the General Corporation Law of the State of Maryland, Article
IX of the Registrant's Articles of Incorporation, filed as Exhibit (b)(1)
hereto, Article V of the Registrant's ByLaws, filed as Exhibit (b)(2) hereto,
and the Investment Management Agreement, a form of which has been filed as
Exhibit 5 hereto, provide for indemnification.
The Articles of Incorporation and By-Laws provide that to the fullest extent
that limitations on the liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of the Registrant shall
have any liability to the Registrant or to its shareholders for damages.
The Articles of Incorporation and By-Laws further provide that the Registrant
shall indemnify and advance expenses to its currently acting and its former
directors to the fullest extent that indemnification of directors is permitted
by the Maryland General Corporation Law and the Investment Company Act; that the
Registrant shall indemnify and advance expenses to its officers to the same
extent as its directors and to such further extent as is consistent with
applicable law. The Board of Directors may, through by-law, resolution or
agreement, make further provisions for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland General
Corporation Law. However, nothing in the Articles of Incorporation or By-Laws
protects any director or officer of the Registrant against any liability to the
Registrant or to its shareholders to which he or she would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
Section 2-418 of the General Corporation Law of the State of Maryland provides
that a corporation may indemnify any director made a party to any proceeding by
reason of service in that capacity unless it is established that (i) the act or
omission of the director was material to the matter giving rise to the
proceeding; and (a) was committed in bad faith; or (b) was the result of active
and deliberate dishonesty; or (ii) the director actually received an improper
personal benefit in money, property, or services; or (iii) in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. Section 2-418 permits indemnification to be made
against judgments, penalties, fines, settlements, and reasonable expenses
actually incurred by the director in connection with the proceeding; however, if
the proceeding was one by or in the right of the corporation, indemnification
may not be made in respect of any proceeding in which the director shall have
been adjudged to be liable to the corporation. A director may not be indemnified
under Section 2-418 in respect of any proceeding charging improper personal
benefit to the director, whether or not involving action in the director's
official capacity, in which the director was adjudged to be liable on the basis
that personal benefit was improperly received.
Unless limited by the Registrant's charter, a director who has been successful,
on the merits or otherwise, in the defense of any proceeding referred to above
shall be indemnified against any reasonable expenses incurred by the director in
connection with the proceeding. Reasonable expenses incurred by a director who
is a party to a proceeding may be paid or reimbursed by the
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<PAGE>
corporation in advance of the final disposition of the proceeding upon receipt
by the corporation of (i) a written affirmation by the director of the
director's good faith belief that the standard of conduct necessary for
indemnification by the corporation has been met; and (ii) a written undertaking
by or on behalf of the director to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
The indemnification and advancement of expenses provided or authorized by
Section 2-418 may not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director may be entitled under the
charter, the bylaws, a resolution of stockholders or directors, an agreement or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office.
Under Section 2-418, a corporation may indemnify and advance expenses to an
officer, employee, or agent of the corporation to the same extent that it may
indemnify directors and a corporation, in addition, may indemnify and advance
expenses to an officer, employee, or agent who is not a director to such further
extent, consistent with law, as may be provided by its charter, bylaws, general
or specific action of its board of directors or contract.
Under Section 2-418, a corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan against any liability asserted against and incurred by such person
in any such capacity or arising out of such person's position, whether or not
the corporation would have the power to indemnify against liability under the
provisions of such Section. A corporation also may provide similar protection,
including a trust fund, letter of credit, or surety bond, not inconsistent with
the foregoing. The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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Item 28. Business and Other Connections of Investment Adviser.
The following persons are the directors and officers of the Investment Manager:
DENNIS C. BORECKI, Director, President and Chief Operating Officer. Mr. Borecki
served as Executive Vice President in charge of operations, systems,
administration and customer service of Reich & Tang from 1990 to July 1995.
KENNETH C. EBBITT, Chairman and Chief Executive Officer. Mr. Ebbitt served as
Executive Vice President of Reich & Tang and Chairman of Reich and Tang's
Cortland Funds from 1990 to July 1995.
DAVID HARTMAN, Senior Vice President and Chief Investment Officer. From February
1995 through August 1995, Mr. Hartman served as Senior Vice President and Senior
Portfolio Manager of Fixed Income Separate Accounts at Mitchell Hutchins - Paine
Webber. Mr. Hartman also served in similar capacities for Kidder Peabody & Co.
from 1983 to 1995. Prior to that, Mr. Hartman served as Vice President at
Federated Investors Inc. from 1976 to 1983, and as a Senior Auditor at Arthur
Anderson & Co. from 1967 to 1976.
MICHELE R. TEICHNER, Senior Vice President. From August 1994 to July 1996, Ms.
Teichner served as President of Mutual Fund Training & Consulting, Inc. From
July 1993 to July 1994, Ms. Teichner served as Assistant Vice President of
Concord Financial Group, Inc. From 1987 to 1992, Ms. Teichner served as
Assistant Vice President of Dillon, Read Capital, Inc. and was responsible for
the administration, operations and compliance for mutual funds and the
investment advisor.
RICHARD H. NEIMAN, Director and Secretary. Mr. Neiman has served as Executive
Vice President, General Counsel, Director and Secretary of Waterhouse Investor
Services, Inc. since July 1994. Mr. Neiman also serves in similar capacities for
Waterhouse Securities, Inc. Mr. Neiman has served as General Counsel, Director
and Secretary of Waterhouse National Bank since July 1994. Prior to that, Mr.
Neiman served as Director of Price Waterhouse's Regulatory Advisory Practice
from January 1990 to June 1994.
FRANK J. PETRILLI, Director. Mr. Petrilli has served as President, Chief
Operating Officer and a Director of Waterhouse Investor Services, Inc. since
February 1995. Mr. Petrilli has served as a Director of Waterhouse National Bank
since March 1995. Prior to that, Mr. Petrilli served as President and Chief
Operating Officer of American Express Centurion Bank from May 1993 to January
1995 and Chief Financial Officer from January 1991 to May 1993.
BERNARD SIEGEL, Senior Vice President, Chief Financial Officer and Treasurer.
Mr. Siegel has served as Executive Vice President--Finance of Waterhouse
Securities, Inc. since February 1994. He has served as Executive Vice President
- - - - Finance for Waterhouse Securities and Senior Vice President and Chief
Financial Officer of Waterhouse Investor Services, Inc. since November 1994.
C-5
<PAGE>
Prior to that, Mr. Siegel served in a number of executive capacities, including
Executive Vice President, Chief Operating Officer and Chief Financial Officer at
Fleet Brokerage Services, Inc. from 1987 to 1993.
LAWRENCE M. WATERHOUSE, Jr., Director. Mr. Waterhouse has served as Chief
Executive Officer and Chairman of Waterhouse Investor Services, Inc. since its
inception in 1987. Mr. Waterhouse is the founder of Waterhouse Securities, Inc.
and has served as Chief Executive Officer since its inception in March 1979. Mr.
Waterhouse has also served as the Chairman of the Board and Chief Executive
Officer of Waterhouse Nicoll & Associates, Inc. and L.M. Waterhouse & Co. since
April 1987. Mr. Waterhouse also serves as Chairman of Waterhouse National Bank
since July 1994.
Item 29. Principal Underwriters.
(a) Funds Distributor, Inc. (the "Distributor") acts as principal underwriter
and distributor of the Registrant's shares. The Distributor currently acts as a
principal underwriter, depositor or investment adviser for the following other
investment companies:
Fremont Mutual Funds, Inc.
HT Insight Funds, Inc., d/b/a Harris Insight Funds
Harris Insight Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
The Panagora Institutional Funds
BJB Investment Funds
The Skyline Funds
Foreign Fund, Inc.
The JPM Advisors Funds
The JPM Institutional Funds
The Pierpont Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
St. Clair Money Market Fund
Waterhouse Investors Cash Management Fund, Inc.
(b) The information required by this Item 29(b) with respect to each director,
officer, or partner of FDI is incorporated by reference to Schedule A of Form BD
filed by FDI with the Securities and Exchange Commission pursuant to the
Securities Act of 1934 (File No. 8-20518).
(c) Not applicable.
C-6
<PAGE>
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained pursuant to
Section 31(a) of the Investment Company Act and the Rules thereunder are
maintained at the offices of the Registrant, the offices of the Registrant's
Investment Adviser and Administrator, Waterhouse Asset Management, Inc., 50 Main
Street, White Plains, New York 10606 and 100 Wall Street, New York, New York
10005, or (i) in the case of records concerning custodial functions, at the
offices of the Registrant's Custodian, The Bank of New York, 48 Wall Street, New
York, New York 10286; (ii) in the case of records concerning transfer agency
functions, at the offices of the Registrant's transfer agent, National Investor
Services Corp., 55 Water Street, New York, New York 10041; (iii) in the case of
records concerning distribution, administration and certain other functions, at
the offices of the Fund's Distributor and Sub-Administrator, Funds Distributor,
Inc., 60 State Street, Suite 1300, Boston, Massachusetts 02109; and (iv) in the
case of records concerning fund accounting functions, at the offices of the
Fund's fund accountant, MGF Service Corp., 312 Walnut Street, Cincinnati, Ohio
45202.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) If requested to do so by the holders of at least 10% of the Fund's
outstanding shares, the Fund will call a meeting of shareholders for the purpose
of voting upon the removal of a Director or Directors and the Fund will assist
communications with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
(b) Registrant hereby undertakes to file a post-effective amendment, using
reasonably current financial statements which need not be certified, within four
to six months from the effective date of Registrant's Registration Statement
under the Securities Act of 1933, as amended.
(c) Not applicable.
(d) Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a director or directors and to
assist in communications with other shareholders, if requested to do so by the
holders of at least 10% of Registrant's then-outstanding shares.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of New York, County of New York, and State of New York the 21st day of
October, 1996.
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
Registrant
By: /s/ John E. Pelletier
---------------------
John E. Pelletier,
President (Principal
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below on October 21, 1996 on behalf of the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ John E. Pelletier President (Principal October 21, 1996
------------------------------ Executive Officer) and
John E. Pelletier Director
/s/ Richard W. Ingram Vice President, October 21, 1996
------------------------------ Treasurer (Principal
Richard W. Ingram Financial and
Accounting Officer)
/s/ Christopher J. Kelley Vice President, October 21, 1996
------------------------------
Christopher J. Kelley Secretary
/s/ James F. Rittinger Director October 21, 1996
------------------------------
James F. Rittinger
/s/ Anthony J. Pace Director October 21, 1996
------------------------------
Anthony J. Pace
C-8
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INDEX TO EXHIBITS
(b)(1)--Articles of Incorporation, as amended to date
(b)(2)--By-Laws, as amended to date
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<PAGE>
ARTICLES OF INCORPORATION
OF
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
ARTICLE I
THE UNDERSIGNED, Valerie A. Zondorak, Esq. whose address is 919 Third
Avenue, New York, New York 10169, being at least eighteen years of age, does
hereby act as an incorporator, under and by virtue of the General Laws of the
State of Maryland authorizing the formation of corporations and with the
intention of forming a corporation.
ARTICLE II
NAME
The name of the corporation is National Investors Cash Management Fund,
Inc. (herein called the "Corporation").
ARTICLE III
PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed, the powers,
rights and privileges that the Corporation shall be authorized to exercise and
enjoy, and the business or objects to be transacted, carried on and promoted by
it are as follows:
(1) To conduct and carry on the business of an investment company of the
management type.
<PAGE>
(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such amounts and
on such terms and conditions for such purposes and for such amount or kind of
consideration now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation, as its Board of Directors may
determine; provided, however, that the value of the consideration per share to
be received by the Corporation upon the sale or other disposition of any shares
of its capital stock shall not be less than the net asset value per share of
such capital stock outstanding at the time of such event.
(4) To exchange, classify, reclassify, change the designation of, convert,
rename, redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its issued or unissued capital stock of any class
or series, as its Board of Directors may determine, in any manner and to the
extent now or hereafter permitted by the Investment Company Act of 1940, as
amended (the "Investment Company Act"), the General Laws of the State of
Maryland and by these Articles of Incorporation.
(5) To do any and all such further acts or things and to exercise any and
all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of
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Maryland now or hereafter in force, and the enumeration of the foregoing
purposes, powers, rights and privileges shall not be deemed to exclude any
powers, rights or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation within
the State of Maryland is 32 South Street, Baltimore, Maryland 21202. The
resident agent of the Corporation within the State of Maryland is The
Corporation Trust Incorporated, whose address is 32 South Street, Baltimore,
Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares which the Corporation has authority to issue
is one hundred billion (100,000,000,000) shares of common stock (par value
$0.0001 per share), amounting in aggregate par value to ten million dollars
($10,000,000.00). All of such shares of common stock are initially classified
into three separate series to be known as "Money Market Portfolio," "U.S.
Government Portfolio," and "Municipal Portfolio." Each such series shall be
divided initially as follows: Money Market Portfolio shall consist of sixty
billion (60,000,000,000) shares; U.S. Government Portfolio shall consist of
twenty billion (20,000,000,000) shares, and Municipal Portfolio shall consist of
twenty billion (20,000,000,000) shares. All of the shares of each such series
are initially classified as a single class.
3
<PAGE>
(2) The Board of Directors may classify and reclassify any unissued shares
of stock (whether or not such shares have been previously classified or
reclassified) into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects
the designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of or rights to require redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series.
(3) The Board of Directors may classify and reclassify any issued shares of
stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects
the designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of or rights to require redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series; provided, however, that any
such classification or reclassification shall not substantially adversely affect
the rights of holders of such issued shares.
(4) Each series of stock of the Corporation shall relate to a separate
portfolio of investments. All shares of stock within each series shall be
identical except that there may be variations among the different series,
including, without limitation, as to the purchase price, determination of net
asset value, designations, preferences, conversion or other rights, voting
powers, restrictions, allocations of expenses, special and relative rights and
limitations as to
4
<PAGE>
dividends and on liquidation, qualifications or terms or conditions of or rights
to require redemption of such shares of stock.
(5) Except as the Board of Directors otherwise may provide when classifying
or reclassifying any shares of stock into separate series, all consideration
received by the Corporation for the issue or sale of shares of stock of a
particular series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds received
thereon, including any proceeds derived from the sale, exchange or liquidation
of such assets, any funds or payments derived from any reinvestment of such
proceeds, and any assets, income, earnings, profits, and proceeds thereof, funds
or payments that are not readily identifiable as belonging to any particular
series ("General Assets") allocated to a series, shall constitute assets of that
series, in contrast to other series (subject only to the rights of creditors)
and are herein referred to as assets "belonging to" that series. Except as
herein expressly provided, any General Assets shall be allocated by or under the
supervision of the Board of Directors to and among any one or more of the series
established and designated from time to time, in such manner and on such basis
as the Board of Directors, in its sole discretion, deems fair and equitable.
Such decisions by the Board of Directors shall be final and conclusive.
(6) The assets belonging to each series of stock shall be charged with the
liabilities of the Corporation in respect of that series and with all expenses,
costs, charges, and reserves attributable to that series. Such liabilities,
expenses, costs, charges, and reserves, together with any liabilities, expenses,
costs, charges, or reserves of the Corporation that are not readily identifiable
as belonging to any particular series ("General Liabilities") allocated to that
series, shall constitute the liabilities of that series, in contrast to other
series, and are herein
5
<PAGE>
referred to as "belonging to" that series. Except as herein expressly provided,
any General Liabilities shall be allocated by or under the supervision of the
Board of Directors to and among any one or more of the series established and
designated from time to time, in such manner and on such basis as the Board of
Directors, in its sole discretion, deems fair and equitable. Such decisions by
the Board of Directors shall be final and conclusive.
(7) Expenses related to the distribution of, and other identified expenses
that should properly be allocated to, the shares of a particular class of stock
of any series may be charged to and borne solely by such class and the bearing
of expenses solely by a class of stock of any series may be appropriately
reflected (in a manner determined by the Board of Directors) and cause
differences in the net asset value attributable to, and the dividend, redemption
and liquidation rights of, the shares of each class of stock of the series.
(8) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary thereto, the holders of each class or
series of stock shall be entitled to dividends and distributions in such amounts
and at such times as may be determined by the Board of Directors, and the
dividends and distributions paid with respect to the various classes or series
of stock may vary among such classes and series. Dividends and distributions
with respect to a series may be declared or paid only out of the net assets
belonging to that series.
(9) Unless otherwise expressly provided in the charter of the Corporation,
including those matters set forth in Article III, Section 4 hereof and including
any Articles Supplementary thereto, on each matter submitted to a vote of
stockholders, each holder of a share of stock of the Corporation shall be
entitled to one vote for each share standing in such holder's name on the books
of the Corporation, irrespective of the class or series thereof, and all shares
of
6
<PAGE>
all classes and series shall vote together as a single class; provided, however,
that (a) as to any matter with respect to which a separate vote of any class or
series is required by the Investment Company Act, or any rules, regulations or
orders issued thereunder, or by the Maryland General Corporation Law, such
requirement as to a separate vote by that class or series shall apply in lieu of
a general vote of all classes and series as described above, (b) in the event
that the separate vote requirements referred to in (a) above apply with respect
to one or more classes or series, then, subject to paragraph (c) below, the
shares of all other classes and series not entitled to a separate class vote
shall vote as a single class, and (c) as to any matter which does not affect the
interest of a particular class or series, such class or series shall not be
entitled to any vote and only the holders of shares of the affected classes and
series, if any, shall be entitled to vote.
(10) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary thereto, subject to compliance with the
requirements of the Investment Company Act, the Board of Directors shall have
the authority to provide that holders of shares of any class or series shall
have the right to convert or exchange said shares into shares of one or more
other classes or series of shares in accordance with such requirements and
procedures as may be established by the Board of Directors.
(11) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary thereto, in the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of all classes and series of stock of the Corporation shall be
entitled, after payment or provision for payment of the debts and other
liabilities of the Corporation, to share ratably in the remaining net assets of
the Corporation; provided, however, that so long as the stock of the Corporation
shall be classified or
7
<PAGE>
reclassified into series, holders of any shares of stock within such series
shall be entitled to share ratably (after taking into account any expenses
attributable to any separate classes of such series) out of the assets belonging
to such series.
(12) Any reference to "shares," "stock" or "shares of stock" in these
Articles of Incorporation shall be deemed to refer, unless the context otherwise
requires, to the shares of each separate class and/or series. As used in the
charter of the Corporation, the terms "charter" and "Articles of Incorporation"
shall mean and include these Articles of Incorporation as amended, supplemented
and restated from time to time whether by Articles of Amendment, Articles
Supplementary, Articles of Restatement or otherwise.
ARTICLE VI
REDEMPTION
(1) Each holder of shares of stock of the Corporation shall be entitled to
require the Corporation to redeem all or any part of the shares of stock of the
Corporation standing in the name of such holder on the books of the Corporation,
and all shares of stock issued by the Corporation shall be subject to redemption
by the Corporation, at the redemption price of such shares as in effect from
time to time as may be determined by the Board of Directors of the Corporation
in accordance with the provisions hereof, subject to the right of the Board of
Directors of the Corporation to suspend the right of redemption of shares of
stock of the Corporation or postpone the date of payment of such redemption
price in accordance with the provisions of applicable law.
8
<PAGE>
(2) All shares of stock of the Corporation shall be redeemable at the
option of the Corporation. The Board of Directors may by resolution from time to
time authorize the Corporation to require the redemption of all or any part of
the outstanding shares of any class or series upon such terms and conditions as
the Board of Directors, in its discretion, shall deem advisable, and upon the
sending of written notice thereof to each holder whose shares are to be
redeemed.
(3) The redemption price of shares of stock of the Corporation shall be the
net asset value thereof as determined by the Board of Directors of the
Corporation or under its direction from time to time in accordance with the
provisions of applicable law, less such redemption or other charge, if any, as
may be fixed by the Board of Directors of the Corporation. Payment of the
redemption price shall be made by the Corporation at such time and in such
manner as may be determined from time to time by the Board of Directors of the
Corporation in accordance with the provisions of applicable law.
ARTICLE VII
DETERMINATION BINDING
Any determination made in good faith and, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
direction of the Board of Directors, as to the amount of the assets, debts,
obligations or liabilities of the Corporation (or of any class or series
thereof), as to the amount of net income from dividends and interest for any
period or amounts at any time legally available for the payment of dividends, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or
9
<PAGE>
purpose for creating such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the price of any security or other asset owned or held by the
Corporation (or any series thereof), as to the number of shares of the
Corporation (or any class or series thereof) outstanding, as to the estimated
expense to the Corporation (or any class or series thereof) in connection with
purchases of its shares, as to the ability to liquidate securities in an orderly
fashion, or as to any other matters, including, but not limited to, those
relating to the issue, sale, purchase and/or other acquisition or disposition of
securities or shares of the Corporation (or any class or series thereof) shall
be final and conclusive, and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of the Corporation
(and any class or series thereof) are issued and sold on the condition and
understanding, evidenced by acceptance of certificates for such shares by, or
confirmation of such shares being held for the account of, any shareholder, that
any and all determinations shall be binding as aforesaid. No provision of these
Articles of Incorporation shall be effective to require a waiver of compliance
with any provision of the Securities Act of 1933, as amended, or the Investment
Company Act, or any valid rule, regulation or order of the Securities and
Exchange Commission thereunder.
10
<PAGE>
ARTICLE VIII
PROVISIONS FOR DEFINING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF
THE DIRECTORS AND STOCKHOLDERS
In furtherance and not in limitation of the powers conferred by the laws of
the State of Maryland the following provisions are hereby adopted for the
purpose of defining and regulating the powers of the Corporation and of the
directors and shareholders.
(1) The Board of Directors of the Corporation is hereby empowered to
authorize, without shareholder approval, the issuance and sale from time to time
of shares of stock of the Corporation of any class or series, whether now or
hereafter authorized, in each case upon such terms and conditions and for such
consideration as such Board of Directors may deem advisable, subject to such
limitations as are contained in these Articles of Incorporation, the By-Laws of
the Corporation, the laws of the State of Maryland, and the Investment Company
Act.
(2) The Corporation may issue fractional shares of stock, which shall carry
proportionately to the respective fractions represented thereby all the rights
of a whole share, including, without limitation, the right to vote and the right
to receive dividends, provided, however, that the Corporation shall not be
required to issue share certificates for such fractional shares.
(3) No holder of stock of the Corporation shall, as such holder, have any
preemptive right to purchase or subscribe for any shares of the stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by the Articles of
Incorporation, or out of any shares of the stock of the Corporation
11
<PAGE>
of any class or series acquired by it after the issue thereof, or otherwise)
other than such right, if any, as the Board of Directors, in its discretion, may
determine.
(4) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the charter and By-Laws of the
Corporation.
(5) Except as required by law, the holders of stock of the Corporation
shall have only such right to inspect the records, documents, accounts and books
of the Corporation as may be granted by the Board of Directors of the
Corporation.
(6) Notwithstanding any provisions of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or
series of stock of the Corporation (or any class or series entitled to vote
thereon as a separate class or series) to take or authorize any action, the
Corporation is hereby authorized (subject to the requirements of the Investment
Company Act, or any rules, regulations and orders issued thereunder) to take
such action upon the concurrence of a majority of the aggregate number of shares
of stock of the Corporation entitled to vote thereon (or a majority of the
aggregate number of shares of a class or series entitled to vote thereon as a
separate class or series).
(7) The presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast shall constitute a quorum at any
meeting of stockholders, except with respect to any matter which requires
approval by a separate vote of one or more classes or series of stock, in which
case the presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast by each class or series entitled
to vote as a separate class or series shall constitute a quorum.
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(8) The Corporation reserves the right from time to time to amend, alter or
repeal any provision of these Articles of Incorporation, including, without
limitation, in any manner now or hereafter prescribed by statute, including any
amendment which alters the contract rights, as expressly set forth in the
charter, of any outstanding stock and substantially adversely affects the
stockholder's rights, and all rights conferred upon stockholders herein are
granted subject to this reservation.
(9) The Board of Directors may make, alter and repeal the By-Laws of the
Corporation, except as such power may otherwise be limited in the By-Laws.
ARTICLE IX
INDEMNIFICATION AND LIMITATION OF LIABILITY
(1) Subject to any limitations imposed by the Investment Company Act, and
to the maximum extent permitted by the General Laws of the State of Maryland
from time to time in effect, the Corporation shall indemnify its currently
acting and its former directors and officers, whether serving the Corporation or
at its request any other entity, including the advance of expenses under the
procedures and to the full extent permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions, and is
expressly empowered to adopt, approve and amend from time to time such By-Laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. Neither the amendment
nor repeal of this Article IX, nor the adoption or amendment of any other
provision of these Articles of
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Incorporation or the By-Laws of the Corporation inconsistent with this Article,
shall apply to or affect in any respect the rights of indemnification provided
hereunder with respect to acts or omissions occurring prior to such amendment,
repeal or adoption.
(2) Subject to any limitation imposed by the Investment Company Act, to the
maximum extent permitted by the General Laws of the State of Maryland from time
to time in effect, no director or officer of the Corporation shall be liable to
the Corporation or its stockholders for money damages. Neither the amendment of
these Articles of Incorporation nor the repeal of any provision hereof, shall
limit or eliminate the benefits provided to directors and officers under this
provision in connection with any act or omission that occurred prior to such
amendment or repeal.
(3) Nothing in these Articles of Incorporation shall be construed to
protect any director or officer of the Corporation against any liability to the
Corporation or its shareholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
ARTICLE X
DIRECTORS
The number of directors of the Corporation shall be three (3), which number
may be increased or decreased pursuant to the By-Laws of the Corporation, but
shall never be less than the number prescribed by the Maryland General
Corporation Law. The names of the
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persons who shall act as directors of the Corporation until the first annual
meeting of shareholders or until their successors are duly elected and qualify
are:
James F. Rittinger
Anthony J. Pace
John E. Pelletier
ARTICLE XI
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, the undersigned incorporator of National Investors Cash
Management Fund, Inc. hereby executes the foregoing Articles of Incorporation,
acknowledges the same to be her act and that to the best of her knowledge, the
matters and facts set forth herein are true in all material respects and that
this statement is made under the penalties of perjury.
Dated: August 16, 1996
/s/ Valerie A. Zondorak
-----------------------------
Valerie A. Zondorak
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NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
National Investors Cash Management Fund, Inc., a Maryland corporation
having its principal Maryland office at c/o The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202 (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by deleting the
last sentence of Article V, Section 1 of the Articles of Incorporation and
substituting in lieu therefor the following sentence:
"All of the shares of each such series are initially classified as a single
class to be known as the 'National Investors Class.'"
SECOND: The foregoing amendment has been effected in the manner and by the
vote required by the Corporation's charter and the laws of the State of
Maryland. The amendment was approved by a majority of the entire Board of
Directors of the Corporation; and at the time of approval by the Board of
Directors there were no shares of stock of the Corporation entitled to vote on
the matter either outstanding or subscribed for.
THIRD: Except as amended hereby, the Corporation's charter shall remain in
full force and effect.
FOURTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.
The President acknowledges these Articles of Amendment to be the corporate
act of the Corporation and states that to the best of his knowledge, information
and belief, the matters set forth in these Articles of Amendment with respect to
the authorization and approval of the amendment of the Corporation's charter are
true in all material respects, and that this statement is made under the
penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, NATIONAL INVESTORS CASH MANAGEMENT FUND, INC. has
caused these Articles of Amendment to be signed in its name and on its behalf by
its President, a duly authorized officer of the Corporation, and attested by its
Secretary effective the 15 day of October, 1996.
NATIONAL INVESTORS CASH
MANAGEMENT FUND, INC.
By /s/ John E. Pelletier
---------------------
John E. Pelletier
President
ATTEST:
/s/ Christopher J. Kelley
-------------------------
Christopher J. Kelley
Secretary
<PAGE>
BY-LAWS
OF
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
ARTICLE I
Meetings of Stockholders
Section 1. Annual Meeting. So long as the Corporation is registered as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act," such term to include the rules and regulations
promulgated under the Investment Company Act unless otherwise specified or the
context otherwise requires), annual meetings of the stockholders shall not be
held except where required to be held by the Investment Company Act or by the
Maryland General Corporation Law or when called by the Board of Directors or by
an officer or officers authorized to take such action by the Board of Directors.
If in any calendar year the Corporation is required or elects to hold an annual
meeting, the meeting shall be held on such day, not a Saturday, Sunday or legal
holiday, as the Board of Directors or the officer or officers calling the
meeting may prescribe. At each such annual meeting, the stockholders shall elect
a Board of Directors and transact such other business as may properly come
before the meeting. The provisions of these By-Laws which contemplate the
holding of an annual meeting of stockholders shall be suspended during any
calendar year in which no annual meeting of stockholders is held.
Section 2. Special Meetings. Special meetings of the stockholders, unless
otherwise provided by law or by the Articles of Incorporation (such term to
include the Articles of Incorporation of the Corporation as the same may be
amended, supplemented or restated from time to time), may be called for any
purpose or purposes by a majority of the Board of Directors, the Chairman of the
Board, the President, or on the written request of at least 10% of the holders
of the outstanding shares of capital stock of the Corporation entitled to be
cast at such meeting to the extent permitted by Maryland law.
Section 3. Place of Meetings. The annual meeting and any special meeting of
the stockholders shall be held at such place within the United States as the
Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date
and time of the holding of each annual and special meeting of the stockholders
and the purpose or purposes of each special meeting shall be given personally or
by mail, not less than ten nor more than ninety days before the date of such
meeting, to each stockholder entitled to vote at such meeting and to each other
stockholder entitled to notice of the meeting. Notice by mail shall be deemed to
be duly given when deposited in the United States mail addressed to the
stockholder at his address as it appears on the records of the Corporation, with
postage thereon prepaid.
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Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
one hundred and twenty days after the original record date, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned were announced at the meeting at which the adjournment is
taken.
Section 5. Quorum. At all meetings of the stockholders, the holders of
shares entitled to cast one-third of the votes entitled to be cast, present in
person or by proxy, shall constitute a quorum for the transaction of any
business, except as otherwise provided by statute or by the Articles of
Incorporation. In the absence of a quorum no business may be transacted, except
that the holders of a majority of the shares of stock present in person or by
proxy and entitled to vote may adjourn the meeting from time to time, without
notice other than announcement thereat except as otherwise required by these
By-Laws, until the holders of the requisite amount of shares of stock shall be
so present. At any such adjourned meeting at which a quorum may be present any
business may be transacted which might have been transacted at the meeting as
originally called. The absence from any meeting, in person or by proxy, of
holders of the number of shares of stock of the Corporation in excess of a
majority thereof which may be required by the laws of the State of Maryland, the
Investment Company Act, or other applicable statute, the Articles of
Incorporation, or these By-Laws, for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present thereat, in person
or by proxy, holders of the number of shares of stock of the Corporation
required for action in respect of such other matter or matters.
Section 6. Organization. At each meeting of the stockholders, the Chairman
of the Board (if one has been designated by the Board), or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Vice President, shall act as chairman
of the meeting. The Secretary, or in his absence or inability to act, any person
appointed by the chairman of the meeting, shall act as secretary of the meeting
and keep the minutes thereof.
Section 7. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the Articles
of Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for every share of such stock standing in his name on the record of
stockholders of the Corporation as of the record date determined pursuant to
Section 9 of this Article or if such record date shall not have been so fixed,
then at the later of (i) the close of business on the day on which notice of the
meeting is mailed or (ii) the thirtieth day before the meeting.
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Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Articles of Incorporation or these By-Laws,
any corporate action to be taken by vote of the stockholders (other than the
election of directors which shall be by plurality vote) shall be authorized by a
majority of the total votes cast at a meeting of stockholders by the holders of
shares present in person or represented by proxy and entitled to vote on such
action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may set a record
date for the purpose of determining stockholders entitled to vote at any meeting
of the stockholders. The record date, which may not be prior to the close of
business on the day the record date is fixed, shall be not more than ninety nor
less than ten days before the date of the meeting of stockholders. All persons
who were holders of record of shares at such time, and not others, shall be
entitled to vote at such meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting powers of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector of an election of directors. Inspectors need
not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Except as otherwise
provided by statute or the Articles of Incorporation, any action required to be
taken at any annual or special meeting of stockholders, or any action which may
be taken at any annual or special
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meeting of stockholders, may be taken without a meeting, without prior notice
and without a vote, if the following are filed with the records of stockholders
meetings: (i) a unanimous written consent which sets forth the action and is
signed by each stockholder entitled to vote on the matter and (ii) a written
waiver of any right to dissent signed by each stockholder entitled to notice of
the meeting but not entitled to vote thereat.
ARTICLE II
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Articles of
Incorporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors except as conferred
on or reserved to the stockholders by law or by the Articles of Incorporation or
these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed from
time to time by resolution adopted by a majority of the directors then in
office; provided, however, that the number of directors shall in no event be
less than the number required by the Maryland General Corporation Law nor more
than fifteen. Any vacancy created by an increase in directors may be filled in
accordance with Section 6 of this Article II. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article II at the time of such decrease. Directors need not
be stockholders.
Section 3. Term of Directors. The term of office of each director shall be
from the time of his election and qualification until the election of directors
next succeeding his election and until his successor shall have been elected and
shall have qualified, or until his death, or until he shall have resigned, or
until he shall have been removed as hereinafter provided in these By-Laws, or as
otherwise provided by statute or the Articles of Incorporation.
Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5. Removal of Directors. Any director of the Corporation may be
removed with or without cause by the holders by a vote of a majority of the
outstanding shares of stock then entitled to be cast in the election of
directors. This Section 5 of Article II of the By-Laws is not subject to
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alteration or repeal by the Board of Directors, subject to the requirements of
the Investment Company Act of 1940, as amended.
Section 6. Vacancies. Subject to the provisions of the Investment Company
Act, any vacancies in the Board, whether arising from death, resignation,
removal, an increase in the number of directors or any other cause, shall be
filled by a vote of the Board of Directors as provided by statute.
Section 7. Place of Meetings. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.
Section 8. Regular Meeting. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors.
Section 9. Special Meetings. Special meetings of the Board may be called by
two or more directors of the Corporation or by the Chairman of the Board or the
President.
Section 10. Telephone Meetings. Members of the Board of Directors or of any
committee thereof may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Subject to the provisions of
the Investment Company Act, participation in a meeting by these means
constitutes presence in person at the meeting.
Section 11. Notice of Special Meetings. Notice of each special meeting of
the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held.
Section 12. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice which is filed with the records of the meeting
or who shall attend such meeting. Except as otherwise specifically required by
these By-Laws, a notice or waiver of notice of any meeting need not state the
purposes of such meeting.
Section 13. Quorum and Voting. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by the Articles of
Incorporation, these By-Laws, the Investment Company Act, or other applicable
statute, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board. In the absence of a quorum at
any meeting of the Board, a majority of the directors
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present thereat may adjourn such meeting to another time and place until a
quorum shall be present thereat. Notice of the time and place of any such
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless such time and place were announced at the
meeting at which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 14. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President or, in his absence
or inability to act, another director chosen by a majority of the directors
present, shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the Chairman)
shall act as secretary of the meeting and keep the minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting. Subject to
the provisions of the Investment Company Act, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writings or writing are filed
with the minutes of the proceedings of the Board or committee.
Section 16. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board.
ARTICLE III
Committees
Section 1. Executive Committee. The Board may, by resolution adopted by a
majority of the entire Board, designate an Executive Committee consisting of two
or more of the directors of the Corporation, which committee shall have and may
exercise all the powers and authority of the Board with respect to all matters
other than:
(a) the recommendation or submission to stockholders of any action
requiring authorization of stockholders pursuant to statute or the
Articles of Incorporation;
(b) the filling of vacancies on the Board of Directors;
(c) the fixing of compensation of the directors for serving on the Board
or on any committee of the Board, including the Executive Committee;
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(d) the approval or termination of any contract with an investment adviser
or principal underwriter, as such terms are defined in the Investment
Company Act, or the taking of any other action required to be taken by
the Board of Directors by the Investment Company Act;
(e) the amendment or repeal of these By-Laws or the adoption of new
By-Laws;
(f) the amendment or repeal of any resolution of the Board which by its
terms may be amended or repealed only by the Board;
(g) the declaration of dividends or distributions on stock and the
issuance of stock of the Corporation; and
(h) the approval of any merger or share exchange which does not require
stockholder approval.
The Executive Committee shall keep written minutes of its proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.
Section 2. Other Committees of the Board. The Board of Directors may from
time to time, by resolution adopted by a majority of the whole Board, designate
one or more other committees of the Board, each such committee to consist of two
or more directors and to have such powers and duties as the Board of Directors
may, by resolution, prescribe.
Section 3. General. One third, but not less than two, of the members of any
committee shall be present in person at any meeting of such committee in order
to constitute a quorum for the transaction of business at such meeting, and the
act of a majority present shall be the act of such committee. The Board may
designate a chairman of any committee and such chairman or any two members of
any committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more committees consisting in
whole or in part of persons who are not directors of the Corporation; provided,
however, that no such committee shall have or may exercise any authority or
power of the Board in the management of the business or affairs of the
Corporation, except as may be prescribed by the Board.
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ARTICLE IV
Officers, Agents and Employees
Section 1. Number, Qualification, Election and Tenure. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect or
appoint one or more Vice Presidents and may also appoint such other officers,
agents and employees as it may deem necessary or proper. Any two or more offices
may be held by the same person, except the offices of President and Vice
President, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity. Such officers shall be elected annually at a regular or
special meeting of the Board of Directors, each to hold office until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall have resigned, or have been removed, as hereinafter
provided in these By-Laws. The Board may from time to time elect, or delegate to
the President the power to appoint, such officers (including one or more
Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents, as may be necessary or desirable for the
business of the Corporation. Such officers and agents shall have such duties and
shall hold their offices for such terms as may be prescribed by the Board or by
the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of resignation to the Board, the Chairman of the
Board, the President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, immediately upon its receipt. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office which shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to such office.
Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
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Section 6. Bonds or Other Security. If required by the Board, any officer,
agent or employee of the Corporation shall give a bond or other security for the
faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.
Section 7. President. The President shall be the chief executive officer of
the Corporation. In the absence of the Chairman of the Board (or if there be
none), the President shall preside at all meetings of the stockholders and of
the Board Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He may
employ and discharge employees and agents of the Corporation, except such as
shall be appointed by the Board, and he may delegate these powers.
Section 8. Vice President. Each Vice President shall have such powers and
perform such duties as the Board of Directors or the President may from time to
time prescribe.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has
placed in the custody of a bank or trust company or member of a
national securities exchange (as that term is defined in the
Securities Exchange Act of 1934, as amended) pursuant to a written
agreement designating such bank or trust company or member of a
national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the credit of
the Corporation;
(d) receive, and give receipts for, moneys due and payable, to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the investment of
its funds as ordered or authorized by the Board, taking proper
vouchers therefor; and
(f) in general, perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by
the Board or the President.
Section 10. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of
the Board and the stockholders;
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(b) see that all notices are duly given in accordance with the provisions
of these By- Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and, if
required, affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificate
shall be a facsimile, a hereinafter provided) and affix and attest the
seal to all other documents to be executed on behalf of the
Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by
the Board or the President.
Section 11. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may confer for the time being, the powers or duties, or
any of them, of such officer upon any other officer or upon any director.
ARTICLE V
Indemnification
Each officer and director of the Corporation shall be indemnified by
the Corporation to the full extent permitted under the General Laws of the State
of Maryland, except that such indemnity shall not protect any such person
against any liability to the Corporation or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. Absent a court determination that an officer or director
seeking indemnification was not liable on the merits or guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, the decision by the Corporation to
indemnify such person must be based upon the reasonable determination of
independent legal counsel or the vote of a majority of a quorum of the directors
who are neither "interested persons," as defined in Section 2(a)(19) of the
Investment Company Act, nor parties to the proceeding ("non-party independent
directors"), after review of the facts, that such officer or director is not
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Each officer and director of the Corporation claiming indemnification
within the scope of this Article V shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by him in connection
with proceedings to which he is a party in the manner and to the full extent
permitted under the General Laws of the State of Maryland without a
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preliminary determination as to his ultimate entitlement to indemnification
(except as set forth below); provided, however, that the person seeking
indemnification shall provide to the Corporation a written affirmation of his
good faith belief that the standard of conduct necessary for indemnification by
the Corporation has been met and a written undertaking to repay any such
advance, if it should ultimately be determined that the standard of conduct has
not been met, and provided further that at least one of the following additional
conditions is met: (a) the person seeking indemnification shall provide a
security in form and amount acceptable to the Corporation for his undertaking;
(b) the Corporation is insured against losses arising by reason of the advance;
(c) a majority of a quorum of non-party independent directors, or independent
legal counsel in a written opinion, shall determine, based on a review of facts
readily available to the Corporation at the time the advance is proposed to be
made, that there is reason to believe that the person seeking indemnification
will ultimately be found to be entitled to indemnification.
The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the General
Laws of the State of Maryland, from liability arising from his activities as
officer or director of the Corporation. The Corporation, however, may not
purchase insurance on behalf of any officer or director of the Corporation that
protects or purports to protect such person from liability to the Corporation or
to its stockholders to which such officer or director would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
The Corporation may indemnify, make advances or purchase insurance to
the extent provided in this Article V on behalf of an employee or agent who is
not an officer or director of the Corporation.
ARTICLE VI
Stock
Section 1. Stock Certificates. If so determined by resolution of the Board
of Directors, each holder of stock of the Corporation shall be entitled upon
request to have a certificate or certificates, in such form as shall be approved
by the Board of Directors, representing the number of shares of stock of the
Corporation owned by him, provided, however that certificates for fractional
shares will not be delivered in any case. Certificates representing shares of
stock shall be signed by or in the name of the Corporation by the President or a
Vice President or the Chairman of the Board and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
shall be issued, it may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were still in the office at the date
of issue.
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Section 2. Books of Account and Record of Stockholders. There shall be kept
at the principal executive office of the Corporation correct and complete books
and records of account of all the business and transactions of the Corporation.
Section 3. Transfer of Shares. Transfer of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
alleged to have been lost or destroyed or which shall have been mutilated, and
the Board of Directors may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board of Directors, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidences of interests or evidences of interests arising out of any
changes, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights
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or interests, and in such case only the stockholders of record at the time so
fixed shall be entitled to receive such dividend, distribution, allotment,
rights or interests.
ARTICLE VII
Seal
The seal of the Corporation shall be in the form determined by the
Board of Directors and shall bear, in addition to any other emblem or device
approved by the Board of Directors, the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Maryland". Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced. If the Corporation is required to place its seal to a
document, it is sufficient to meet the requirements of any law, rule or
regulation relating to a corporate seal to place the word "(seal)" adjacent to
the signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall be as determined by the Board
of Directors from time to time.
ARTICLE IX
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances,
bills of exchange and other orders or obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board of
Directors and, when so authorized to be held on behalf of the Corporation or
sold, transferred or otherwise disposed of, may be transferred from the name of
the Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
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ARTICLE X
Amendments
These By-Laws or any of them may be amended, altered or repealed at
any regular meeting of the stockholders or at any special meeting of the
stockholders by a favorable vote of the holders of not less than a majority of
all votes cast on the matter at such meeting, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors, except any particular By-Law which is
specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act.
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