SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Securities Act of 1933 File #2-65242
Investment Company Act of 1940 File #811-2941
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. ___ / /
POST-EFFECTIVE AMENDMENT NO. 22 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 21 /X/
COMPOSITE CASH MANAGEMENT CO.
- --------------------------------------------------------------------------
(Exact name of Registrant as specified in Charter)
601 W. Main Avenue, Suite 801, Spokane, WA 99201
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(Address of principal executive offices)
1-509-353-3486
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(Registrant's telephone number, including area code)
JOHN T. WEST, CORPORATE SECRETARY
Composite Group of Funds
601 West Main Avenue, Suite 801, Spokane, WA 99201
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(Name and address of agent for service)
Approximate Date of Proposed Public Offering: April 30, 1996
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[xx] on April 30, 1996, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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CALCULATION OF REGISTRATIAON FEE UNDER THE SECURITIES ACT OF 1933
Indefinite amount has been registered pursuant to Rule 24f-2. The Rule 24f-2
Notice for the most recent fiscal year was filed on February 27, 1996.
<PAGE>
PART A
TABLE OF CONTENTS
N-1A Item No. Location
Item 1. Cover Page ......................................... Cover Page
Item 2. Synopsis ........................................... Fee Table
About this
Prospectus
Item 3. Condensed Financial Information .................... Financial
Highlights
Calculation of
Yields
Item 4. General Description of the Registrant .............. Cover Page
The Fund's
Objectives
Investment
Practices and
Risk Factors
Investment
Restrictions
Item 5. Management of the Fund ............................. Who We Are
The Cost of
Good
Management
How to Buy
Shares
Item 6. Capital Stock and Other Securities ................. Who We Are
Distribution
of Income
Income Taxes on
Dividends
We're Here
to Help
You
Item 7. Purchase of Securities Being Offered ............... The Cost of
Good
Management
The Value of a
Single Share
How to Buy
Shares
Item 8. Redemption or Repurchase ........................... How to Sell
Shares
Item 9. Pending Legal Proceedings .......................... *
*Not applicable or negative answer
<PAGE>
PART B
TABLE OF CONTENTS
Item 10. Cover Page ......................................... Cover Page
Item 11. Table of Contents .................................. Table of
Contents
Item 12. General Information and History .................... Organization
and
Authorized
Capital
Item 13. Investment Objectives & Policies ................... See Prospectus
page 5
Investment
Practices
Brokerage
Allocations
and
Portfolio
Transactions
Item 14. Management of the Fund ............................. The Fund and
Its
Management
Item 15. Control Persons and Principal Holders of Securities. Directors &
Officers of
the Fund
Item 16. Investment Advisory and Other Services ............. The Investment
Adviser
Investment
Management
Services
Distribution
Services
Custodian
Item 17. Brokerage Allocation & Other Practices ............. Brokerage
Allocation
and Portfolio
Transactions
Item 18. Capital Stock and Other Securities ................. Organization
and
Authorized
Capital
Voting
Privileges
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered ................................... How Shares are
Valued
How Shares Can
Be Purchased
How to Sell
Shares - See
Prospectus
page 10
Exchange
Privilege
Services
Provided
by the Fund
Item 20. Tax Status ......................................... Dividends,
Capital
Gain
Distributions
and Taxes
Item 21. Underwriters ....................................... Distribution
Services
Item 22. Performance Information ............................ Performance
Information
Item 23. Financial Statements ............................... Financial
Statements
and Reports
Incorporated
by Reference-
Annual Report
to Share-
holders dated
12/31/95
<PAGE>
COMPOSITE
CASH
MANAGEMENT
COMPANY
MONEY MARKET
PORTFOLIO
TAX-EXEMPT
PORTFOLIO
PROSPECTUS
APRIL 30,
1996
[LOGO]
COMPOSITE
GROUP OF FUNDS
<PAGE>
COMPOSITE CASH MANAGEMENT COMPANY
Suite 801
601 W. MAIN AVENUE
SPOKANE, WASHINGTON 99201-0613
TELEPHONE (509) 353-3550 TOLL FREE (800) 543-8072
A MONEY MARKET FUND TO MEET SEVERAL INVESTOR GOALS:
Composite Cash Management Company is a mutual fund designed to enable
investors to meet several short-term goals, as summarized below. Two different
portfolios are available for your investments:
* MONEY MARKET PORTFOLIO. This Portfolio is intended to provide maximum
current income, while preserving capital and maintaining liquidity.
Investments are primarily in higher grades of money market instruments.
* TAX-EXEMPT PORTFOLIO. The objective of this Portfolio is maximum current
income that is exempt from federal income tax, while preserving capital and
maintaining liquidity. Primary investments are in high-quality, short-term
municipal obligations. The "Financial highlights" tables in this Prospectus
provide information on both Portfolios' performance over several years.
Information that follows those tables explains the detailed investment
criteria.
Please read this Prospectus dated April 30, 1996, and retain it for future
reference. It sets forth information about these Portfolios that a prospective
investor should know before investing.
OTHER IMPORTANT INFORMATION SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, GUARANTEED OR ENDORSED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR
GUARANTEED BY THE UNITED STATES GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE IS NO
ASSURANCE THAT THE $1.00 PER SHARE NET ASSET VALUE (NAV) WILL BE MAINTAINED. A
STATEMENT OF ADDITIONAL INFORMATION ABOUT THIS FUND, DATED APRIL 30, 1996, IS ON
FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. IT IS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. YOU MAY OBTAIN A FREE COPY BY CALLING OR WRITING
THE FUND AT THE LOCATION LISTED IN THE HEADING OF THIS INTRODUCTION.
CONTENTS Page
Fee table....................................... 2
Financial highlights............................ 3
The Funds' objectives........................... 5
Investment practices and risk factors........... 5
Investment restrictions......................... 6
Who we are...................................... 6
The cost of good management..................... 7
The value of a single share..................... 8
How to buy shares............................... 8
Distribution of income.......................... 8
Income taxes on dividends....................... 9
Exchanges for other Composite funds............. 9
How to sell shares............................. 10
IRAs and other tax-sheltered
retirement plans............................. 11
Calculation of yields.......................... 11
Reports to shareholders........................ 11
We're here to help you......................... 11
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.
<TABLE>
<CAPTION>
FEE TABLE
The Fee Table below shows the Fund's costs and expenses and how they affect share ownership. Operating expenses are projected
based on historical data. For further information on costs and expenses, please see "The cost of good management" on Page 7.
Money Market Portfolio Tax-Exempt Portfolio
Class A Class B Class A Class B
SHAREHOLDER TRANSACTION EXPENSES: Shares Shares Shares Shares
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales Charge on Purchases or Reinvested Dividends None None None None
Contingent Deferred Sales Charge None 4.00% None 4.00%
Redemption or Exchange Fee None None None None
Annual fund operating expenses
(as a percentage of average net assets):
Management Fees .45% .45% .45% .45%
12b-1 Expenses .04% 1.00% None 1.00%
Other Expenses, Net of Reimbursement .32% .32% .10% .10%
----- ----- ---- -----
Total Fund Operating Expenses .81% 1.77% .55% 1.55%
===== ===== ==== =====
</TABLE>
There is a $10 charge for redemptions paid by Fed Funds wire, but not for
redemptions deposited to your pre-authorized bank account or paid by check.
Absent reimbursements, "Other expenses" would have been .36% for Money
Market Class A and Class B shares and "Total expenses" would have been .85% and
1.81%, respectively. "Other expenses" would have been .25% for Tax-Exempt Class
A and Class B shares and "Total expenses" would have been .70% and 1.70%,
respectively.
Class B shares are offered only by exchange of Class B shares from other
Composite Funds. The 4% contingent deferred sales charge declines 1% annually to
0% after four years. Class A shares exchanged from another Composite Fund which
were originally purchased subject to a contingent deferred sales charge continue
to be subject to that charge for 18 months after the original purchase.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming that
the annual return was 5% and that you redeemed your shares at the end of the
time periods listed. The 5% figure is a constant rate required for comparative
purposes by the Securities and Exchange Commission.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market Portfolio, Class A shares $ 8 $26 $45 $100
Money Market Portfolio, Class B shares $58 $76 $97 $159
Tax-Exempt Portfolio, Class A shares $ 6 $18 $31 $ 69
Tax-Exempt Portfolio, Class B shares $56 $69 $85 $132
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL RESULTS WILL BE GREATER OR LESS THAN THE
ILLUSTRATION.
Class B shares automatically convert to Class A shares after six years.
Because of that, years seven through ten reflect Class A operating expenses.
Long-term Class B shareholders could pay more than the economic equivalent of
the maximum front-end sales charge permitted by the National Association of
Securities Dealers. The conversion feature is intended to reduce the likelihood
this will occur.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
COMPOSITE CASH MANAGEMENT COMPANY
The supplemental financial information on this page has been audited by independent auditors. Their reports appear in the Fund's
Annual Report which is incorporated by reference in the Statement of Additional Information.
Class A Class B
---------------------------------------------------------------------------------------- ----------------
YEAR MAY 2,
ENDED 1994 to
MONEY MARKET YEARS ENDED DECEMBER 31, DEC. 31, DEC. 31,
PORTFOLIO 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1995 1994(2)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR......... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income.... 0.0519 0.0341 0.0243 0.0302 0.0526 0.0733 0.0826 0.0668 0.0588 0.0596 0.0421 0.0184
------- ------- ------- ------- ------- ------- ------- -------- -------- ------- ------- --------
Total income from
investment operations. 0.0519 0.0341 0.0243 0.0302 0.0526 0.0733 0.0826 0.0668 0.0588 0.0596 0.0421 0.0184
------- ------- ------- ------- ------- ------- ------- -------- -------- ------- ------- --------
LESS DISTRIBUTIONS
Dividends (from net
investment income)...... (0.0519) (0.0341) (0.0243) (0.0302) (0.0526) (0.0733) (0.0826) (0.0668) (0.0588) (0.0596)(0.0421)(0.0184)
------- ------- ------- ------- ------- ------- ------- -------- -------- ------- ------- --------
Total distributions.... (0.0159) (0.0341) (0.0243) (0.0302) (0.0526) (0.0733) (0.0826) (0.0668) (0.0588) (0.0596)(0.0421)(0.0184)
------- ------- ------- ------- ------- ------- ------- -------- -------- ------- ------- --------
NET ASSET VALUE,
END OF YEAR............... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= ======= ======= ======= ======== ======= ======= ========
TOTAL RETURN(1)........... 5.33% 3.47% 2.41% 3.07% 5.41% 7.61% 8.60% 6.85% 5.97% 6.08% 4.30% 1.86%
RATIOS/
SUPPLEMENTAL DATA
Net Assets, End of Year
(in thousands).......... $171,225 $125,651 $135,187 $141,193 $178,741 $252,051 $256,017 $180,130 $137,737 $114,569 $74 $11
Ratio of Expenses
to Average Net Assets(3) 0.92% 0.95% 0.97% 0.88% 0.93% 0.97% 1.06% 1.01% 1.05% 0.98% 1.94% 1.93%(4)
Ratio of Net Income
to Average Net Assets... 5.19% 3.39% 2.38% 3.04% 5.33% 7.33% 8.26% 6.68% 5.88% 5.96% 4.19% 3.29%(4)
<FN>
(1) Returns of less than one year are aggregate returns and not annualized.
(2) From the commencement of offering Class B Shares.
(3) Ratios of expenses to average net assets include expenses paid indirectly beginning in fiscal year
1995.
(4) Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
COMPOSITE CASH MANAGEMENT COMPANY
The supplemental financial information on this page has been audited by independent auditors. Their reports appear in the Fund's
Annual Report which is incorporated by reference in the Statement of Additional Information.
Class A Class B
YEAR MAY 2,
ENDED 1994 TO
YEARS ENDED DECEMBER 31, DEC. 31, DEC. 31,
TAX-EXEMPT PORTFOLIO 1995 1994 1993 1992 1991 1990 1989 1988(3) 1995 1994(4)
------- ------- ------- ------- -------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.......... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------- ------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................... 0.0339 0.0235 0.0203 0.0238 0.0410 0.0561 0.0587 0.0381 0.0226 0.0097
Net Realized Gains on Securities........... 0.0054 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0054 0.0000
------- ------ ------ ------ ------- ------- ------- -------- -------- --------
Total from investment operations......... 0.0393 0.0235 0.0203 0.0238 0.0410 0.0561 0.0587 0.0381 0.0280 0.0097
------- ------ ------ ------ ------- ------- ------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income)..... (0.0339) (0.0235) (0.0203) (0.0238)(0.0410) (0.0561) (0.0587)(0.0381) (0.0226) (0.0097)
Distributions (from capital gains)......... (0.0054) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 (0.0054) 0.0000
------- ------ ------ ------ -------- ------ ------- ------ -------- --------
Total distributions...................... (0.0393) (0.0235) (0.0203) (0.0238)(0.0410) (0.0561) (0.0587)(0.0381) (0.0280) (0.0097)
------- ------ ------ ------ -------- ------ ------- ------ -------- --------
NET ASSET VALUE, END OF YEAR ............... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ====== ======== ====== ======= ====== ======== ========
TOTAL RETURN (1) ........................... 4.01% 2.37% 2.06% 2.41% 4.19% 5.77% 6.05% 4.10% 2.83% 0.97%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (in thousands)..... $30,988 $33,612 $34,513 $32,425 $40,060 $43,379 $25,113 $ 8,031 $1 $1
Ratio of Expenses to Average Net Assets(2) . 0.61% 0.60% 0.50% 0.57% 0.44% 0.24% 0.09% 0.75% 1.73% 1.66%(5)
Ratio of Net Income to Average Net Assets .. 3.39% 2.33% 2.03% 2.36% 4.11% 5.60% 5.97% 3.81% 2.12% 1.38%(5)
<FN>
(1) Returns of less than one year are aggregate returns and not annualized.
(2) A portion of the expenses was reimbursed by the investment adviser, transfer and shareholder servicing agent, and principal
underwriter and distributor for the period April 1, 1989, through December 31, 1995. Ratios of expenses to average net assets
include expenses paid indirectly beginning in fiscal year 1995.
(3) Information for 1988 is since the Portfolio's inception on January 28, 1988.
(4) From the commencement of offering Class B Shares.
(5) Annualized.
</FN>
</TABLE>
THE FUND'S OBJECTIVES
Composite Cash Management Company is made up of two separate portfolios:
Money Market Portfolio and Tax-Exempt Portfolio. The Portfolios' objectives are
to maximize current income while, at the same time, preserving capital and
maintaining liquidity. They intend to do this by purchasing high-quality
investments which mature in 397 days or less with an average maturity of no more
than 90 days. Tax-Exempt Portfolio primarily invests in municipal obligations
that pay interest which is exempt from federal income tax. These objectives are
fundamental policies which may only be changed with a majority vote of the
Portfolio's outstanding shareholders. Because risks are involved, there cannot
be any assurance that the Portfolios' objectives will be attained.
INVESTMENT PRACTICES AND RISK FACTORS
The Adviser intends to achieve the Fund's objectives by following the
carefully chosen investment procedures summarized below. Included is information
about several relatively complex financial instruments. Please contact us at the
address or telephone listed on the back cover if you would like further
information about any of these. The Statement of Additional Information contains
details concerning the types, ratings and nature of the investments and the
criteria used for evaluation and selection.
MONEY MARKET PORTFOLIO
This Portfolio invests solely in money market instruments. These are
selected from the following five general categories:
1) Obligations issued or guaranteed by the U.S. government, its agencies, or
its instrumentalities.
2) Obligations of U.S. and foreign banks with assets of more than $500 million.
3) Short-term commercial notes issued directly by businesses and banking
institutions to finance short-term cash needs. The Portfolio may only
purchase notes which have the two highest ratings by Moody's Investors
Service, Inc. ("Moody's"), or by Standard & Poor's Corporation ("S&P"); or
those issued by companies whose unsecured debt is rated A or better by
Moody's or S&P.
4) Short-term corporate obligations rated A or better by Moody's or S&P.
5) Short-term repurchase agreements.
TAX-EXEMPT PORTFOLIO
This Portfolio invests primarily in a diversified selection of short-term,
investment-grade municipal obligations, whose income is exempt from federal
income tax. Under normal market conditions, the portfolio attempts to invest
100% of its total net assets in these type of obligations. The Portfolio will
not invest more than 20% of its assets in obligations that pay interest subject
to alternative minimum tax.
Municipal obligations are debt securities of states, counties, cities,
municipal agencies, and other regional districts. The obligations purchased by
the Portfolio are rated in the two highest credit categories assigned by the
major rating services, e.g. Moody's and S&P. They consist of:
1) Municipal commercial paper rated Prime-1 or 2 by Moody's or A-1 or 2 by S&P.
2) Municipal notes rated MIG 1 or 2 by Moody's or rated VMIG 1 or 2 in the case
of floating or variable rate obligations, or SP 1+ or 1 by S&P.
3) Securities of other tax-exempt mutual funds as temporary investments of cash
reserves.
If not rated, securities purchased by the Portfolio will be of comparable
quality to the above ratings as determined by the Adviser under the supervision
of the Fund's Board of Directors.
Short-term municipal notes may include, but are not limited to, tax
anticipation notes (TANs), bond anticipation notes (BANs), revenue anticipation
notes (RANs) and project notes (PNs), or other forms of short-term municipal
loans and obligations.
When, in the opinion of the Adviser, adverse market conditions exist, the
Tax-Exempt Portfolio may adopt a "defensive" strategy. In such cases, it may
temporarily invest more than 20% of its assets in taxable money market
instruments. These investments must have the quality and maturity
characteristics comparable to those for the municipal obligations of the
Portfolio, but they would produce income that is not exempt from federal income
taxes. The Adviser considers that this would be necessary only under highly
improbable circumstances. Taxable investments are limited to:
1) Obligations of the U.S. government and its agencies and instrumentalities.
2) Corporate commercial paper rated in the highest grade by either Moody's or
S&P.
3) Obligations of U.S. banks belonging to the Federal Reserve System.
4) Time or demand deposits in U.S. banks.
5) Municipal bonds or any of the previously mentioned investments subject to
short-term repurchase agreements.
INVESTMENT RESTRICTIONS
Although many of the Adviser's decisions depend on flexibility, there are
certain principles so fundamental to a portfolio that they may not be changed
without a vote of a majority of the outstanding shares of the affected
portfolio.
IN ADDITION TO OTHER RESTRICTIONS LISTED IN THE STATEMENT OF ADDITIONAL
INFORMATION, EACH OF THE PORTFOLIOS MAY NOT:
1) Invest in common stocks or other equity securities.
2) Borrow money for investment purposes, except that a portfolio may borrow up
to 5% of its total assets in emergencies and that it may borrow up to 331/3%
of such assets to meet redemption requests that would otherwise result in
the untimely liquidation of vital parts of its portfolio.
3) Invest more than 5%* of its total assets in the securities of any single
issuer, except for the U.S. government, its agencies, or instrumentalities.
(For the Tax-Exempt Portfolio, this restriction applies to 75% of the
assets.)
4) Invest more than 25%* of its total assets in securities of issuers in any
single industry.
*Percentage at the time investment is made.
WHO WE ARE
Composite Cash Management Company was incorporated July 2, 1979, under the
laws of the state of Washington. It is a diversified, open-end management
investment company, often called a "mutual fund."
ADVISER. The Fund is managed by Composite Research & Management Co., which
is referred to as the "Adviser" in this Prospectus.
The Adviser has been in the business of investment management since 1944.
It currently manages more than $2.1 billion for mutual funds and institutional
advisory accounts. Those accounts include more than $1.3 billion within the
Composite Group of Funds, which is made up of the Fund described in this
Prospectus and several other mutual funds with differing objectives.
The Adviser advises the Fund on investment policies and specific
investments. Subject to supervision by the Fund's Board of Directors, the
Adviser determines which securities are to be bought or sold. These decisions
are based on analyses of the economy, sectors of industry, and specific
institutions. They are compiled from extensive data provided by some of the
country's largest investment firms, in addition to the Adviser's own research.
DISTRIBUTOR. Murphey Favre, Inc. is the "Distributor" for this Fund. The
Distributor is not a bank. Securities offered by it are not deposits nor bank
obligations, and they are not backed or guaranteed by a bank nor insured by the
FDIC. The value of investments may fluctuate, return on investments is not
guaranteed, and loss of principal is possible.
TRANSFER AGENT. Murphey Favre Securities Services, Inc., which serves as
the "Transfer Agent," acts as the Fund's shareholder servicing and dividend
disbursing agent.
THE ADVISER, DISTRIBUTOR AND TRANSFER AGENT, WHOSE ADDRESSES APPEAR ON THE
BACK COVER, ARE AFFILIATES OF WASHINGTON MUTUAL BANK AND WASHINGTON MUTUAL FSB.
THEY ARE ALSO SUBSIDIARIES OF WASHINGTON MUTUAL, INC.
OTHER IMPORTANT INFORMATION. The Fund has an authorized capitalization of
10 billion shares of capital stock. Both Portfolios offer two classes of shares,
which are described in the section concerning "How to buy shares." The shares do
not have preemptive rights, and none has preference as to conversion, exchange,
dividends, retirements, liquidation, redemption or any other feature, except as
described in "How to buy shares." Shares have equal voting rights on corporate
matters submitted for shareholder approval, except that each class may vote
separately on its distribution plan.
Normally, the Fund will not hold annual meetings of shareholders. When
meetings are held, shareholders have the right to vote cumulatively for any
election of directors. In other words, each voting shareholder may cast one vote
per share times the number of directors to be elected. The shareholder may then
allocate the total votes among the director nominees in the amounts he or she
chooses.
Additional portfolios and classes may be created by the Board of Directors
from time to time, without further action by the existing shareholders.
THE COST OF GOOD MANAGEMENT
Composite Research & Management Co. serves as Adviser under investment
management agreements with both Portfolios. The contracts are renewable every
year, subject to the approval of the Board of Directors or the shareholders
themselves.
ADVISORY FEES. A fee based on a percentage of average daily net assets is
paid to the Adviser for its services. These include investment advisory and
administrative services and the Adviser's function as an agent for the Fund when
paying a portion of the fee to the Distributor and Transfer Agent for their
services. The Fund is responsible for paying expenses of operation that are not
assumed by the Adviser.
The management fee is calculated daily and paid monthly. It is equal to an
annual rate of .45% of the average daily net assets of each Portfolio. If the
average daily net assets grow to more than $1 billion, the rate will decrease to
.40% with respect to that Portfolio.
12b-1 EXPENSES. The Fund's Board of Directors has approved, and reviews at
least quarterly, a distribution plan that meets the provisions of Rule 12b-1
under the Investment Company Act of 1940. The plan is intended to benefit
shareholders by stimulating interest in purchasing shares of the Fund and, thus,
providing a consistent flow of investment capital. This allows larger and more
diversified holdings and economies of scale.
With respect to Class A shares, the plan authorizes the Fund to reimburse
the Distributor's direct costs of marketing, selling and distributing Class A
shares of the Fund. These costs include sales literature and prospectuses (other
than those provided to current shareholders), and other costs of sales and
marketing, including any state business and occupation tax on such
reimbursement.
The plan allows both Portfolios to reimburse actual Class A distribution
costs subject to directors' approval. Reimbursements are not to exceed annual
limits of .15% of a portfolio's average daily net assets attributable to Class A
shares. No service fees are paid to dealers for Class A shares.
Class B shares of both Portfolios are available only by exchange of Class B
shares from other funds within the Composite Group. The plan authorizes both
Portfolios to pay the Distributor a distribution fee of .75% of the Portfolio's
average daily net assets attributable to Class B shares and a service fee of
.25% of such assets. The distribution fee is designed to permit investors to
purchase Class B shares of other funds within the Composite Group without having
to pay a front-end sales charge. At the same time, this allows compensation to
the Distributor in connection with the sale of Class B shares. The service fee
covers personal services and/or account maintenance services. No dealer will
receive more in service fees than .25%, annualized, of the value of Class B
shares owned by investors for whom that dealer is the dealer of record.
Because the Distributor's distribution fee for Class B shares is not
directly tied to its expenses, the amount of compensation may be more or less
than its actual expenses. For this reason, the Class B distribution plan may be
characterized by the staff of the Securities and Exchange Commission as being a
"compensation" plan - in contrast to the Class A "reimbursement" plan. The Fund
is not liable for any of the Distributor's expenses that are in excess of the
compensation it receives.
OTHER EXPENSES. Expenses of operating the Fund include fees of directors
who are not affiliated with the Adviser; custodial, tax, auditing and legal
expenses; various costs of issuing and redeeming shares; the publishing of
reports to shareholders; corporate meetings; and other normal costs of running a
business. Total expenses for recent periods can be found after "Ratio of
expenses to average net assets" in the "Financial highlights" section of this
Prospectus.
The Fund pays for shareholder services but not for special services such as
producing and mailing historical-account transcripts. You may be required to pay
a fee if you need these special services.
THE VALUE OF A SINGLE SHARE
At the end of each business day of the New York Stock Exchange or at 1:00
p.m. Pacific time, whichever is earlier, the Fund calculates the value of each
class of shares of each Portfolio. That figure is determined by adding the value
of (1) the securities in the portfolio that are attributable to each class and
(2) all other assets - and then subtracting any liabilities. Next, the resulting
figure is divided by the number of shares outstanding. That provides the net
asset value per share, which is frequently referred to as "NAV." The securities
in each Portfolio are valued using the amortized cost method by adjusting the
cost of each security for amortization of discount or premium and accrued
interest (unless unusual circumstances indicate another method of determining
fair value should be considered by the Fund's Board of Directors).
The NAV per share of most mutual funds fluctuates with the value of the
portfolio. However, many money market funds, including the portfolios of
Composite Cash Management Company, attempt to maintain the NAV at a constant
$1.00 per share.
Fund shares are not guaranteed nor insured by the U.S. government, and
there is no assurance that the $1.00 per share NAV will be maintained.
HOW TO BUY SHARES
Class A shares of both Portfolios are offered continuously at a net asset
value of $1.00 per share on any regular business day. THERE IS NO INITIAL OR
DEFERRED SALES CHARGE ON CLASS A SHARE DIRECT PURCHASES. Class B shares are
offered only by exchange of Class B shares from another Composite fund. See
"Exchanges for other Composite funds."
DISTRIBUTOR AND SECURITIES DEALERS. You may buy Class A shares through
Murphey Favre, the Distributor, or through selected dealers provided they are
authorized to sell mutual funds in your state of residence. Fund shares must
also be registered in your state.
MAIL. Accounts may be opened by mail by sending an application form
together with a check for $1,000 or more ($500 or more for IRA accounts) to the
address noted below. Application forms are available by requesting one from the
same address or by calling the Fund at 1-800-543-8072.
Composite Cash Management Company
601 W. Main Ave., Suite 801
Spokane, Washington 99201-0613
WIRE TRANSFER. Accounts may be opened even more quickly with a Federal
Reserve wire transfer of $1,000 or more by calling the Fund.
SUBSEQUENT INVESTMENTS. Subsequent investments should be in amounts of $50
or more.
SYSTEMATIC INVESTMENT PROGRAM. For your convenience, you may have monthly
purchases automatically deducted from your checking account. The minimum initial
investment for an approved systematic investment program is $50 and subsequent
monthly investments should be at least $50. You can arrange this at the time of
your application or you can do it later by talking to your investment
representative or by calling the Fund.
EFFECTIVE DATE OF PURCHASE. An order to purchase shares will be entered on
the day it is received, if it is received prior to 1:00 p.m. Pacific time.
Otherwise it will be entered on the following business day. PURCHASE ORDERS
CANNOT BE EFFECTIVE UNTIL PAYMENT IS RECEIVED IN FEDERAL FUNDS (MONEY IS
CREDITED TO THE FEDERAL RESERVE ACCOUNT OF THE TRANSFER AGENT'S BANK). The
investment will not earn income prior to its effective date.
Checks drawn on Seafirst Bank are immediately available for investment
purposes. Checks drawn on other Washington banks will be credited on the day
following their receipt; checks drawn on out-of-state banks will be credited on
the second day following receipt. Checks drawn on banks that are not members of
the Federal Reserve System may take longer to convert into federal funds.
CERTIFICATES. In the interest of economy and shareholder convenience,
physical certificates representing Fund shares will only be issued upon written
request. Draft writing and certain other withdrawal options are not available
for certificated shares.
DISTRIBUTION OF INCOME
Both Portfolios declare income dividends daily based on their net
investment income. Net investment income is the difference between interest
earned on portfolio securities and expenses.
Dividends are reinvested in additional shares at the NAV each day. In
effect, this compounds an investor's income daily. Dividends are earned on the
day of withdrawal, not the day of purchase. You may request to have dividends
deposited to a pre-authorized bank account or paid by check each month. If
you've chosen to receive dividends in cash and the U.S. Postal Service cannot
deliver your check, the Fund reserves the right to reinvest your check and to
automatically reinvest subsequent dividends in your account. The Fund may also
automatically reinvest dividends of $10 or less.
INCOME TAXES ON DIVIDENDS
Here is important information on each of the Fund's portfolios and on tax
provisions that relate to both Portfolios:
MONEY MARKET PORTFOLIO. You are responsible for federal income taxes and
any applicable state and local income taxes on dividends from this Portfolio.
Generally, dividends paid by the Portfolio are taxable as interest income.
Of course, if your shares are in an IRA, or other qualified retirement
plan, you do not have to pay any tax on the reinvested amount until funds are
withdrawn.
TAX-EXEMPT PORTFOLIO. Tax-exempt interest earned by this Portfolio retains
its tax-advantaged status when it is passed on by the Fund to investors.
However, the federal exemption may not result in exemption from any state and
local taxes. A portion of the income may be subject to alternative minimum tax.
Please consult your tax advisor for more information.
Interest income earned by the Portfolio from any investments that are not
tax-exempt is taxable to you as ordinary income. (For information on how this
could happen, please see the closing segment of "How we plan to reach our
objectives.") The same is true for income from any short-term capital gains.
BOTH PORTFOLIOS. Shortly after the end of each year, the Fund will advise
you of the tax status of the dividends from your individual Portfolio. Most of
the Fund's income is expected to consist of interest.
Each Portfolio complies with provisions of the Internal Revenue Code that
apply to regulated investment companies. In keeping with this, any taxable
income is distributed to investors without making any provision for federal
income and excise taxes on those earnings.
To meet federal tax laws, you must provide the Fund with an accurate and
certified Social Security Number or Taxpayer Identification Number to avoid
imposition of a 31% "backup" withholding tax.
EXCHANGES FOR OTHER COMPOSITE FUNDS
You may exchange shares of any Composite fund for the same class of shares
of any other Composite fund. In addition to the portfolios described in this
Prospectus, there are several Composite funds that invest in other types of
securities including: stocks, a balance between stocks and bonds,
income-generating securities, tax-exempt bonds, and U.S. government securities.
Contact your investment representative or the Fund offices to request a
prospectus for the Composite fund that interests you. You may arrange for
automatic monthly exchanges which are subject to the minimum investments allowed
for systematic investment plans of the acquired fund.
Exchanges are made at the prevailing net asset values of the shares being
exchanged. All exchanges are subject to the minimum investment requirements of
the fund being acquired and to its availability for sale in the state where you
live.
There is no charge for exchanges. However, an exchange of shares purchased
without a sales charge may be subject to a sales charge by the Composite Fund
receiving the exchanged shares. In addition, any contingent deferred sales
charges will continue to apply based on the original purchase. Sales charges are
fully explained in the applicable Fund's prospectus.
The Fund reserves the right to refuse any order for the purchase of shares,
including those by exchange. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the Fund and,
consequently, may be disallowed.
HOW TO SELL SHARES
You may redeem shares at any time. Requests received by 1:00 p.m. Pacific
time will result in redemption of shares on the next business day. Several
alternatives are available to you:
DRAFTS. For withdrawals of $500 or more, you may write drafts that are
similar to checks. This option is available for Class A shares and is selected
by filling out the appropriate section of the account application.
TELEPHONE. You may authorize telephone transactions when you sign your Fund
account application or you may choose at that time not to allow such
transactions.
Provided you have pre-authorized these transactions, you may redeem or
exchange shares by telephoning 1-800-543-8072. You may also request these
transactions through your investment representative. Proceeds may be directed to
a pre-authorized bank or broker account or to the address of record for the
account. Exchanges also may be made by telephone. (See the previous section for
more information.)
It may be difficult to reach the Fund offices by telephone during periods
of unusual economic or market activity. Please be persistent if this occurs. The
Transfer Agent is committed to extending its availability beyond regular 7 a.m.
to 6 p.m. (Pacific time) customer service hours during such periods. Calls
requesting telephone redemption or exchanges during periods of unusual market
activity that are received after business hours will be recorded and returned in
the order they were received.
For protection, all telephone instructions are verified. This is done by
requesting personal shareholder information, providing written confirmation of
each telephone transaction, and recording telephone instructions. The Transfer
Agent may require a Letter of Authorization, other documents, or authorization
from your broker to initiate telephone redemptions of $25,000 or more that are
not directed to your pre-authorized bank or broker account. All transactions are
reflected on shareholder statements. If reasonable procedures are used, neither
the Transfer Agent nor the Fund will be liable for following telephone
instructions which they reasonably believe to be genuine. Shareholders assume
the risk of any losses in such cases. However, the Transfer Agent or the Fund
may be liable for any losses because of unauthorized or fraudulent telephone
instructions if reasonable procedures are not followed.
WRITTEN REQUEST. Redemptions also may be requested by writing the Fund
offices. Written requests may require a signature guarantee, as discussed below,
and the return of any outstanding stock certificates. Changes in pre-authorized
redemption instructions or your account registration also require signature
guarantees. For your protection, the signature(s) must be guaranteed by an
officer of a U.S. bank belonging to the Federal Reserve System, a member of the
Stock Transfer Agent Medallion Program, or a member of the National Association
of Securities Dealers, Inc.
PROMPT PAYMENT. Payment normally is made the next business day, but no
later than seven days. However, if you recently purchased Fund shares by check,
redemption proceeds may be delayed until the Transfer Agent verifies collection
of that check. Generally, this occurs within 14 days. Redemption proceeds will
be sent by check or Automated Clearing House transfer without charge. Wire
redemption proceeds may be subject to a $10 fee. The receiving bank also may
charge a fee.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders may choose to receive specific
cash withdrawals on a periodic basis. A $5,000 minimum balance is required to
establish a systematic withdrawal plan in a Fund account. Shares of the Fund
will be redeemed to provide the requested payment. Naturally, withdrawals that
continually exceed dividend income will eventually exhaust the account. Class B
shareholders may use a systematic withdrawal plan to redeem up to 12% of the
beginning balance annually without incurring a contingent deferred sales charge.
The beginning balance is the Fund account balance at the time the plan is
established.
It is costly to maintain small accounts. Because of this, an account may be
closed after 90 days advance, written notice if the total account value falls
below $700 when any transfer or redemption is made. Shares will be redeemed at
the closing NAV on the day the account is closed. To prevent an account closure,
investors may increase holdings to a minimum of $700 during the 90-day grace
period.
IRAs AND OTHER TAX-SHELTERED RETIREMENT PLANS (Money Market Portfolio only)
Money Market Portfolio shares may be appropriate for many retirement plans,
including IRAs. Although there are some restrictions on the deductibility of
contributions, earnings in these plans compound on a tax-deferred basis until
withdrawn.
From time to time, Murphey Favre or its affiliates may offer "IRA bonuses"
on IRA rollovers and transfers to IRA accounts maintained by them. The Fund does
not pay any portion of these bonuses. The products purchased through these
rollovers and transfers may include the Composite Group of Funds. Information
about IRAs and other qualified retirement plans is available from the Fund
offices or your investment representative.
CALCULATION OF YIELDS
From time to time, either Portfolio may advertise its yield and effective
yield.
YIELD. The "yield" refers to the income generated by an investment in the
Portfolio over a seven-day period that is identified in the advertisement. The
income is then annualized. That amount then is shown as a percentage of the
total investment.
EFFECTIVE YIELD. The "effective yield" is calculated similarly. However,
when it is annualized, the income is assumed to be reinvested, and it will show
growth from compounding. The effective yield will be higher than the yield
because of this assumed compounding.
For the Tax-Exempt Portfolio, you may want to calculate the tax-equivalent
yield. That will show you the yield you would need to receive from a taxable
investment to reach the same earnings level as this portfolio. Here is how to do
that: First, subtract your income tax rate from 1.0. Second, divide the
Tax-Exempt Portfolio's stated yield or effective yield by your answer to the
first step. For example, to calculate a tax-equivalent yield at a 36% tax rate,
divide the Portfolio's yield by .64.
Each Portfolio will include yields of each class of shares in any
advertisement or promotional material presenting performance data for that
portfolio. The Portfolios also may quote performance results from recognized
services and publications which monitor the performance of mutual funds.
Included, too, may be comparisons of their performance with various published
historical indices.
OF COURSE, THE FUND'S YIELDS ARE NOT FIXED, NOR IS THE PRINCIPAL
GUARANTEED. ANNUALIZATION OF RATES SHOULD NOT BE INTERPRETED AS AN INDICATION OF
THE FUND'S ACTUAL PERFORMANCE IN THE FUTURE. THE FUND DOES NOT INTEND ANY SUCH
REPRESENTATION.
REPORTS TO SHAREHOLDERS
Shareholders receive semiannual and annual reports. The financial
statements included in the annual reports are audited by independent
accountants.
Shareholders whose accounts are directly with the Fund also receive
statements at least quarterly. These reports show transactions in their
accounts, the total number of shares owned, and any dividends or distributions
paid. Shareholders also receive confirmation after each transaction except for
dividend reinvestments, systematic investment program purchases, and systematic
withdrawal plan redemptions.
WE'RE HERE TO HELP YOU
Any inquiries you may have regarding this Fund or your account should be
directed to the Fund at the address or telephone number on the front page and
back cover of this Prospectus. We will be glad to answer your questions.
<PAGE>
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION, PLEASE CONTACT:
FUND OFFICES
601 W. Main Avenue, Suite 801
Spokane, WA 99201-0613
Phone: (509) 353-3550
Toll free: (800) 543-8072
- --------------------------------------------------------------------------------
ADVISER
Composite Research & Management Co.
1201 Third Avenue, Suite 1220
Seattle, WA 98101-3015
DISTRIBUTOR
Murphey Favre, Inc.
1201 Third Avenue, Suite 789
Seattle, WA 98101-3015
CUSTODIAN
Investors Fiduciary Trust Company
127 W. 10th Street
Kansas City, MO 64105-1716
INDEPENDENT PUBLIC ACCOUNTANTS
LeMaster & Daniels, PLLC
601 W. Riverside Avenue, Suite 800
Spokane, WA 99201-0614
COUNSEL
Paine, Hamblen, Coffin, Brooke & Miller LLP
717 W. Sprague Avenue, Suite 1200
Spokane, WA 99204-0464
BOARD OF DIRECTORS
Wayne L. Attwood, M.D.
Kristianne Blake
Anne V. Farrell
Edwin J. McWilliams
Michael K. Murphy
William G. Papesh
Jay Rockey
Leland J. Sahlin
Richard C. Yancey
[ RECYCLE LOGO ]
<PAGE>
STATEMENT OF
ADDITIONAL
INFORMATION
APRIL 30, 1996
COMPOSITE CASH MANAGEMENT COMPANY
A Money Market Fund Designed to Meet Several Investor Goals
601 W. Main Avenue, Suite 801
Spokane, WA 99201-0613
Telephone: 509-353-3550
Toll free: 800-543-8072
Composite Cash Management Company (the "Fund") aims to enable investors to meet
several short-term goals by providing a series of two separate portfolios, each
with different investment objectives. Each Portfolio offers two classes of
shares. Class A shares are offered directly to the public or via exchange of
Class A shares from other funds within the Composite Group. Class B shares are
offered only by exchange of Class B shares from other Composite funds. The
portfolios are:
MONEY MARKET PORTFOLIO: Investing in higher grades of money market instruments
for maximum current income, while preserving capital and allowing liquidity.
TAX-EXEMPT PORTFOLIO: Investing in high-quality, short-term municipal
obligations for maximum current income exempt from federal income tax, while
preserving capital and allowing liquidity.
Individual portfolio investments, carefully chosen to fulfill the different
objectives, are adjusted in accordance with management's evaluation of changing
market risks and economic conditions.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE FUND'S PROSPECTUS DATED APRIL 30, 1996, WHICH CAN BE
OBTAINED WITHOUT CHARGE BY CONTACTING THE FUND AT THE ABOVE ADDRESS.
TABLE OF CONTENTS
Page Page
----- -----
The Fund and Its Management 2-8 Investment Practices 16-19
Distribution Services 8-9 Investment Restrictions 19-20
How Shares Are Valued 9-10 Performance Information 20-22
How Shares Can Be Brokerage Allocations and 22-23
Purchased 10 Portfolio Transactions
Redemption of Shares 10-12 General Information 23-24
Exchange Privilege 12-13 Financial Statements and
Services Provided by the Fund 13 Reports 24-25
Tax-Sheltered Retirement Plans 13-14 Appendix A 26
Dividends, Capital Gain Appendix B 27-29
Distributions and Taxes 14-15
THE FUND AND ITS MANAGEMENT
THE INVESTMENT ADVISER
As discussed under "Who We Are" in the prospectus, the Fund is managed and
investment decisions are made under the supervision of Composite Research &
Management Co. (the "Adviser"). Decisions to buy, sell, or hold a particular
security are made by an investment team of the Adviser, subject to the control
and final direction of the Fund's Board of Directors.
Composite Research & Management Co. is Adviser for the eight investment
companies (currently 12 separate portfolios) in the "Composite Group," namely:
Composite Bond & Stock Fund, Inc.; Composite Equity Series, Inc.; Composite
Income Fund, Inc.; Composite Tax-Exempt Bond Fund, Inc.; Composite Cash
Management Company; Composite U.S. Government Securities, Inc.; Composite
Northwest Fund, Inc.; and Composite Deferred Series, Inc. The Adviser also
provides investment advice to institutional clients.
INVESTMENT MANAGEMENT SERVICES
Management fees and services performed by the Adviser are discussed under "The
Cost of Good Management" in the prospectus. The investment management agreements
(the "Agreements") between each Portfolio and the Adviser to furnish suitable
office space, research, statistical and investment management services to the
Fund were approved by shareholders. The Agreements continue in effect from
year-to-year provided their continuation is specifically approved at least
annually by the Fund's Board of Directors (including a majority of the directors
who are not parties to the Agreements) by votes cast in person at a meeting
called for the purpose of such approval; or by vote of a majority of the
outstanding shares of the respective Portfolio. The Agreements can be terminated
by either party on sixty (60) days' notice, without penalty, and provides for
automatic termination upon its assignment.
Under the provisions of the Investment Company Act of 1940 and as used elsewhere
in the prospectus and this Statement of Additional Information, the phrase "vote
of the majority of the outstanding shares of the Fund" means the vote at any
meeting of shareholders of (a) 67% or more of the shares present at such meeting
if the shareholders of more than 50% of the outstanding shares are present or
represented by proxy; or (b) more than 50% of the outstanding shares, whichever
is less.
In payment for its services, the Adviser receives a fee from each Portfolio
calculated and paid monthly at an annual rate of .45% on average daily net
assets of the first $1 billion and .40% on assets in excess of $1 billion. Prior
to July 1, 1995, the fee was .50% of average daily net assets. Fees paid to the
Adviser during the fiscal years ended December 31, 1995, 1994, and 1993 for the
Money Market Portfolio were $688,617, $635,990, and $693,244, respectively. Fees
paid during 1995, 1994, and 1993 for the Tax-Exempt Portfolio were $143,292,
$168,779, and $167,891, respectively.
The Agreements require that, should the expenses of either Portfolio (excluding
taxes, interest and any portfolio brokerage and the .75% Class B Distribution
fee exceed in any fiscal year 1.5% of the average net assets of the Portfolio up
to $30 million and 1% of average net assets over $30 million, it will reimburse
the Portfolio for such excess. No reimbursements were required by these
Agreements during 1995, 1994, or 1993.
Under the terms of the Agreements, the Portfolios are required to pay fees of
directors not employed by the Adviser or its affiliates; custodian expenses;
brokerage; taxes; auditing and legal expenses; costs of issue, transfer,
registration or redemption of shares for sale; costs relating to disbursement of
dividends, corporate meetings, corporate reports, and the maintenance of the
Fund's corporate existence.
The Adviser, Transfer Agent, and Distributor jointly agreed to reimburse the
Tax-Exempt Portfolio for a portion of its expenses during 1995, 1994, and 1993.
Such reimbursements and waivers may continue at their discretion. Additionally,
effective September 1, 1995, the Transfer Agent agreed to waive shareholder
servicing fees for accounts below $1,000 and the Distributor reimbursed printing
and postage expenses attributable to these accounts. The Money Market
Portfolio's expense waivers and reimbursements totaled $22,965 during
1995.Amounts waived and reimbursed to the Tax-Exempt Portfolio for the years
ended December 31, 1995, 1994, and 1993 totaled $57,104, $55,629, and $92,576,
respectively.
Investment decisions for the Fund are made independently of those for other
funds in the Composite Group. However, the Adviser may determine that the same
security is suitable for more than one of the funds. If more than one of the
funds is simultaneously engaged in the purchase or sale of the same security,
the transactions are allocated as to price and amount in accordance with a
formula considered to be equitable to each. It is recognized that in some cases
this system could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned. In other cases, however, it is
believed that the ability to participate in volume transactions may provide
better executions for the Fund. It is the opinion of the Fund's Board of
Directors that these advantages, when combined with the personnel and facilities
of the Adviser's organization, outweigh possible disadvantages which may exist
from exposure to simultaneous transactions.
The Fund has adopted a code of ethics which is intended to prevent access
persons from conducting personal securities transactions which interfere with
Fund portfolio transactions or otherwise take unfair advantage of their
relationship with the Fund. In general, the personal securities transactions of
individuals with access to information regarding Fund portfolio transactions
must be pre-cleared by the Adviser's Compliance Officer and must not occur when
similar transactions are contemplated by the Fund.
GLASS-STEAGALL
The Glass-Steagall Act, among other things, generally prohibits member banks of
the Federal Reserve System from engaging to any extent in the business of
issuing, underwriting, selling or distributing securities and generally
prohibits management interlocks and affiliations between member banks and
companies engaged in certain activities. In a Statement of Policy dated
September 1, 1982, the Federal Deposit Insurance Corporation concluded that the
investment restrictions of the Glass-Steagall Act do not apply to banks or their
affiliates if the banks are not members of the Federal Reserve System.
Washington Mutual Bank is not a member bank. The Adviser has advised the Fund
that, in its view, the Glass-Steagall Act does not prohibit the activities of
the Adviser and that it may perform the services for the Fund contemplated by
the Investment Management Agreements without violation of the Glass-Steagall Act
or other applicable banking laws or regulations.
DIRECTORS AND OFFICERS OF THE FUND
The Fund's Board of Directors is elected by its shareholders. Interim vacancies
may be filled by current directors so long as at least two-thirds were
previously elected by shareholders. The Board has responsibility for the overall
management of the Fund including general supervision and review of its
investment activities. The directors, in turn, elect the officers of the Fund
who are responsible for administering the day-to-day operations. All of the
Fund's directors and officers hold identical positions with each of the funds in
the Composite Group. Directors and officers of the Fund and their business
experience for the past five years are set forth below. Unless otherwise noted,
the address of each executive officer is 601 W. Main Avenue, Suite 801, Spokane,
Washington 99201-0613.
WAYNE L. ATTWOOD, MD
Director
3 E. 40th
Spokane, Washington 99203
Dr. Attwood is a retired doctor of internal medicine and gastroenterology in
Spokane, Washington.
KRISTIANNE BLAKE
Director
705 W. 7th, Suite D
Spokane, Washington 99204
Mrs. Blake is president of Kristianne Gates Blake, PS, an accounting services
firm specializing in personal financial planning and tax planning.
*ANNE V. FARRELL
Director
425 Pike Street, Suite 510
Seattle, Washington 98101
Mrs. Farrell is president and CEO of The Seattle Foundation (a charitable
foundation). In addition, she serves as a director of Washington Mutual, Inc.
EDWIN J. McWILLIAMS
Director
1717 S. Upper Terrace Road
Spokane, Washington 99203
Mr. McWilliams is former president of both Fidelity Service Corporation (a
mortgage servicing subsidiary of Sterling Savings Association) and Fidelity
Mutual Savings Bank.
*MICHAEL K. MURPHY
Director
PO Box 3366
Spokane, Washington 99220-3366
Mr. Murphy is Chairman and CEO of CPM Development Corporation (a holding company
which includes Central Pre-Mix Concrete Company). In addition, he serves as a
director of Washington Mutual, Inc.
*WILLIAM G. PAPESH
President and Director
Mr. Papesh is president and a director of the Adviser and Transfer Agent, and a
director and executive vice president of the Distributor.
JAY ROCKEY
Director
2121 - Fifth Avenue
Seattle, Washington 98121
Mr. Rockey is Chairman and CEO of The Rockey Company (a regional public
relations firm).
*LELAND J. SAHLIN
Chairman and Director
Mr. Sahlin is a senior vice president of the Adviser and served as president of
the Fund from 1972 to 1989; of the Distributor from 1972 to 1987; and of the
Adviser from 1972 to 1988.
RICHARD C. YANCEY
Director
535 Madison Avenue
New York, New York 10022
Mr. Yancey is senior advisor to Dillon, Read & Co., Inc. (a registered
broker-dealer and investment banking firm), New York, New York.
*These directors are "interested persons" of the Fund as that term is defined in
the Investment Company Act of 1940 because they are either affiliated persons of
the Fund, its Adviser, or Distributor.
GENE G. BRANSON
Vice President
Suite 780
1201 Third Avenue
Seattle, Washington 98101
Mr. Branson is a senior vice president and director of the Distributor and
Transfer Agent and a vice president and director of the Adviser.
MONTE D. CALVIN, CPA
Vice President and Treasurer
Mr. Calvin is an executive vice president of the Transfer Agent and serves as
the chief financial officer of the Fund.
CASSIE L. FOWLER, CPA
Assistant Secretary
Ms. Fowler is an employee of the Transfer Agent.
KERRY K. KILLINGER
Executive Vice President
Suite 1501
1201 Third Avenue
Seattle, Washington 98101
Mr. Killinger is president, chairman of the board, and chief executive officer
of Washington Mutual, Inc. and a director of the Adviser, Distributor, and
Transfer Agent.
JEFFREY L. LUNZER, CPA
Assistant Treasurer
Mr. Lunzer is a vice president of the Transfer Agent.
CONNIE M. LYONS
Assistant Secretary
Ms. Lyons is an employee of the Transfer Agent.
DOUGLAS D. SPRINGER
Vice President
Suite 780
1201 Third Avenue
Seattle, Washington 98101
Mr. Springer is president and a director of the Distributor and a director of
the Adviser and the Transfer Agent.
JOHN T. WEST, CPA
Secretary
Mr. West is a vice president of the Transfer Agent.
The Fund paid no remuneration to any of its officers, including Mr. Papesh and
Mr. Sahlin, during the year ended December 31, 1995. The Fund and other Funds
within the Composite Group paid directors' fees during the year ended December
31, 1995, in the amounts indicated below.
Money Market Tax-Exempt Total
Director Portfolio Portfolio Complex (1)
- ------------------ -------------- --------------- -------------
Wayne L. Attwood $1,250 $1,250 $15,000
Kristianne Blake $ 775 $ 775 $ 9,300
Edwin J. McWilliams $1,208 $1,208 $14,500
Jay Rockey (2) $1,177 $1,177 $14,125
Richard C. Yancey $1,208 $1,208 $15,000
(1) Each director serves in the same capacity with each Fund within the
Composite Group (eight companies) comprising 12 individual investment
portfolios.
(2) Mr. Rockey is Chairman and CEO of The Rockey Company, a public relations
firm which has received revenue from the Funds and Washington Mutual, Inc.,
parent company of the Adviser and Distributor, during the 1995 fiscal year.
As of April 1, 1996, officers, directors and their immediate families as a group
owned of record and beneficially 1,994,357 shares the Money Market Portfolio and
438,703 shares of the Tax-Exempt Portfolio which amounted to 1.0% and 1.4%,
respectively, of the total shares outstanding on that date. On that date no
individual owned of record or beneficially more than 5% of the outstanding
voting securities in either of the two Portfolios.
Wayne L. Attwood, MD, Kristianne Blake, *Anne V. Farrell, and *Michael K. Murphy
serve as members of the Board's audit committee. The committee meets
periodically with the Fund's independent accountants and officers to review
accounting principles used by the Fund and the adequacy of the Fund's internal
controls.
The investment committee performs interim functions for the Board of Directors
of the Fund including, but not limited to, dividend declaration and portfolio
pricing matters. Members are *Anne V. Farrell, *Michael K. Murphy, and Richard
C. Yancey.
Responsibilities of the Board's nominating committee include preparing for and
recommending replacements for any vacancies in directors' positions and initial
review of policy issues regarding the size, composition, and compensation of the
Board. Members of the nominating committee are Kristianne Blake, Edwin J.
McWilliams and Jay Rockey.
The Board's distribution committee is responsible for reviewing distribution
activities and 12b-1 expenditures to determine that there is a reasonable
likelihood the 12b-1 plan will benefit the Fund and its shareholders. The
committee meets at least annually and is responsible for making recommendations
to the Board regarding renewal or changes to the distribution plan. Committee
members are Wayne L. Attwood, MD, Edwin J. McWilliams, Jay Rockey, and Richard
C. Yancey.
The Board may appoint annually a valuation committee comprised of any two
directors or officers of the Fund and one or more portfolio managers, as
designated by the Fund chairman, president or vice president/treasurer of the
Fund. The valuation committee is called upon to value any security held by the
Fund whenever the security cannot otherwise be valued under the Fund's
guidelines for valuation.
*These directors are "interested persons" of the Fund as that term is defined in
the Investment Company Act of 1940, because they are either affiliated persons
of the Fund, its Adviser, or Distributor.
DISTRIBUTION SERVICES
12b-1 Plan
As discussed in the prospectus under "The Cost of Good Management," the
directors of the Fund have approved a plan for both classes of shares (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 which
provides that investment companies may pay distribution expenses, directly or
indirectly, according to a plan adopted by the Fund's Board of Directors and
approved by its shareholders.
Under the Plan, the Fund may reimburse Murphey Favre, Inc. (the "Distributor")
for Class A distribution expenses, including the cost of printing and
distributing prospectuses, statements of additional information and other
promotional and sales literature, compensation to registered representatives for
their services, and reimbursement to the Distributor for the direct and indirect
cost of furnishing services of its personnel to assist in the entire
distribution process but excluding general and administrative expenses.
The maximum annual reimbursement allowed by the Plan and authorized by directors
for such Class A distribution expenses may not exceed .15% of the Fund's average
daily net assets. Distribution expenses incurred in the Money Market Portfolio
in 1995 were .01% of average daily net assets. No distribution expenses were
incurred by the Tax-Exempt Portfolio. Directors accepted a proposal by the
Distributor to limit distribution expenses to .07% in the Money Market Portfolio
but reserve the right to increase future expenses to the maximum limit. The
Money Market Portfolio reimbursed the Distributor $18,754 for distribution
expenses incurred on behalf of the Portfolio during 1995. Of this amount, $9,420
was paid for printing and $9,334 was for other distribution-related expenses.
During 1994 and 1993, the Money Market Portfolio reimbursed the Distributor
$29,207 and $69,536, respectively.
Under the Plan, the Fund compensates the Distributor with a distribution fee at
an annual rate of .75% of the Fund's average daily net assets attributable to
Class B shares and a service fee at an annual rate of .25% of such assets.
During 1995, the Money Market and Tax-Exempt Portfolios compensated the
Distributor $702 and $11, respectively, for the sale of Class B shares. During
the fiscal period from May 2, 1994 (commencement of public offering), to
December 31, 1994, the Money Market and Tax-Exempt Portfolios compensated the
Distributor $29 and $7, respectively, for the sale of Class B shares.
Under the Plan, the Fund will report at least quarterly to its Board of
Directors the amounts and purposes of all distribution expense payments. During
the continuance of the Plan, as required by Rule 12b-1, the selection and
nomination of the independent directors of the Fund will be committed to the
discretion of the independent directors then in office.
The Plan has been approved unanimously by the directors of the Fund, including a
majority of the independent directors who have no direct or indirect interest in
the Plan, and by the Distributor. The Plan will remain in effect for one year,
may be terminated at any time by a vote of a majority of the disinterested
directors or by a vote of a majority of the outstanding voting securities of the
Fund, and may be renewed from year to year thereafter only if approved by a vote
of independent directors. In approving the Plan and submitting it to
shareholders, directors of the Fund determined, in the exercise of their
business judgment and in light of their fiduciary duties as directors, that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Plan will be renewed only if the directors make a similar
determination for each subsequent year of the Plan. All material amendments to
the Plan must be approved by a vote of the Fund's Board of Directors, including
independent directors, and by shareholders.
DISTRIBUTOR
The Distributor purchases shares of each Portfolio's capital stock in a
continuous offering to fill orders placed with it by investors and investment
dealers. It purchases and resells shares at net asset value in accordance with
terms of the Distribution Contract with the Fund. The Distributor acts in a
similar capacity for all other funds in the Composite Group.
The Distributor has not received any earnings or profits from the redemption of
Class A shares. During the fiscal year ended December 31, 1995, the Distributor
received contingent deferred sales charge payments of $1,445 and $0 upon
redemption of Money Market Portfolio and Tax-Exempt Portfolio Class B shares,
respectively. No brokerage fees were paid by the Fund to the Distributor during
the year, but the Distributor may act as broker on portfolio purchases and sales
should it become a member of a securities exchange.
The Fund bears the cost of registering its shares with federal and state
securities commissions and printing copies of prospectuses and statements of
additional information used for its shareholders. The Distributor pays for
information to send to potential shareholders but may be reimbursed under the
Distribution Plan for such expenses applicable to Class A shares.
TRANSFER AGENT
Murphey Favre Securities Services, Inc. (the "Transfer Agent") furnishes
necessary personnel, and other transfer agent services required by the Fund. The
Shareholders Service Contract was originally approved by shareholders. The Money
Market Portfolio paid the sums of $268,265, $259,630, and $286,762, for these
services during 1995, 1994, and 1993, respectively. For the fiscal years 1995,
1994, and 1993, the Tax-Exempt Portfolio paid $32,355, $37,138, and $36,465,
respectively, for these services. As of April 30, 1996, each Portfolio's monthly
shareholder servicing fee was $1.55 per account for the first 25,000 accounts,
$1.25 per account thereafter for Class A accounts and $1.65 per account for the
first 25,000 Class B accounts and $1.35 per each Class B account thereafter. The
Transfer Agent has agreed to waive its fees for all accounts with a balance of
under $1,000. All requests for transfer of shares should be directed to the Fund
or to the Transfer Agent.
HOW SHARES ARE VALUED
Please see "How Shares are Valued" in the prospectus for more information. (See
"Appendix A" for a specimen price make-up sheet).
Management of the Fund has designed procedures which it believes will stabilize
each Portfolio's net asset value per share for the purposes of distribution,
redemption, and repurchase at a single value of $1.00. In the event that, on any
business day, either Portfolio's net asset value per share substantially
deviates (exceeds 1/2 of 1 percent) from $1.00, that Portfolio will (in lieu of
reducing the net asset value below $1.00 per share) apply net income to the
extent available and, if not sufficient, that Portfolio will reduce the number
of shares outstanding in order to maintain a net asset value per share of $1.00.
Investment securities are valued at cost as adjusted for amortization of
premiums and discounts where applicable. The Board of Directors regularly and
routinely monitors amortized cost value assigned to these securities to insure
that carrying value approximates market valuation.
HOW SHARES CAN BE PURCHASED
Information concerning the purchase of shares is discussed under "How to Buy
Shares" in the prospectus. Shares in each class of each Portfolio are
continuously offered at a net asset value of $1.00 per share on any regular
business day. There is no initial ales charge on Class A shares. Class B shares
are available only by exchange of Class B shares of another Composite fund.
Either class may be subject to a contingent deferred sales charge for shares
purchased by exchange as discussed in the prospectus.
Investments made by an agent or fiduciary (such as a bank trust department,
investment adviser, broker or employee benefit or retirement plan), pursuant to
a periodic investment plan, may have the minimum purchase requirements on
initial and subsequent investments waived. The Fund further intends to waive the
minimum purchase requirements for directors, officers and employees of
Washington Mutual, Inc. and its affiliates (including the Adviser, the
Distributor, and the Transfer Agent), as well as directors and officers of the
Fund, or to any trust, pension, profit-sharing or other benefit plan for such
persons. The foregoing privilege also will be extended to directors, officers
and employees (including their benefit plans), of other companies which enter
into selling arrangements with the Distributor. Persons may also invest in the
Fund by purchasing shares with the assistance of non-affiliated broker-dealers,
who may charge a fee to investors for their service. All investments will be
credited to investors' accounts in full and fractional shares carried to the
second decimal place. Composite Cash Management Company reserves the right to
reject any order. Certificates for full shares will be issued at no cost upon
written request only. No certificates will be issued to accounts having
telephone redemption or draft (check) writing privileges.
REDEMPTION OF SHARES
Investors may withdraw all or any portion of collected funds credited to their
account in the Fund at any time. Such withdrawal constitutes a redemption of
shares which will occur at the net asset value of $1.00 after receipt of the
redemption request at the Fund office prior to 1:00 p.m. Pacific time as
described below.
DRAFT (CHECK) WITHDRAWAL
Investors may elect to withdraw funds from their account by writing drafts
(similar to checks) on an account established by the Distributor. The
Distributor shall have the right to select the bank at which the account will be
maintained. This arrangement does not establish an account for investors with
the depository institution.
Investors must indicate their preference for the draft-writing privilege on the
new account application. All drafts must be signed exactly as the account is
registered. By completing the appropriate authorization on the new account
application, joint registrants may authorize one registrant to sign.
The Fund will provide each investor, upon request, with forms of drafts which
may be made payable in any amount of $500 or more. Investors using the drafts to
make withdrawals from the account will continue to earn income on the amount of
the draft until the item is presented to the Fund. Processing of these drafts
will be subject to the rules and regulations of the bank maintaining the
account.
Draft-writing will constitute instruction and authorization to the Fund, as
agent, to withdraw the indicated amounts from the investor's account. All drafts
presented are subject to the approval of the Fund and will not be paid unless
the investor's account has sufficient collected balances. The bank maintaining
the account will not provide immediate cash for drafts presented by investors,
and clearance time may be as much as ten business days. Although other banks
receiving a draft for deposit generally will process it as a regular check, they
also may not provide immediate credit.
There is currently no charge for the maintenance of this draft privilege, but
the Fund reserves the right, at any time and without notice, to impose charges
or to terminate this privilege.
GENERAL REDEMPTION INFORMATION
Investors may withdraw all or any portion of their account upon written request,
and the return of any outstanding stock certificates to the Fund. Signatures on
the request must correspond with those on the account application and must be
guaranteed by an officer of a member bank of the Federal Reserve System, a
member of the Stock Transfer Association Medallion Program, or a member firm of
the National Association of Securities Dealers, as discussed in the prospectus.
Payment will normally be made the day following the effective date of the
request.
In each of the above cases, sufficient full and fractional shares will be
redeemed to cover the amount of money withdrawn. Accounts registered in the name
of institutions, corporations, and fiduciaries may require additional
documentation prior to any withdrawal. Please contact the Fund if your account
is carried in one of these registration forms.
Investors should be certain that adequate shares and collected balances are in
their account to cover any redemption request. Requests for the withdrawal of
amounts in excess of account balances will be automatically dishonored.
Purchases made by cashier's check, certified funds, or bank wire are available
for immediate redemptions.
The right of redemption may be suspended or the date of payment postponed: (a)
during any periods when the New York Stock Exchange is closed (other than
customary weekend and holiday closings); (b) when trading in the markets the
Fund normally utilizes is restricted, or an emergency exists as determined by
the Securities and Exchange Commission so that disposal of the Fund's
investments or determination of its Portfolio's net asset values is not
reasonably practicable; or (c) for such other periods as the Commission by order
may permit to protect the Fund's investors. In the event of suspension of the
right to redeem, investors may withdraw their redemption request or receive
payment based upon the net asset value computed upon the termination of the
suspension.
EXCHANGE PRIVILEGE
Shareholders may exchange shares of their portfolio for the same class of shares
in another portfolio of Composite Cash Management Company or other mutual funds
in the Composite Group. A brief discussion of such privileges is in the
prospectus under "Exchanges for Other Composite Funds." Exchanges will be made
at the respective net asset values in effect on the date of such exchange.
Shares previously subject to a sales charge may be exchanged without incurring
any additional initial or contingent deferred sales charge. Class B shares are
available only by exchange. Exchanged shares of either class which would be
subject to a contingent deferred sales charge will continue to be subject to
contingent deferred sales charges according to the schedule applicable to the
originally purchased shares. Sales charges are fully explained in the
prospectuses of the applicable funds. Any gains or losses realized on an
exchange should be recognized for federal income tax purposes, as required. This
privilege is not an option or right to purchase securities but is a revocable
privilege permitted under the present policies of each of the funds. This
privilege is not available in any state or other jurisdiction where the shares
of the fund into which the exchange is to be made are not qualified for sale, or
when the value of the shares presented for exchange is less than the minimum
dollar purchase required by the appropriate prospectus.
An investor may exchange some or all of his shares in the Fund for those of any
other fund in the Composite Group of Funds, currently consisting of:
COMPOSITE GROUP OF FUNDS
I. Composite Bond & Stock Fund: primary objective is continuity of income and
conservation of capital with long-term growth a secondary objective.
II. Composite Growth & Income Fund: primary objective is long-term growth of
principal with current income a secondary objective.
III. Composite Northwest Fund: designed to provide long-term growth of capital
by investing in a broadly diversified portfolio of common stocks selected
from companies located or doing business in the Northwest.
IV. Composite Income Fund: primary objective is current income with
preservation of principal a secondary consideration.
V. Composite U.S. Government Securities: primary objective is to provide a
high level of current income, consistent with the safety and liquidity of
U.S. government-backed securities.
VI. Composite Tax-Exempt Bond Fund: primary objective is a high level of
current income exempt from federal income taxes as is consistent with
prudent investment risk and protection of capital. (Not allowed in IRAs)
SERVICES PROVIDED BY THE FUND
SYSTEMATIC WITHDRAWAL PLAN
As described in the prospectus, the Fund offers a Systematic Withdrawal Plan.
All dividends and distributions on shares owned by shareholders participating in
this plan are reinvested in additional shares. Shares will be redeemed at the
close of business on or about the 25th day of each month preceding payment, and
payments will be mailed within three business days thereafter.
The Systematic Withdrawal Plan may involve the use of principal and is not a
guaranteed annuity. Payments under such a plan do not represent income or a
return on investment but instead are made from the redemption of Fund shares.
Naturally, withdrawals that continually exceed reinvested dividend income will
eventually exhaust the account.
A Systematic Withdrawal Plan may be terminated at any time by directing a
written request to the Fund or the Transfer Agent. Upon termination, all future
dividends and capital gain distributions will continue to be reinvested in
additional shares unless a shareholder requests otherwise.
TAX-SHELTERED RETIREMENT PLANS (Money Market Portfolio only)
As described in the prospectus, shares of the Money Market Portfolio may be
purchased as an investment medium for various tax-sheltered retirement plans.
The amounts of contributions to such plans are generally limited by the Internal
Revenue Code. Each of these plans involves a long-term commitment of assets, and
participants may be subject to possible regulatory penalties for excess
contributions, premature distributions, excess distributions, or insufficient
distributions after age 70 1/2.
QUALIFIED RETIREMENT PLANS
Self-employed individuals (as sole proprietors or partnerships) or corporations
may wish to purchase Fund shares in a retirement plan. Investors may obtain
information regarding these plans by contacting an investment representative or
the Fund's offices.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
IRA contributions are invested when received. However, individuals establishing
a new IRA plan may terminate their plan within seven days. In the event of such
termination, their entire purchase price will be refunded by the Distributor
provided they notify the Distributor of their desire to rescind the purchase.
Termination during the seven-day period through regular redemption rather than
through recission will result in adverse tax consequences. Internal Revenue
Service regulations prohibit revocation of rollover contributions. Any losses
derived through recission will be absorbed by the Distributor.
IRA CUSTODY AGREEMENT, SERVICE CHARGES AND TAX ASPECTS
Unless participants elect otherwise, any capital gain distributions and income
dividends are reinvested on ex-dividend date in full and fractional shares of
the applicable Portfolio at net asset value.
The IRA plan provides that the Distributor will furnish custodial services
either as agent for Washington Mutual Bank or as the named custodian. There are
set annual fees for IRA plans per participant unless made under an
employer-sponsored plan, in which case the custodial fee is negotiable. If
custodial fees are not paid annually by separate check, shares will
automatically be liquidated to cover such fees.
IRA BONUSES
"IRA Bonuses" may periodically be credited to IRA accounts for contributions,
transfers and/or rollovers. Payments will be made at a uniform rate determined
by the Distributor or its affiliates and will be based on the value of the
rollovers and/or transfers. IRA Bonuses are not paid by the Fund.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
The Fund intends to continue to conduct its business and maintain the necessary
diversification of assets and source of income requirements to qualify as a
diversified management investment company under the Internal Revenue Code (the
"Code"). The Fund so qualified during the 1995 fiscal year. As a result, under
Subchapter M of the Code, the Fund is accorded conduit or "pass through"
treatment for federal income tax purposes during each year in which it
distributes to its shareholders 90% or more of its gross income from dividends,
interest and gains from the sale or other disposition of securities, and in
which it derives less than 30% of its gross income from gains (without deduction
for losses) from the sale or other disposition of securities held for less than
three months. In addition, if the Fund distributes 98% of its ordinary income
and capital gain net income for each calendar year, it will not be subject to
excise tax on undistributed income. The Fund intends to distribute such amounts
as necessary to avoid federal income and excise taxes.
MONEY MARKET PORTFOLIO
Under the Code, dividends from net investment income (including realized net
short-term capital gains, if any) are taxable to Portfolio investors as dividend
income. Since the Portfolio's net investment income is derived from interest
income, the dividends paid are not eligible for the 70% corporate dividends
received deduction. Dividends may also be subject to state and local taxes.
TAX-EXEMPT PORTFOLIO
Congressional legislation allows income received by the Portfolio, which is
excludable from gross income under the Code, to retain its status as income
exempt from federal income tax when distributed to shareholders as such. This
allowance is based on the Portfolio holding 50% of the value of its total assets
in municipal obligations at each quarter end of its fiscal year. Interest earned
by the Portfolio on municipal bonds is not includable by the holders of shares
in their respective gross incomes for federal income tax purposes. Net interest
income received by the Portfolio from other obligations (e.g., certificates of
deposit, commercial paper, and obligations of the United States government, its
agencies or instrumentalities) and net short-term capital gains realized by the
Portfolio, if any, will be taxable to holders of shares as ordinary income.
Dividend distributions are calculated and recorded daily and distributed on the
last day of each month under the "actual earned" method. Under this method, the
portion of each distribution which is tax-exempt may vary. Any reinvestments
will be taxed to the shareholder in the same manner as if they had been
distributed.
Section 265 of the Code in effect provides that interest on indebtedness, and
expenses associated therewith, incurred or continued to purchase or carry
obligations, the interest on which is tax exempt, are not deductible. Consistent
with the general view of the Internal Revenue Service, it is probable that
interest on indebtedness incurred or continued to purchase or carry shares is
not deductible.
Interest on certain "private activity" bonds (referred to as "qualified bonds"
in the Code) is subject to the federal alternative minimum tax ("AMT"), although
the interest continues to be excluded from gross income for other purposes.
Interest from private activity municipal obligations is a tax preference item
for the purposes of determining whether a taxpayer is subject to AMT and the
amount of AMT to be paid, if any. Private activity obligations issued after
August 7, 1986, to benefit a private or industrial user or to finance a private
facility are affected by this rule. It is the current position of the staff of
the Securities and Exchange Commission that income from municipal obligations
that is a preference time for purposes of the AMT is not deemed to be
"tax-exempt." Under this position, at least 80% of the Portfolio's income
distributions would have to be exempt from the AMT as well as exempt from
federal taxes.
The exemption of interest income 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 interest income and each
holder of shares of the Portfolio is advised to consult his own tax adviser in
that regard. Upon request, the Portfolio will report the source of tax-exempt
income by state. Shareholders are urged to consult their own tax advisers
regarding specific questions about federal, state and local taxes.
INVESTMENT PRACTICES
MONEY MARKET PORTFOLIO
Investment objectives and policies of the Money Market Portfolio are described
in the prospectus. The investment objective of the Portfolio is to provide a
high level of current income while at the same time preserving capital and
maintaining liquidity. It is a fundamental policy of the Portfolio to invest
only in the following money market instruments which at the time of purchase
mature within 397 days:
1. Obligations issued or guaranteed by the United States government or any
agency or instrumentality thereof. U.S. government obligations are issued
by the Treasury and include bills, certificates of indebtedness, notes, and
bonds. Agencies and instrumentalities of the U.S. government are
established under the authority of an act of Congress and include, but are
not limited to: the Government National Mortgage Association, the Tennessee
Valley Authority, the Bank for Cooperatives, the Farmers Home
Administration, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks and the Federal National Mortgage Association.
2. Obligations of domestic and foreign banks having total assets in excess of
500 million U.S. dollars as of the date of their most recently published
financial statement:
Certificates of deposit are receipts issued by a bank in exchange for the
deposit of funds. The bank agrees to pay the amount deposited, plus
interest, to the bearer of the receipt on the date specified on the
certificate. Because the certificate is negotiable, it can be traded in the
secondary market before maturity. Certificates of deposit purchased by the
Portfolio will not be fully insured.
Bankers' acceptances are time drafts drawn on a U.S. bank by an exporter or
importer to obtain a stated amount of funds to pay for specific merchandise
or, less frequently, foreign exchange. The draft is then "accepted" by the
U.S. bank (the drawee) which in effect unconditionally guarantees to pay
the face value of the instrument on its maturity date. The face of the
instrument specifies the terms and the nature of the underlying
transaction.
Letters of credit are issued by U.S. banks and authorize the beneficiary to
draw drafts upon such U.S. banks for acceptance payment under specified
conditions. All of the securities in the Portfolio and income thereon are
payable in U.S. dollars.
3. Commercial paper (unsecured short-term notes of indebtedness issued by
business and banking firms to finance their short-term needs), purchased by
the Portfolio will consist only of direct obligations which, at the time of
their purchase, are (a) rated in the two highest ratings by Moody's
Investors Service, Inc. or by Standard & Poor's Corporation, or (b) issued
by companies having an outstanding unsecured debt issue currently rated A
or better by Moody's or by Standard & Poor's (see "Appendix B").
4. Short-term corporate obligations which at the date of investment are rated
A or better by Moody's or by Standard & Poor's (see "Appendix B").
5. Repurchase agreements: The Portfolio may acquire an underlying debt
instrument for a relatively short period (usually not more than one
business day) subject to an obligation of the seller to repurchase and the
Portfolio to resell the instrument at a fixed price. In the event the
seller defaults on his agreement to repurchase the instrument, the
Portfolio may suffer a loss because of a decline in the value of the
underlying debt instrument. The Portfolio will enter into repurchase
agreements only with domestic banks or recognized money market securities
dealers, with respect to any of the above-mentioned securities. To limit
risk, repurchase agreements maturing in more than seven days will not
exceed ten percent of the total assets of the Portfolio. The Portfolio
requires daily valuation of the underlying debt instrument for any
repurchase agreement maturing in more than one (1) business day and
requires that the market value of the collateral be maintained at a minimum
of 102 percent of the current value. The Portfolio maintains constructive
possession of the securities through a safekeeping arrangement with parties
who qualify as custodians under Section 17(f) of the Investment Company Act
of 1940.
The Portfolio will invest less than 25% of its assets in bank obligations,
including foreign banks and foreign branches of U.S. domestic banks. These
investments involve risks that are different in some respects from an
investment in an investment company which invests only in debt obligations
of U.S. domestic issuers. Among the items to be considered are possible
differences in foreign versus domestic reserve regulations, future
political and economic developments, the possible imposition of withholding
taxes on interest income payable on the securities, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on the foreign
bank obligations. Foreign reserve requirements are lower than domestic
ones, and currency blockage may develop which may prevent the Portfolio
from moving the proceeds of its investments out of foreign countries. Any
foreign bank obligations purchased will be readily marketable at the time
of purchase; however, such marketability and corresponding liquidity may
change at any time.
TAX-EXEMPT PORTFOLIO
Investment objectives and policies of the Tax-Exempt Portfolio are described in
the prospectus. The investment objective of the Portfolio is to provide maximum
current interest income which is exempt from federal income taxes while at the
same time preserving capital and maintaining liquidity. It is a fundamental
policy of the Portfolio to invest only in municipal obligations which at the
time of purchase mature within 397 days.
1. Municipal commercial paper represents very short-term unsecured, negotiable
promissory notes issued by states, municipalities and their agencies.
Payment of principal and interest on issues of municipal paper may be made
from various sources, to the extent the funds are available therefrom.
Maturities of municipal paper generally will be shorter than the maturities
of TANs, BANs, RANs or PNs.
2. Tax anticipation notes (TANs) are issued by state and local governments to
finance their current operations. Repayment is generally to be derived from
specific future tax revenues. TANs are usually general obligations of the
issuer. A weakness in an issuer's capacity to raise taxes due to, among
other things, a decline in its tax base or a rise in delinquencies, could
adversely affect the issuer's ability to meet its obligations on
outstanding TANs.
3. Bond anticipation notes (BANs) are usually general obligations of state and
local governmental issuers which are sold to obtain interim financing for
projects that will eventually be funded through the sale of long-term debt
obligations or bonds. The ability of an issuer to meet the obligations on
its BANs is primarily dependent on the issuer's access to the long-term
municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal and interest on the BANs.
4. Revenue anticipation notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source
will be used to repay the notes. In general, they also constitute general
obligations of the issuer. A decline in the receipt of projected revenues,
such as anticipated revenues from another level of government, could
adversely affect an issuer's ability to meet its obligations on outstanding
RANs. In addition, the possibility that the revenues would, when received,
be used to meet other obligations could affect the ability of the issuer to
pay the principal and interest on RANs.
5. Project notes (PNs) are issued on behalf of local authorities at auctions
conducted by the United States Department of Housing and Urban Development
to raise funds for federally sponsored urban renewal, neighborhood
development and housing programs. PNs are backed by the full faith and
credit of the federal government through agreements with local authorities
which provide that, if required, the federal government will lend the
issuer an amount equal to the principal of and interest on the PN.
Ordinarily, PNs are repaid by rolling over the notes, or from the proceeds
of new bonds or other securities, which are issued to provide permanent
financing.
Certain municipal obligations may carry variable or floating interest rates.
Variable rate instruments bear interest at rates which are readjusted at
periodic intervals so as to cause the instruments' market value to approximate
par. Floating rate instruments bear interest at rates which vary automatically
with changes in specified market rates or indices, such as the bank prime rate.
The Tax-Exempt Portfolio may invest in variable and floating rate instruments
even if they carry stated maturities in excess of 397 days, but only if the
period to the next interest change is less than 397 days. The Tax-Exempt
Portfolio will only purchase these instruments if there is a secondary market
for such instruments or if they carry demand features permitting the Portfolios
to redeem upon notice of seven days or less at par, or both. The Portfolio's
right to obtain payment at par on a demand instrument upon demand could be
affected by events occurring between the date the Portfolio elects to redeem the
instrument and the date redemption proceeds are due which affect the ability of
the issuer to pay the instrument at par value.
Although the ultimate maturity of such variable rate obligations may exceed 397
days, the Tax-Exempt Portfolio will treat the maturity of each variable rate
demand obligation, for purposes of computing its dollar-weighted average
Portfolio maturity, as the longer of (i) the notice period required before the
Portfolio is entitled to payment of the principal amount upon demand, or (ii)
the period remaining until the next interest rate adjustment.
The Portfolio may invest no more than 10% of its total assets in other
investment companies which invest in tax-exempt securities. No more than 5% of
the Portfolio's total assets may be invested in a single investment company nor
may the Portfolio purchase more than 3% of the total voting securities of a
single investment company. The Adviser will reduce its advisory fees on such
investments to offset management fees paid to the other investment company.
GENERAL POLICIES
The Fund may attempt to increase yields by trading to take advantage of
short-term market variations. This policy is expected to result in high
Portfolio turnover. This turnover may (but in the opinion of management should
not) adversely affect the Fund since the Fund does not usually pay brokerage
commissions when it purchases short-term debt obligations (see "Brokerage
Allocations and Portfolio Transactions").
Because of the many factors which influence fluctuations in the market value of
securities owned by the Fund's portfolios, including economic trends, government
actions and regulations and international monetary conditions, there can be no
assurance that the objectives of the Fund's portfolios will be achieved because
of market risks inherent in all investments. The Fund believes, however, that
through professional management, the prospects for investment success are
enhanced.
INVESTMENT RESTRICTIONS
While many of the decisions of the Adviser depend on flexibility, there are
several principles so fundamental to the Fund's philosophy that neither they,
nor the investment objectivemay be changed without a vote of a majority of the
outstanding shares of the Fund.
Each Portfolio within the Fund may not:
o invest in common stocks or other equity securities;
o borrow money for investment purposes, except that it may borrow up to 5% of
its total assets in emergencies, and that it may borrow up to 33 1/3% of
such assets to meet redemption requests that would otherwise result in the
untimely liquidation of vital parts of its portfolio;
o buy securities on margin, mortgage or pledge its securities, or engage in
"short" sales;
o buy or sell options;
o act as underwriter of securities issued by others;
o buy securities subject to restrictions on sale (except in connection with
repurchase agreements);
o buy or sell real estate, real estate investment trust securities,
commodities, or oil, gas and mineral interests;
o lend money, except in connection with repurchase agreements and for
investments made in accordance with Fund policies discussed in the
prospectus;
o issue senior securities;
o invest more than 5%* of its total assets in the securities of any single
issuer (except for the United States government, its agencies or
instrumentalities);**
o invest more than 25%* of its total assets in securities of issuers in any
single industry;
o invest more than 10%* of its net assets in illiquid securities;
o invest in companies for the purpose of exercising control.
MONEY MARKET PORTFOLIO ONLY may not:
o invest in other investment companies (except as part of a merger).
TAX-EXEMPT PORTFOLIO ONLY may not:
o invest more than 20%* of its assets in obligations that pay interest
subject to federal alternative minimum tax.
* Percentage at the time the investment is made.
PERFORMANCE INFORMATION
YIELD
The current yield for the each class of shares within each Portfolio is
determined by dividing the net change, exclusive of capital changes, in a
hypothetical account for a given seven calendar day period, by the value of the
account at the beginning of the period. The resulting base period return is
multiplied by 365 divided by seven. The effective yield is determined by
compounding for 365 days the base period return divided by seven. The results
are expressed as a percentage and yield figures are carried to the nearest
hundredth of one percent.
Class A share yields for the seven-day period ended December 31, 1995:
Portfolio
Money Market Tax-Exempt
------------ -----------
Ending account value
(includes the value of any additional shares
purchased with dividends from the original $1.000941551 $1.000774313
share, and all dividends declared on both
the original share and any such additional
shares)
Less beginning account value 1.000000000 $1.000000000
------------ ------------
Net Change in Account Value $ .000941551 $ .000774313
============ ============
Base Period Return: Money Market Portfolio
(Net Change in Account Value) $ .000941551 = .000941551
---------------------------------------------
(Beginning Account Value) $1.000000000
Current Yield = .000941551 x 365/7 = 4.91%
Effective Yield =
Current Yield compounded for 365 days = 5.03%
Base Period Return: Tax-Exempt Portfolio
(Net Change in Account Value) $ .000774313 = .000774313
--------------------------------------------
(Beginning Account Value) $1.000000000
Current Yield = .000774313 x 365/7 = 4.04%
Effective Yield =
Current Yield compounded for 365 days = 4.12%
Class B share yields for the seven-day period ended December 31, 1995:
Portfolio
Money Market Tax-Exempt
------------ -----------
Ending account value
(includes the value of any additional shares
purchased with dividends from the original $1.000758506 $1.000545473
share, and all dividends declared on both the
original share and any such additional shares)
Less beginning account value 1.000000000 $1.000000000
Net Change in Account Value $ .000758506 $ .000545473
============ ============
Base Period Return: Money Market Portfolio
(Net Change in Account Value) $ .000758506 = .000758506
--------------------------------------------
(Beginning Account Value) $1.000000000
Current Yield = .000758506 x 365/7 = 3.96%
Effective Yield =
Current Yield compounded for 365 days = 4.04%
Base Period Return: Tax-Exempt Portfolio
(Net Change in Account Value) $ .000545473 = .000545473
(Beginning Account Value) $1.000000000
Current Yield = .000545473 x 365/7 = 2.84%
Effective Yield =
Current Yield compounded for 365 days = 2.88%
Among the factors determining yields are portfolio quality, type of investments,
operating expenses, the relative amount of new money coming into the portfolio
and the pPortfolio maturity.
Publishing the above yields as of a given period provides investors with a basis
for comparing the Portfolio's yield with that of other managed portfolios and
with the yields on savings accounts and money market instruments (which are
normally stated on the basis of a full year's interest). In making any such
comparisons care must be taken to consider the dissimilarities of the investment
media as well as the differences in the methods of computing yields.
Neither Portfolio's yield is fixed nor is principal guaranteed. Yields fluctuate
daily and the annualization of rates is not a representation by the Fund as to
what an investment in either Portfolio will actually yield for any given period.
The average dollar weighted Portfolio maturity as of December 31, 1995, for both
classes of shares in the Money Market Portfolio was 54 days; for the Tax-Exempt
Portfolio, it was 59 days.
Tax-equivalent yield for the Tax-Exempt Portfolio Class A shares is calculated
by dividing the Portfolio's current yield or effective yield by the number one
minus a stated income tax rate. For example, the Portfolio's effective yield of
4.12%, for the seven day period ended December 31, 1994, would result in a
tax-equivalent yield of 6.82%, at the maximum federal tax rate of 39.6%: 4.12%
divided by (1.00 - .396) = 6.82%.
Tax-equivalent yield for the Tax-Exempt Portfolio Class B shares is calculated
by dividing the Portfolio's current yield or effective yield by the number one
minus a stated income tax rate. For example, the Portfolio's effective yield of
2.88%, for the seven day period ended December 31, 1995, would result in a
tax-equivalent yield of 4.77%, at the maximum federal tax rate of 39.6%: 2.88%
divided by (1.00 - .396) = 4.77%.
From time to time, the Portfolio may present illustrations of the relationship
between tax-exempt yields and taxable yields at various tax rates.
BROKERAGE ALLOCATIONS AND PORTFOLIO TRANSACTIONS
Portfolio securities are normally purchased directly from the issuer or from an
underwriter or a market maker for money market instruments. Usually no brokerage
commissions are paid by the Fund for these purchases. Purchases from
underwriters of Portfolio securities include a concession paid by the issuer to
the underwriter and the purchase price paid to market makers for money market
instruments may include the spread between the bid and asked price.
Under the terms of the Investment Management Agreements, Composite Research &
Management Co. acts as agent for the Fund in entering orders with broker-dealers
to execute Portfolio transactions and in negotiating commission rates where
applicable. Decisions as to eligible broker-dealers are approved by the
president of the Fund.
In executing Portfolio transactions and selecting broker-dealers, the Adviser
uses its best efforts to seek, on behalf of the Fund, the best overall terms
available. In assessing the best overall terms available for any transaction,
the Adviser may consider all factors it deems relevant, including the breadth of
the market in the security, the price of the security, the size of the
transaction, the timing of the transaction, the reputation, the financial
condition, experience, and execution capability of a broker-dealer, the amount
of commission, and the value of any brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended) provided by a broker-dealer.
The Adviser is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a Portfolio
transaction for the Fund. This commission may be in excess of the amount of
commission or net price another broker or dealer would have charged for
effecting the transaction if the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of that particular
transaction or in terms of the overall responsibilities of the Adviser to the
Fund and/or other accounts over which the Adviser exercises investment
discretion. The Adviser may commit to pay commission dollars to brokers or
financial institutions for specific research materials or products that it
considers useful in advising the Fund and/or its other clients. Research
services furnished to the Adviser include, for example, written and electronic
reports analyzing economic and financial characteristics, telephone
conversations between brokerage securities analysts and members of the Adviser's
staff, and personal visits by such analysts, brokerage strategists and
economists to the Adviser's office.
Some of these services are of value to the Adviser in advising various clients,
although not all of these services are necessarily useful and of value in
managing the Fund. The management fee paid to the Adviser is not reduced because
it receives those services, even though it might otherwise be required to
purchase these services for cash.
The staff of the Securities and Exchange Commission has expressed the view that
the best price and execution of over-the-counter transactions in Portfolio
securities may be secured by dealing directly with principal market makers,
thereby avoiding the payment of compensation to another broker. In certain
situations, the Adviser believes that the facilities, expert personnel and
technological systems of a broker often enable the Fund to secure a net price by
dealing with a broker that is as good as or better than the price the Fund could
have received from a principal market maker, even after payment of the
compensation to the broker. The Adviser places its over-the-counter transactions
with principal market makers, but may also deal on a brokerage basis when
utilizing electronic trading networks or as circumstances warrant.
None of the brokers with whom the Fund executes Portfolio transactions has any
interest in the Adviser or the Distributor. The Distributor did not execute any
Portfolio orders for the Fund during the fiscal year, nor did the Distributor or
the Adviser receive any direct or indirect compensation as a result of Portfolio
transactions of the Fund. Shares may be sold by brokers who execute Portfolio
transactions for the Fund; however, no brokerage fees will be allocated for such
sales.
GENERAL INFORMATION
ORGANIZATION AND AUTHORIZED CAPITAL
As discussed under "Who We Are" in the prospectus, Composite Cash Management
Company was incorporated under the laws of the state of Washington on July 2,
1979, under a Certificate of Incorporation granting perpetual existence. The
Fund at the present time has an authorized capitalization of ten billion shares
of capital stock having $.0001 par value. Shares are issued by class designated
by specific Portfolio. All shares of the Fund are freely transferable. The
shares do not have preemptive rights, and none of the shares has any preference
as to conversion, exchange, dividends, retirements, liquidation, redemption or
any other feature. Shares have equal voting rights except that each Portfolio
would vote separately on a change in investment objective and each class has
exclusive voting rights with respect to provisions of the distribution plan that
pertain to that class.
VOTING PRIVILEGES
The Fund does not anticipate holding annual meetings solely to elect directors;
however, when directors are nominated for election by shareholders, a
shareholder may exercise cumulative voting privileges for the election of
directors under Washington state law. Using this privilege, shareholders are
entitled to one vote per share for each director candidate. The total number of
votes for directors to which a shareholder is entitled may be accumulated and
cast for each candidate in such proportion that the shareholder may designate.
CUSTODIAN
The securities and cash owned by the Fund are held in safekeeping by Investors
Fiduciary Trust Company (IFTC), 127 West 10th, Kansas City, MO 64105. IFTC is a
wholly owned subsidiary of State Street Bank. The custodian's responsibilities
include collecting dividends, interest and principal payments on the Fund's
investments.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of LeMaster & Daniels, PLLC, Certified Public Accountants, has been
selected as the independent certified public accountants of the Fund. LeMaster &
Daniels performs audit services for the Fund including the examination of the
financial statements included in annual reports to shareholders, which are
incorporated by reference into this Statement of Additional Information.
REGISTRATION STATEMENT
This Statement of Additional Information and the prospectus do not contain all
of the information set forth in the registration statement the Fund has filed
with the Securities & Exchange Commission. The complete registration statement
may be obtained from the Securities & Exchange Commission upon payment of the
fee prescribed by the rules and regulations of the Commission.
FINANCIAL STATEMENTS AND REPORTS
Semiannual and annual reports are issued to shareholders. The annual reports
include audited financial statements.
The Fund's financial statements and schedules for fiscal year 1995 appear in the
annual report to shareholders dated December 31, 1995, which is incorporated by
reference into this Statement of Additional Information and may be obtained
without charge by contacting the Fund's offices.
APPENDIX A
SPECIMEN PRICE MAKE-UP SHEET
COMPOSITE CASH MANAGEMENT COMPANY
at December 31, 1995
Money Market Tax-Exempt
Portfolio Portfolio
-------------- --------------
Assets $174,407,683 $31,207,360
Liabilities 3,107,858 218,521
-------------- --------------
Net Assets $171,299,825 $30,988,839
============== ==============
Shares Outstanding
Class A 171,225,368 30,987,806
Class B 74,457 1,033
Net Assets Per Share
(Net Assets/Shares Outstanding)
Class A $1.00 $1.00
Class B $1.00 $1.00
APPENDIX B
Commercial Paper Ratings (taxable and tax-exempt)
Standard & Poor's Corporation: Commercial Paper Rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of no
more than 365 days.
Ratings are graded into four categories, ranging from 'A' for the highest
quality obligations to 'D' for the lowest. The top two categories are as
follows:
'A': Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
'A-1': This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
'A-2': Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
"A-1".
Moody's Investors Service, Inc.: "Prime-1" and "Prime-2" are the two highest
commercial paper rating categories. The ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months.
Issuers rated "Prime-1" have a superior capacity for repayment of short-term
promissory obligations. "Prime-1" repayment capacity will normally be evidenced
by the following characteristics:
- --Leading market positions in well established industries.
- --High rates of return on funds employed.
- --Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- --Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- --Well established access to a range of financial markets and sources of
alternate liquidity.
Issuers rated "Prime-2" have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Corporate Bond Ratings
Standard & Poor's ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
'AAA': Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
'AA': Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
'A': Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
'BBB': Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Moody's Investors Service, Inc.: Its ratings for investment-grade corporate
bonds are as follows:
Bonds 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.
Bonds 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 some time in the future.
Tax-Exempt Note Ratings
Standard & Poor's Corporation rating of short-term notes evolved from its
long-standing practice of evaluating the effect of such debt on bond ratings.
Its note rating symbols and definitions are as follows:
'SP-1': Very strong or strong capacity to pay principal and interest. Issues
determined to possess overwhelming safety characteristics are given a plus (+)
designation.
'SP-2': Satisfactory capacity to pay principal and interest.
'SP-3': Speculative capacity to pay principal and interest.
Moody's Investors Service, Inc. municipal note ratings are as follows:
'MIG' or 'VMIG' 1 Best quality
'MIG' or 'VMIG' 2 High quality
'MIG' or 'VMIG' 3 Favorable quality
'MIG' or 'VMIG' 4 Adequate quality
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements. The Condensed Financial Information ten-year
summary is set forth on page three of Part A of this registration statement. The
annual report to shareholders, as of December 31, 1995, was filed with the
Securities and Exchange Commission via EDGAR on February 12 1995, and is
incorporated by reference in both Parts A and B.
FILING DATE
(b) EXHIBITS INCORPORATED WITH FILED
(1a) Articles of Incorporation Form N1 7-24-79
(1b) Amendment to Articles of Incorporation Form N-SAR 8-23-94
(2) Bylaws Form N-1A 4-24-96
(3) Voting Trust Agreement INAP
(4) Specimen Capital Stock Certificate Form N1 7-24-79
(5) Investment Management Contract Form N-SAR 8-23-94
(6a) Distribution Contract Form N-1A 4-24-96
(6b) Specimen Selling Agreement INAP
(7) Bonus, profit sharing, pension, or other
similar contracts for benefit of
directors or officers of the Registrant INAP
(8) Custodial Agreement Form N1 2-28-94
(9) Shareholders Service Contract Form N-1A 4-30-85
(10) Opinion & Consent of Counsel Form N-1A 4-24-96
(11) Accountants' Consent Form N-1A 4-24-96
(12) All financial statements omitted from Form N-1A
Item 23. Annual Report 2-12-96
(13) Agreements or understandings made in
consideration for providing initial
capital. Form N-1A 7-24-79
(14) Retirement Plan and Forms Form N-1A 1-22-85
(15) 12b-1 Plan Notice of Annual
Meeting of
Shareholders 3-10-83
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Registrant is operated under the supervision of Composite Research &
Management Co. Composite Research is affiliated with Murphey Favre, Inc. and
Murphey Favre Securities Services, Inc. through common ownership and management.
Murphey Favre serves as principal underwriter and distributor for the
Registrant. Murphey Favre Securities Services serves as transfer agent for the
Registrant. Composite Research, Murphey Favre, and Murphey Favre Securities
Services serve in their same capacities for the seven other investment companies
within the Composite Group of Funds, namely: Composite Income Fund, Inc.;
Composite Equity Series, Inc.; Composite Tax-Exempt Bond Fund, Inc.; Composite
U.S. Government Securities, Inc.; Composite Bond & Stock Fund, Inc.; Composite
Northwest Fund, Inc; and Composite Deferred Series, Inc.
Composite Research & Management Co., Murphey Favre, and Murphey Favre Securities
Services are all wholly owned subsidiaries of Washington Mutual, Inc. All
companies named are incorporated in the State of Washington.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of March 31, 1996, there were 20,724 Class A shareholders and 7 Class B
shareholders in the Money Market portfolio. On the same date, there were 1,441
Class A shareholders and 2 Class B shareholders in the Tax-Exempt portfolio.
ITEM 27. INDEMNIFICATION.
Registrant shall have the power to indemnify any director, officer or former
director or officer of the Corporation, or any person who may have served at the
Corporation's request as a director or officer of another corporation, against
expenses actually and reasonably incurred by such person in connection with the
defense of any action, suit or proceeding, civil or criminal, in which he
becomes a party by reason of being or having been such director or officer, to
the full extent permitted by the laws of the State of Washington, as such laws
at anytime may be in force and effect, provided however, that this
indemnification provision shall not protect, or purport to protect any director
or officer of the corporation against any liability to the corporation or to the
shareholders to which he otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of this office.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
Registrant's Investment Advisor is Composite Research & Management Co., a wholly
owned subsidiary of Washington Mutual, Inc., a Washington corporation organized
in 1889. The Advisor serves in that capacity for the seven (7) other investment
companies with the Composite Group of Funds identified in Item 25.
Business and other connections of the Investment Adviser were most recently
filed on Form ADV, Securities and Exchange Commission File No. 801-4855, which
was mailed on February 23, 1996, and is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
The principal underwriter for the Registrant is Murphey Favre which also serves
in the same capacity for seven (7) other investment companies identified in Item
25.
Business and other connections of the underwriter were most recently filed on
Form BD, CRD 599, with the National Association of Securities Dealers on
February 20, 1996, and are incorporated herein by reference.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder will be
maintained at the offices of the Registrant at 601 W. Main Avenue, Suite 801,
Spokane, Washington 99201. The Registrant's custodian activities are performed
at Investors Fiduciary Trust Company (IFTC), 127 West 10th, Kansas City, MO
64105.
ITEM 31. MANAGEMENT SERVICES.
Registrant is not a party to any management related service contract, other than
set forth in the Prospectus.
ITEM 32. UNDERTAKINGS.
The management discussion of fund performance required by Item 5A is contained
in the 12/31/95 annual report to shareholders which will be provided to each
person to whom a prospectus is delivered, upon request and without charge.
<PAGE>
SIGNATURES
FORM N-1A
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Spokane, and State of Washington
on the 28 day of November, 1995.
COMPOSITE CASH MANAGEMENT CO.
------------------------------------------
Registrant
[SEAL]
By:/s/ William G. Papesh
------------------------
ATTEST: William G. Papesh
/s/ John T. West President
- -----------------------------
John T. West, CPA /s/ Monte D. Calvin
Secretary ------------------------
Monte D. Calvin, CPA
Principal Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the date indicated:
/s/ Wayne L. Attwood November 28, 1995
- -------------------------------------------
Wayne L. Attwood, Director (Date)
/s/ Kristianne Blake November 28, 1995
- -------------------------------------------
Kristianne Blake, Director (Date)
/s/ Anne V. Farrell November 28, 1995
- -------------------------------------------
Anne V. Farrell, Director (Date)
/s/ Edwin J. McWilliams November 28, 1995
- -------------------------------------------
Edwin J. McWilliams, Director (Date)
/s/ Michael K. Murphy November 28, 1995
- -------------------------------------------
Michael K. Murphy, Director (Date)
/s/ William G. Papesh Novewmber 28, 1995
- -------------------------------------------
William G. Papesh, Director (Date)
/s/ Jay Rockey November 28, 1995
- -------------------------------------------
Jay Rockey, Director (Date)
/s/ Leland J. Sahlin November 28, 1995
- -------------------------------------------
Leland J. Sahlin, Director (Date)
/s/ Richard C. Yancey November 28, 1995
- -------------------------------------------
Richard C. Yancey, Director (Date)
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT INDEX
- --------------------------------------------------------------------------------
EX-99.B2 BYLAWS
EX-99.B6 DISTRIBUTION CONTRACT
EX-99.B9 SHAREHOLDERS SERVICE CONTRACT
EX-99.B10 OPINION & CONSENT OF COUNSEL
EX-99.B11 ACCOUNTANT'S CONSENT
EX-27.CLASS A FINANCIAL DATA SCHEDULE - CLASS A
EX-27.CLASS B FINANCIAL DATA SCHEDULE - CLASS B
- --------------------------------------------------------------------------------
EXHIBIT 2
As Revised 1/23/96
BYLAWS
OF
COMPOSITE CASH MANAGEMENT COMPANY
ARTICLE I.
Stockholders' Meetings
SECTION 1. ANNUAL MEETING: The corporation shall not be required to hold an
annual meeting of the shareholders unless an election of Directors is required
by the Investment Company Act of 1940. This provision shall not prohibit the
President or the Board of Directors from calling an annual meeting of
stockholders for any purpose. (Amended 3/22/94)
SECTION 2. SPECIAL MEETINGS: Special meetings of the shareholders may be
called at any time by the President or by the Board of Directors. At any time,
upon receipt of written request of shareholders holding in the aggregate
one-tenth (1/10) of the voting power of all shareholders, it shall be the duty
of the Secretary or other person duly authorized, to call a special meeting of
shareholders to be held at the registered office at such time as the Secretary
or other duly authorized person may fix; the notice of such meeting shall comply
with the requirements set forth in Section 4 of this Article and shall further
state the purpose or purposes for which the meeting is called. If the Secretary
or other duly authorized person shall neglect or refuse to issue such call, the
shareholders making the request may do so.
SECTION 3. PLACE OF MEETING: The annual meeting of shareholders or any
special meeting of shareholders shall be held at the principal office of the
corporation or at such other place either within or without the State of
Washington as determined by the Board of Directors.
SECTION 4. NOTICE OF MEETINGS: Except as otherwise required by statute,
notice of the time and place of each meeting of shareholders, whether annual or
special, shall be given to each shareholder of record entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
such meeting, by delivering a written or printed notice thereof to him
personally, or by mailing such notice by certified mail, with return receipt
requested, in a postage-prepaid envelope addressed to him at his address as it
appears on the stock transfer books of the corporation.
SECTION 5. WAIVERS: Notice of any meeting of shareholders shall not be
required as to any shareholder who shall attend such meeting in person or by
proxy; and if any shareholder shall, in person or by attorney duly authorized,
waive notice of any meeting, whether before or after such meeting, notice
thereof shall not be required as to him.
SECTION 6. QUORUM: Unless otherwise provided in the Articles of
Incorporation, the presence in person or by proxy duly authorized, of the
holders of the majority of the shares entitled to vote shall constitute a quorum
for the transaction of business; if a quorum be present, the affirmative vote of
the majority of the shares represented at such meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless the vote of a
greater number is required by law or by the Articles of Incorporation, or other
sections of these Bylaws.
SECTION 7. VOTING: Unless otherwise provided in the Articles of
Incorporation, every shareholder of record shall be entitled to one vote per
share on each matter submitted to a vote at any meeting of shareholders. No
proxy shall be valid after eleven (11) months from the date of its execution,
unless such proxy provides for a longer period. The Board of Directors may fix
in advance a record date for the determination of shareholders entitled to vote
at such meeting, or for any other purpose. No share of stock shall be voted at
any meeting which shall have been transferred on the books of the corporation
subsequent to the record date fixed herein and prior to the date of the meeting.
When a determination of the shareholders entitled to vote at any meeting of
shareholders has been made, such determination shall apply to any adjournment
thereof.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE: The business of this corporation
shall be managed by a Board of Directors which shall be composed of not less
than three nor more than fifteen directors, the specific number to be set by
Resolution of the Board or the shareholders. The numbers of directors may be
changed from time to time by amendment of these Bylaws, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. Unless a director dies, resigns, or is removed, his or her
term of office shall continue until his or her successor is elected and
qualified, or until there is a decrease in the authorized number of directors.
Directors need not be stockholders of the corporation or residents of the State
of Washington and need not meet any other qualifications. (Amended 3/22/94)
SECTION 2. PLACE OF MEETING: Meetings of the Board of Directors may be held
either within or without the State of Washington.
SECTION 3. STATED MEETINGS: The Board of Directors may, by resolution
adopted by the affirmative vote of a majority of the whole board, from time to
time, appoint the time and place for holding stated meetings of the Board if it
be deemed advisable and such stated meetings shall thereupon be held at the time
and place so appointed, without the giving of any special notice with regard
thereto. In case the day appointed for a stated meeting shall fall upon a legal
holiday, such meeting shall be held on the next following day not a legal
holiday, at the regularly appointed hour. Except as otherwise provided in the
Bylaws, any type of business may be transacted at any stated meeting.
SECTION 4. SPECIAL MEETINGS: Special meetings of the Board of Directors
shall be held whenever called by the President, or by a majority of the
directors. Notice of any such meeting or any adjournment thereof shall be mailed
to each director, addressed to him at his residence or usual place of business,
not later than five (5) days before the day on which the meeting is to be held,
or shall be sent to him at such place by telegraph, or delivered personally or
by telephone, not later than the day before such day of meeting. Notice of any
meeting of the Board need not, however, be given to any director if waived by
him in writing or if he shall be present at the meeting; and any meeting of the
Board of Directors shall be a legal meeting without any notice thereof having
been given if all the members shall be present thereat except as otherwise
provided in the Bylaws or as may be indicated in the notice thereof, and any and
all business may be transacted at any special meeting.
SECTION 5. QUORUM AND MANNER OF ACTING: A majority of the number of
directors fixed by resolution of the directors shall constitute a quorum for the
transaction of business. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
In the absence of a quorum, a majority of the Directors present may adjourn any
meeting, from time to time, until a quorum is present.
SECTION 6. RESIGNATIONS: Any director of the corporation may resign at any
time either by oral tender of resignation at any meeting of the Board or by
giving written notice thereof to the Secretary. Such resignation shall take
effect at the time specified therefor; and unless otherwise specified with
respect thereto, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 7. FILING OF VACANCIES: In the case of any vacancy or vacancies in
the Board of Directors, such vacancy or vacancies shall be filled by the
remaining directors.
SECTION 8. SALARIES AND BONUSES: The Board of Directors shall have power to
fix salaries of officers, and the Board shall further have power to determine
and authorize payment of bonuses from time to time as may be best determined by
the financial condition of the corporation.
SECTION 9. MEETINGS: Meetings of the Board of Directors or of any
committees thereof may be held by conference telephone or similar communication
equipment so long as all participants can hear each other and participate in
discussion without restriction.
SECTION 10. COMMITTEE DESIGNATION: In addition to the committees designated
in this section, the Board of Directors, by resolution adopted by a majority of
the members, may designate from among its members one or more other committees,
each of which, to the extent provided in such resolution, shall have and may
exercise all the authority of the Board of Directors to the extent permitted by
applicable law. Designated Board of Directors' committees and responsibilities
are:
1) AUDIT COMMITTEE - consisting of three (or more) disinterested
Directors: This committee is responsible for overseeing the financial
reporting process and assuring the objectivity of the independent
audit. The committee will hold periodic meetings with the independent
auditors and make recommendations to the Directors about the adequacy
and accuracy of systems, acceptance of audits and suggestions on
internal control improvements.
2) NOMINATING COMMITTEE - consisting of three (or more) Directors: This
committee will nominate or recommend a slate of Directors each year
and make preparations and recommendations for replacements.
Responsibilities will also include the initial review of policy issues
regarding Board compensation, size of the Board, and composition of
the Board.
3) INVESTMENT COMMITTEE - consisting of three (or more) Directors: This
committee will perform interim functions for the Board including, but
not limited to, dividend declaration, investment policy preparation
and recommendations, and portfolio pricing matters. The committee will
have the authority to act on behalf of the Board with any policy
recommendations subsequently reported to the Board for ratification.
4) VALUATION COMMITTEE:
a. MEMBERSHIP. The Board of Directors may annually appoint a
Valuation Committee comprised of two or more individuals. The
names of persons serving on the Committee will be named in the
Committee guidelines.
b. RESPONSIBILITIES AND DUTIES. The purpose of the Valuation
Committee shall be to value any security held by a Fund or any
Series which cannot otherwise be valued under the Fund's
guidelines for valuation of portfolio securities.
c. RULES OF PROCEDURES. In determining the fair value of a security,
the Valuation Committee shall consider such factors and follow
such procedures as may be established under guidelines approved
by the Board of Directors. The guidelines shall be reviewed and
approved by the Board as frequently as the Board shall deem
appropriate, but in no event less than annually. A record of each
meeting shall be kept. At the next regularly scheduled Board of
Directors meeting following the Valuation Committee's
determination of a fair value for a security, the Board of
Directors shall consider ratifying the Valuation Committee's
action.
d. VOTE REQUIRED. The members of the Valuation Committee must
unanimously approve a fair value for the security.
e. ACTION WITHOUT MEETING. Any action that may be or is required to
be taken at a meeting of the Valuation Committee may be conducted
by telephone or may be taken without a meeting, if a consent in
writing setting forth the action so taken shall be signed by all
members of the Valuation Committee. Such consent shall have the
same effect as a unanimous vote.
f. COMPENSATION OF COMMITTEE MEMBERS. Each committee member who is
not an interested person of the Fund may receive such
compensation from the Fund for his or her services and
reimbursement for his or her expenses as may be fixed from time
to time by the Directors.
ARTICLE III.
OFFICERS
(Amended 5/31/89) The officers of the Company shall be the Chairman of the
Board of Directors, a President, a Treasurer, and a Secretary. Persons elected
to those offices by the Board of Directors shall serve at the will of the Board
of Directors and continue in office until such time as their successors are
elected and qualified. Any two of the foregoing officers may be united in one
person. A Vice President or Vice Presidents may be added from time to time as
determined by the Board of Directors who may also appoint one or more Assistant
Secretaries and one or more Assistant Treasurers.
The Chairman of the Board of Directors shall preside at all meetings of the
stockholders and of the Board of Directors and shall have further duties and
responsibilities as the Board of Directors may determine. The President, subject
to the general supervision and control of the Board of Directors, shall be
responsible for the affairs of the company and shall perform such other duties
as may be assigned to him from time to time by the Board of Directors.
The Secretary shall issue notices for all meetings, shall have charge of
the seal and the corporate books, shall sign with the President such instruments
as require such signature and shall perform such other duties as are incident to
his office or are particularly required of him by the Board of Directors.
The Treasurer shall have the custody of monies and securities of the
Company. He shall sign and issue checks, notes and other obligations of the
Company not under seal, and shall perform all duties incident to his office or
that are particularly required of him by the Board of Directors.
The Vice Presidents, Assistant Secretaries and Assistant Treasurers shall
perform the duties of the President, Secretary or Treasurer in his or their
offices or during their inability to act; such officer shall have such other and
further powers and perform such other and further duties as may be assigned to
him or them, respectively, by the Board of Directors.
ARTICLE IV.
AUDITS
The accounts and transactions of the Corporation shall be submitted for
audit at least once a year to reputable certified public accountants to be
chosen by the Board of Directors. These audits are to be directed to a
verification as of the date selected of the assets and liabilities and principal
and income accounts and are to include a detailed check of the sales price and
liquidation value make-up sheets for at least one day in each calendar month.
ARTICLE V.
COMMON STOCK
SECTION 1. STOCK CERTIFICATES: Certificates shall not be issued until the
shares represented thereby shall have been fully paid for. Certificates will not
be issued unless requested by the stockholder.
SECTION 2. TRANSFERS: Shares may be transferred by assignment and delivery,
but no such transfer shall be binding upon the Corporation until same shall have
been entered upon the share register as provided in Section 3 of this Article.
SECTION 3. SHARE REGISTER: The Secretary shall keep a stock book and a
record of the shares issued in accordance with procedures established by the
distributor and/or as may be required by the Investment Company Act of 1940 and
rules promulgated thereunder.
ARTICLE VI.
CORPORATE SEAL
The Corporate Seal of this Corporation shall consist of an impression on
paper or wax circular in form, bearing the words:
COMPOSITE CASH MANAGEMENT COMPANY
CORPORATE SEAL
Spokane, Washington
as indicated by the impression on the margin hereof. The seal shall be prepared
only if requested by an officer and upon a showing of legal necessity.
ARTICLE VII.
BOOKS AND RECORDS
The Corporate Minute Book, Record of Shareholders, Share Register and other
corporate records, shall be kept at the registered office of the Corporation in
Spokane, Washington, and the location of such registered office may be changed
at any time by resolution of the Board of Directors regularly adopted, and by
filing a proper notice of such change in such public office as the law may
require.
ARTICLE VIII.
AMENDMENTS
These Bylaws may be amended or repealed, or new Bylaws may be adopted, by
the Board of Directors at any meeting thereof, provided, however, that notice of
such meeting shall have been given as provided in these Bylaws, which notice
shall mention that amendment or repeal of the Bylaws, or the adoption of new
Bylaws, is one of the purposes of such meeting. Any such Bylaws adopted by the
Board may be amended or repealed, or new Bylaws may be adopted, by vote of the
stockholders of the Corporation, at any annual or special meeting thereof;
provided, however, that the notice of such meeting shall have been given as
provided in these Bylaws, which notice shall mention that amendment or repeal of
these Bylaws, or the adoption of new Bylaws, is one of the purposes of such
meeting.
EXHIBIT 6
DISTRIBUTION CONTRACT
THIS AGREEMENT, dated this 24th day of January 1996, is a continuation of
Agreements initially adopted in 1983 (with the exception of Composite Northwest
Fund, Inc. which adopted the Plan in 1987), by and between individual funds
within the Composite Group of Funds (corporations duly incorporated and existing
under the laws of the State of Washington), and MURPHEY FAVRE, INC., doing
business at Seattle, Washington, herein sometimes referred to as the
"DISTRIBUTOR." This Agreement is by and between the Composite Group of Funds and
the Distributor.
RECITALS
WHEREAS, the Composite Group of Funds ("Composite") is a family of funds
registered as open-end, management investment companies under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Composite Group of Funds and the Distributor desire to enter
into an agreement that sets forth standard terms and conditions for distribution
services for the individual funds, as noted on the signatory page, and in
accordance with the schedule of fees attached as Exhibit A;
WHEREAS, the payments contemplated herein intend to result in the sale of
Composite shares of common stock with the allocation of certain charges and
expenses in paragraph 6 hereof and the reimbursement of expenses incurred by the
Distributor as agent for Composite for advertisement, promotional material,
sales literature and printing and mailing of prospectuses to other than current
Composite shareholders;
WHEREAS, such payments may be considered the financing of activities
intended to result in the sale of Composite shares;
WHEREAS, this Agreement is intended to be a "written plan" of the
reimbursement type for Class A shares and of the compensation type for Class B
shares as contemplated by Rule 12b-1 promulgated pursuant to the provisions of
the 1940 Act;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. APPOINTMENT. Composite hereby appoints Murphey Favre as the Distributor for
the funds for the period and on terms set forth in this Agreement. The
Distributor accepts such appointment and agrees to render the services
herein set forth, for the payments herein provided (including reimbursement
of expenses).
2. DELIVERY OF DOCUMENTS. Composite has furnished the Distributor with copies
of:
(a) Articles of Incorporation and all amendments thereto for each fund;
(b) Bylaws and all amendments thereto for each fund;
(c) Each fund's most recent prospectus and recent registration statement.
From time to time, each fund will furnish the Distributor properly
certified or authenticated copies of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the
Securities and Exchange Commission (the "SEC").
3. DUTIES OF THE DISTRIBUTOR. The Distributor shall provide each fund with the
benefit of its best judgment, efforts and facilities in rendering its
services as Distributor. The Distributor will act as the exclusive
Distributor, subject to the supervision of each fund's board of directors
and the following understandings: (i) directors shall be responsible for
and control the conduct of each fund's affairs; (ii) in all matters
relating to the performance of this Agreement, the Distributor will act in
conformity with the Articles of Incorporation, Bylaws and Prospectus of
each fund and with the instructions and directions of each fund's board of
directors and will conform to and comply with the requirements of the 1940
Act and all other applicable federal or state laws and regulations. In
carrying out its obligations hereunder, the Distributor shall:
(a) provide to each fund's board of directors, at least quarterly, a written
report of the amounts expended in connection with all distribution services
rendered pursuant to this Agreement, including an explanation of the
purposes for which such expenditures were made; and
(b) take, on behalf of each fund, all actions which appear to be necessary to
carry into effect the distribution of each fund's shares as provided in
paragraph 4.
4. DISTRIBUTION OF SHARES. It is mutually understood and agreed that the
Distributor does not undertake to sell all or any specific portion of the
shares of common stock of any of the funds. A fund shall not sell any
shares of its common stock except through the Distributor. Notwithstanding
the provisions of the foregoing sentence:
(a) A fund may issue its shares at their net asset value to any shareholder of
the fund purchasing such shares with dividends or other cash distributions
received from the fund pursuant to any special or continuing offer made to
shareholders;
(b) the Distributor may, and when requested by a fund, shall, suspend its
efforts to effectuate sales of the shares of common stock of a fund at any
time when in the opinion of the Distributor or of the fund no sales should
be made because of market or other economic considerations or abnormal
circumstances of any kind and may in its sole discretion reject orders for
the purchase of a fund's shares;
(c) a fund may withdraw the offering of its shares of common stock (i) at any
time with the consent of the Distributor or (ii) without such consent when
so required by the provisions of any statute or of any order, rule or
regulation of any governmental body having jurisdiction; and
(d) the price at which the shares may be sold (the "offering price") shall be
the net asset value per share, plus a sales charge which shall be
determined in the manner established from time to time by a fund's
Distributor and set forth in a fund's then current prospectus.
5. COMPENSATION FOR SERVICING SHAREHOLDER ACCOUNTS. Composite acknowledges
that the Distributor may compensate its investment representatives for
opening accounts, processing investors' purchase and redemption orders,
responding to inquiries from fund shareholders concerning the status of
their accounts and the operations of a fund, and communicating with a fund
and its transfer agent on behalf of fund shareholders in such manner and
amount as the Distributor may deem appropriate.
6. EXPENSES. The expenses connected with distribution shall be allocable
between the funds and the Distributor as follows:
(a) the Distributor shall furnish the services of personnel to the extent that
such services are required to carry out its obligations under this
Agreement.
(b) Composite agrees that each fund assumes and shall pay or cause to be paid
the following expenses incurred on its behalf:
registration of common stock (except the initial registration) including
the expense of printing and distributing prospectuses; expenses incurred
for corporate services; taxes and expenses related to portfolio
transactions; charges and expenses of any registrar, custodian or
depository for portfolio securities and other property, and any stock
transfer, dividend or account agent or agents; brokers' commissions
chargeable in connection with portfolio securities transactions; all taxes,
including securities issuance and transfer taxes, and corporate fees
payable to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of stock certificates representing shares
of a fund; costs and expenses in connection with the registration and
maintenance of registration of a fund and its shares with the SEC and
various states and other jurisdictions (including filing fees, legal fees
and disbursements of counsel); expenses of shareholders' and directors'
meetings and of preparing, printing, and mailing of proxy statements and
reports to shareholders; fees and travel expenses of "disinterested"
directors; expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares or in cash; charges and
expenses of any outside service used for pricing of a fund's shares; fees
and expenses of legal counsel and of independent accountants; membership
dues of industry associations; postage (excluding postage for promotional
and sales literature); insurance premiums on property of personnel
(including, but not limited to legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and
costs of a fund's operation unless otherwise explicitly provided herein.
(c) With respect to Class A shares, the Distributor shall request reimbursement
for distribution expenses not otherwise described above, including, without
limitation, the direct cost of advertising, marketing, selling, and
distributing shares of common stock of each fund; printing and mailing
prospectuses to other than current shareholders; the cost of preparation,
printing, and mailing of promotional and sales literature; and compensation
paid to registered representatives of the Distributor, affiliates of the
Manager or other dealers. Reimbursement for these distribution expenses
will be subject to the provisions of Rule 12b-1 and will not exceed an
annual rate of a fund's average daily net assets attributable to Class A
shares as set forth in Exhibit A. Such expenditures will be reviewed at
least quarterly by the board of directors. In addition, the Distributor and
its affiliates or the Manager and its affiliates may pay additional
expenses of any type or nature which are reported to and deemed by the
directors to be appropriate for reimbursement within the provisions of this
paragraph.
(d) With respect to Class B shares, the Distributor shall be compensated with a
distribution fee equal to an annual rate of .75 of 1% of a fund's average
net assets attributable to Class B shares and a service fee at an annual
rate of .25 of 1% of such assets. Proceeds from any contingent deferred
sales charges are paid to the Distributor.
(e) The distributor will furnish the board of directors statements of
distribution revenues and expenditures at least quarterly with respect to
each class of shares. Only distribution expenses properly attributable to
Class A shares will be used to support the reimbursement charged to Class A
shareholders.
(f) Each fund will record all payments made under the Plan as expenses in the
calculation of its net investment income. The amount of distribution
expenses incurred by the Distributor that may be paid pursuant to the Plan
in future periods will not be incurred as a liability, unless the standards
for accrual of a liability under generally accepted accounting principles
have been satisfied. Such distribution expenses will be recorded as an
expense in future periods as they are paid by a fund.
(g) For purposes of Section 6 of this Distribution Contract, the Distributor
shall not be responsible for the payment of distribution expenses that are
subject to reimbursement, as the Distributor has acted solely as the agent
of Composite or of a specific fund in connection therewith.
7. EXPENSE LIMITATION. In the event the operating expenses of any fund, for
any fiscal year exceed the expense limitations imposed by the securities
laws or regulations thereunder of any state in which that fund's shares are
qualified for sale, as such limitations may be raised or lowered from time
to time, the Distributor will reimburse that fund for annual operating
expenses in excess of any expense limitation that may be applicable;
provided, however, there shall be excluded from such expenses the amount of
all distribution costs as well as any interest, taxes, brokerage
commissions, and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund.
8. NON-EXCLUSIVITY. The services of the Distributor are not exclusive and the
Distributor shall be entitled to render distribution or other services to
others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers of the Distributor
may serve as officers or directors of Composite, and that officers or
directors of Composite may serve as officers of the Distributor to the
extent permitted by law; and that officers of the Distributor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers or
directors of any other firm or corporation, including other investment
companies.
9. TERM AND APPROVAL. This Agreement shall become effective upon execution and
shall continue in force and effect from year to year, provided that such
continuance is specifically approved at least annually:
(a) by Composite's board of directors or (ii) by the vote of a majority of the
outstanding voting securities of any fund (as defined in Section 2{1}{42}
of the 1940 Act), and
(b) the affirmative vote of a majority of the directors who are not parties to
this Agreement or interested persons of any such party or have no direct or
indirect financial interest in the operation of this Agreement or any
agreement related to this Agreement, by votes cast in person at a meeting
specifically called for the purpose of voting on such approval.
10. TERMINATION. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of Composite's board of directors, by a
vote of a majority of the members of the board of directors of Composite
who are not interested persons of any fund and have no direct or indirect
financial interest in the operation of this Agreement or in agreement
related to this Agreement, or by a vote of a majority of any fund's
outstanding voting securities (as defined in Section 2{a}{42} of the 1940
Act), or by the Distributor on sixty (60) days' written notice to the other
party. The notice provided for herein may be waived by either party. This
Agreement shall automatically terminate in the event of its assignment, the
term "assignment" for this purpose having the meaning defined in Section
{a}{4} of the 1940 Act.
11. AMENDMENTS.
(a) This Agreement may be amended by the parties hereto only if such amendment
is specifically approved (i) by the board of directors of Composite or by
the vote of majority of outstanding voting securities of any fund, and (ii)
by a majority of those directors who are not parties to this Agreement or
disinterested persons of any such party, which vote must be cast in person
at a meeting called for the purpose of voting on such approval; provided,
however, that if any such amendment is "material" as such word is used in
Rule 12b-1 under the 1940 Act, such amendment shall be approved in the
manner prescribed in paragraph 10 for the annual approval of the
continuation of the Agreement.
(b) In the event that this Agreement is proposed to be amended to increase
materially the amount to be spent for distribution, such amendment will not
be effected without shareholder approval.
12. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties hereunder,
the Distributor shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to
insure the accuracy of all services performed under this Agreement, but the
Distributor shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part
of the Distributor or reckless disregard by the Distributor of its duties
under this Agreement provided that the Distributor shall be responsible for
its own negligent failure to perform its duties under this Agreement.
13. NOTICES. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as
such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of
Composite shall be 601 West Main Avenue, Spokane, WA 99201, and the address
of the Distributor shall be 1201 Third Avenue, Seattle, WA 98101.
14. QUESTIONS OF INTERPRETATION. This Agreement shall be implemented and
continued in a manner consistent with the provisions of the 1940 Act and to
interpretations thereof, if any, of the United States Courts or, in the
absence of any controlling decision of any such court, by rules,
regulations or orders of the SEC issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of
the SEC, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year
first above written.
FUNDS BOUND BY THIS AGREEMENT COMPOSITE GROUP OF FUNDS
Composite Bond & Stock Fund, Inc. By /s/ William G. Papesh
Composite Equity Series, Inc. -------------------------
Composite Northwest Fund, Inc. William G. Papesh
Composite U.S. Government Securities, Inc. President
Composite Income Fund, Inc.
Composite Tax-Exempt Bond Fund, Inc.
Composite Cash Management Company
ATTEST:/s/ John T. West
---------------------
John T. West
Secretary MURPHEY FAVRE, INC.
By /s/ Douglas D. Springer
---------------------------
Douglas D. Springer
President
ATTEST:/s/ Suzanne M. Krahling
-----------------------
Suzanne M. Krahling
Secretary
EXHIBIT 9
SHAREHOLDERS SERVICE CONTRACT
AGREEMENT, dated March 26, 1996, between COMPOSITE CASH MANAGEMENT CO. (the
"Fund"), a Washington corporation with offices at 601 West Main Avenue, Suite
801, Spokane, Washington 99201, and MURPHEY FAVRE SECURITIES SERVICES, INC. (the
"Transfer Agent"), a Washington corporation with offices located at 601 West
Main Avenue, Suite 801, Spokane, Washington 99201:
W I T N E S S E T H
WHEREAS, the Fund is an investment company registered under the Investment
Company Act of 1940, whose shares will be registered under the Securities Act of
1933; and
WHEREAS, the Transfer Agent engages in the business of rendering computer
and related services and acting as transfer agent and shareholder servicing
agent for investment companies;
WHEREAS, the Fund desires the Transfer Agent to perform the services set
forth in Schedule A attached hereto and incorporated herein by reference, and
the Transfer Agent is willing to perform such services;
1. The Transfer Agent shall perform for the Fund the services set forth
in Schedule A for a monthly fee as detailed in Schedule C (see
attached addenda).
2. The Fund agrees to reimburse the Transfer Agent for postage, the
procurement and/or printing of share certificates, statements,
envelopes, checks, reports, tax forms, proxies, or other forms of
printed material required in the performance of its services to the
Fund under this agreement.
3. The Fund agrees to reimburse the Transfer Agent for all freight and
other delivery charges and insurance or bonding charges incurred by
the Transfer Agent in delivering materials to and from the Fund and
for certificates delivered to shareholders.
4. The Fund agrees to reimburse the Transfer Agent for all direct
telephone expenses incurred by the Fund in calling shareholders
regarding their Fund transactions, accounts, and for any other Fund
business.
5. The Transfer Agent at the end of each month during the term of this
agreement will render an itemized statement to the Fund for its
charges under this agreement. Payment by the Fund is due 10 (ten) days
from the date such statement is received.
6. The Fund agrees that all computer programs and procedures developed to
perform services required under this agreement are the property of the
Transfer Agent and the Transfer Agent agrees that all records and
other data, except computer programs and procedures, are the property
of the Fund. The Transfer Agent agrees that it will furnish all
records and other data as may be requested to the Fund immediately
upon termination of this agreement for any reason whatsoever.
7. The Transfer Agent agrees to treat all records and other information
relative to the Fund with utmost confidence and further agrees that
all records maintained by the Transfer Agent for the Fund shall be
open to inspection and audit at reasonable times by the officers,
agents or auditors employed by the Fund and that such records shall be
preserved and retained by the Transfer Agent so long as this agreement
shall remain in effect.
8. The Transfer Agent shall not be liable for any damage, loss of data,
delay or any other loss caused by any such power failure or machine
breakdown, except that the Transfer Agent shall be liable for actual
out-of-pocket costs caused by any such power failure or machine
breakdown, and the Transfer Agent shall recover the data in process
that is assumed lost during any power failure or machine breakdown.
9. The Transfer Agent will maintain in force through the duration of this
agreement at least $1,000,000 or more fidelity bond written by a
reputable bonding company, covering theft, embezzlement, forgery and
other acts of malfeasance by the Transfer Agent, its employees, or
agents in connection with services performed for the Fund.
10. This agreement is a continuation of the agreement dated March 26,
1991. This agreement may be terminated without the payment of any
penalty by either party upon (90) days' written notice thereof given
by the Fund to the Transfer Agent and upon one hundred eighty (180)
days' written notice thereof given by the Transfer Agent to the Fund.
11. Any notice shall be officially given when sent by registered or
certified mail by either party to the foregoing addresses, provided
that either party may notary the other of any changed address to which
such notices should be mailed thereunder.
12. This agreement constitutes the entire agreement between the parties
and shall be governed by, and its provision shall be construed in
accordance with, the laws of the state of Washington.
13. This contract will be subject to review annually.
IN WITNESS WHEREOF, the parties hereto cause this agreement to be executed
by their officers designated below as of the date first above-written.
COMPOSITE CASH MANAGEMENT CO.
By:/s/ William G. Papesh
--------------------------
President
ATTEST:
/s/ John T. West
- ------------------------------
Secretary
MURPHEY FAVRE SECURITIES SERVICES, INC.
By:/s/ William G. Papesh
-----------------------
President
ATTEST:
/s/ Suzanne M. Krahling
- -------------------------
Secretary
SCHEDULE A
I. Shareholder Services
A. Maintain all shareholder records on electronic data processing
equipment, including:
1. Share balances
2. Account transaction history
3. Names and addresses
4. Certificate records
5. Distribution records
6. Transfer records
7. Over-all control records
B. New Accounts
1. Deposit all monies received into transfer account maintained
for the Custodian
2. Set up account according to shareholders' instructions as
to:
a. Amount of shares purchased
b. Retain shares or deliver to shareholder
3. Issue and mail shareholder confirmations
C. Additional Purchases
1. Deposit monies received into transfer account maintained for
the Custodian
2. Issue shareholder confirmations
D. Liquidations - Full and Partial
1. Liquidate shares upon shareholder request
2. Issue checks for amount of liquidation
3. Issue and mail shareholder confirmation
E. Transfer shares as requested which includes obtaining necessary
papers and documents to satisfy transfer requirements. On
irregular transfer requiring special legal opinions, such special
legal fees, if any, are to be paid for by the Company
F. Prepare and mail certificates as requested by shareholders
G. Process changes, corrections of addresses and registrations
H. Maintain service with shareholders as follows:
1. Activity required to receive, process and reply to
shareholders' correspondence regarding account matters
2. Refer correspondence regarding investment matters to the
Company with sufficient account data to answer
3. Contact shareholders directly to settle problems and
questions
I. Compute distributions, dividends and capital gains
1. Reinvest in additional shares
2. Advise each shareholder of amount of dividends received and
tax status annually
J. Handle replacement of lost certificates
K. Produce transcripts of shareholder account history as required
L. Maintain the controls associated with the computer programs and
manual systems to arrive at the Company's total shares
outstanding
M. Receive mail and perform other administrative functions relating
to transfer agent work.
II. Reports and Schedules
A. Daily
1. Name and address changes
2. Name and address additions and deletions
3. Transaction Register
a. Purchases
b. Sales
c. Adjustments
4. Cash reconciliation - cash received for day
5. Check reconciliation - checks issued for day
6. Transaction reconciliation
a. Amount received
b. Total shares purchased
c. Number of purchase transactions
d. Amount liquidated
e. Total shares liquidated
f. Number of liquidations
g. Checks issued for liquidations
B. Bi-Monthly
1. Balance list of shareholders in account number sequence
a. Number of issued shares outstanding
b. Number of unissued shares outstanding
c. Total shares outstanding
2. a. Purchases, sales and adjustments
b. Certificates issued
c. Certificate, redemptions and transfers
d. Certificate reconciliation by certificate number
C. Monthly
1. Sales by states for month
D. Periodically
1. Alphabetical account listing
III. Other Services
*A. Mailing labels or other mailing services to shareholders
*B. Services in connection with any stock splits
*C. The computer system is designed to produce almost any display
of statistical management or accounting data in almost any
format desired by the management, auditors or directors. The
parameters of reporting are only limited to the data
contained on disc. With sufficient notice, this information
is available to management in accordance with charges as
itemized in Schedule B.
* Extra charge services, per Schedule B.
SCHEDULE B
TIME AND MATERIAL SERVICES
Computer..............................................$50/hour
Keypunch..............................................$10/hour
Clerical..............................................$10/hour
Programming and Direct Technical Management $25/hour
Travel and per diem expenses (chargeable only
when authorized by Company).........................At Cost
Mailing Services......................................At Cost
Any of the above services when performed outside regular working hours of
Murphey may be billed at 150 percent of the above.
SCHEDULE C: MONTHLY SHAREHOLDER SERVICING FEES
March 26, 1996
FEE PER ACCOUNT PER MONTH
CLASS A CLASS B
-------- --------
Composite Bond & Stock Fund $1.35 $1.45
Composite Growth & Income Fund $1.35 $1.45
Composite Northwest Fund $1.35 $1.45
Composite Income Fund $1.60 $1.70
Composite Tax-Exempt Bond Fund $1.60 $1.70
Composite U.S. Government Securities $1.30 $1.40
Composite Cash Management Company
Money Market Portfolio
First 25,000 accounts $1.55 $1.65
Each additional account $1.25 $1.35
Composite Cash Management Company
Tax-Exempt Portfolio
First 25,000 accounts $1.55 $1.65
Each additional account $1.25 $1.35
EXHIBIT 10
April 19, 1996
Securities and Exchange Commission
450 Fifth Street, NW
Washington DC 20549
RE: Composite Cash Management Company
(SA File No. 2-65242)
Gentlemen:
We have acted as counsel to the Composite Cash Management Company ("the
Fund") in connection with the preparation of Post-Effective Amendment No. 22
(the "Amendment") to the Fund's Registration Statement. We have reviewed the
Amendment and, in our opinion, the Amendment does not contain disclosures which
would render it ineligible to become effective pursuant to Paragraph (b) of Rule
485 under the Securities Act of 1933.
Very truly yours,
PAINE, HAMBLEN, COFFIN,
BROOKE & MILLER
/s/ Lawrence R. Small
Lawrence R. Small
<PAGE>
EXHIBIT 10
April 19, 1996
Composite Cash Management Company
601 W. Main Avenue, Suite 801
Spokane, WA 99201-0613
Gentlemen:
In connection with an amendment to the Registration Statement now being
filed by your company with the Securities and Exchange Commission relating to an
offering of shares of common stock, we certify that, as attorneys for this
corporation, we have examined the corporate proceedings relating to its
incorporation, the Bylaws, the Distributor and Management Contracts, and such
other matters and documents as we deem necessary. It is our opinion that:
(a) Composite Cash Management Company is a corporation duly incorporated and
existing under the laws of the State of Washington, with authorized capital
stock, consisting of 10,000,000,000 shares of common stock with
6,000,000,000 shares denominated as Class A and 4,000,000,000 shares
denominated as Class B; the par value is $.0001 per share with all shares
having equal voting rights.
(b) All of the 10,000,000,000 shares have been validly and legally authorized to
be issued by proper corporate action and in conformity with the laws of the
State of Washington applicable thereto. Such authorized shares, upon their
issuance, will be for proceeds to the company of not less than the net asset
value of such shares at the time of sale after adjusting to the nearer full
cent, and will be fully paid and nonassessable.
Very truly yours,
PAINE, HAMBLEN, COFFIN,
BROOKE & MILLER LLP
/s/ Lawrence R. Small
Lawrence R. Small
<PAGE>
EXHIBIT 10
April 19, 1996
Composite Cash Management Company
601 W. Main Avenue, Suite 801
Spokane, WA 99201-0613
Gentlemen:
We hereby consent to the use of our written opinion dated April 19, 1996,
upon the validity of the organization of Composite Cash Management Company, and
upon the designation of the authorized capital stock of said company in the
Articles of Incorporation Statement now being filed with the Securities and
Exchange Commission and the Prospectus or revised Prospectus relating to the
proposed offer and sale of the capital stock of the corporation.
Very truly yours,
PAINE, HAMBLEN, COFFIN,
BROOKE & MILLER LLP
/s/ Lawrence R. Small
Lawrence R. Small
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference into the Prospectus and
Statement of Additional Information in Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A of Composite Cash Management Company of our
report dated January 17, 1996, on the financial statements and financial
highlights included in the December 31, 1995 Annual Report to Shareholders of
Composite Cash Management Company. We further consent to the reference to our
Firm under the headings "Financial Highlights" in the Prospectus and
"Independent Public Accountants" in the Statement of Additional Information.
/s/LeMater & Daniels, PLLC
LeMaster & Daniels, PLLC
Spokane, Washington
January 17, 1996
<PAGE>
EXHIBIT 11
INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
Board of Directors and Shareholders of
Composite Cash Management Company
We have audited the accompanying statements of assets and liabilities, including
the investment portfolios, of Composite Cash Management Company (comprising,
respectively, the Money Market and Tax-Exempt Portfolios) as of December 31,
1995, and the related statements of operations for the year then ended, the
statements of changes in net assets for the two years ended December 31, 1995
and 1994, and the financial highlights for each of the five years in the period
ended December 31, 1995. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirming securities owned as of December
31, 1995, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting Composite Cash Management Company as
of December 31, 1995, and the results of their operations, the changes in their
net assets, and their financial highlights for the above-stated periods in
conformity with generally accepted accounting principles.
/s/ LeMaster & Daniels, PLLC
Certified Public Accountants
Spokane, Washington
January 17, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT AND FORM N-SAR WHICH ARE ON FILE WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
DOCUMENTS.
</LEGEND>
<CIK> 0000312346
<NAME> Money Market Portfolio Class A
<SERIES>
<NUMBER> 011
<NAME> Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 171,883,159
<INVESTMENTS-AT-VALUE> 171,883,159
<RECEIVABLES> 2,494,189
<ASSETS-OTHER> 30,335
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174,407,683
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,107,858
<TOTAL-LIABILITIES> 3,107,858
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 171,299,825
<SHARES-COMMON-STOCK> 171,225,368
<SHARES-COMMON-PRIOR> 140,995,574
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 171,299,825
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,825,703
<OTHER-INCOME> 0
<EXPENSES-NET> (1,272,399)
<NET-INVESTMENT-INCOME> 7,553,304
<REALIZED-GAINS-CURRENT> 9,864
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,563,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,550,363)
<DISTRIBUTIONS-OF-GAINS> (9,858)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 468,926,898
<NUMBER-OF-SHARES-REDEEMED> (430,816,328)
<SHARES-REINVESTED> 7,464,213
<NET-CHANGE-IN-ASSETS> 45,638,384
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<GROSS-ADVISORY-FEES> 688,617
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<GROSS-EXPENSE> 1,295,364
<AVERAGE-NET-ASSETS> 145,538,957
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT AND FORM N-SAR WHICH ARE ON FILE WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
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</LEGEND>
<CIK> 0000312346
<NAME> Composite Cash Management Company
<SERIES>
<NUMBER> 012
<NAME> Money Market Portfolio Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 171,883,159
<INVESTMENTS-AT-VALUE> 171,883,159
<RECEIVABLES> 2,494,189
<ASSETS-OTHER> 30,335
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174,407,683
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,107,858
<TOTAL-LIABILITIES> 3,107,858
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 171,299,825
<SHARES-COMMON-STOCK> 74,457
<SHARES-COMMON-PRIOR> 84,282
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 171,299,825
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,825,703
<OTHER-INCOME> 0
<EXPENSES-NET> (1,272,399)
<NET-INVESTMENT-INCOME> 7,553,304
<REALIZED-GAINS-CURRENT> 9,864
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,563,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,941)
<DISTRIBUTIONS-OF-GAINS> (6)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 157,286
<NUMBER-OF-SHARES-REDEEMED> (96,301)
<SHARES-REINVESTED> 2,616
<NET-CHANGE-IN-ASSETS> 45,638,384
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,295,364
<AVERAGE-NET-ASSETS> 145,538,957
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT AND FORM N-SAR WHICH ARE ON FILE WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
DOCUMENTS.
</LEGEND>
<CIK> 0000312346
<NAME> Composite Cash Management Company
<SERIES>
<NUMBER> 021
<NAME> Tax-Exempt Portfolio Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 30,669,857
<INVESTMENTS-AT-VALUE> 30,669,857
<RECEIVABLES> 505,428
<ASSETS-OTHER> 32,075
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,207,360
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 218,521
<TOTAL-LIABILITIES> 218,521
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,988,839
<SHARES-COMMON-STOCK> 30,987,806
<SHARES-COMMON-PRIOR> 29,251,039
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,210,919
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 1,035,200
<REALIZED-GAINS-CURRENT> 165,507
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<NET-CHANGE-FROM-OPS> 1,200,707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,035,177
<DISTRIBUTIONS-OF-GAINS> 165,501
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,063,893
<NUMBER-OF-SHARES-REDEEMED> (56,881,967)
<SHARES-REINVESTED> 1,193,764
<NET-CHANGE-IN-ASSETS> (2,624,304)
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 232,823
<AVERAGE-NET-ASSETS> 30,559,168
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<PER-SHARE-NII> 0.04
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<PER-SHARE-NAV-END> 1.00
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT AND FORM N-SAR WHICH ARE ON FILE WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
DOCUMENTS.
</LEGEND>
<CIK> 0000312346
<NAME> Composite Cash Management Company
<SERIES>
<NUMBER> 022
<NAME> Tax-Exempt Portfolio Class B
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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<INVESTMENTS-AT-COST> 30,669,857
<INVESTMENTS-AT-VALUE> 30,669,857
<RECEIVABLES> 505,428
<ASSETS-OTHER> 32,075
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<TOTAL-ASSETS> 31,207,360
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 218,521
<TOTAL-LIABILITIES> 218,521
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<PAID-IN-CAPITAL-COMMON> 30,988,839
<SHARES-COMMON-STOCK> 1,033
<SHARES-COMMON-PRIOR> 1,033
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 30,988,839
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,210,919
<OTHER-INCOME> 0
<EXPENSES-NET> (175,719)
<NET-INVESTMENT-INCOME> 1,035,200
<REALIZED-GAINS-CURRENT> 165,507
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,200,707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23)
<DISTRIBUTIONS-OF-GAINS> (6)
<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> (13)
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> (2,624,304)
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 232,823
<AVERAGE-NET-ASSETS> 30,559,168
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
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<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (0.01)
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